Kuala Lumpur, Malaysia – Preliminary November 2022 traffic figures released today by the Association of Asia
CASA calls for key maritime reforms to boost shipping industry
There has been much talk about how Sri Lanka can pull its way out of the economic crisis and pave a path of recovery and sustainable growth. There is no doubt that this will require relooking at key sectors driving Sri Lanka’s economy and developing a roadmap for progress.
The maritime industry is the backbone of Sri Lanka’s international trade and contributes immensely towards Sri Lanka’s foreign exchange by being an important link to the subcontinent and providing a range of services to international vessels. Sri Lanka is strategically located where the busy East-West shipping route passes just six to ten nautical miles south of the island. More than 70,000 ships ply this route annually, carrying two-thirds of the world’s oil and half of all container shipments. This inherent strength provides a fantastic opportunity for Sri Lanka to become a maritime hub in the region, which will contribute immensely towards resetting the economy.
Since 1944, The Ceylon Association of Shipping Agents (CASA) has played a vital role in developing the local maritime industry to position Sri Lanka as a transshipment hub in the region. CASA contributes in several ways towards this including policy formulation, solving operational issues, regular dialogue with government and private institutions, pushing for digitalisation, education, training and more. Being the voice of the shipping industry, CASA plays an important role in managing the expectations of international shipping lines and working with the ministry and other government authorities on key development areas. What are these key development areas? This article highlights five key focus areas needed for the maritime sector and reforms which are paramount to reset the economy.
- Port and port-related infrastructure
The port of Colombo has seen a steady rise in volumes over the past few years and is now reaching its optimum operating capacity. It is vital that the East Container Terminal is fully operationalised and the development of the West Container Terminal is completed soon. If Sri Lanka is to stay relevant, Sri Lanka must ensure that capacity is added on a regular basis ensuring that the Port of Colombo operates at a high efficiency level with minimal berthing delays. Furthermore, Sri Lanka Should look beyond the East Container Terminal and should now be looking at developing the north port project and operationalising it in phases so that there never comes a time when the Port of Colombo becomes congested leading to principals looking at alternative ports.
Sri Lanka’s strategic location has positioned Sri Lanka as an attractive transshipment location. In order for us to grow our transshipment volumes, it is important that we develop capabilities to add value to transiting cargo. The availability of modern warehousing and value addition centres inside the port, will help develop Sri Lanka’s position as an attractive Multi Country Consolidation destination.
In the recent few weeks Sri Lanka has seen cruise lines resuming calls in Colombo, however the lack of a vibrant passenger terminal discourages operators from increasing calls to the Port of Colombo. As the world moves away from the coronavirus, many tourists are looking to spend their time on cruise tourism. If Sri Lanka could attract these cruise operators to call Sri Lanka it would boost the Sri Lankan economy by bringing in much needed tourists and foreign exchange.
Another aspect that should be looked at for the Port of Colombo to stay relevant is operational efficiency. Inter Terminal trucking and berth productivity are important contributors towards this which help shipping lines save time and money. The use of technology such as berthing management systems and automation can help position the Port of Colombo as an efficient and productive port in the region.
- Maritime ancillary services
Ancillary services provided to international ships is considered a ‘deemed export’ and generates significant foreign exchange to the country. While we focus on developing our existing export sectors such as apparel and tourism, we also need to focus on developing this sector. To develop this sector, it is important that we can offer the full range of services at competitive prices to main liners, feeders, casual callers, tankers, RORO vessels and passenger vessels. This will attract more vessels that are presently obtaining these services from other ports in Singapore and UAE. Ancillary services include; bunkering, marine lubricants, freshwater supply, offshore supplies, ship chandelling, slop disposal facility, salvage and towage, ship repairs, ship building, ship layup, maritime security and other services.
Some of the reforms needed include:
• Expansion of storage capacity for bunker fuel – to be globally competitive, Sri Lanka needs to be able to import and store larger parcels of bunkers to take advantage of economies of scale. This requires increasing the storage capacity. The current storage capacity is only up to 35,000 MT. This capacity needs to at least be doubled if we are to take more than 1% share from the 50 million tons supplied in Singapore annually. Favourable regulations will also be required for companies to set up floating storage facilities to increase the capacity.
• Development of modern warehousing facilities within port limits – Sri Lanka can attract more procurement volumes of ship stores, provisions, spare parts, marine lubricants, and other supplies if we are able to provide competitive prices compared to the region. This requires dedicated bonded facilities for storage close to the Port and easy clearance procedures to ensure timely delivery to vessels. There are over 200 vessels passing the tip of Galle every day but there are no bonded facilities available to supply these ships.
• Development of waste reception facilities- Ship waste such as slop, sludge and solids is a day-to-day need. We need to develop reception facilities for such waste to ensure timely collection and disposal of waste in an environmentally friendly manner.
• Developing emergency response services- the recent maritime disasters in Sri Lanka have shown the importance of having salvage services available in Sri Lanka. The government needs to encourage investment in salvage and towage so that we can respond to maritime emergencies in and around our waters faster.
• Developing ship layups – due to Sri Lanka’s strategic location, the Trincomalee harbour can be promoted as a favourable location for ship layups. This requires having competitive tariffs and facilities such as adequate buoys to attract vessels. Current restrictions need to be lifted such as the height restrictions imposed which do not allow rigs and other vessels with a mast over 45 metres to be laid up.
- Legal infrastructure
For the proposed maritime reforms to be implemented, the legal reforms need to be in place. Many of the laws and legal practices need to be reviewed to meet the current needs of the industry. Sri Lanka needs to develop specialised legal services covering the maritime and logistics sectors. Many of the laws and regulations are outdated and therefore restrict the progress of the industry. Developments in our legal infrastructure can enable Sri Lanka to become a favourable location for ship arrests and arbitration.
Investing in talent development is crucial to propel the industry forwards. The education framework needs to include soft skills training and vocational training. Training facilities and infrastructure should also be increased to develop talent for specific sectors such as; cruise, oil and gas, offshore support services, tankers, catering, etc. We also need to promote female participation to maintain equality, gender balance and inclusivity. Finally, we need to re-brand the image of Sri Lankan Seafarers and inspire young talent to join the industry by revealing the remarkable future potential.
- Ease of doing business
Improving the ease of doing business is important to improve the efficiency of the industry and attract more investment. Sri Lanka is ranked 99th in the Ease of Doing Business Index compared to Singapore which is ranked 2nd. This shows an urgent need to streamline processes, introduce digitalisation and provide more transparency. While the world has adopted automation, paper-less transactions, AI and blockchain technology in their operations, we are still dependent on paper and manual processes. CASA has been continuously encouraging digitalisation including the development of a single window linking the main stakeholders of the industry. CASA is also actively involved in working with government authorities to develop standard operating procedures to streamline communication and approvals processes.
Policymakers need to engage with stakeholders of the industry to allow these reforms. Implementing these reforms requires collaboration between the government authorities and the private sector. The policies developed need to be forward looking so that they don’t restrict the growth of the industry in the modern world. Most importantly, policies need to remain consistent to build confidence and trust among all stakeholders of the industry. Some have argued that development of the maritime sector requires liberalisation of the industry. Those proposing this do not understand that the industry is already liberalised and are shedding light away from the critical reforms that are necessary as highlighted in this article. By focusing on having the right policy and resources, Sri Lanka has tremendous potential to realise its vision of becoming a maritime hub in the region.