Sri Lanka maritime aspirations in troubled waters

2017-09-01 10:56:21

By Industry Insider
Lack of antitrust laws has made the free economy of Sri Lanka to become a closed one, which is controlled by a few individuals who monopolize the country’s business activity 

The interesting fact is, in the shipping industry, this has now turned to a double-edged sword as the local small and medium enterprise (SME) shipping and logistics agency businesses are taken over by two to three major players. 

Whilst the acquisitions are taking place, simultaneously they are also planning to join hands for other arrangements within themselves to further monopolize and cartelize both the shipping and logistics business. Interestingly, at the same time, they keep on lobbing international ship owners and operators to be kept out of the market hiding behind the protectionist agency banner.

These monopolies are also given government protection by guaranteed tariffs by the Ports and Shipping Ministry and Central Bank of Sri Lanka.

At a time where globally shipping lines are consolidating, shippers’ communities worldwide are worried about the anti-competitive practices that can come into play. These are closely watched by the developed nations as they have mechanisms in place to stop such behaviour.

The local shipping authorities and government seem to be sleeping when almost all major shipping company agencies are held in Sri Lanka by two or three parties, who have now gained control of 80 percent of market share and announcing further acquisitions as they fear no law. The port chairman, considered a knowledgeable person, is now drafting a national policy, wonder if he will adopt antitrust laws in the interest of the country and recommend the minister to do so?

If the government and the competition authorities of this country are sleeping or are purposely allowing this to happen, the future for this country’s shipping industry  is bleak and  has no hope for becoming the hub of South Asia  without proper rule of law and the regulatory establishment in place.
In the United States, the Sherman Act of 1890 says, “Every person who shall monopolies, or attempt to monopolies, or combine, or conspire with any other person or persons, to monopolise any part of trade or commerce among several states, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by a fine not exceeding US $ 100,000,000 if a corporation or, if any other person  US $ 1,000,000 or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.”

When there is such an environment in developed countries, what is the verdict for the 20 million people in Sri Lanka? What is the position for SMEs? What is the impact to the export industry? What is the impact to the consumers? What will be the impact to the port and its competitiveness? Will there be political ramifications in the long run? What is the message for investors? What is the message of good governance? It is time for the president and prime minister to answer these questions. They must understand that the wealth generated out of this country cannot be given to a few and keep the people poor forever.

The country’s shipping image is at cross roads, exporters and importers are at risk as one or two groups having access to all their data and ability to control the local freight market. This will be an interesting case study for the international shipping community where shipping lines are barred from talking to each other on pricing and fixing prices, but here is a situation that an agent can be used as the platform to do the same anti-competitive behaviour for the ship owners.

Interestingly, the monopolizing companies have got control of the local shipping lobby under its control by appointing officials from these companies, so that no formal protest takes from them.

The agency industry small players must understand that their business is under threat and the country’s shipping industry is not going to benefit and the public at large will pay for this. They should start reporting this activity to the Federal Maritime Commission (FMC) and European Union (EU), as this a backdoor method of controlling freight market using monopolies of agencies, which no doubt will indirectly impact the US and EU consumers as well.

The newly formed National Economic Council (NEC) and Cabinet Committee on Economic Management (CCEM) are called upon to study these new developments very fast. The World Bank, Asian Development Bank (ADB), International Monetary Fund (IMF), Japan International Cooperation Agency (JAICA) and other donors need to understand these and educate the government, without just committing aid without the reforms being implemented either through ignorance or otherwise. 

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