The country’s logistics industry is working hard to build capacity in terms of infrastructure and human capital and is moving towards achieving hub status. With the right policy decisions, Sri Lanka’s ports could be the most competitive in the region and automation will play an important role, Chief Executive Officer, Shippers Academy Colombo and Chairman, Advisory Committee for Logistics, Rohan Masakorala said.
He said that the development work on the East Container Terminal needs to be speeded up to meet the 2025 volumes and advanced technology is necessary for the logistics industry to move forward.
“We should consider regional port development in India, Bangladesh and Pakistan as complementary. These developments will bring in more business to our country,” he said in an interview with Business Observer.
Excerpts:
Q. Can you give us a brief account of the success of the shipping industry?
A. Sri Lanka’s success has been in the transshipment business. The country has failed to become a logistics hub. Transshipment is purely an economic benefit. Sri Lanka has a long way to go. Success is yet to come compared to other regional hubs. But, a window of opportunity is still awaiting if we take the right decisions.
Q. A major international conference will be held in Colombo this year. It is the first ever Colombo International Logistics Conference.
a) What are its objectives?
b) Who will attend the conference?
A. a) We hosted two maritime conferences in the past. Sri Lanka is in an advantageous position to be the best logistics hub in the shipping industry. There are many reasons for this, and geographical location is one of them. We have a two-billion consumer market and the Indian subcontinent is the world’s fastest growing region.
Sri Lanka is between two major hubs, Singapore and Dubai. We have an advantage as we connect to Dubai and Singapore through a route which is faster compared to other countries in the region.
This is a unique selling proposition, and connectivity to other hubs is also unique. It is a convenient location for storage and bunkering for the global supply chain. The objective of the conference is to showcase the opportunities we offer.
b) Investors, manufacturers, representatives of logistics companies, e-commerce business, logistics market, from companies in the Indian subcontinent and businessmen from China and Singapore looking for new avenues of investment will attend the conference. We believe logistics can change the landscape of Sri Lanka.
Q. How could this kind of international event help build Sri Lanka’s image as a logistics hub?
A. Global players have a wrong perception of Sri Lanka. This is due to bad marketing. The idea of having international events in the country is to tell the world to witness the location, use the facilities.
Q. The shipping industry is currently handled by some veterans in the sector. What immediate steps would you propose for them to develop the industry?
A. I do not agree with this statement, because we do not have global veterans in our local industry. The lack of veterans is an issue. However, there are a few veterans, but their voices are not heard. As a result, the country has gone backwards from 1977 with liberal policies.
This is what we want to change with the expansion of the logistics industry. The government should see the big picture and take the country to the next level. Otherwise, we will fall behind in competition. We are late in introducing reforms and building the industry.
Q. The government has still not taken a decision on the East Container Terminal contract. What is the best way to get this project going?
A. The development of the East Container Terminal is important to send a message to the international community. At present, our terminal operators could manage 3-4 million TEUs by increasing productivity and using modern equipment. We should not scare any player by saying that we are not ready.
That does not mean I endorse the delay in the East Container Terminal operation. The stage by stage development of the terminal, which began two years ago, should go on. It is important, simply because we have to increase capacity by 20 percent.
Ship owners will plan their routine business keeping Colombo in mind. There are ways to develop this terminal. Terminal operators in Colombo could be encouraged to invest along with the Government and expand current consortia that would benefit the country, the Sri Lanka Ports Authority, ship owners and investors.
If we look inwards, we may have a solution for this. I urge the government and relevant authorities to think out of the box. The solution is within us. It is necessary to be prepared for 2025 volumes.
Q. How should the Colombo Port be developed taking into consideration Indian port development?
A. Colombo port development is our own business. We cannot stop regional players developing their ports. We need capacity and infrastructure to meet demand. The growth of Indian, Bangladeshi, Pakistani and Sri Lankan ports means all the countries will have business.
There will not be any negative competition. It will be complementary. A report by the World Bank on the Indian subcontinent in 2017 said that ports are working at 50 percent efficiency. (Probably excluding Sri Lanka).
We rely a lot on Bangladesh and India. We need partnerships for cohabitation and better economic relationships. I see India and Bangladesh as an opportunity. As we have always been looking at a hub and spoke model, we should not only talk about the hub but see that the spoke is well oiled to spin the Indian subcontinent.
Q. Sri Lanka has been aiming to become a maritime hub for some time. But it seems that support services of the industry are yet to be realised. How should this be tackled?
A. Sri Lanka should aim at being the best logistics hub in the Indian ocean. Politicians, bureaucrats and business leaders have failed to see a bigger picture. It seems that the vast majority of the politicians are self-centered and protectionists. As a result, the people have not got what they deserve in this sector. This sector can become one big pillar to support poverty eradication. But lip service has been the only tool without focussed action by many governments except for a few people who try to change the system.
Q. What is the status of the Customs e-service?
A. The Customs e-service is relatively backward compared to international services. This is due to internal factors and external interference by politicians and businessmen. The slowing down of the reform process has a negative impact on the service.
Corruption is the biggest problem. We are merely fire fighting and covering with plasters to rectify issues. We need a modern Customs service to serve beyond the Indian subcontinent, to compete with our world-class hub and to attract more business to Sri Lanka. I see an effort being made to move towards this goal, but the obstacles are many.
Q. What are the issues in the export-import sector that should be sorted out in the journey to become a logistics hub?
A. The shipping industry constantly faces many challenges because multiple ministries and agencies work in different directions. They do not understand government policy, global competition and the external perception on Sri Lanka.
While some institutions are focussed on helping exporters, others pull back. There are bureaucrats and people, who have built their own empires within these institutions, and not flexible enough to speedily facilitate reforms. Some facilitate their own interests.
We seek greater political will to improve Sri Lanka’s logistics performance ranking and ease of doing business ranking as these indexes reflect what exporters and importers face. Government ministries must collectively meet industrialists once a month to look into their problems not the other way round where exporters and importers have to write to them repeatedly regarding their problems.
What Sri Lanka really needs is to strengthen the institutional framework and depend less on people-based action. Export and import based industries could be facilitated by such a move.
Q. What is the development that you would like to see in Trincomalee and Hambantota ports?
A. The Hambantota port is now a private public partnership (PPP), on a long term lease through a Chinese investment. The investor has the global scale, ability and knowledge to develop it over the next 2-5 years into a profitable business. I see Hambantota as a positive factor for Sri Lanka with the partnership we have built with China.
Hambantota is not only for Sri Lanka, but for the region including India. India’s biggest trading partner is China. Hambantota may become a viable commercial zone in the region soon.
Trincomalee is a natural port. Its viability will depend on how the Bay of Bengal expands in economic activities. It will also depend on the investment climate and how investors look at it through a business point of view. It will be a good industrial port for storage and distribution of energy and bulk products. It is up to businessmen to develop these ports not the government. The government will be the facilitator.
Q. What sort of investment would you encourage in the Port city?
A. Sri Lanka needs to create a more business-friendly environment to be a good business centre in the Indian subcontinent. In this scenario, maritime and logistics is one of the components and energy and finance the others.
We lost many opportunities in 1960s due to nationalisation. We basically threw the baby with the bathwater by chasing away international capital and technological know-how. We threw out these opportunities. Singapore and the UAE embraced them.
As a result, they became $ 50,000 per capita income countries where as we became a $ 4,000 per capita income country. If we go on the same road over the next 70 years, we will be a $ 10,000 per capita income country and they will be a $ 100,000 per capita income countries.
We need to change this now. We should move away from the protectionist, over nationalistic, namesake free economy. We need to open up for more foreign investment. We need to acknowledge the presence of global companies and recognise that profits are a part of the free economy.
We need to give more freedom to entrepreneurs who adopt the best practices of the UAE and Singapore so that we will not reinvent the wheel to double or triple our growth.
If our politicians over the past 40 years had accepted the free market, it is time for them to look at much greater reforms and look outward to be a global hub.
Q. The maritime sector is also swiftly moving towards automation. How should we develop human resources for the future needs of the logistics industry?
A. We are living in the fourth industrial revolution. The fifth industrial revolution is also fast approaching. Technology is rapidly changing the way we do business and production and the consumers response to this is also changing.
This is true for the logistics industry as well. The domestic logistics industry is really backward in terms of automation and technology. The international conference is to open the industry to more advanced logistics.
If we put our house in order step by step it will not be a difficult task for Sri Lanka to emerge as a logistics hub. I request our political leaders to be united and get the fundamentals right.
I appreciate the fact that all political parties have accepted the free market economy and that Sri Lanka must connect to the global market and supply chain to benefit and bring prosperity.
We also need to develop skills, capacity and the knowledge of our workers and the general education system. Without proper human capital, we may fail. We need the best policy, best technology and the best opportunity. I request the government and businesses to focus on proper capacity building to face the fourth and fifth industrial revolutions.