They say every cloud has a silver lining. We are a country that has been starving with reforms to connect to the modern world with technology to improve the country’s processes in logistics and trading capabilities to make it a true hub, given its enormous advantage being in the centre of the east-west linking shipping route in the Indian Ocean.
SLPA partial work disruption
Last week, we encountered a partial destruction of work at the government-managed Jaya Container Terminal (JCT) by the unions. Fortunately, the country’s customers, who are ship operators and regional shippers, who transship via Colombo, were not seriously disturbed due to the support extended by South Asia Gateway Terminals (Pvt.) Ltd (SAGT) and Colombo International Container Terminals Ltd (CICT) being the private terminals and other stakeholders operating in the Port of Colombo and Hambantota.
For the last one and a half decades, I have been highlighting the importance of the Sri Lanka Ports Authority (SLPA) adapting a proper landlord model to compete with the global shipping hubs, investing and partnering terminal operations and management of the same with the global standards. It was in the years 2000-2001, the then Minister Ronnie De Mel initiated ‘JCT Ltd’, a company to run in par with the first private terminal SAGT and was established in 2003. But sadly, this never became a realty in implementation although many governments changed hands.
Now it is time for the national government and the best opportunity to transform and reform the SLPA within the next two years into a landlord operator. In terms of capacity, JCT is already out of reach for 10,000 twenty-foot equivalent unit (TEU) vessels; that does not mean it is redundant as all ships are not going to be that in size, just as in the airline industry, whilst there are A380s there are many A320s to handle, same applies for shipping and an efficiently managed JCT will always have business.
Yes, in the medium term, Colombo may have excess yard capacity but as CICT is approaching 1.8 million TEU out of its 2.4 million design capacity, we will see the peak time traffic demanding more berths in the short run in Colombo. In my opinion, it is time that the government gets going to establish the first berth of the East terminal, which should be in operation with cranes in 2017 to avoid mainline congestion or further declining volumes at JCT. The East Container Terminal (ECT) would also help both help JCT and SAGT to sustain and develop more business into the country.
Indian opportunity and India’s reforms
Given the continues opportunities and challenges in the industry and the recent initiatives taken by India to develop its ports and maritime industry and liberalising its cabotage rules and starting direct service between India and Bangladesh, Colombo terminals will have to work more closely with reciprocity in developing new business and facing challenges and providing further value addition to its customers to attract new business to our ports. I am always a firm believer that we cannot be talking of what India is doing or not doing, but we must see the expansion of India as a great opportunity for business and especially for shipping and logistics.
Given the competitive environment, we hope the government and the minister will urgently relook at the SLPA policies and the Colombo Port model and adapt the Hambantota management model in the short term with JCT Ltd and then work towards the SLPA landlord and regulator model. The government must get its consultancy partner to do a 15-year and a 30-year volume/trade growth study, which is probably available with the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) for the region and plan out demand and capacity strategy accordingly. I am sure the newly appointed Managing Director of the SLPA with his global terminal management experience would agree with us on the sentiments we have shared.
IMF: Conditions for automation
It is somewhat surprising and sorry to see that during the ongoing negotiations with the International Monitory Fund (IMF) to get a 36-month standby arrangement, they have highlighted the need in their press statement that the country needs to fully implement automation and ASYCUDA++ Customs module. The question is why are our authorities waiting for someone else to say that our system and processes are wrong? The local industry professionals, including the Shipper’s Academy and many other associations, have been clamouring for more than two decades for processes to be simplified, automated and finally the IMF had to tell this to the government!
The question is does the government and its agencies understand the benefits of full automation of trade?
The World Trade Organisation (WTO), World Customs Organisation (WCO), United Nations Conference on Trade and Development (UNCTAD) and UNESCAP have had many forums globally and locally educating the government authorities on how to implement trade facilitation and the importance of it and I have seen many of our leaders and officers attending these meetings around the world and in Sri Lanka, in fact during the last regime in 2013, the treasury secretary invited the former Georgian Prime Minister to Colombo who had brought the doing business performance index of Georgia to no 12/185 with fully implementation of Customs reforms and the single window and moving toward the paperless trade facilitation environment. But in Sri Lanka, the ground reality has been they attend conferences, listen and forget.
The question is how many in the government understand the benefits and the transformation that automation can bring to the country? Simply, the valuation process alone must be leaking out billions of dollars as the government revenue. More than 20 key institutions should be properly electronically linked and that is how the government can obtain proper data and implement full trade facilitation and access transparent information. In my opinion, the import/export data alone probably has a 10 percent – 20 percent variation at any given time and that is why it takes two months to get some idea of the trade status for a particular month.
The answer is for the government to speedily set up a trade facilitation and automation unit headed by the prime minister along with the key ministers as a public-private partnership (PPP) with an implantation authority via a parliamentary act. No ‘Not the ICTA’. This is the model all international agencies recommend and has given example, starting from Mongolia.
Sadly, our knowledgeable Customs officers have implemented better systems on the invitation of the Papua New Guinea government in that country for e-commerce!
Therefore, the government being new, a united force must make the correct changes during the next one year, so that the country will benefit the fruits in terms of export facilitation and improve the overall business climate for investment, trade and logistics. I don’t think we have many more buses to miss but if this golden opportunity is missed to introduce strong reforms to be a regional and a global hub, we may be left behind by the global trends.
If we do the reforms within the next two years, the country would see a paradigm shift without any doubt. Indeed the recent negative development has given another chance for the country to implement reforms that are much needed in the maritime and trade sector.
(Rohan Masakorala, CEO of Shippers’ Academy Colombo, is an economics graduate from the Connecticut State University USA, Senior Consultant Ports and Aviation – SEMA and past Secretary General Asian Shippers’ Council)