SMEs concerned over liberalization

By Small timer

The SMEs engaged in the shipping industry are concerned over the recent government move to liberalize the shipping industry by lifting the 40% foreign ownership threshold. It is sad to note that SMEs who are the largest contributor to the industry, has not been consulted and thus been completely neglected and sidelined by the government. 

SMEs in the shipping industry share the same vision of the government to make Sri Lanka a maritime hub. These companies have helped Sri Lankan ports to compete with regional ports by continuously reaching out to foreign shipping lines and attracting them to Sri Lanka. Out of close to 11500 vessels that call at Sri Lankan ports,  about 8000 are casual caller vessels (non container vessels) which are canvassed by the SME sector.  Their contribution during the height of the war has been forgotten by many Sri Lankans today. Following the attack of the Bandaranaike International Airport in 2001 many international shipping insurance companies classified Sri Lanka  as a high risk  zone and introduced War Risk insurance  premiums for ships calling at Colombo which discouraged many international shipping lines to call Colombo. It was these SMEs who continuously battled to promote Sri Lanka to global shipping lines.

How has the Local Agencies helped our Economy? 

Apart from job creation and foreign exchange earnings these agencies have diversified their businesses locally and are going global with their investments. Many of these shipping agents have invested on local freight stations, container depots, third party logistics and even stepped into the construction industry. Some of these agents have expanded regionally bringing in more foreign exchange earnings to the country.

Investments in the Maritime education sector by the shipping agency companies as well as finding placements for Sri Lankan seafarers have contributed immensely to employment generation as well as additional generation of foreign remittances. 

These agency companies have been at the forefront of driving new businesses such as off-shore services, servicing of maritime security companies, attracting of non-containerized business as well as promoting Sri Lanka as a hub for all maritime related activities in all the ports in Sri Lanka.

The removal of the Sri Lankan stake of 60% would have a ripple effect on our Economy and the livelihoods of many people who are directly and indirectly effected.

In a case of full foreign ownership what benefits can we expect to our Economy? In terms of Foreign direct investment how much would Sri Lanka gain? The gains are very minimal. Ship agency business require very low investment and will not make any impact to the foreign reserves position of our Economy. These foreign companies will not promote the national interest of our country and it is likely that there would be greater focus on automation and reducing job opportunities in the industry. Sri Lankan operations would be perceived as cost centers so that they don’t have to pay taxes when repatriating profits. The voices within these global giants who are “promoting Sri Lanka as a port of call” will be no more as the key decision makers in Sri Lanka will be non-nationals whose sole aim is high profit and cost reduction, not the attraction of vessel to Sri Lanka.

SMEs concerned

The SMEs are closely monitoring the developments on this budget proposal as this would have an adverse impact on the livelihoods of several thousand as well as the large number of local companies involved in this business. 

It is very unfortunate that our country has been missing a lot of opportunities due to inconsistencies in policy and the delays with regard to capacity expansions. 

The regional outlook is very positive and the transshipment volumes handled by Colombo originating from India and Bangladesh is set to grow rapidly in the next 5 years. 

It is prudent that we step up the Colombo Port expansion to grab these volumes and thereby making Colombo a preferred port of call. Any further delays will result in the mega lines looking at other hubs for their transshipment volumes. 

The need of the hour is to expand terminal capacity in Colombo to ensure that the port of Colombo will continue to attract large vessels and remain the transshipment hub for the Indian subcontinent.

 If we lose this focus it will result in strengthening the hands of the newly developed and developing Indian ports at the expense of Sri Lanka.