CASA’s predicament

By Analyst

As the new year dawns, Sri Lanka will enter a new era of the  promised development agenda which was delivered through the 2018 Budget policy statement announced by the Finance Minister. As the Budget has now been passed through a two-thirds majority in Parliament, the international community, Sri Lanka’s partners and international investors are now watching to see if action will be taken on the much-needed reforms or if it they will end up, like in the past, as unfulfilled proposals.

One of the policy topics most lobbied against by the Ceylon Association of Shipping Agents (CASA) was the liberalisation of the shipping and logistics industry, where the Government wants to create a conducive environment for international capital and global partners to focus attention on Sri Lanka to transform the maritime sector into an Indian Ocean shipping and logistics hub as shown in the middle page of the Vision 2025 jointly issued by President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe.

Finance Minister Mangala Samaraweera, upon the conclusion of the Budget vote, repeated that Sri Lanka would not be a nanny state and would not allow a handful of protectionists to hold government policy and the country’s progress to ransom and promised that he would engage the Minister of Ports and Shipping soon on this matter.

Monopoly accusation

At the same time, surprising news came out when Joint Opposition MP Vasudeva Nanayakkara had filed a petition against the Shipping Minister for allowing the monopolisation of the local shipping agency business, citing a violation of the Merchant Shipping Act, which harmed exports and competitiveness. 

International sources also revealed that the EU Competition Commission too had accepted a petition from London sighting the indirect cartelisation of shipping lines in Sri Lanka using the agent as the front end to do so. The EU is considered having the strongest regulations in terms of monopolisation and antitrust laws in transportation.

In this instance it seems that the Government and the Joint Opposition also see that the lobby of the shipping agency business is not only harming local exporters but the interest of agents from smaller shipping services and freight forwarders, by not only controlling the market but eliminating any intense competition within the shipping services sector in Sri Lanka.

It is known from industry sources that there were a few meetings held within CASA behind closed doors last week, further lobbying the Minister of Shipping, hosting dinners and canvassing with a selected group of newly-formed freight forwarders to use them as pawns to protect the interests of the few who control CASA.

The majority of the local shipping and freight forwarding fraternity privately expressed their support to the Government to open up the sector as they believed that it would create new opportunities for them. Some expressed the view that CASA was a private club of two or three individuals running the show through their company employees and using all the small players to do the dirty work for them and then squeeze the very same small players out of business by monopolising the industry. 

Most small and medium players’ only requirement from the Government was to ensure that international players were properly regulated and some request a stage-by-stage opening and getting some of the big players to commit to Sri Lanka by investing and setting up sub-regional offices or bringing in some backward integration to help the industry move towards a new era of expansion.

Clearly there are two camps within CASA now and the freight forwarding industry has distanced itself as an independent body and probably realised that the opportunities for them are greater if shipping is liberalised as global and regional interest would be drawn towards Sri Lanka as the Government expands the ports of Colombo and the new agreement with China on managing the Hambantota Port. 

Some forwarders even commented that with the new regulation they would be able to attract more capital with an international joint venture giving global companies a bigger stake and enabling growth through partner strength. 

Some expressed that if the price was right they would like to sell their companies to international investments or expand globally as partners in places which Sri Lanka does not have access to.

Liberalisation

Liberalisation is all about the freedom of the market to buy, sell, share, partner, invest and diversify. These are the choices of a maritime hub which will help create economic activity that will bring down costs, push towards technological reform and help expand the sector itself and Sri Lankan exports. 

As the industry is slowly realising the inevitable, the few who benefited at the expense of the country and the rest of the industry will certainly pull all the strings until the last moment. The unfortunate part of this whole episode is that the Minister of Ports and Shipping is playing a hero’s role for these few companies and acting against the vision of the Prime Minister, who is the Minster in charge of policy, and the Minister of Finance, to make the long overdue call that Sri Lanka needed. Now it is interesting to see how the Ports Minister intervenes on MP Nanyakkara’s case against a monopoly. If he simply remains silent then he agrees that there is a monopoly situation in Sri Lanka.

In the meantime, CASA’s predicament is whether they can retain a loyal SME membership beyond 2018, as Sri Lanka celebrates 70 years of independence, with an autocratic set of rulers who operate as a merry-go-round electing friends as chairmen of the association to carry on business as usual. It is likely with this policy reform that a new era of agents will be born in Sri Lanka who will be entrepreneurs who think differently and use their talent to partner global players and truly make Sri Lanka a maritime and logistics hub. 

CASA’s lifetime is probably ending for sure if they do not reform, stop underhand dealings and adapt to the 21st Century reality of competition.