Removing foreign equity taboos to spur industry | Daily News
National Public Private Dialogue on Maritime, Logistics and Transform Reform

Removing foreign equity taboos to spur industry

Minister Eran Wickramaratne. Picture by-Wimal Karunathilake
Minister Eran Wickramaratne. Picture by-Wimal Karunathilake

The government’s plans to liberalise Sri Lanka’s shipping agency sector will augment its ambitious target of transforming Sri Lanka into a maritime and trading hub in the Indian ocean and it will also lead to attract more foreign investment, reduce costs and improve efficiencies, Eran Wickramaratne, State Minister of Finance and Mass Media told

the National Public Private Dialogue (PPD) on Maritime, Logistics and Transform Reform event held at the Galle Face Hotel yesterday.

In addition to these benefits, the Minister said removing 40 percent foreign equity ownership restriction on shipping agencies will encourage knowledge sharing activities among the counterparts and also increase the overall market size.

“By removing this restriction, shipping industry will witness more global companies invest in Sri Lanka, increasing the overall competition. It is also imperative that we maximize our potential and take the advantage of the country’s geographical location,” he said.

Minister said further that the global shipping and logistics companies don’t have incentives to directly invest in maritime and logistics sector in Sri Lanka due to their minority equity ownership.

“Removing 40% foreign equity ownership restrictions will help them to invest and infuse their expertise into maritime sector in order to create a world class industry,” he said.

Noting that key objective of the government is to develop Sri Lanka’s maritime industry as a key trading hub in the Indian Ocean, the Minister said that the government is hoping to see the initial steps, taken to achieve this target to be completed by 2025 for which country needs to adopt proactive reforms and invest mainly in supply chain management.

“We have already embarked on transforming country’s ports’ infrastructure and the government will be developing the Trincomalee port to complement existing Colombo and Hambantota ports. Another important step in this process is the full liberalization of the shipping industry,” he said.

“If Sri Lanka is to become a maritime hub by 2025, the country needs to provide basic transshipment services, more value added services even to non transshipment vessels as well,” he said.

One of the Sri Lanka’s greatest advantages is its strategic location along many maritime trading routes in the Indian Ocean, which has enabled it to become a container transshipment hub. However the minister pointed out that Sri Lanka captures a small amount of basic transshipment growth in the Indian ocean and the full potential of Sri Lanka’s maritime and logistics industry remains unused.

The Minister also emphasised the need to protect current industry market share and urged industry stakeholders to be more proactive and act immediately to grow and protect the market share.

“Otherwise we will regret years later,” he said.

He also added that current artificial pricing mechanism of shipping agencies also doesn’t reflect market dynamics. In addition to that, the industry is also controlled by large domestic players and there is a lack of foreign participation in the agency business.

 


‘Time ripe to accelerate structural and regulatory reform in SL’

Tung Lai Margue

 Indunil Hewage

Sri Lanka needs to step up its efforts to accelerate structural and regulatory reforms to be on part with regional piers and to realise Sri Lanka’s vision of becoming a maritime and distribution centre in the region.

Tung Lai Margue , Ambassador and Head of Delegation, Delegation of the European Union to Sri Lanka and to the Maldives told the National Public –Private Dialogue On Maritime , Logistics and Transport Reform held at Galle Face Hotel yesterday.

“In a rapidly changing and developing environment where regional neighbours such as India, Dubai and Singapore have intensified their efforts to grab opportunities to increase market share, the time is ripe to accelerate structural and regulatory reform in Sri Lanka,” he said.

He further said that well performing logistics industry unlocks tremendous opportunities for growth of trade it enables connectivity of intraregional markets, helps meet the demand of a growing e-commerce industry and integrates value added services to obtain higher profitability and increases the country’s competitiveness.

“As outlined in Vision 2025, Sri Lanka aims to transform itself into South Asia’s leading maritime, logistics and distribution hub. Furthermore the industry has been identified as a priority cross-cutting sector in the recently launched National Export Strategy which the European Union was pleased to fund through the EU-Sri Lanka Trade Related Assistance Project, he said.

However he said that transforming Sri Lanka into a leading maritime, logistics and distribution hub in the Indian Ocean will require the creation of a conducive business environment and improved infrastructure and services to compete with the likes of Dubai to the West and Singapore to the east.

Compared with regional peers Sri Lanka has a lower ranking in the World Bank’s Logistic Performance Index (LPI) and is in the 94th position (of 160 countries) in 2018. Other hubs like Singapore and Dubai have high and consistent LPI rankings.

“India used to depend on Sri Lanka for their transshipment cargo but gradual improvements to their port infrastructure have resulted in some shipping lines diverting their ships to Indian ports,” he said

Sri Lanka has also higher shipping costs in comparison to regional hubs such as Malaysia and Thailand.

The Sri Lankan Government has invested heavily in developing infrastructure– however some completed transport projects in Sri Lanka have not so far met their targets, although notable efforts are being made to transform these into profitable business.

Sri Lanka is mainly known as a container hub in South Asia. It must however rapidly diversify its business model to attract other types of ships and related services, for instance, multi modal hub providing logistical services for passing cargo such as crew changes, supplying and replenishing of food stock, bonded warehousing, cold storage solutions, packing etc.

“I noted that the Government in its 2018 budget policy speech announced that the current legal framework for shipping and logistics would be changed in order to remove government protection in the sector and to fully open up the sector for international players and greater competition.

He expressed hope that these announcements will now be implemented.

 


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