Sri Lanka’s port development: The growth engine of the nation

With the country’s three main ports being developed extensively for connectivity and a variety of purposes and Colombo being the only main South Asian port well equipped for mega container ships, Sri Lanka should develop opportunities to showcase the country as an investment destination in the 21st Century – Pic by Shehan Gunasekara

By Srimal Fernando and Mizly Nizar 

Sri Lanka is striding on a new development trajectory by embracing port development to create significant changes to the current commercial environment and spur economic growth in the global arena where 90% of the world’s trade is moved through shipping considered as the wheels of global trade. Developing ports with appropriate infrastructure facilities to accommodate and facilitate higher seaborne trade is one way to transform the country’s economy and unlock its growth potential. 

Enabling this growth agenda is Sri Lanka’s geographical setting in the Indian Ocean that provides the country with the unique opportunity to emerge as a maritime and logistics hub in Asia. There are two major factors contributing to this possibility. Firstly, a massive amount of maritime cargo, nearly 45% from the Indian sub-continent transfers through the port of Colombo. The other major factor is that annually nearly 60,000 ships ply the international shipping lanes that pass a few nautical miles off the coast of Hambantota. 

The above key factors based on Sri Lanka’s strategic positioning enables the country to provide global and regional connectivity to transport freight to and from Asia to the rest of the world.  

Out of the six main ports in the country, the ports of Colombo, Hambantota and Trincomalee can play a significant role to ensure the efficient movement of freight between the ports of origin and the destination ports. This requires the development of a port freight network of key transport corridors comprising road, rail, sea and air linking the freight activity centres at provincial and district levels.

Freight passing through ports is measured by the volume of container shipment measured in TEUs (Twenty-foot Equivalent Units). In order to increase efficiency and profitability, shipping companies are adding larger container ships to their fleet to increase their cargo carrying capacity. Hence, to accommodate these ships, ports need to develop deep water terminals. 

In this context the port of Colombo was developed in order to increase its container handling capacity in the face of growing competition from regional ports. The Colombo port underwent several stages of development in the past few decades. With the opening of the Colombo International Container terminal (CICT) in 2014, it is now one of the world’s largest marine container handling ports with the only deep water terminal in South Asia capable of handling the largest vessels afloat. 

The CICT with a 6.8-kilometer main breakwater can handle the biggest Triple-E Class vessels carrying 18,000 container units. According to the  latest World Shipping Council’s Top 50 World Container Ports rankings based on the volume of the containers handled for five consecutive years, the port of Colombo is the 24th best container port in the world. With three container terminals, the port handled a record breaking 7 million TEUs in 2018 alone and is the only South Asian port among the rankings. 

Focusing further on transforming Sri Lanka into a maritime logistic hub similar to Singapore, the nation further looked at developing ports outside of the country’s commercial capital. 

As such, given the strategic positioning of the port in Hambantota at the Southern tip of the country, its development was initiated in 2008. Compared to the other ports in the region it has the geographic advantage of being strategically located nearest to the world’s busiest shipping lane with the added benefit of a deep water coastline. This allows for the building of large deep-water ports capable of handling the world’s largest container ships and supertankers making this port an ideal location for the transshipment of goods and natural resources moving across the subcontinent. Hambantota is also integrated into the global development strategy of the Chinese government, the Belt and road initiative (BRI), providing the opportunity for wider regional maritime connectivity. 

Moreover, this port has the benefit of the vast expanse of land available in the Hambantota District for its expansion and has the potential to emerge as the most favoured International business hub. With the aim of creating an energy hub surrounding the port of Hambantota, the LAUGFS LPG Transshipment Terminal, the largest of its kind in South Asia was initiated in May 2019. Projected to achieve an annual export value of $ 500 million, this terminal will also commence coastal shipping services between the ports of Hambantota and Colombo for the very first time.

The other important port of this island nation and the world’s second largest natural port is situated on the Eastern coast in Trincomalee. The water and land area available to this port is around 10 times as much as is at hand for the Port of Colombo. Presently Trincomalee is being designed with the aim of making it an important maritime city to service the Bay of Bengal region that connects South Asia to South East Asia. 

With the expanding population and the middle income group in South Asia, the demand for consumption and manufacturing products is expected to increase nearly three to four fold by 2050. This would create a huge demand for cost effective logistics services. Sri Lanka’s geostrategic positioning offers for the ideal setting to provide logistics to emerging markets. 

Sri Lanka, in fact is the only location that links two major hubs of the Middle East and the Far-East (Dubai and Singapore) within four hours’ flight time and four days of sailing. This unique benefit along with the market of the Indian Sub-Continent provides for an unparalleled advantage for cost reduction, timely delivery to markets and the provision of access to customers. 

Sri Lanka’s Commercial Hub Act offers an investor friendly flexible environment opening the country for logistics FDI with least procedures for international investments. Known as a mega transshipment location in South Asia and ranked as the 11th best connected shipping port, Sri Lanka’s ports are among the fastest growing ports in the world. Located in the centre of the Indian Ocean, linking continents with an outreach of billions of people the country is yet to realise its potential as the best location for logistics, storage and distribution of containerised and bulk shipments. 

With the country’s three main ports being developed extensively for connectivity and a variety of purposes and Colombo being the only main South Asian port well equipped for mega container ships, Sri Lanka should develop opportunities to showcase the country as an investment destination in the 21st Century. 

(Srimal Fernando is a Doctoral Fellow at Jindal School of International Affairs (JSIA), India and a Global Editor of Diplomatic Society for South Africa. He won the 2018/2019 Best Journalist of the year award in South Africa. Mizly Nizar is a foreign policy analyst and a former visiting lecturer at The Bandaranaike Centre for International Studies and the Open University of Sri Lanka.)