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From left: Maersk Lanka Managing Director Siddarth Iyer, Expolanka Freight Group Chief Executive Officer Shanmugam Senthilnathan, Emirates Area Manager – Sri Lanka and Maldives Chandana de Silva, McLarens Group Joint Managing Director Shehara Jayawardana, South Asia Gateway Terminals CEO Romesh David and moderator Shippers Academy International CEO Rohan Masakorala
By Charumini de Silva
Top maritime and logistics experts last week called for a reality check on the country›s ability to benefit from the global trade shift post-COVID and to become a logistic powerhouse in the Indian Ocean.
They reiterated that Sri Lanka needs to intensify its capacity expansion, ease of business, policy consistency, export basket diversity and technology integration; to attract a sizeable chunk of the global trade shift to be able to maintain Colombo’s status as a maritime hub.
This was echoed at a webinar organised by the AMCHAM titled ‘TRADESHIFTS: The role of Logistics: Are we ready for the shift’, where experts shared their insights on the country’s readiness to benefit from the global supply chain shifts from a logistics perspective and the disruption it requires to attract and retain opportunity, and truly harness the power of Sri Lanka›s geographical placement. In adjusting to survive in a VUCA (volatility, uncertainty, complexity and ambiguity) world, the experts said the ability to take quick action will remain a game changer.
Maersk Lanka Managing Director Siddarth Iyer said unless Sri Lanka attracts international supply chain companies, it will be difficult to capitalise Colombo’s maritime hub status.
“There is a huge opportunity for Sri Lanka, despite trade wars. We need to get supply chains to Sri Lanka, either as a value addition or part-manufacturing. The country needs to study new areas for supply chains. Without the supply chain companies, it is going to be difficult,” he added.
Although global trade declined last year due to COVID-19 pandemic, with the US looking at a $ 6 trillion economic boost, Iyer was of the view that it will crank up consumption, resulting in opportunities for trade.
He also said that the pandemic has resulted in economies and companies shifting from single sourcing to multi-sourcing, which once was regarded as impossible due to high costs, trade wars and policies.
“The shift is not going to happen overnight, but surely and steadily it will,” he said.
Iyer also said the dependency on fabric is still in China.
“Even if you take 1% off China’s supply chain that will be sufficient for economies like Vietnam, Cambodia, Bangladesh and Sri Lanka — but that still keeps China on top,” he pointed out.
McLarens Group Joint Managing Director Shehara Jayawardana said companies are still choosing to be in China and pay higher cost of the tariffs, while more agile companies have moved to India — the first country to be able to attract this shift followed by countries like Vietnam, Bangladesh, Indonesia.
Although Sri Lanka had not seen a sizable chunk of the business shifted, she said the country›s first four-month trade statistics reflect a rebound in terms of the value.
Jayawardana also said the countries that are able to get the vaccine and get their production sorted will be the first to get back on to the post-COVID manufacturing and trade levels. “Sri Lanka is lagging behind with the vaccines and there is also a view that the country is aligned to China as well. In that context, it is difficult to gauge how firms moving out of China would look at Sri Lanka as a perception,” she stressed.
In addition, she said ease of doing business, regulatory regime, policy consistency, legal infrastructure, cost of labour are all considerations that need to be addressed to be an attractive maritime and logistics hub in the region.
“We are hopeful that the Government and private sector will come together to track some of these (most of the services) with the Colombo Port City coming as well,” Jayawardana said.
South Asia Gateway Terminals Ltd., (SAGT) Chief Executive Officer Romesh David said Sri Lanka’s opportunity is not so much around the trade shift, but to serve the region in terms of close proximity to huge markets – India and China.
“I think what we need here is consistency of policy and that signals loud and clear to the world that Sri Lanka is here for business. While there is a trade shift happening, the real opportunity is as a gateway to this huge mass of consumption as the global economy shifts from the US and Western Europe to more South Asia and the Far East,” he added.
He said there aren’t too many economies that are service-led which have the luxury to access such large markets.
“Our strategic location is a great opportunity that has remained unchanged over the past 20 years. By air, we are within two hours from one quarter of the world›s population and within five and half hours to half of the world’s population. There is no lack of opportunity in terms of connectivity,” he said.
According to David, lack of diversity in offerings is a huge inhibitor to make use of the trade shifts.
“The biggest barrier today is not so much about the logistics, but the lack of diversity in terms of export basket, human resource capability and resource availability,” he said.
Expolanka Freight Group Chief Executive Officer Shanmugam Senthilnathan said Sri Lanka has a great opportunity to position itself, provided the country addresses the fundamental bottlenecks in trade.
“We need to do some homework and make sure we are ready to be part of the beneficiary of the shift in global trade. Ramping up capacities, trade agreements, regulatory frameworks are top considerations that need to be addressed to be able to benefit from this shift,” he said.
According to him, the top beneficiaries of the trade war fallout are Vietnam (leading), Indonesia, Malaysia, Thailand and India, which boasts of 35 to 40 free trade agreements (FTAs).
Senthilnathan also highlighted the need to increase the current 50% trade to gross domestic product (GDP) by many folds like competitive other nations.
He said the trade shift could have happened even faster, had there been no pandemic.
Emirates Area Manager – Sri Lanka and Maldives Chandana de Silva said the country will have to consider all key factors collectively, rather than in silos to be a hub in the region. He also highlighted the importance of integrated technology to be competitive in this trade shift.
