Article by Mr. Suren Abeysekera - Sri Lanka The Future Hub for Logistics
16th October 2019
In previous years, Sri Lanka was mostly used as a trading hub. Traders would come from different countries in the silk route and they would bring in their goods and some of their services that were traded in the Port of Colombo. There was less manufacturing of goods in the country that were exported except for the well-known Sri Lankan spices and tea.
Therefore, the focus has constantly been on developing the country as a maritime hub. At the Port of Colombo, the majority of container volume are for transshipments. Sri Lanka has taken this advantage as a maritime hub and Sri Lankan ports are increasing capacities to cater to the needs of this sector
However, in terms of international trade, the focus has shifted away from trading goods and services based on a maritime hub. The modern-day businesses concentrate on the speed of product delivery to their customers and how cost efficient they are in terms of their goods and services. Therefore, there is a supply chain that encompass raw material production in different parts of the world being shipped to another country for manufacturing and ultimately distributed globally in an effort to attract best cost and profit.
"If you look at apparel, whatever that we consume as apparel, the cotton starts somewhere in Africa or in India, the thread is being done in China and the material is maybe dyed in Taiwan or maybe in South China or Vietnam, and then the goods maybe produced in Sri Lanka for a brand selling in US or Europe" he stated, explaining the process.
Having realised the importance of transforming into a logistics hub rather than continuing to function as a maritime hub, Sri Lanka has now initiated several projects with this in mind. As Suren Abeysekera explained, Sri Lanka has four advantages towards becoming a logistics hub; location, connectivity, infrastructure and regulation. As an existing maritime hub located in the Indian Ocean, the country already possesses the ability,
space and the knowledge necessary to operate as a logistics hub. Due to the connectivity which Sri Lanka currently enjoys, all major carriers call Colombo Port serving various destinations. In terms of infrastructure, the ports, investment promotion zones, and highways which connect these places have enabled Sri Lanka to reach its goal as a logistics hub.
With regards to regulation, Suren Abeysekera said, "We are slowly going in the right direction with the introduction of hub regulation and the logistic hub concept already in place, helps Sri Lanka to reach its aspirations to operate as a fully-fledged logistic hub."
Apart from being geographically located within days from the Far East, Europe, Asia, Australasia and Africa, one of the other most important advantages Sri Lanka has is its ease of access to India. One of the biggest markets with a population of over one billion, India presents a superb opportunity to the Island in terms of logistics services, be it warehousing, simple value addition, manufacturing, part assembly or shipping final products.
In terms of areas for the logistics hub, the Sri Lankan ports such as Colombo and Hambantota as well as specified bonded areas like Mattala Airport and the Mirijawila zone can manage manufacturing, minor processing and logistic value addition.
Meanwhile the Export Processing Zones (EPZ) in Katunayake and Koggala can handle minor processing and logistic value addition. Entrepot trade, off-shore business, front end services, headquarters operations are other activities fueling the growth of commercial hub concept in the country. Logistics hub activities also offer the opportunity for improvements in warehousing, value addition, as well as pick and pack.
"We have a conducive environment where the new legislation of the hub defines boundaries for the Customs minimal involvement in the operation and if you look at cost, we are approximately 30-60 per cent cheaper than the neighboring hubs like Singapore and Dubai depending on the product. Thus, we have the location advantage and cost advantage," he stated. Sri Lanka has the capacity to grow further in this space.
In the past five years, Sri Lankan Hub operators handled approx. 20,000 containers a month, out of which over 70 per cent is incremental business."We recognise that there should be additional controls in place that would leverage some of the environmental issues, but the concept is something
that we should clearly take to the next level for Sri Lanka to succeed as an export based economy," Suren Abeysekera stressed. The Council provides assistance to the committees appointed by the Ministries to draw up logistic related process and future development plans. The Council was a signatory to the National Export Strategy developed two years ago by the EDB in consultation with ITC. Within the Strategy, the hub concept is highlighted, and the Sri Lanka Shippers' Council sits in these stakeholder discussions and advisory committee meetings, supporting the development of entrepot trade process regulations. "Since this is a new sector in the country, there is a need to educate the public, the trade, and overseas investors in terms of its concept. We partner relevant stakeholders in these efforts.
The Sri Lanka Freight Forwarders Association and Logistics hub association are members of our Council, so we sit together and discuss their issues to support overall logistics functions in the country," commented Suren Abeysekera. "We feel that through the Global Shippers' Forum, and the other bodies we partner with, we should be able to have an inclusive attitude in terms of promoting Sri Lanka as a logistic hub, so that's what we aspire to do," he added. Suren Abeysekera also said.
"We also have another point of action in relation to the National Export Strategy, it is to educate shippers and those involved in the trade to build much needed capacity in logistics workforce which the country will require on its journey to become an integrated logistics hub". In this endeavor CINEC campus and Institute of Shipping & Logistics partner with the Council to award annual scholarships to deserving young talent in the industry. "These parties have been very supportive in terms of helping to build the talent pool so that there is future growth in logistics in the country" Suren Abeysekera commented.
The responsibility of the Government
"We feel from the Government side, there should be additional support to those who would want to enter into the logistics sector. The Government should step into improve the ease of doing business in the country so that new players will want to enter the industry swiftly without having to consider lengthy procedure and controlling laws. We also feel appropriate shipping liberalisation for international involvement and growth of industry is needed, particularly in terms of harnessing new technology.
Looking at the neighbouring liberalised economies one could easily understand various benefits this would attract to the maritime and logistics industry," Suren Abeysekera opined. Adequate dialog needs to be established on this point between those who are already in this space and those who aspire to come into the business including beneficiaries such as importers and exporters thereby creating an enabling environment for business.
"We also work with the border agencies such as customs and several other agencies in terms of trade facilitations. Because we want to see the industry go to a place where things happen virtually, we are pushing ourselves and our members to move into the digital world, and to support the initiatives of the Government agencies to go online so that there are adequate facilitations for trade and as there would be less intervention of humans, reduce corruption as well" he mentioned.
He emphasised that the country is taking steps in the right direction. He also commended Sri Lanka Customs, stating that Customs was "one of the main organisations who have led the race in terms of digitalisation and entered the so called 21st century and they are well ahead in terms of the ability to get into the next level. While we salute them, we work very closely with them to support those agencies."
The Council is involved in almost all necessary meetings connected to logistics and transportation in the country. From five-year strategy meetings to development of road maps and policies, the Council offers valuable advice and assistance to implement plans connected to logistics. However, the Council continues to lobby to address some of the pain points covered in this article.
"I must say, there has been good response from some of the quarters, but the challenges that are mentioned cannot be overcome within a month of two, so it will be continuous work that we need to do," he went on to say. "I know the previous Chairmen have done immense work for the Council to get to this place. The two Vice Chairmen and I will do the best to take it forward, but we recognise that it is an ongoing process that we need to work on diligently."
Source: Business Lanka Magazine
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