Who wants liberalisation of shipping agency when we have the expertise locally

By Son of the Soil

There have been calls from various unrelated persons to liberalise the shipping agency business. What these pundits fail to understand is that the shipping industry was liberalised in 1990 under the then UNP Government of President R. Premadasa. Prior to 1990, the Central Freight Bureau (CFB) was the deciding authority on which shipping line could load export cargo out of Colombo, how much each shipping line could load, to what destinations they could load, what are the applicable freight rates, etc. The CFB was the defacto marketing arm of the Ceylon Shipping Corporation (CSC) who tried to ensure that the CSC vessels were given priority of cargo. 

The Government decided to liberalise the shipping industry permitting all shipping lines to load export cargo from Sri Lanka without any restriction. The Government also took steps to permit foreign shareholding in shipping agencies to encourage shipping lines calling at Colombo.

In the light of all these developments, we cannot understand why these pundits who call themselves ‘Shipping Experts’ are calling for liberalisation. Why do they say that the shipping industry is not liberalised, when in fact it is.

The role played by the shipping agents is an important one as they are the ones who market the ports in Sri Lanka, lobby the lines and attract them to call at Colombo or other ports in Sri Lanka. The shipping agents use their own finances to secure agencies, attract lines to call at Colombo, push for transshipment cargo to be routed via Colombo and also bring in the foreign exchange. It’s the ‘local’ agent who has expertise in local procedures etc and hence the need for local representation for the international shipping line.

The argument in offering 100% ownership of shipping agency business to foreigners anticipating the foreigners to bring in investments, create more jobs and generate more cargo volume is an absolute myth. What will happen is the reverse. The foreign shareholders will bring in expatriates from overseas to run the office depriving locals of job opportunities, will push all the service providers to reduce rates etc, thereby depriving the service providers of earnings in foreign exchange, will make the Colombo office as a cost centre showing no profits at all, because the foreign investor will bill everything to the local office thereby depriving the country of foreign exchange and taxes and also deprive the country of investments in other sectors. 

The setting up of a shipping agency does not need much investment. Basically having office space, some computers with the appropriate software and staff you can operate a shipping agency. Sri Lanka has the human capital, expertise, IT knowhow and the capacity to own and manage the shipping agency business which it has done for the past several decades. The entrepreneurs who were involved in the shipping agency business ploughed back all the profits into the Sri Lankan economy by investing in container yards, freight stations, warehouses, transport fleets, tugs/barges/launches for offshore services, maritime schools, and other logistic related services. 

Furthermore these entrepreneurs also invested in the other sectors like tourism, power generation, real estate development, IT, garments manufacturing, etc. In other words the profits earned from the shipping agency business were retained in Sri Lanka and invested in Sri Lanka.

The Governments focus should be on more burning issues for national shipping like bringing East Container Terminal on stream, digitalising the port, harmonising customs procedures and investing in passenger terminal etc which are the pressing issues in today’s maritime sector business. Addressing these issues will in fact bring in more business and development to the Sri Lankan maritime industry rather than trying look into trivial matters such as foreign shareholding in shipping agencies, which will impact local business negatively.

Those lobbying for 100% foreign ownership in the shipping agency are totally unaware or don’t want to be aware of the efforts made by the Sri Lankan companies to develop the shipping industry. They feel that opening the industry to the foreigners will benefit the industry. They are sadly mistaken. We wonder where their allegiances lie. Are they Sri Lankan Nationals wanting to promote Sri Lanka or are they opportunist wanting to lobby for foreigners so that they can make a buck at the expense of selling the country. These people are absolute ‘Desha Drohis’ working under hidden agendas.