18 Oct CASA outlines strategic priorities for developing maritime sector
Since its inception in 1944, the Ceylon Association of Shipping Agents (CASA) has played a vital role in developing the local maritime industry and has contributed towards positioning Sri Lanka as a transshipment hub in the region.
Leading on policy and strategy CASA also works on multiple day-to-day issues in the smooth movement of goods and handling maritime operations. Through regular dialogue with stakeholders, Government institutions, regulatory bodies and other Government and private sector agencies, CASA seeks to affect an interchange of ideas and information, represent and advocate the views of the association in all official fora and shape the future of the industry by investing in education and training for its members and working with maritime training academies to train seafarers.
CASA too echoes the Government’s aspirations towards making Sri Lanka a maritime hub, leveraging on its strategic positioning. However, there are several key initiatives that will need to be prioritized to reach this goal.
Sri Lanka is strategically located, where the busy East-West shipping route passes just six to 10 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. It is no secret that Asia is bound to emerge as the economic powerhouse of the world if the current trends of development continue for the next couple of decades.
Many have expressed views on what is required to make this transformation including the need to liberalize the industry, which is misleading and also misses out on the fundamentals of what is required to develop and build efficiency in the maritime sector Sri Lanka needs to invest in basic infrastructure and improve the ease of doing business. In any case the shipping industry is fully liberalized contrary to views expressed.
Shipping agents have significantly contributed to the GDP and the Balance of Payment of Sri Lanka, amidst turbulence and has demonstrated a positive trend in the generation of foreign exchange, over the years despite the global financial crisis, the tsunami, the Easter bomb attacks and COVID-19.
The sea transport income in 2019 had been $ 1,555 m, which was 4.4% of the current and capital account balance. Agents have expanded their service offering to the principals through ancillary services and promoting Port of Colombo and convincing them to divert additional business to Colombo. Shipping agencies have reinvested their income on other related logistics and transportation related businesses (which would have otherwise been repatriated out of the country) thus creating employment opportunities for Sri Lankans.
Direct employment in the transportation and storage sector is over 6% of the Sri Lankan labor force. It is also important to remember that there are other indirect contributions to other sectors such as boat operators, bunker traders, vendors for ship supplies, hotels/villa operators, sludge removers, etc., which also has to be considered when calculating the economic contribution of the agents.
It is inevitable that Sri Lanka should capitalize on the location specific advantages and position itself as a hub. Therefore, it is important to probe what constitutes a maritime hub and what are the immediate investments required to get there. This article mainly highlights few of those crucial investments requiring urgent attention.
Fast-tracking the development of port-related infrastructure
- Deep draught container berths – The Port of Colombo has a container throughput of 4.79 million TEUs cumulative up to August 2021 compared to 4.54 million in 2020 for the same period. The terminals in operation are reaching maximum capacity and if the development and commercialization of new terminals are not prioritized, we will not be able to cater to the volumes. There is an urgent need to fast track the procurement of port cranes for the East Container Terminal and make it fully operational, expanding the capacity to 11 million TEUs per annum. If this is not expedited, we will see “footloose” transshipment volumes moving out of Colombo to Indian ports offering cheaper and faster alternatives.
- Developing break bulk vessel handling capabilities – If the country is serious about attracting bulk cargoes for transshipment and value addition, we need to urgently upgrade the land side equipment for handling multiple vessels simultaneously at Ports of Colombo and/or Hambantota. The speed and efficacy of operations can be increased by increasing the skill levels of labor force. Further, it is important to maintain consistency in billing and provision of other services by the Ports Authority.
- State-of-the-art passenger terminal – Sri Lanka being a hotspot for global tourism, there is immense potential to attract more cruise vessels to Sri Lanka. The current passenger terminal is required to be modernized and upgraded to cater to the requirements of tourists and modern ocean liners which carry a large number of passengers and crew. The harbor requires adequate facilities to provide water, dispose garbage, and refuel the vessel. A state-of-the-art passenger terminal will help position Sri Lanka as a cruise destination and open up the opportunity for several other complementary services.
- Increasing the efficiency of Inter Terminal Trucking (ITT) – Developing an efficient ITT system is important to give more visibility to port users and avoid delays and congestion. This requires integration of Terminal Management Systems and technology to ensure trucks are optimized and containers are moved only when needed. With the increase of terminals, the weak link of the Port of Colombo will be the Inter Terminal Trucking, hence proactive investment in ITT monitoring system is urgent.
- Investing in new harbor tugs and improve berth productivity – Upgrading the existing harbor tugs and using technology such as integrated berthing planning systems can help enhance resource allocation, increase turnaround, and reduce delays in vessel berthing
- Infrastructure to handle hazardous cargo – Considering the increase in hazardous cargo volumes and the possible negative impact to our ocean and marine life, it’s imperative that the port enhances infrastructure and equipment to mitigate risk and ensure safety at all times.
- Develop state of the art multi-user, multi-country consolidation warehouses within port limits – Developing such facilities will enhance the logistics capabilities and enable Sri Lanka to provide more value-added services to the region in line with the vision of being a maritime hub. State-of-the-art modern warehouse with racking and warehouse management systems is required to enhance the value-added services we can offer as a regional hub for cargo consolidation and processing. Such facilities will increase the port volumes and handling of cargo.
Developing maritime ancillary services
For Sri Lanka to realize its vision of being a maritime hub, it is important to focus on the development of support services or ancillary services. We need to ensure that we have the full range of services at competitive prices to be perceived as an attractive destination for main lines, feeders, causal callers and passenger vessels. These 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 areas that need to be developed are highlighted below:
- Developing bunkering services: To be a globally competitive bunker supplier, Sri Lanka needs to be able to import and store larger parcels of bunkers to take advantage of price fluctuations and economies of scale. This requires increasing the storage capacity. At the current moment JCT oil bank capacity is only up to 35,000 MT. This capacity needs to be at least doubled if we are to take more than 1% share from the 50 million tons supplied in Singapore annually. Currently restrictions and bureaucracy prevent initiatives like floating storages from being implemented in order to increase the storage capacity.
- Develop and permitting the use of modern bonded warehousing facilities within port limits – Sri Lanka can attract more procurement volumes of ship stores, provisions, spare parts, lubricants, and other supplies if we are able to provide competitive prices compared to the region. Dedicated bonded facilities inside the port can enable duty free items to be supplied with a quick response time. Galle OPL is a big market for offshore supplies but there are no bonded facilities available.
- Developing marine lubricants and fresh water supply – In order to develop the marine lubricants and freshwater market, it is important for us to be competitive in the market and improve ease of supply. This requires development of infrastructure such as dedicated lubricant tanks for bulk storage and more freshwater barges allowed to operate inside and outside harbor limits. In addition, the private sector needs to be allowed to supply inside the port/OPL and 24 hours a day with ease of obtaining permissions and approvals round the clock.
- Waste reception services – Slop, sludge and solid waste discharge from ships is a recurring need. Having proper reception facilities at ports for the same is an obligation of all port states agreed by the MARPOL Convention to which Sri Lanka is a party. Regulations should be made more favorable to facilitate collection and disposal of such waste in a timely manner. And also encourage investments in environmentally friendly reception facilities in line with the international conventions.
- Developing salvage services – The recent maritime disasters shows that it is important now more than ever to ensure salvage services are available to minimise the impact of any future incidents. Having such services is also beneficial to ports, transporters, surveyor and everyone else involved in the supply chain. The Government should encourage the development and promotion of the business of salvage and towage and encourage Sri Lankan entrepreneurs to invest in this industry with necessary incentives. The Government should also ensure that minimum salvage and search and rescue facilities are maintained in and around the Sri Lankan waters to be able to respond immediately to maritime disasters such as the mv express pearl.
- 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 and also dealing with the height restrictions imposed which do not allow rigs and other vessels with mast over 45 metres to be laid up.
Opportunities in maritime security industry and as a crew change hub
Sri Lanka has been a central point for the embarkation and disembarkation of sea marshals and ship crew for private maritime security companies and crewing companies. All the logistics for the transfer of these guards and crew are arranged for by shipping agents including airport transfers, liaising with service providers and the Sri Lanka Navy for the storage of the weapons and equipment in the Naval Armoury, arranging accommodation, subsequent repatriation for foreign seafarers/sea marshals, etc.
If Sri Lanka wishes to maintain its position as a crew exchange hub the country needs to align the health ministry quarantine regulations for sea farers in line with that for tourists and also enable them to travel on commercial airlines in order to attract more numbers of ship owners and managers to perform their crew exchanges using ports of Galle/Colombo and thereby increasing the volume and foreign exchange revenue to the Country as well. Further relaxation of isolation and quarantine regulations in line with those offered to tourists will send a clear message to ship owners and help the country earn more foreign exchange at this crucial time.
With regard to OBST operations it is vital that the rates offered to sea marshal companies by the armoury are competitive and in line with the competing floating armouries in the Red Sea, in order to maintain volumes and also encourage Sri Lankan sea marshals to be employed.
Developing legal infrastructure
There is a need to review and develop the laws and judicial practices according to the industry needs. This includes specialised legal services covering the marine and logistics sector as well as laws and regulations recognising the modern developments in the maritime supply chain that are required to reach a hub status. Further if the legal systems are enhanced, Sri Lanka can become a favourable location for ship arrests, arbitration, etc. It also is necessary to develop the dispute resolution process so that decisions can be expedited. Special admiralty courts need to be developed to have fast resolution of maritime matters.
Further a system of clearing the abandoned and detained containers at the Port of Colombo needs to be implemented. Currently over 1,100 containers are lying in terminals for many years. Speedy action needs to be taken for destruction or auction these containers and release the containers to the trade, especially at the time there is a shortage of equipment in the market. Local prohibitive legislation for shipping lines to recover logistics costs has also contributed to the short allocation of containers for Colombo cargo.
Development of national merchant shipping fleet and Sri Lanka flag
The Government should encourage organisations towards ship ownership, ship operation and ship management under the Sri Lanka flag. This requires fiscal incentives and measures to make such investments attractive. It also requires a smooth and easy process for ship owning, operations and management.
Therefore it is important to have framework and a central unit which is dedicated for the purpose of promoting ship owning and flagging. Attracting ship owners to register their fleet using the Sri Lanka flag is a direct method of earning foreign exchange revenue.
Capacity and talent building
Investment in capacity building of people will be of paramount importance to the growth of the industry. A key area of development is vocational training. To develop the skills required it would be important to encourage partnerships between foreign and local universities to provide world class education in logistics and supply chain management.
It will also be important to introduce workshops and trainings for specialised roles within the supply chain. Further, the importance and opportunities in shipping and logistics can be incorporated at a much earlier age to students at the secondary education level.
Improving ease of business and digitalisation
Finally, if we want to realise our maritime hub aspirations, the Government needs to create an encouraging climate for investors by improving ease of doing business. This includes; streamlining process, providing incentives and non-bureaucratic regulatory infrastructure for these services to be offered at world class standards and regionally competitive rates.
One of the biggest barriers has been integration of information between different authorities and lack of transparency. Sri Lanka is ranked 99th in the Ease of Doing Business Index compared to Singapore which has a ranking of 2nd. This shows that there is a long way to go and one way of getting there is adopting digitalisation. Many countries are implementing initiatives such as; automation, paper less trade, electronic data interchange, artificial intelligence and block chain to develop greater efficiency in operations.
Currently the shipping process involves a myriad of manual documents, physical interactions and paper submissions to multiple government authorities leading to delays and increased ultimate costs for the consumer. There is an urgent need to fast-track the digitalisation drive starting with port community systems, customs systems and also 24 approvals process in all ports and affiliated authorities.
CASA, the voice of the shipping industry, has been supporting the initiatives to develop the Single Window Blueprint facilitated by the National Trade Facilitation Committee and Port Community System Project spearheaded by the Sri Lanka Ports Authority. As a stakeholder and an industry body representing shipping lines in Sri Lanka, CASA firmly believes that the National Single Window and the National Trade Information Portal will put us in the right direction to achieve the maritime hub aspirations of Sri Lanka.
CASA is also in consultation with Government authorities such as the Sri Lanka Ports Authority, Sri Lanka Customs, Department of Immigration and Emigration to streamline processes and to improve Ease of Doing Business which will eventually facilitate trade in Sri Lanka. During the pandemic, CASA played an active role in coordinating the implementation of Electronic Delivery Orders (EDO) which significantly reduced the physical interaction and can be considered a key step towards digitalisation. Yet the port community urgently awaits an integrated system that makes supply chain seamless.
The policymakers need to engage with stakeholders and the private sector to ensure these initiatives and plans are implemented systematically. The aspects highlighted in this article are critical success factors in our pursuits towards sustainable competitive advantages, a superior business proposition to the global shipping community, which will in turn will be instrumental in realising our aspirations to become a maritime hub. It is imperative that these issues are addressed urgently, with due priority, rather than non-issues such as liberalisation.
Real progress can only be made when we first focus on having the right resources in place, at the opportune time, increasing efficiency and driving cost effectiveness. Once this is in place, the rest will follow. This should be the key focus area of policymakers.