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04th July 2017

Speech by the Chief Guest and keynote speaker Hon. Dr. Harsha de Silva, Deputy Minister, Ministry of National Polices and Economic Affairs

Speech by the Chief Guest and keynote speaker Hon. Dr. Harsha de Silva

Good Evening; Chrisso de Mel, Chairman of the Sri Lanka Shippers’ Council; Sean Van Dort, the vociferious Immediate Past President, other past Presidents, all other Chairmen, Chairpersons, [-] Council Members, distinguished Ladies & Gentlemen:

In fact, I have prepared something, but it’s that file the office gave me; instead I took a bunch of notes from day-to-day, because I think it is more important that I address the issues that you face now, rather than talking in general terms. But I think, before I do that, I need to give you some context as to what we are trying to do, where we are trying to go, so that we can plan for business.

To me, Sri Lanka is not a south Asian country. I don’t consider Sri Lanka as a South Asian nation. I consider Sri Lanka as an ‘Indian ocean’ nation. I believe Sri Lanka’s future depends on how we leverage the maritime opportunities in front of us, and I think, more so than before, people are beginning to realize this.

We are an island; we are an ocean nation. Our history tells us that every time we were prosperous, we had leveraged the maritime opportunities. And it is going to be the same in the future. The near future is pregnant with hope. And anyone who reads and understands what is going on around the world, we all know that Asia is the place to be. The Indian Ocean is the ocean that will create wealth and we are the center of the Indian Ocean! We will become the hub of this ocean. We will!

The government has a vision. You might sometimes wonder, and I agree – there have sometimes been issues in implementation of that vision. We made some course corrections. But that vision will become a reality if we are able to understand the issues that you deal with and work hand-in-glove with the private sector.

Let me take you through some of the things we need to think about. If you look at the historical context, I am not going to go back centuries, millennia, but I could if I wish to, to the Chinese and the Roman days of trade, Ceylon or Taprobane, or whatever you called it, was very much a player. We were part of the ‘Silk Road’ – not in 2014, but millenniums ago!

You all are the shippers – not me! I read somewhere that the winds changed in the Indian ocean where Sri Lanka is located, [perhaps someone can educate me as you know more than me] and the sails had to be adjusted etc., etc., at this location.

If you look at the history and the archeology of this country you will realize that coins from Egypt to China, Persia, from various countries were found here. How did that happen? It happened only because we were a trading nation, these didn’t fall from the sky. Whether we were trading in ivory, or whether we were trading in gems and jewelry, or in the more recent past, in tea rubber and other things, we were a trading country; an ocean-going country leveraging the maritime resources and opportunities to us.

Now if you look at the regional context, you will find that what is happening is that commerce cannot happen because people won’t trade. For commerce to happen there must be that conducive environment.

I flew to Qatar on Thursday. When I was in Doha I asked people there ‘so what do you think, what’s going on – and they started bad-mouthing their neighbours – the United Arab Emirates are jealous of us because we are winning the World cup; the Saudi’s hate us because we are [7:07] they are telling all these lies, etc. I said I was coming back on Sunday. Perhaps things would have changed by then. I came back on Monday; I asked the same question – what do you think, how are things? They said things haven’t improved, they are going the other way. So Qatar has been cut off. For whatever reason. I am just taking an example.

Now Sri Lanka, on the other hand continuously been friends of our neighbours. We are friends with India, we are friends with Pakistan, we are friends with Bangladesh; we are friends with everybody else around us. We have maintained that diplomatic relations, which has always been conducive for our expansion of trade. Of course we have had problems in the recent past – certain bridges were lost, certain were damaged – but I take pride, as the Government of Sri Lanka – we rebuilt all those damaged bridges; whether it is the European Union, whether it is China, India, America – we have an excellent relationship with the rest of the world, which provides us that guarantee, that conducive environment to trade.

So trade and security and diplomatic relations are all intertwined. You can’t fight with Europe and try to trade with Europe; you can’t fight with India and try to trade with them. It really doesn’t happen that way. I am just taking Kuwait as an example [9:17].

Now in the Indian ocean, security is something that we should be concerned about. Unlike the Atlantic or the Pacific Ocean, where there is quite a bit of water, the Indian ocean doesn’t have that. Whether it is China in the South China Sea, whether it is India, or America or other global powers there is no one entity that controls the Indian Ocean. And there won’t be any one entity that controls the Indian Ocean. So in that context, it is essential, that Sri Lanka, if we are going to leverage the Indian Ocean [because, come on, we have to fight for our main class] must take the initiative in giving leadership to creating that order in the Indian Ocean.

So that is why the Prime Minister has been quite bold in offering Sri Lanka it’s [10:37] to attempt to create an Indian Ocean Order that gives freedom of navigation and freedom of overflight, with a ruled-space context. India, china, everyone will have to fall in line. Big countries, small countries will all have to work together to protect the security of the Indian Ocean. So that is, I think, critical for trade and commerce to take place.

I had a very interesting experience a few months ago when we got that call from some people, desperate, on board an oil tanker saying “@m`n`hÞ iKmnt krNn, [11:34] @[email protected]`Lln aÓv @v« ñyl` mrzv`” [ Do something quickly, if we [11:34] these people will shoot and kill us”

So it was the Puntland guys having sort of high jacked [sea jacked, whatever you call it] or pirated that Comoros-flag vessel, with a totally Sri Lankan crew on board. That can happen. If that happens, confidence begins to wane. So we have to ensure that we have a diplomatic solution, without guns being fired, here guns were fired; without lives being lost. I was showing them to a person who has become a kind of friend of mine now, because I have visited their country so many times, the Australian Foreign Minister, she was rolling on the floor laughing when I showed her the WhatsApp messages between the Puntland president and myself in trying to rescue these seamen.

Whether it is the Bahraini maritime force, or the European Union Defense services, or the Sri Lankan Navy, we have to all work together to ensure that strategic sea lanes are open for traffic. That there are rules and freedom of navigation. So while it might not be terribly critical when you look at your business plans for the next five years, for the Government as the government it is critical for us that we play that role and ensure that the space is available for you to do your business. So what you don’t see is how your government, I’m not talking of this government only, previous governments also, have ensured the freedom of navigation in this ocean, so that trade can take place and for your businesses to flourish. So I think that it is important that it is mentioned.

Now let us talk about, for a moment, how your business depends on how much we trade. As you know, global trade has not been growing very rapidly. In fact, after twenty years, global trade has slowed down – populist, residence, nationalist thinking, around the world, have threatened to disband trade agreements, have threatened to erect walls between countries, have threatened to put new duties of 45% on goods and services coming into the countries. While others have not only been critical but been able to gather their populations, show the world that that is not necessarily the way to go. Whether it is what we saw in France, or whether it is what we saw in the UK, I think are signals that the protectionist-era of the thugs of this world are threatening to create, is only going to be threats.

So in my mind, I don’t think, even though there has been a certain slow-down in global trade, that the world will see a significant contraction in trade. Even though there might be some in the West, the East, the Indian Ocean region will continue to thrive. So I think the field of play for us will continue to remain wide open.

Exports and Imports, together make international trade of a country. [16.20] the statistics that exports to GDP to a country like Hong Kong is roughly 250%; a country like Singapore, exports to GDP 150%. Sri Lanka was about 35% about ten years ago. Unfortunately it has fallen lower. It fell to under 14% when this government came to office, what was 34% ten years ago had fallen to 14%. Of course the problems that come with low exports, I don’t need to explain, whether it is the need to borrow dollars overseas, whether it is the need to burn our FOREX reserves to control our foreign exchange or our currency value, or other inherent problems.

The root cause is that we have ignored our competitive advantage. Our advantage is trade. Our advantage is to leverage the maritime opportunities we have. So if you ignore that. If your policy is not aligned, then we will not succeed. So therefore the government’s primary objective now is to figure out how to make that U turn. We have not been successful in the last two years. The Chairperson notes that exports kept falling, it has not improved, it has continued to go down, which is not good. Of course we have seen some areas where it has positive growth, apparels has seen some growth. But we need a, what I call an economic structural shift in our policy. There is no way that this country is going to grow by having patchwork solutions, you know, distributing something here, distributing something there; a minor change here, minor change there.

We have to change our Economic Game Plan. We have to understand what our [19:01] are. We have to work with the Private Sector to ensure that instead of yelling bad things about the government, resolve to stand up here in three years’ time and say what a great partnership we have had. That is what we want. So I think in that context, the challenges we face are rather [19.36]. We used to say we were the nicest looking girl on the beach. Perhaps we may have been at one time, but no longer. The Vietnamese, Myanmarese the Chinese, The Irish, the Jewish, everyone is trying to go the same way. And they are succeeding. Vietnam had 20 billion dollars in FDIs in 2016. Myanmar has 10 billion dollars in FDIs in 2016. Sri Lanka had less than half-a-billion dollars in FDIs in 2016. What happened Export Development Board? What happened BOI?

There is no way we are going to succeed if we continue to make these marginal differences, you know, have talk shops and have politicians talk BS, it won’t happen! We have to change. Right, so giving a little bit of theory, we have survived almost unexpectedly, because theorists know that what our apparel sector did, was theoretically not possible. [21:18 – 21:22] because what we are used to, or what happens in this country by and large is what is called ‘buyer-driven’ networks. Meaning, there is Abercrombie & Fitch or someone, who tells Sean’s employer, I would like to have an extra dozen of these pieces, and Seans employer will, consult the factory get the equipment, get the raw material and complete the products and send it on to Abercrombie & Fitch. But if Abercrombie & Fitch find someone better than Sean in Vietnam, or gives a little bit more of a discount than Sean, in Myanmar, he may ditch Sean. That is the theory. It has happened and it continues to happen. That is why I said that people like Sean’s employer have been exceptions to the rule. They have been outcomes, and I think it is necessary to acknowledge that people like Sean’s employer and others, [I don’t want to name names] a few of these people have kept this country going, afloat. But that is not enough.

We have to change the model. The model is to ‘flippit’ what do you mean by flippit. From a partner-driven network to a producer-driven network. Which means that they are still in the game. Whether it is Abercrombi & Fitch, or it is our own company is selling to the ultimate buyer based on what he or she has developed, produced or branded as theirs. That is called production network, global production network. For example what is happening in Vietnam. [---] put a billion dollars in to producing creams. Once you put a billion dollars, you’re not going to look around to a next door neighbour to see if they can make it for a little less – 20 cents less. Because you have ‘skin in the game’. We need ‘skin in the game’. How do we get ‘skin in the game’? By making sure that we have FDIs that is the ‘skin in the game’ – FDIs are what is called Foreign Direct Investments. That’s the money you put in the mouth. Not just answer in the grid. So to convert a buyer-driven network to a production-driven network takes a lot of work. A lot of policy changes. But that is the challenge that we face.

So what I’m trying to say is that for the shipping industry to prosper and grow, which it certainly can, and mind you our competitive advantage is in trade, we have to have people put money in building, not just goods, and services, but plans, and that is where our success or failure will be determined.

We are doing the best we can as a government; we are trying to get into trade agreements with others. Some people don’t like it. They go crying and say, look we are going to sell our sovereignty to someone else. Absolute bunkem! Look at Singapore. How many trade agreements does Singapore have? I don’t know whether you know – sixteen! Sixteen trade agreements. We have one!! One working one, and that also, people are throwing stones at!

Answer me this question. Is GSP plus good or is it bad? Whether we keep it for four years or five years. Is it better not to get a 10% discount? Is it better not to get a 20% discount if you are selling bicycles? Is it better not to get the 25% discount or whatever it is, if you are selling fish? There are people like that also in this country who shoot at their mouth and say “It is bad to get GSP plus” – so to those people I say loudly “Shut up” – Read, Understand. Bad enough for ten years, fifteen, you [--] enough, now you’re telling us not to help our producers, not to help our exporters. That’s nonsense. GSP plus should be used as a stepping stone to carve out, develop and design a free trade agreement with Europe. That is what it ought to be. We have to take further steps to convert the Trade and Investment Framework Agreement that we have with American [TIFA] to try and move it up to a free trade agreement with the US. Trump will come, Trump will go, but discussions need to start to try and get access to these partners. If we do we have free access, and we know who loses out. So from the company’s point of view, we are trying to link Sri Lanka, to build bridges between Sri Lanka and the rest of the world. We did that with diplomatic initiatives at the beginning. We normalized our relationship, including bringing GSP plus back, now we’ll build on it. And so that has to move on.

Now I’ll talk about the challenges, and specifically in terms of what I think, you guys need to worry about. How is it that we need to help you guys deliver the goods. And delivery is something I heard you say over and over again, both Chrisso and Sean, that we have failed. Let us be honest about it. Delivery has been fairly slow, and we need to figure out why this is so. Because the garbage in Kotte was not collected, I was sick of it and I called the paper in the morning with all the stakeholders – since you said you are one of my [--] I thought I must tell you this story.

The Kotte Municipality employs 93 people to collect garbage from the homes of residents of Sri Jayawadanapura Kotte, Divisional secretaries, Kotte. Many of you maybe from that area. And that is besides 60 odd people employed by Abans to service half of my electorate. So I asked Aban’s man, how many people from Aban’s worked today – between 60-65 on the average. I asked the Nagara Sabha fellow, out of 93 people, how many worked today? ‘Most people have clocked in’ ‘I don’t mean clocked in, how many are working?’ And I’m telling you, he didn’t have the number, but we had a fair estimate of how many were working – between 30 and 40. The rest of them, they clocked in, and they are driving their three-wheelers, and doing their other work. They are employed elsewhere. So how on earth can they take the garbage, if they clocked in, get paid, and then do something else. I looked at the audit, I almost threw up! Most of their compactors they say are working, but apparently they are not. I looked at how much they were supposed to pay to purchase each of those things. The Auditor General of Sri Lanka who is a very good provincial man, has said that these compactors could have been purchased at Rupees Six million each, but instead, the Kotte Municipality spent Rs.11.6 million to purchase each of those. That means instead of purchasing X-number of compactors, they could have purchased 2-times X number of compactors! And if you had those people working instead of doing other work, they could have completed the job.

So we have come up with some solutions. I have told my constituents, give me about a month and a half, we will have this system working fully, and I have got the police involved. So if by any chance, you are in the habit of dumping garbage on the road, I’ll have to come and visit you in the Remand prison to tell you.

So to come to the last part of what I was going to say, in the challenges that you face with the global shipping industry consolidating, I was reading somewhere that there might be only 6-10 major carriers in time to come. How do you become globally consolidated? So you talked about policy inconsistencies, you talked about poor governance, you talked about lack of delivery. All our problems; my problems, government’s problem. I wrote down a whole lot of things, you talked about PHCs, You said there are people who are trying to curry favour, paying people off and trying to mislead the government, you talked about the Export Facilitation Center not getting activated, you talked about the Customs Ordinance, you said it is 100 years old. You said many time, whatever people did to try and change it it didn’t work, you said it was totally outdated.

But you also said about the liberalization on the shipping industry, you said you were 100% in favour of liberalization, but that questions is to be asked from the industry leaders also. Whether the industry leaders are willing to liberalize industry. [My friend is nodding, Ruwan. Are you willing?] I am for liberalization, but are you willing to liberalize? So I’m going to pose that question back to you to think about these issues. You talked about the cess. You said we must be the only country that taxes exporters. Indrani, I think, you will have to figure this out. It’s going on. Then you talked about the Tea Board., the money that they have. So many things that you mentioned, most of it that we will try and figure out.

So, if on the one hand it is us as government that need to have consistent policies, and you show us this is right, this is wrong. And the industry also must be united. The moment we try to implement one, somebody else will say ‘what are you going’ – that guy has paid for something that is why you are doing this’. That is why you have to look into this too, you have to have the light flash on you too, Sean, and see ‘are we together, willing to make the sacrifices in the short term for gains in the long term?

I mean, I was in Dubai yesterday, you talked of Jeppalali. What was Jeppalali 50 kilometers of sand. Look at it today – consistent policy, working together with industry, industry not fighting with each other inside, everybody is together, holding hands with the government of Dubai and getting it done! They are going to put a new airport. Already Dubai has about 75 million people, per year, going and coming. The new airport they say will have 250 million people per year going in and out – a quarter million people! If Dubai can do it on nothing but just waste sand, as someone was saying about out ocean, our mountains, our culture, why on earth can’t we? You said there were so many problems in this country, I am not disagreeing with you, but don’t just put it onto me. I think we as the government, you as the private sector, you as an industry within the private sector must all work together.

So we can talk about Jebbalali. There will be other Jebbalalis coming up every minutes. Whether we want to blend it here or blend it there, you need to take a decision and do it. The tea industry can’t figure it out. If you want to do it in the free Zone, let’s do it in the Free zone. If the industry is fighting, if the industry is divided, don’t blame the government. I think these tough calls must be made. We’re no longer boys, we are men, no longer girls, we are women. Girls and boys cry; Men and Women decide. So I am telling you, let us not be cry-babies anymore, let’s get together do this [-] thing. I mean, do we do Hambantota or don’t? Is Hambantota good for us or not? Whether we like it or not we have a road, that cost us one-and-a-half million dollars. So what do we do with it? Let us, as grown-up people in this country, decide! We want to do something, industry or somebody else is up in arms. We try to placate them, some others are shouting – we can’t go on like this. We try to get the Agreement signed, somebody goes to court. That same somebody agreed to it when he was on the other side.

So what I am saying, Chrisso, is in your two years in your area of leadership, do it. I watched the movie, Invectus, on the plane. How many of you have seen that? It is about leadership. How do you lead? How do you lead a country. How do you lead a football team. How do you lead a rugby team. It is about the South African rugby team and Nelson Mandela.

You have a port, and you have to get there and somebody has to lead. So Industry leaders must lead political leaders and that’s the only successful way that I see. we are a democracy, We are not autonomous, we have to work together. You have to become globally competent, and the only way you will become globally competent is if our incentives aligned; your incentives the government incentives must be aligned.

So I am not going to bore you much longer with all these things. But remember, when you want to become a globally competitive player, technology. I just got my alert Amazon, it just bought Wholefoods. Wholefoods is a huge US food and retail company, for thirteen-and-a half billion dollars. What is Amazon doing with a grocery and retail company. Think about the logistics. See how companies are coming together. See how technology is being used. If drones are going to be used for delivery, what is your logistics for land delivery. So all these things are for you to think about.

So than you everyone for inviting me to say a few words here. I don’t know whether I put you to sleep here, except one. But I wish you all the very best and I think it is a strategic vision, whether this industry or some other industry which will see Sri Lanka going from where we are to where we want to be.

Thank you very much.

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