Shippers and freight forwarders cry foul over move to liberalize industry

• Say no foreign investments will come
• Asserts local players have invested as required
• Believes increased foreign involvement will harm local jobs
• FinMin says can’t continue to nanny shipping industry

Two apex lobby groups in the shipping and logistics industry this weekend cried foul over Finance and Mass Media Minister Mangala Samaraweera’s proposal to open up the industry to further foreign ownership in companies.The Ceylon Association of Shipping Agents (CASA) and the Sri Lanka Logistics and Freight Forwarders Association (SLFFA) said that they “strongly object to the government’s budget proposal to lift the remaining restriction of 60 percent on foreign ownership in shipping and freight forwarding agencies”.

 The two groups claimed that the liberalization on foreign ownership will not bring any benefits to Sri Lanka, and will adversely impact the country.

 “The removal of restrictions on foreign ownership will not bring in any additional investments or benefits to the country as envisaged.   There will be no new investments by shipping lines and freight forwarders as a result of this policy change,” a joint statement by the two associations said.

 They said that all major international shipping lines and logistics networks are already represented in Sri Lanka, and the local agents have already invested in the required infrastructure, such as container depots, freight stations, logistics parks, transportation etc.

 “The policy change would enable shipping lines and freight forwarders to repatriate hundred percent of profits instead of reinvestment locally. They will convert the agencies to cost centres reducing the employment of Sri Lankans and depriving the government of substantial tax revenue,” the statement said.

 It further noted that there is no restriction for foreign companies to set up fully-owned headquarters or regional offices in Sri Lanka, and that any foreign ship owner can freely operate their vessels in Sri Lankan waters.

 The only restriction, CASA and SLFFA said, applies to ownership in shipping agencies and freight forwarding functions.

 “(This) has not inhibited  shipping lines’ interests in investing in port  terminal capacity in Sri Lanka as displayed in the expression of interest for ECT where all major shipping lines and terminal operators submitted bids. An example would be the case of SAGT where there have been investments from major shipping lines,” the statement said. 

The two lobby groups noted that there will not be any knowledge or technology transfers due to this change, and would risk the 12,000 directly employed and 100,000 indirectly employed staff through 750 shipping, freight forwarding and clearing agents.

 Meanwhile, Finance and Mass Media Minister Mangala Samaraweera, speaking at a post-budget forum, said that the state cannot continue to protect the local shipping industry. “I know some of my friends in the shipping industry are not that happy, but we have to open up and compete. In fact, look at countries like Bangladesh, where the shipping industry is open and even in India today, 100 percent foreign ownership is allowed, and likewise I think Sri Lanka must stop being a nanny state and move forward,” he said. The entire budget 2018 document is focusing on minimizing protection of local industries and opening them up to global forces in order to make local industries competitive.

CASA and SLALFFA said that they have always endeavoured to assist exporters in securing space in tight situations which will not be the case when control of shipping agencies shift to foreign ownership, and risks will arise with regard to responsibility of the cargo handled, when ownership of the agencies become foreign.

 Their statement said that if the policy was intended to help Sri Lanka become a logistics hub, there are instead more urgent initiatives which should be addressed to achieve this goal.

“Such as the development of port infrastructure and measures to improve the ‘ease of doing business’ thus removing all bottlenecks / bureaucracy throughout the supply chain which will reduce unnecessary costs and bring significant relief to the consumer/trade,” they said.

The two industry bodies called on the government to consult with the local stakeholders prior to implementing policies.