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ANNUAL REPORT & ACCOUNTS 2006/2007

The Council

Mr. Jayanath Perera
Chairman

Mr. Ananda Wijesuriya
Vice Chairman

Mr. Noel Priyatillake
Immediate Past Chairman

HONARARY MEMBERS
Mr. S.S. Jayawickrama

OBSERVER
The International Chamber of Commerce

SECRETARY GENERAL
Mr. Prema Cooray

SECRETARIAT
The Ceylon Chamber of Commerce
50, Nawam Mawatha
Colombo 02
Telephone: 2422156
Fax: 2449352
Email: [email protected]
web: www.shipperscouncil.lk

MEMBERSHIP

The Ceylon Chamber of Commerce

Mr. Jayanath Perera
(Representative)

Mr. Ruwan Senanayake
(Alternate)

The Ceylon Chamber of Commerce Import Section

Mr. Clement Pereira
(Representative)

Mr. Panduka Jayawardhana
(Alternate)

Mr. Adrian Oswald
(Alternate)

The National Chamber of Commerce of Sri Lanka

Mr. Gihan Kuruppu
(Representative)

Mr. Nalin Jayasinghe
(Alternate)

Mr. Tissa Ruberu (Alternate)

Exporters' Association of Sri Lanka

Mr. Devaka Attygalle
(Representative)

Mr. Deepal Chandrasekara
(Alternate)

The National Chamber of Exporters'of Sri Lanka

Mr. Rasa Weerasingham
(Representative)

Mr. L.S.G. Tillekeratne
(Alternate)

The Colombo Tea Traders' Association

Mr. Manjula Agalawatte
(Representative)

Mr. Dinesh de Silva
(Alternate)

The Colombo Rubber Traders' Association

Mr. Anura Edirisinghe
(Representative)

Mr. M.F. Jiffry
(Alternate)

The Ceylon Coir Fibre Exporters' Association

Mr. I Piyasena
(Representative)

Mr. Randolph Perera
(Alternate)

The Sri Lanka Freight Forwarders' Association

Mr. Niral Kadawatharatchie
(Representative)

Mr. S. Mohanadas
(Alternate)

The Sri Lanka Apparel Exporters' Association

Mr. Rohan Ranasinghe
(Representative)

Mr. Ajith Jayasekara
(Alternate)

Sri Lanka Fruits & Vegetable Producers, Processors & Exporters' Association

Mr. Zuresh Hashim
(Representative)

Sri Lanka Association of Air Express

Mr. Ismath Rahman Companies
(Representative)

Sri Lanka Logistics Providers' Association

Mr. Anil Panagoda
(Representative)

Mr. Andre Fernando
(Alternate)

Mr. Harith Jayasuriya
(Alternate)

Sri Lanka Coir & Allied Products Manufacturers Association

Mr. Sarath Wickramaratne
(Representative)

Mr. Shalinda Perera
(Alternate)

Seethawaka Industrial Park Manufacturers' Association

Mr. Ananda Wijesuriya
(Representative)

INDIVIDUAL MEMBERS

Agility Logistics (Pvt) Ltd
Canro Exporters
City Cycle Stores
Coco Lanka Ltd
Cross Ocean Logistics (Pvt) Ltd
Delmon Shipping & Logistics (Pvt) Ltd
Excel Global Holdings (Pvt) Ltd
Fascination Exports (Pvt) Ltd
Freight Links International (Pte) Ltd
Hayleys Ltd
Hela Clothing (Pvt) Ltd
Imperial Teas (Pvt) Ltd
James Finaly & Co. (Colombo) Ltd
MAC Holdings (Pvt) Ltd
Mabroc Teas (Pvt) Ltd
Neil Fernando & Co. (Pvt) Ltd
Orient Garments Ltd
Oxley Threads Lanka (Pvt) Ltd
Qualitea Ceylon (Pvt) Ltd
Readywear Industries Ltd
Standard Trading Co. (Pvt) Ltd
Tea Palace (Pvt) Ltd
Tea Tang Ltd
Van Rees Ceylon Ltd

SRI LANKA SHIPPERS' COUNCIL

Sri Lanka is a nation depending heavily on shipping services. Historically Colombo has been recognized as the most important and strategic geographical point in the east-west maritime group, which was also named as "Silk Route"

The Sri Lanka Shippers' Council was established in March 1966 to protect and promote the interests of shippers. It was the first National Shippers' Council to be set up in Asia and was formed on a request made in 1965 by the local Committee of the Ceylon/Continental Conference, and a subsequent request made by the Director of Commerce in January 1966, to the Ceylon Chamber of Commerce. The Sri Lanka Shippers' Council is the apex body that represents the interest of shippers.

Membership of the Council consists of Chambers of Commerce and Trade Associations, and fifteen such organisations are currently members of the Council and the Council represents more than 95% of the import/export trade. The Council derives its broad based representation and membership from these trade Associations. The Council has now opened its doors to individual companies as Associate Members so that companies in the import/export trade could have access to the Council's resources and expertise to resolve their shipping related problems.

The Sri Lanka Shippers' Council is headed by an elected Chairman and assisted by a Vice-Chairman who is also elected by the constituent members.

The Ceylon Chamber of Commerce provides secretarial services to the Council and also acts as the Secretariat

The Council actively promotes the Sri Lankan Government's vision of making the Colombo Port a competitive Maritime & Logistics Center in the Asian region, which would result in the generation of enhanced economic activity, employment and wealth. As such all Council activities have been planned and prepared to support this vision.

The Sri Lanka Shippers' Council is a founder member of the Association of Shippers' Councils of Bangladesh, India, Pakistan and Sri Lanka (ASCOBIPS), founded in 1981 and the Asian Shippers' Council, founded in 2004.

OUR VISION

"To enhance the competitiveness of our members by abolishing hidden logistics costs."

OUR MISSION

We facilitate our customers to be more competitive in their Business Logistics; performance and cost, by the following;

  • Being the APEX Body, protect the interest of our customers and being a strong Advocate to the Government.
  • Ensuring cost effective strategies are developed and implemented in the logistics and value chain to make our members more competitive.
  • Facilitating greater efficiencies in logistics by reducing logistics barriers and simplifying trade.
  • Acting as the mediator in resolving conflicts amongst our customers (members).
  • Facilitating a level playing field by developing and promoting a code of conduct / ethics for our customers (members).
  • Establishing a centre for excellence for information sharing and to upgrade competencies of members to compete globally.
  • Leveraging regional and global partnerships and facilitating global best practices in logistics in Sri Lanka.

It is the Council’s firm belief that in order to be competitive with the international market Sri Lankan shippers’ should;

  • Not have any ambiguity in freight rates;
  • Have freight and associated costs stabled, particularly for traditional exports such as tea, rubber, coconut products, which account for at least 70% of total export volume out of Sri Lanka. A major part of the turn over of these exports in foreign exchange is retained in the country and it is vital to protect these industries from international competition. Furthermore, these commodities are with relatively low margins and usually with forward trading patterns cannot absorb constant and continuous cost escalations.
  • Concurrently are the major exports such as garments are usually traded on FOB terms and the local manufacturers are constantly under pressure to provide low priced services, thus are unable to absorb any additional charges keeping in mind that almost all material for these industries are being imported. Therefore the constant increases in charges could seriously affect such industries as they are called upon to pay these charges both at the point of import of raw materials and export of finished products.
  • Have reasonable Service providers who would not take undue advantage from their captive customers.

OVERVIEW OF THE ECONOMY

Sri Lanka’s economy grew by an impressive 7.4 per cent in real terms in 2006, recording the highest growth since 1978 followed by a high growth rate of 6 per cent in 2005. This growth was commendable as it was achieved in a challenging environment marked by high and volatile oil prices, recurring natural disasters such as floods and landslides, and renewed terrorism activities. The per capita income has rose to US dollars 1,355 in 2006, from US dollars 1,197 in 2005. The expansion was broad-based, with all sectors of the economy registering positive growth. The services sector achieved the highest growth rate of 8.3 per cent and contributed 63 per cent to the overall growth.

Faster implementation of the proposed infrastructure developments projects is an essential requirement for rapid expansion of the economy. Major development projects such as Colombo South Harbour, coal and hydro-power projects, express highways and railways need to be implemented without delays as they are essential for rapid and sustainable development of the economy. Given the fiscal constraint, public and private partnership should be encouraging in funding for such projects.

The growth in exports continued in 2006 benefiting from improvements in the quality of exports, economic prosperity of export destination countries, enhanced market access through further integration of the domestic economy with the world economy and commercial diplomacy and various initiatives by the government and major exports. Export earnings increased by 8.4 per cent to US dollars 6,883 million in 2006, which was the combined outcome of improved prices and volumes.

Industrial exports grew by 8.8 per cent in 2006. Despite the intense global competition, apparel exports grew by 6.4 percent in 2006. Although apparel exports to the USA declined marginally, exports to the EU including apparel increased significantly by 18.4 per cent partly capitalizing the concessions offered by the GSP+ scheme. Agricultural exports were largely led by higher performance of tea and rubber in 2006. Rubber exports too increased in 2006 reflecting increases in both prices and volumes. Other agricultural exports increased reflecting higher exports of fruits, pepper, cinnamon and un manufactured tobacco. The external demand for these products was stimulated by the duty free access to the Indian market under the ISLFTA and the growing demand from the Middle Eastern countries.

Imports grew by 15.7 per cent to US dollars 10,253 million in 2006, reflecting both increased demand and higher import prices. The expansion of manufacturing and processing activities, ever expanding demand for consumer durables, and the relatively low interest rate regime contributed to raise import demand for all three categories, viz., intermediate, investment and consumer goods, in 2006. Intermediate goods imports, which was dominated by petroleum products, grew by 12.1 per cent in 2006. Amongst the non oil imports, investment goods exhibited the fasted growth in 2006. Investment goods imports, which has been continuously expanding in recent years, grew by 20.1 percent in 2006, outperforming the growth of 12.0 percent recorded in 2005. In tandem with higher import prices and increased demand, consumer goods imports increased by 20.5 per cent in 2006.

Net earnings from transportation services, which consist of freight charges, port related activities and passenger fares, increased by 3.6 per cent to US dollars 211 million in 2006. Inflows from transportation services increased by 11.5 per cent mainly led by a substantial increase in port related activities, resulting from a higher volume of transshipment cargo handling, and increased earnings from passenger fares due to the expansion of flying destinations by the national carrier as well as the increase in flight frequency. Transshipment cargo handling grew by 37 per cent reflecting India’s expanding international trade and tandem with higher economic growth. Several port development projects identified in the Government’s Ten Year Horizon Development Framework 2006/20016, especially the construction of the Colombo South Harbour, would increase future earning prospects and competitiveness of the Colombo Port. Meanwhile, outflows on account of transportation also increased at a higher rate of 14.9 per cent, in line with a higher growth in imports and an increase in Sri Lankans traveling abroad for leisure, employment, education and healthcare purposes.

OFFICE BEARERS

At the Thirty Sixth Annual General Meeting held on 21st July 2006, Mr. Jayanath Perera and Mr. Ananda Wijesuriya were re-elected Chairman and Vice Chairman of the Council respectively.

ACTIVITIES OF THE COUNCIL

The activities of the Council have been focused on issues faced by shippers on shipping and port related matters. The Council always performed a lead role in resolving problems and serve as the focal point where various shipping and port related matters are brought up and discussed. In addition, the Council actively advises the Government on matters relating to port and shipping whenever its advice is sought after.

There were four (4) Action Committees appointed to function as follows: The Issues Sub Committee, Membership Sub Committee, Trade Complaints Sub Committee and the Finance Sub Committee.

A detailed description of the activities of the Council appears elsewhere in this report. However, in this section for your easy reference we give below the main topics covered in the report.

  • Terminal Handling Charge
  • Freight Rates & Surcharges
  • Port of Colombo
  • Need for a Regulator to look after the interest of all stakeholders
  • Pushing for South Harbour Development Project
  • Maritime Policy of Sri Lanka
  • Electronic Data Interchange (EDI)
  • War Risk Surcharge
  • Sri Lanka Customs
  • Federation of ASEAN Shippers’ Councils (FASC)
  • Association of Shippers’ Councils of Bangladesh, India, Pakistan & Sri Lanka (ASCOBIPS)

TERMINAL HANDLING CHARGE (THC)

Despite our continuous lobbying against the application of THC, the authorities continue to turn a blind eye. As a result, during the period under review we have seen shipping lines arbitrarily introducing various other charges apart from the Freight Rate and THC. This has affected the exporters competitiveness in the international market whilst seriously affecting the consumers as a result of imported good going up in price.

Due to the silence of the authorities concerned on these unreasonable charges the lines have taken the advantage of increasing the THC without adopting to any consultative procedures with the shippers and importers.

The SLSC continue to urge the authorities to take appropriate action, which the governments of China, Indonesia and India have successfully taken in order to protect their industries from carterlized activities of some of the international lines.

FREIGHT RATES & SURCHARGES

Many expected the freight rates to come down with the introduction of ultra large container vessels in shipping trade. However we have seen freight rates particularly to the west bound trade increase constantly, disproving all predictions. The reason for this is the rapid economic and industrial growth mainly in China and India. We understand that a good part of the envisaged excess space have already been occupied by these two large economies. And hence, it is difficult to see any declines in the freight market.

It was also understood that the space crunch in Colombo for Europe was also due to the following reasons:

  • Hanjin shipping pulled out their pdx service. They operated 02 services and pulled out one. It was a European service. K line and UASC were their joint partners in that service. The export trade lost 250 teus a week in space due to this cancellation of services. No line has since replaced these 250 teus a week space.
  • Norasia pulled out from their weekly European service. Zim was their joint partner. The export trade lost another 200 Teus a week with this pull out and no other line has replaced this loss.
  • Maersk had introduced a service/route change. Their European vessel has now been dedicated to the UK trade lane and give preference to garments to the U.K. As a result, they do not offer much space to other European ports. Prior to the route change, they used to offer low freight rates to gain more Teus to fill their vessels. However, they do not offer the low rates any more. This change of route created another 150 Teus a week vacuum.
  • In total the export trade has lost approximately 600 Teus of space. This is a very large quantity and no steps have been taken to by any other line to replace this loss.

PORT OF COLOMBO

Though we have seen an increase in the volumes handled in the Port of Colombo during the period under review, it is a fact that we have reached the maximum capacity. We understand that the productivity levels have come down due to congestion and other security related issues.

As we have pointed out in the past the failure in embarking on a proper development program in the Port of Colombo has resulted in these diminishing situations. In the meantime, our immediate neighbour has successfully completed many of its Terminal development programs and for the first time they have recorded a very efficient and higher productivity level compared to Colombo. As a result, some of the main shipping lines withdrew and reduced their services on the Colombo West bound trade creating a major space crisis for the Colombo Export Trade.

Some of the shipping lines opting to call at Indian Ports on their West bound route is also an alarming signal towards our retention of hub status. We are pleased that the Government has decided to embark on the Colombo South Harbour development project as we see this is the only way forward. However, we urge the authorities to improve the efficiency of the port operations on an immediate basis without waiting for this giant project to be completed, as we have to secure our position as the main hub in the Indian sub continent.

Nevertheless, during the year under review, the SLSC continuously supported the Sri Lanka Ports Authority in any initiative that was taken to streamline the process of import export operations and maintained an excellent relationship with the SLPA and the South Asia Gateway Terminal (SAGT).

NEED FOR A REGULATOR TO LOOK AFTER THE INTEREST OF ALL STAKEHOLDERS

The Council strongly believes that there should be a regulatory body to monitor maritime service activities in Sri Lanka, which directly affect the importers and exporters. The SLSC reiterates that a regulatory body should not in any way interfere with free market economic policies. However their role should be to monitor and restrict/control any carterlized activities in the market, thereby preventing unreasonable and arbitrary levies being imposed hindering the import export business in Sri Lanka.

PUSHING FOR SOUTH HARBOUR DEVELOPMENT PROJECT

The Indian economy is expected to grow at a rate of 8%-10% within the next 10 year. In the meantime India has already embarked on a rapid port, rail, road infrastructure development in support of their economic boom. Some of these international class container terminals have already completed whilst most of the others are nearing completion.

During the recent past, we have seen that some of the Shipping lines showing preference to call Indian ports direct either prior to arriving in CMB or after leaving CMB of the west bound trade.

We also experience during this period some shipping line completely or partly withdrawing their services in preference to calling at Indian ports. This gives a clear signal that shipping lines prefer industry next to the terminal concept for various benefits, which are attributed to the same.

In the meantime, we have not commenced any of our Colombo Port development projects other than laying the foundation stone for the South Port Development project.

Although we are already late, the SLSC believes that if these projects do not commence immediately, Sri Lanka will be left behind and will soon lose its hub status in Colombo. In today’s terms, the geographical strategic location is no longer valid unless port terminals and the required facilities are not available for the shipping lines. Therefore, the SLSC would like to urge the authorities and the government to instigate with these development projects, (Colombo Port and other infrastructure developments) before Sri Lanka lose the hub status and have to depend on other regional hubs for the transportation of imports and exports.

MARITIME POLICY OF SRI LANKA

As a country, which depends on maritime services, the Council strongly advocates the need to have a proper maritime policy and we have urged the authorities regarding the importance of such a policy.

ELECTRONIC DATA INTERCHANGE (EDI)

The Council continuously lobbied to the respective authorities highlighting the need for maintaining a complete EDI solution for the shipping and trading activities in Sri Lanka whereby minimizing the transactional costs to a bear minimum level in par with our competitors in the regent.

During the year under review the progress on the implementation of the Sri Lanka Automated Cargo Clearance System, which was initiated in January 2001, was minimal.

Successful operations on CUSDEC processing on imports and exports continued throughout the year and it is expected that BOI processing at Katunayake would commence from June 2007.

The Sri Lanka Tea Board was connected on line with Customs through the EDI system, and a rate of Rs. 200/- was being charged for transactions. However, submissions on imported teas could still not be processed through the system.

Therefore, whilst the Council continue to fully support the implementation of the EDI system, it is important that the respective bodies and authorities involved with this project would complete all areas of the system in a speedy and reasonable manner for the betterment of the entire industry.

WAR RISK SURCHARGE

Sri Lanka is still under held cover status and the SLSC would like the authorities to monitor the situation very carefully, as any impose of a war risk surcharge would be further detrimental to the export trade and Sri Lankan economy.

SRI LANKA CUSTOMS

The Council on numerous occasions highlighted to the Sri Lanka Customs the importance of maintaining a close and meaningful dialog in order to bring solutions to many problems that the importers and exporters face.

FEDERATION OF ASEAN SHIPPERS' COUNCILS (FASC) & ASIAN SHIPPERS’ COUNCIL (ASC)

Despite the SLSC’s bid to host the 29th Annual General Meeting of the Federation of Asean Shippers’ Council (FASC) in Sri Lanka, which was initially accepted by the FASC Committee, the Council decided that the prevailing security situation in the Country did not provide a safe environment to host an important international conference such as the FASC. Therefore, the 29th AGM of the FASC was once again held in Indonesia in November 2007.

The Honorable Minister of Trade, Dr. Mari Elka Pangestu was the Guest of Honor and Keynote Speaker who aptly expounded on the theme of the meeting "Cooperation is the best way to solve the problem".

The members who took part are from Indonesian National Shippers’ Council, Malaysian National Shippers’ Council, Philippine Shippers’ Bureau, Singapore National Shippers’ Council, Thai National Shippers’ Council, Australian Peak Shippers’ Association, China Shippers’ Association, Hong Kong Shippers’ Council, Korean Shippers’ Council, Macau Shippers’ Association and Sri Lanka Shippers’ Council. Observer in attendance was Japan Shippers’ Council.

The meetings covered a broad range of subjects including the regional and country reports highlighting the member country accomplishments and activities, issues of common concerns including Terminal Handling Charge and other surcharge problems, the dialogue with carriers, maritime regulatory system and freight transportation security.

During the year under review, Mr. Rohan Masakorala, Pash Chairman SLSC took over the post of Convenor from Mr. Ravi Ratnapala, for the Asian Shippers’ Council (ASC).

ASSOCIATION OF SHIPPERS’ COUNCILS OF BANGLADESH, INDIA, PAKISTAN & SRI LANKA (ASCOBIPS)

The Annual General Meeting of the Association of Shippers’ Council of Bangladesh India, Pakistan and Sri Lanka (ASCOBIPS) was initially scheduled to be held from 15th and 16th of May 2007 in Mumbai, India, where the All India Shippers’ Council (AISC) was to have taken over the ASCOBIPS chairmanship and this is a very important event for Sri Lanka and the region. In addition to the AGM, the AISC had arranged a regional conference on maritime and shipping related subjects on the second day of the event. However, due to unavoidable circumstances, it was informed by the ASCOBIPS Secretariat that the AGM was postponed to July 2007.

TRADE COMPLAINTS

The Council continues to facilitate the trade by assisting in the mediation of trade disputes among the shipping lines, freight forwarders, NVOCC Operators, and shippers.

REPRESENTATIONS

The Council continues to maintain its close association with the Government and Private sector organizations and also with the Trade Associations with a view to improve the service level of these organizations.

THE CEYLON CHAMBER OF COMMERCE (CCC)

The Chairman of the Sri Lanka Shippers’ Council is a member of the Committee of the Ceylon Chamber of Commerce, the oldest Chamber in Sri Lanka with a history of over 165 years. The Council members have had several meetings with the Chamber officials on policy matters relating to port and shipping.

MEMBERSHIP

The membership of the Council is open to all Trade Chambers and Associations engaged in Shipping and Port related activities as well as individual companies in the import/export trade. The membership committee is responsible for developing and increasing the membership of the Council.

The annual membership fee for Trade Associations/Chambers is Rs. 5,000/-, while the membership fee for individual companies is Rs. 2,000/-.

During the year under review, the Council approved membership for the following companies/organizations as Individual and Trade Association Members:

  • Seethawaka Industrial Park Manufacturers Association
  • Van Rees Ceylon Ltd

FINANCE

The Ceylon Chamber of Commerce manage the Council funds on behalf of the Council.

WEB SITE

The website is regularly updated with trade related information and hosts value added services. The website address of the Council is www.shipperscouncil.lk

SECRETARIAT

The Ceylon Chamber of Commerce provides Secretarial services to the Council. The infrastructure of the Chamber is readily available to the Council.

BY THE ORDER OF THE COUNCIL
Sgd
PREMA COORAY
SECRETARY-GENERAL
29th June 2007

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