Sunday Oct 06, 2024
Sunday Oct 06, 2024
Monday, 25 November 2013 00:00 - - {{hitsCtrl.values.hits}}
As a whole, industry should realise that the President has taken courage to address long outstanding grievances of businesses, specifically of the country’s exporters, by addressing these issues in Budget 2014. In fact, some action was taken before the budget announcements which now will complement both providers and uses of shipping services.
The infrastructure
The shipping industry has continued to benefit since the end of the conflict, as infrastructure relating to the industry has been provided constantly by building ports, airports, roads and logistics-related infrastructure.
The recently opened south harbour in Colombo has given Sri Lanka the necessary edge over the region to develop the country as a mega maritime hub. The Hambantota Port is now starting to attract new shipping services as shown evidently in the vehicle trans-shipment business which has boomed over a period.
The addition of the bunkering facility at the port soon will no doubt create value for shipping lines plying the east west shipping route over the next few years where they would benefit in many ways.
The shipping services sector and beyond
Services to shippers and shipping lines have been improved by way of many reforms which are being implemented at ports and customs department. The automation of services have seen a rapid increase over the last year and this policy is now being extended as announced by the 2014 Budget to expand into other departments such as the inland revenue department.
We also witnessed the liberalisation of the exchange regulations by the Central bank (CBSL) and the Finance Ministry publishing the new trade-friendly gazette on international payments which has removed anomalies in the area of international trade.
A game-changing policy
It must also be appreciated and acknowledged that the Finance Ministry had taken a lot of effort to develop the recently introduced commercial hub regulations law, which has created the legal framework for Sri Lanka to compete and provide equal service to shipping lines, exporters, traders and logistics providers to operate in a manner they do in Singapore and Dubai in a free environment.
This law amounts to having a clever two systems solution in a country that has a hinterland economy unlike the two city states of Singapore and Dubai. If businesses adapt the hub model, it would be a game changer for the country soon.
Smart moves against anticompetitive practices and providing tax relief for shipping
The Budget 2014 saw the announcing a policy that would help the export sector at large, specifically the SME exporters, consumers and the manufacturing industry. As way back in 1997 certain anticompetitive charges were introduced and levied on the export/import community of Sri Lanka as the country lacked a system of checks and balances in international trade services.
A separation of THC in the mid 1990s has now increased to over 40 separate surcharges for imports and exports levied by service providers at their will by 2013. So much so, that this had also spread to such an extent that non-transparent surcharges in many cases exceeded the freight cost of exports and imports in some trade lanes.
Sections of the exporter community requested the complete abolishing of non-freight related charges through government intervention. But the President has given a fair hearing and given a policy ruling without interfering in the market by pronouncing that any charge could be made and levied as long as it is part of the market driven freight charge.
Adapting best international practices
The President as the Minister of Shipping and Finance has also ensured that parties contracting for the carriage of cargo in international transportation take responsibility for the goods in containers in modern shipping terminals as guided by the best practices of International Commercial Terms known as ‘INCOTERMS 2010’ and published by the respected Paris-based International Chamber of Commerce (ICC).
It seems that the Finance Ministry has studied the position and done its homework for the last three years carefully and adapted these best international practices into national law. If one recalls the President as far back in 2010 in his budget proposals, promised to look into anticompetitive practices.
This framework will also help the Government and the CBSL to monitor transparent foreign exchange payments for such services and help reduce unlawful leakages from the country, whilst ensuring that unequal terms in bargaining power prevalent in the international business world does not hamper our exporters and consumers.
Strengthening of Director Merchant Shipping Act
It is commendable that the Merchant Shipping Act will be amended to provide a legal framework for the above purpose through the Finance Act. This was a huge vacuum that was evident in country since liberalisation of the economy in 1977, and shipping per say in 1991. This gives a chance to both service users such as exporters and service providers, for a platform to have better dialogue and an opportunity to set up and empower an Ombudsman and a committee to resolve disputes and grievances through an established legal framework, which is equal to a fair competition regulator being established, as done in many develop countries.
Tax on shipping
On the other hand, the budget also announced that the taxes on profits of shipping lines, freight forwarders and logistics industry services, will be reduced and brought to the tax level of exporters.
The policy to streamline and adapt international best practices for pricing to suit the free market economy, tax reforms and monitoring mechanisms of the shipping industry through a balanced approach, have to be acknowledged as very positive developments and hope that the sceptics too will support these moves for the benefit of the country.
The challenges
The challenges we are now left with as country are to improve its deficit, increase productivity, introduce labour reforms, adapt new technology, change our attitude towards service and quality and to enhance our marketing capabilities to increase business volumes to the country. It was more than evident for me as an individual who participated at the Commonwealth Business Forum, that the biggest drawback we have as a nation is a lack of a proper country marketing strategy by all sectors of business to showcase our strengths as a nation.
At CHOGM a foreign presenter said that “Sri Lanka has it all”, but it seems the world is not aware of it!
In shipping and the international trade environment, the major gap we see in Sri Lanka is inadequate human resources in the logistics and maritime industry to make policy and drive policy.
The budget also proposes large scale support in terms of maritime training, capacity building and skills developments. It proposes many incentives to increase this lagging area where the industry now can take the initiative to do so and make it happen, so that the next generation of youth can take up jobs in the country’s promising logistics industry.
The continuous upgrade of equipment and simplification of processes with further automation would be a challenge and a requirement for the heads of institutions and their management to make the budget proposal successful beyond 2014, and for us to achieve this national goal to become a reliable hub. It is hoped that these reforms will be speedily implemented for the greater benefit of the country and its people.
(The writer is the CEO of Shippers’ Academy Colombo, a Member of the Global Shippers’ Forum and a former Chairman of the Sri Lanka Shippers’ Council/South Asian Shippers (ASCOBIPS) Council, and the immediate past Secretary General of the Asian Shippers’ Council, he is also a senior consultant on ports and airports for SEMA.)
