Government of Sri Lanka NATIONAL EXPORT STRATEGY OF SRI LANKA LOGISTICS STRATEGY 2018-2022 The National Export Strategy (NES) of Sri Lanka is an official document of the Government of Sri Lanka
For any queries about the NES, please contact :
Ministry of Development Strategies and International Trade
Address: Level 30, West Tower, World Trade Centre, Colombo 01. Phone : +94 (0) 112337629 Phone : +94 (0)112337627 E-mail : [email protected]
Sri Lanka Export Development Board
Address: No. 42 Nawam Mawatha, Colombo-02, Sri Lanka. Phone : +94-11-230-0705 / 11 Phone : +94-11-230-0715 E-mail : [email protected]
This Logistics Strategy was developed on the basis of the process, methodology and tech- nical assistance of the International Trade Centre (ITC) within the framework of its Trade Development Strategy programme.
ITC is the joint agency of the World Trade Organization and the United Nations. As part of the ITC mandate of fostering sustainable development through increased trade opportunities, the Chief Economist and Export Strategy section offers a suite of trade-related strategy solutions to maximize the development payoffs from trade. ITC-facilitated trade development strategies and roadmaps are oriented to the trade objectives of a country or region and can be tailored to high-level economic goals, specific development targets or particular sectors.
Technical support was provided by Charles Roberge, Olga Khomula, Rohan Masakorala, Vincent Lee and Chullante Jayasuriya.
Financial support was provided by the European Union, as part of the ‘European Union – Sri Lanka Trade Related Assistance : Increasing SMEs’ trade competitiveness in regional and European Union markets’ project. The contents of this document can in no way be taken to reflect the views of the European Union.
The views expressed herein do not reflect the official opinion of ITC. Mention of firms, products, and product brands does not imply the endorsement of ITC. This document has not been formally edited by ITC.
The International Trade Centre
Street address: ITC 54-56, rue de Montbrillant 1202 Geneva, Switzerland Postal address: ITC Palais des Nations 1211 Geneva 10, Switzerland Telephone: +41-22 730 0111 Fax: +41-22 733 4439 E-mail: [email protected] Internet: http://www.intracen.org
Layout : Jesús Alés (www.sputnix.es) Government of Sri Lanka NATIONAL EXPORT STRATEGY OF SRI LANKA 2018-2022 LOGISTICS STRATEGY
Photo: World Bank Photo Collection MESSAGE OF THE LOGISTICS INDUSTRY
The Sri Lankan Logistics Industry is conscious of the increase in regional com- petition and the systemic digitisation of the industry. These two aspects highlight the need for accelerated structural reform of the logistics industry.
Regional neighbours such as India, United Arab Emirates and Singapore have intensified their efforts to capitalise on mentioned changes in the industry and are ahead of the curve in terms of their preparedness to attract emerging economic opportunities – be it in the manufacturing or the services sector.
In this changing regional context, Sri Lanka has aspirations to become South Asia’s leading maritime, logistics and distributions hub. Sri Lanka is geographi- cally well positioned in South Asia, at the crossroads of the fastest growing region of the world. The country’s proximity to many emerging markets has positioned it favourably as a very important hub in the region. With its ports being the only ports in the world to experience double digit growth in 2016, this strategy will consolidate Sri Lanka’s existing strengths to achieve its goals.
Stakeholders of the logistics industry in Sri Lanka hail this document as a long- awaited strategy that will create a cohesive regulatory framework to fully optimise the enormous potential of Sri Lanka’s logistics industry. The advancement of the logistics industry will be a prominent enabling factor to facilitate the growth and expansion of the other mature and priority sectors.
The development of the logistics sector as a key Trade Support Function of the National Export Strategy is strongly welcomed by key public and private stake- holders. This strategy is a collective endeavour of public and private stakeholders to define priorities, coordinate and monitor activities and implement Plans of Action over the course of the next five years.
This strategy creates the condition for achieving the ambitions of the industry. It emphasises key reforms required for the industry to reach new heights. The provision of efficient logistics services will be possible through amendments to the Merchant Shipping Act, SLPA Act, Finance Act/Commercial Hub Regulation, Customs Ordinance, and Electronic Transaction Act as key to successful imple- mentation of the strategy. Additionally, the strategy also considers a key interven- tion, the creation of the conditions ( land, logistics zones ) for private sector to lead development of cold storage solutions and multi-user facilities across the country and provide value added services through MCC, LCL de-stuffing, entrepot trade and commercial hub activities. [ iii ]
Careful and focused coordination of all activities, monitoring of progress and optimal mobilisation of resources will be key to the successful implementation of this strategy.
We wish to express our commitment to successfully implement the logistics strat- egy of the National Export Strategy of Sri Lanka and look forward to contribute towards prosperity and development of our country.
Chrisso De Mel Rohan Masakorala Chairman President Sri Lanka Shipper's Council Hub Operator's Association
Jagath Pathirane Ruwan Waidyaratne Chairman Chairman Sri Lanka Logistics and Freight Forwarders Ceylon Association of Shipping Agents Association ( SLFFA )
[ MESSAGE OF THE LOGISTICS INDUSTRY ] Photo: © advantis.world [ v ]
ACKNOWLEDGEMENTS
The Logistics Strategy was developed as part of the National Export Strategy ( NES ) of Sri Lanka, under the aegis of the Ministry of Development Strategies and International Trade ( MoDSIT ) and the Sri Lanka Export Development Board ( EDB ), with the financial support assistance of the European Union ( EU ), as part of the ‘EU-Sri Lanka Trade Related Assistance’.
The document benefited particularly from the inputs and guidance provided by the members of the Logistics national stakeholders that steered the formulation of the Strategy, namely :
Name Designation Name of institution Mr. S. Mahesan Director of Customs Sri Lanka Customs Mr. Upali W. De Zoysa Director - Logistics Sri Lanka Ports Authority Rear Admiral D.E.C. Jayakody Project Director - Maritime Cities Ministry of Mega polis & Western Development Project Development Mr. Jagath Pathirane Chairman Sri Lanka Logistics and Freight Forwarders Association ( SLFFA ) Mr. Sean Van Dort Member Joint Apparel Association Forum - Logistics committee Mr. N.J. Chrisso De Mel Chairman Sri Lanka Shippers Council Mr. Ruwan Waidyaratne Chairman Ceylon Association Of Shipping Agents Mr. Harin de Silva Chairman Exporters Association of Sri Lanka Captain A. Banerjee Managing Director ZIM Eng. Nishal Samarasekara Senior Lecturer Department of Transport and Logistics Management Ms. Manori Dissanayaka Assistant Secretary General Ceylon Chamber of Commerce Mr. Dinesh De Silva Chairman Import Section of the Ceylon Chamber of Commerce Mr. S.R.P. Indrakeerthi Director - Trade Facilitation & Trade Export Development Board Information
The full list of public and private stakeholders that contributed their precious time to the design of this Strategy are detailed in Appendix 1.
[ ACKNOWLEDGEMENTS ] [ vi ]
CONTENTS
Message of the Logistics Industry ii Acknowledgements v Acronyms ix
EXECUTIVE SUMMARY 1 GLOBAL INDUSTRY GROWTH DRIVEN BY DEMAND 3 SRI LANKA : IMPORTANT REGIONAL TRANS-SHIPMENT AND COMMERCIAL HUB DEVELOPING OTHER LOGISTICS ACTIVITIES IN THE REGION 7 LOGISTICS SERVICES MAP 15
FOCUSING ON THE MOST PRESSING ISSUES 18 DEVELOPING SRI LANKA INTO A GLOBAL LOGISTICS HUB 23
THE FUTURE OF THE INDUSTRY 23 MOVING TO ACTION 31
THE STRATEGIC FRAMEWORK 31 IMPLEMENTATION FRAMEWORK 33 PLAN OF ACTION 2018-2022 37 ANNEXES 47 Appendix 1: List of participants in the public-private consultations 48 Appendix 2 : Current logistics infrastructure in Sri Lanka 50 References 55
[ SRI LANKA LOGISTICS STRATEGY ] [ vii ]
LIST OF FIGURES
Figure 1 : Global TEU container throughput ( millions ), 2000–2014 4 Figure 2 : First quarter 2017 container throughput by region ( % ) 4 Figure 3 : Shipping density in the Indian Ocean 8 Figure 4 : Marine freight for Colombo Port ( container traffic type in thousand TEUs ), 2012–2016 9 Figure 5 : Trans-shipment volume of containers for India ( million TEUs ) 10 Figure 6 : Container throughput in millions ( TEUs ) for Sri Lanka and regional peers, 2008–2014 12 Figure 7 : The average cost incurred to import and export one TEU for Sri Lanka and regional peers ( US $ ) 13 Figure 8 : The average time taken to import and export one TEU for Sri Lanka and regional peers 13 Figure 9 : Logistics services map 16 Figure 10: Long list of constraints faced by the logistics industry 17 Figure 11 : Future logistics services map 24 Figure 12: Main areas of improvements in the logistics sector 25 Figure 13 : Institutional framework for logistics industry development 34 Figure 14 : Sri Lankan rail network 51 Figure 15 : Air passenger and air cargo handling in Sri Lanka, 2012–2016 52 Figure 16 : Expressway network in Sri Lanka 53 Figure 17 : Locations of export processing zones in Sri Lanka 53 Figure 18 : Concept Plan for Logistics Corridor of Western Region Megapolis Master Plan 54
[ LIST OF FIGURES ] [ viii ]
LIST OF TABLES
Table 1 : Detailed Logistics Performance Index rankings of Sri Lanka and regional peers in 2014 12 Table 2 : Performance of port services, 2013–2016 51
[ SRI LANKA LOGISTICS STRATEGY ] [ ix ]
ACRONYMS
The following abbreviations are used :
3PL Third-party logistics MoMWD Ministry of Megapolis and Western B2B Business-to-business Development B2C Business-to-consumer MoNPEA Ministry of National Policies and Economic BIA Bandaranaike International Airport Affairs BOI Board of Investment MoPS Ministry of Ports and Shipping BOT Build-operate-transfer MoTCA Ministry of Transport and Civil Aviation CBSL Central Bank of Sri Lanka MoTDI Ministry of Telecommunication and Digital DoC Department of Commerce Infrastructure EDB Export Development Board MSS Merchant Shipping Secretariat EPZ Export Processing Zone PMO Prime Minister’s Office FDI Foreign direct investment PoA Plan of Action FCCISL Federation of Chambers of Commerce and PPP Public–private partnership Industry Sri Lanka R&D Research and development ITC International Trade Centre SCM Supply chain management LCL Less than container load SLFFA Sri Lanka Freight Forwarders' Association LPI Logistics Performance Index SLPA Sri Lanka Port Authority MIC Ministry of Industry and Commerce SMEs Small and medium-sized enterprises MCC Multi-country consolidation TEU Twenty-foot equivalent container unit MoDSIT Ministry of Development Strategies and TF Trade facilitation International Trade TISI Trade and investment support institution MoF Ministry of Finance
[ ACRONYMS ] Photo: World Bank Photo Collection 1
EXECUTIVE SUMMARY
The development of the logistics industry in Sri Lanka is a Because it is situated on the main east–west and north– five-year endeavour that was defined through a consultative south shipping corridors that connect Asia to Europe and process between public and private sector stakeholders. Africa, Sri Lanka has not diversified its business model to Transforming Sri Lanka into a leading maritime, logistics and attract other types of ships and related services. The coun- distribution hub in the Indian Ocean will depend heavily on try is known mainly as a container shipping hub in South the ability of the industry to implement activities defined in Asia. Over the five-year Strategy period, Colombo Port will this Strategy. Stakeholders will need to coordinate actions, be the major trans-shipment hub of South Asia. Sri Lanka monitor progress and mobilize resources for Strategy imple- will service all types of ships and provide ship-related ser- mentation in order to achieve its targets. Implementation will vices – for example, crew changes, supplying and replenish- succeed only if an adequate regulatory environment is fos- ing victuals and water – through its network of major ports in tered, and operational procedures and guidelines for provi- the west, east and south connecting the international east- sion of efficient logistics services are followed. west shipping route and increasing trans-shipment business through its ports. Sri Lanka aims to transform into South Asia’s leading mari- time, logistics and distribution hub to support the national Modern technologies have transformed the logistics in- economy. This will be achieved by fostering the right regu- dustry by facilitating trade-related operations and grow- latory environment and implementing enabling procedures ing opportunities for intraregional markets, e-commerce and guidelines for provision of efficient logistics services. and services for integrated connectivity. By encouraging These actions will create the conditions for the private sec- large, medium and small global trading companies to use tor to lead development of the logistics sector, attract the Sri Lanka as a major distribution hub for the Indian subcon- investment needed to install the proper facilities across the tinent and beyond, the country can become a connecting country ( cold storage solutions and multi-user facilities ) and point for all of South Asia by providing business-to-business provide value added services through multi-country consoli- ( B2B ), business-to-consumer ( B2C ) and e-commerce ser- dation ( MCC ), less than container load ( LCL ) de-stuffing and vices. The potential lies in the development of entrepot trade, commercial hub activities. bonded warehouses or MCC logistics services, international buyer-seller consolidations and front-end services to clients, Strategically located in South-East Asia, at the crossroads air / sea transfers and value addition services. Developing of the fastest-growing region in the world, Sri Lanka is logistics is the best way to expand indirect export revenue close to many emerging markets and is already an impor- and provide backward and forward links for industries that tant logistics hub for the region. The overall performance would expand export processing, trading and manufactur- of port-related services has been improving. Total container ing in Sri Lanka. handling in 2016 increased by 10.6 % to 5.7 million twenty- foot equivalent container units ( TEUs ), from 5.2 million TEUs Becoming a multimodal logistics hub providing integrated handled in 2015.1 services and facilities requires physical and information technology infrastructure to ensure a seamless flow from While Sri Lanka is one of the major trans-shipment hubs in one mode of transportation to another. Currently, three Asia, the logistics industry has not fully tapped the grow- terminals in Colombo Port and Bandaranaike International ing opportunities in trans-shipment and e-commerce. Airport ( BIA ) are already reaching maximum capacity. An There is a unique opportunity to develop a world-class lo- underused rail network for transportation of reefer contain- gistics hub and enter the global supply chain industry that ers, limited availability of land and no proper cold storage is rapidly digitalizing and evolving with a new generation of facilities or infrastructure for storage and value addition ser- consumers. vices hinder export opportunities. Allocating land and form- ing the ecosystem to attract more foreign direct investment
1.– Central Bank of Sri Lanka ( 2016 ). Annual Report 2016, chapter 3. ( FDI ) will create the conditions for the private sector to lead
[ Executive summary ] 2
the development of cold storage solutions, multi-user facili- The following is a delineation of the proposed vision and ties, LCL de-stuffing and commercial hub activities across strategic objectives of this Strategy. This vision statement the country. was agreed on by all stakeholders of the Sri Lankan logis- tics industry. The following key areas of intervention are priorities to fa- cilitate the implementation of the Strategy : Sri Lanka : The Indian Ocean maritime, Urgently implement operational procedures and guide- lines for provision of efficient logistics services ( amend- logistics and distribution hub ments to the Merchant Shipping Act, Sri Lanka Port providing all services and facilities Authority Act, Finance Act–Commercial Hub Regulation, for integrated connectivity Customs Ordinance and Electronic Transactions Act ). “ Create the conditions ( land, logistics zones ) for the pri- vate sector to lead development of cold storage solutions The strategic Plan of Action ( PoA ) responds to this vision and multi-user facilities across the country and provide by addressing key constraints and leveraging opportunities value added services through MCC, LCL de-stuffing, and in a comprehensive manner. Emphasis is on” the following commercial hub activities. strategic orientations.
Strategic objective 1: To create an Creating a conducive business environment for industry enabling and efficient business expansion by providing efficient logistics services through environment driven by technology and operational procedures and guidelines is the main priority. public-private coordination
Creating conditions (land, logistics zones) for the private sector Strategic objective 2: To ensure to lead development of cold storage solutions and multi-user adequate facilities and availability of a facilities across the country and attracting skilled labour will qualified labour force allow industry capacity to expand.
Strategic objective 3: To promote the Increasing market outreach and building the country s image will image of Sri Lanka as a logistics hub help build awareness of the country s locational advantages and worldwide attract more FDI.
Coordinating activities, monitoring progress and mobi- An effectively organized and supported committee can lizing resources for implementation will be critical to suc- plan industry development strategically. High-level sup- cessful achievement of these targets. To that effect, an port from the Government, in collaboration with strong advisory committee for the logistics industry was estab- championship by the private sector, will be the real driv- lished, operationalized and empowered. The logistics ad- ers to truly make Sri Lanka a leading maritime, logistics visory committee is responsible for overall coordination, and distribution hub in the Indian Ocean. provision of policy guidance and monitoring of industry de- velopment along the strategic orientations.
[ SRI LANKA LOGISTICS STRATEGY ] 3
GLOBAL INDUSTRY GROWTH DRIVEN BY DEMAND
The global logistics and supply chain management ( SCM ) are opening up to establish connectivity with the rest of the industries are expanding, and this is expected to continue. world. This increased connectivity brings competition be- Since the beginning of 2017 global container port through- tween carriers, which lowers the cost and promotes efficien- put has grown by 5.8 % compared to the same period in cy among service providers. Cooperation between global 2016, and is expected to reach 4.6 % annual growth in 2017.2 container terminal operators has also improved port perfor- The industry – including roads, waterways, rail and air trans- mance. Connectivity and innovation in the digital economy port, and any related logistics services – is growing in val- reduces trade costs and creates positive spillovers by in- ue at around US $ 350 billion to US $ 380 billion per year. creasing the efficiency of Customs operations, transparen- cy and reliability for the private sector. Physical delivery of With advances in information technology and the Internet goods still depends on physical connectivity though, includ- of Things, the industry’s sophistication has evolved. The ing transport networks, intermodal connections and func- range of logistics services is quite large, including transpor- tioning transport service providers.3 tation, customer service and inventory management but also warehousing, packaging, material handling, maintenance and Geographical position can give comparative advantages information. Industry services have evolved in sophistication, to a country, although improving the efficiency of trade lo- with service offerings ranging from individual transport and gistics services and providing a conducive business en- storage solutions to customized, integrated SCM services as vironment are the keys to increasing trade performance well as electronic tracking, paperless operations and digital and satisfying the requirements of trading customers. services throughout the value chain. The industry has grown Increasing logistics efficiency through trade facilitation ( TF ) continually as the pace of outsourcing gathers momen- requires policy changes, and trade and transport servic- tum, namely through SCM and other value added services. es can bring more investment to the logistics sector and strengthen trade relations with partners. Modern technologies have transformed logistics and con- tinue to facilitate trade-related operations. Most countries South-East Asia’s fast economic growth and East Africa’s are taking steps to improve the transport and logistics sec- development both offer potential for the logistics sector in tor and to support its growing manufacturing activities and the Indian Ocean as a lower-cost supply base. Increases external trade by lowering costs and improving the perfor- in population and middle class consumption, and fast-grow- mance of ports. Globally, transport operations have moved ing regional economies, provide important multimodal op- from being labour-intensive to using automated guided ve- portunities for maritime countries willing to serve as a hub hicles and cranes. Optical readers for containers have im- and provide logistics services for passing regional cargoes. proved container management within yards. Modern hubs and warehouses have management systems enabled by International shipping of trade goods has grown in recent information technology. Scanners, optical readers and ra- years. The development of port handling reflects the evolu- dio frequency identification have reduced human errors and tion of world trade. Looking at global container throughput improved accuracy. between 2000 and 2014, there was a steady annual increase of 6 % on average in volume ( see figure 1 ). This growth is ex- The logistics industry today represents a growing op- pected to continue. Container handling growth at main ports portunity for integrated connectivity of intraregional mar- kets, e-commerce and services. The world’s major ports 3.– Organization for Economic Co-operation and Development and World Trade Organization ( 2017 ). Aid for Trade at a Glance 2017 : Promoting 2.– Alphaliner ( 2017 ). Website. Available at www.alphaliner.com. Trade, Inclusiveness and Connectivity for Sustainable Development.
[ Global industry growth driven by demand ] 4
around the world since the beginning of 2017 has been un- even, however. Ports in South Asia, Africa and Latin America experienced volume growth, with Chinese ports including Hong Kong ( China ) being the key driver of the 7.3 % year- on-year increase in the first quarter of 2017 ( see figure 2 ), as well as North European and North American ports.4 The top five world container handling ports remain Shanghai, Singapore, Shenzhen, Ningbo-Zhoushan and Hong Kong ( China ).
4.– Alphaliner ( 2017 ). Website. Available at www.alphaliner.com.
Figure 1 : Global TEU container throughput ( millions ), 2000–2014
800.000.000 679,264,658
600.000.000
400.000.000
224,774,536 200.000.000
- 1 20 1 2000 2001 2002 2003 2004 2006 2007 2008 2009 2010 2012 2013 2014 2005
Source : World Development Indicators
Figure 2 : First quarter 2017 container throughput by region ( % )
12% Global average % 10% 8% 6% 4% 2% 0%
Africa Oceania China HKNorth Asia Middle EastSouth Asia North EuropeSouth Europe Southeast Asia North AmericaLatin America
Source : Alphaliner
[ SRI LANKA LOGISTICS STRATEGY ] 5
Increasing trade of goods and services, advances in infor- mation and communications technology, and globaliza- tion have changed the industry trade patterns for logistics services. Many countries are making efforts to attract cus- tomers and satisfy key client requirements, providing ready- made logistics solutions, new infrastructure, and fast and cost-effective services.
E-commerce is transforming the global business, open- ing up more opportunities for firms to trade internationally. Globally, e-commerce sales in 2015 reached US $ 25.3 trillion, 90 % of which were in the form of B2B e-commerce and 10 % in the form of B2C sales.5 Cellular phone and Internet penetration, the rise of the middle class in devel- oping countries and easy access to international online platforms drive growth in supply from new e-commerce players as well as increasing logistics options. New tech- nologies help overcome several logistical constraints, providing sophisticated equipment and powerful software to deliver goods more efficiently. Logistics services outsourcing includes various func- tions outsourced to third-party logistics ( 3PL ) service providers. By 2020, the global 3PL market is expected to reach US $ 925 billion.6 3PL companies provide inte- grated logistics services according to customer needs by incorporating transportation, warehousing, packaging, inventory control, order processing, customer support, Customs procedures and other logistics services in an SCM system. Logistics services outsourcing contributes Photo: © advantis.world to overall logistics cost reduction and high quality of cus- tomer services. Fourth-party logistics is the integration of all logistics potential suppliers, increased market transparency and procedures within one company involved in a different reduced market research costs. stage of the supply chain. Using fourth-party logistics Reverse logistics was introduced to support sustaina- benefits companies by providing a broader base of ble development and consists of all logistics activities to gather, disassemble, remanufacture, reuse and recycle used products and materials. This type of service helps to reduce environmental impact and improve corporate 5.– United Nations Conference on Trade and Development ( 2017 ). social responsibility. Maximizing the development gains from e-commerce and the digital economy. ( Note by the Secretariat TD/B/EDE/1/2 ). Available from http ://unctad.org/meetings/en/SessionalDocuments/tdb_ede1d2_en.pdf. These developments represent an opportunity for value 6.– Orbis Research ( 2015 ). Third Party Logistics ( 3PL ) Market Analysis chain diversification. However, Sri Lanka will need to move By Service ( Dedicated Contract Carriage, Domestic Transportation Management, International Transportation Management, Warehousing quickly to establish the right business environment if this op- And Distribution, Software ) And Segment Forecasts To 2020, 2015. portunity is to be taken full advantage of.
• The global logistics industry and SCM are expanding, and • The logistics industry today represents a growing oppor- international trade is expected to grow in the future. tunity for integrated connectivity of intraregional markets, • Modern technologies have transformed the logistics industry e-commerce and services. and continue to facilitate trade‑related operations. • The increase of logistics efficiency through TF requires policy changes and trade and transport service adaptation in order to bring more investment to the sector and strengthen trade relations with partners.
[ Global industry growth driven by demand ] 6
Box 1 : The United Kingdom of Great Britain and Northern Ireland, the world’s leading maritime business services hub
The United Kingdom has a 35 % share of global marine insurance Kingdom and expend their services and operations internationally. premiums and 26 % of global shipbroking revenue, while 25 % of the The cluster impact creates a multiplying effect for related businesses world’s maritime legal partners are based in the United Kingdom.1 and attracts talent. British companies offer a wide variety of maritime business services : Despite the lack of an established major hub port in the United marine insurance, shipbroking, legal services, education, maritime Kingdom, and limited local ownership and shipping activity com- finance, accountancy and consultancy. The industry contributes pared with big ports such as Rotterdam, Hamburg and Shanghai, US $ 6.3 billion yearly to the economy and employs over 10,000 London has managed to remain a key maritime node in the world. people.2 It is estimated that 80–85 % of its business comes from A stable business environment, rule of law and geography attract outside the country. many operations to the country, which aims to continue building a The United Kingdom is a pre-eminent international maritime centre vibrant and influential transport services sector. However, Brexit and by virtue of the strong, interlocking maritime services cluster that a number of bottlenecks such as corporation tax and the high relative it has built up over the years. Many of the world’s leading maritime cost of doing business in London make it more feasible to locate law and shipbroking firms have their headquarters in the United high added value businesses in the United Kingdom.
Box 2 : Singapore : on the way to developing a global integrated logistics hub
Having grown successfully as a maritime centre over the past few maritime products and services. It is also fast becoming Asia’s hub decades, Singapore is a very efficient maritime hub with strong for maritime law and arbitration and is one of the top global players assets in ports, operators, and technical and business services. in the offshore and marine engineering industry. One of the key success factors is a supportive government aim- The Maritime and Port Authority, established in 1996, promotes ing to be the global leader in all segments. Other factors include Singapore as a premier global hub port and international maritime strategic geographic port location; skills; good infrastructure and a centre, facilitates port operations and growth, expands clusters of pro-business environment including political, economic and social maritime ancillary services, and promotes maritime research and stability; a strong legal system; a favourable tax structure; and a development ( R&D ).3 It has also established the Maritime Cluster number of bilateral and multilateral free trade agreements. Singapore Fund to support manpower and business development efforts, and has good connectivity to major trading hubs and manufacturing to drive productivity improvements. bases by air and sea. Major shippers and logistics service providers Singapore does face several constraints, namely a small domestic have their regional headquarters there and a large number of com- market, relatively high cost of operations ( land rental and wages ), modities traders have their chartering desk in Singapore. limited space and fragmentation, with limited scale presented by the The Singaporean maritime ecosystem comprises over 5,000 estab- majority of small and medium-sized companies. These factors and lishments employing more than 170,000 people and contributes growing competition in the region resulted in the Maritime and Port about 7 % to gross domestic product. Home to about 140 of the Authority road map : International Maritime Centre 2030. world’s top shipping groups, Singapore offers a rich diversity of
[ SRI LANKA LOGISTICS STRATEGY ] 7
SRI LANKA : AN IMPORTANT REGIONAL TRANS- SHIPMENT AND COMMERCIAL HUB
Sri Lanka has a unique selling proposition to develop a world-class logistics hub and enter the global sup- ply chain industry, which is rapidly digitalizing and cre- ating a new generation of consumers. According to the Government, logistics services contribute 2.5 % of gross domestic product, which represents around US $ 2 billion. Logistics services include container trucking, warehousing, ports and shipping, but exclude domestic transport of pas- sengers, fisheries and interregional domestic cargo trans- portation. The total share of logistics in national exports is estimated at 7 %. The industry provides full-time direct em- ployment to over 40,000–50,000 people. The size of com- panies varies between 5 and 1,000 employees. Around 70 % of registered companies are national and the rest are multi- national. Currently there are 130 shipping agencies and 120 freight forwarders in associations, and 500+ companies reg- istered with the Merchant Shipping Secretariat ( MSS ), which includes clearing agents.
With reasonably well-established air and sea connectivity, Sri Lanka offers varied logistics services. Logistics refers to a series of services and activities – such as transporta- Photo: World Bank Photo Collection tion, warehousing and brokerage – that help to move goods and establish supply chains across and within borders.7 In Sri Lanka there is a wide range of facilities and services Strategically located in South Asia at the crossroads of involving logistics : shipping, freight forwarding and logis- the fastest-growing region in the world, Sri Lanka is close tics operations, ports and inland container depots / dry ports, to many emerging markets and is already an important bonded zones and warehousing, domestic transportation, trans-shipment hub for the region. Previous sector devel- free zones and commercial hub activities. opment was mainly concentrated on hard infrastructure, with many Government policies and support from interna- tional partners including Mahinda Chinthanaya, the Urban Transport Master Plan for Colombo Metropolitan Region and Suburbs, mega-projects like the development of the Mattala Rajapaksa International Airport and Hambantota Port, and national master plans for ports, railways and roads. 7.– World Bank ( 2016 ). Connecting to compete 2016 – trade logistics in the global economy, June 28. Available from www.worldbank.org/en/news/ feature/2016/06/28/connecting-to-compete-2016-trade-logistics-in-the- global-economy.
[ Sri Lanka : AN IMPORTANT REGIONAL TRANS-SHIPMENT AND COMMERCIAL HUB ] 8
Figure 3 : Shipping density in the Indian Ocean
Source : Marine Traffic Density Map ( 2017 )
Yet the country has not fully tapped the growing opportu- not been a specific policy, project or initiative focusing on the nities in trans-shipment and e-commerce. Improvements in quality of logistics services. A national policy for the maritime TF have been ongoing for many years and the World Trade and logistics sector is currently being formulated. One has Organization Trade Facilitation Agreement is speeding up been developed several times before but has never been the TF reform agenda. TF initiatives are coordinated by the approved by Parliament. National Trade Facilitation Committee. However, there has
Box 3 : Strengths, weaknesses, opportunities and threats analysis for Sri Lanka logistics
Strengths Weaknesses • Located on busy East-West maritime trade links • Port capacity limited by facilities and equipment • Trans-shipment hub for India • The airport, Jaya Container Terminal and South Asia Gateway Terminal • Modern port facilities to handle large container vessels ( >9,000 TEUs ) are operating at maximum capacity • Availability of land • Outdated road and rail infrastructure • Non-transparent Customs and tax regulations
Opportunities Threats • E-commerce hub for South Asia • India is revamping its port operations and the Indian Government • Ability to offer higher value chain activities in global trade has worked to reduce the reliance of Indian shippers on Colombo • Growth in vessel size and consolidation of shipping lines • Unstable utility supply • Belt and Road initiatives, able to act as hub for South Asia for trade • Malaysia and Singapore are improving their port infrastructure and services to Africa, the Middle East, Europe and Asia • Indian growth
[ SRI LANKA LOGISTICS STRATEGY ] 9
Photo: (cc) jgmorard, Colombo Port.
Logistics can become a driver of the Sri Lankan econo- focuses on container trans-shipment largely for the textile my and the country has huge potential for growth in lo- industry. There are three types of trans-shipment : gistic services but ports are already reaching maximum capacity. Colombo Port was the twenty-third largest port Hub-and-spoke ( hub/feeder ) – between deep-sea and in the world in 2016, handling 5,734,000 TEUs.8 Port ser- feeder; vices consist mainly of handling containers, trans-shipment Interlining/intersection – between deep-sea and deep-sea and cargo. Trans-shipment of cargo has been the main ser- along shipping routes; vice of Colombo Port and 75 % of traffic over the last five Relay – between deep-sea and large deep-sea as inter- years has been that from trans-shipment cargo ( see fig- face between shipping routes along the same maritime ure 4 ). However, three terminals in Colombo Port are already range but servicing different ports of call. reaching maximum capacity. Magampura Mahinda Rajapaksa International Port in Sri Lanka is the main trans-shipment hub for the Indian Hambantota provides services mainly for vehicle trans- subcontinent, mainly to India ( see figure 5 ). Colombo Port shipment ( roll-on / roll-off operations ). Japanese, Korean and Indian carmakers use this port for trans-shipping vehicles
8.– World Shipping Council ( 2017 ). Website. built in India, Thailand, Japan and China to markets in Africa, Available at www.worldshipping.org/. the Middle East, Europe and the Americas.
Figure 4 : Marine freight for Colombo Port ( container traffic type in thousand TEUs ), 2012–2016
7000 6000 5000 4000 3000 2000 1000 0 2012 2013 2014 2015 2016
Transhipment Container Total Container Traffic
Source : SLPA
[ Sri Lanka : AN IMPORTANT REGIONAL TRANS-SHIPMENT AND COMMERCIAL HUB ] 10
Figure 5 : Trans-shipment volume of containers for India ( million TEUs )
1,2
1
0,8
0,6
0,4
0,2
0 Singapore Port Klang Colombo Jebel Ali Others
2014-2015 2015-2016
Source : Indian Ministry of Shipping
Sri Lanka’s target of becoming a multimodal logistics hub 2003 and 2006 respectively, but the document stayed with providing integrated services and facilities requires phys- the Ministry of Ports and Shipping ( MoPS ) and was never ical and information technology infrastructure to ensure approved by Cabinet. In 2009, the Presidential Committee a seamless flow from one mode of transportation to an- on Maritime Affairs was created. Recently, the Minister has other. To attract multimodal transport and logistics opera- requested a new committee to be formed under the SLPA tors and maximize the potential of air and sea links to entice Chair to go through earlier reports and develop a policy to more goods to flow through Sri Lanka, rail, air and sea con- be approved by Cabinet. A national policy for the maritime nectivity around the country must be improved in order to and logistics sectors is currently being drafted. Once the expand logistics services. draft is finalized as a national policy, it should be available for public comments and should be submitted to the Ministry However, the absence of an integrated logistics policy of National Policies and Economic Affairs [ MoNPEA – Prime impedes cross-sector development and public–private Minister’s Office ( PMO ) ], which will call for comments from coordination. The first shipping policy document was pre- relevant line ministries for further observation prior to ratifi- pared in 1997 and later committees created new drafts in cation by parliament.
Strategically located in South Asia, at the crossroads of the fastest- advantages in the region. Yet it has not fully tapped the growing growing region in the world, Sri Lanka is close to many emerging opportunities in trans-shipment and e-commerce, and has a unique markets and is already an important logistics hub for the region. opportunity to develop a world-class logistics hub and enter the Having modern port facilities to handle large container vessels, be- global supply chain industry that is rapidly digitalizing and evolving ing an important trans-shipment hub for India and being situated on with a new generation of consumers. the One Belt and One Road Initiative give Sri Lanka many competitive
[ SRI LANKA LOGISTICS STRATEGY ] 11
Because of its position on the main east-west shipping Providing efficient inbound / outbound logistics and ware- corridor and north-south corridor connecting Asia to housing services for domestic suppliers is essential to Europe and Africa, Sri Lanka has not diversified its busi- ensure swift transportation of perishable fruits, veg- ness model to attract other types of ships and related etables and processed food products. There are 138 services. The country is known mainly as a container ship- Customs bonded locations around the country, which in- ping hub in South Asia. For the foreseeable five-year period, clude Government and private bonds areas. Most logistics Colombo Port will be the major trans-shipment hub of South companies ( 80 % ) are located in the Western Province. There Asia. Sri Lanka will service all types of ships and provide are 12–15 container depots that operate as dry ports and ship-related services : for example, crew changes, supply- there are a number of cold storage facilities, mostly related ing and replenishing victuals and water through its network to the fisheries industry and a few for food and medical prod- of major ports in the west, east and the south connecting ucts. For perishable fruits, vegetables, processed food and the international east-west shipping route and increasing other products which require special conditions, storage and trans-shipment business through ports of Sri Lanka. The transportation facilities are limited. upcoming enhanced free trade agreement with India and the new free trade agreements with China, Singapore and Bangladesh provide many opportunities for developing trad- ing activities and SCM services for the whole of South Asia and even East African emerging markets.
Box 4 : Commercial hub activities in Sri Lanka
Setting up free ports and bonded areas to facilitate import in entrepot trade, logistics services ( bonded warehouses or MCC ), and export of goods and services through the Commercial front-end services to clients abroad, and offshore business and Hub Regulation of the Finance Act provided investment oppor- headquarters operations of leading buyers for management of the tunities to carry out specific business activities. Colombo and finance supply chain and billing operations. Facilities in free ports Hambantota declared Free Ports, and Katunayake and Koggala Export and bonded areas offer important advantages in terms of product Processing Zones ( EPZs ) declared as bonded areas. Currently, turno- storage facilities, shared warehousing, equipment, delivery time, ver is estimated at around US $ 150 million to US $ 175 million for support facilities and effective management. four commercial hub companies in operation. They cover activities
Key critical points that attract multimodal transport and logistics operators are cost of operations and turnaround time. The World Bank Logistics Performance Index ( LPI ) ranked Sri Lanka eighty-ninth in 2014. This index includes efficiency of the clearance process, the quality of trade- and transport-related infrastructure, the overall level of compe- tence and quality of logistics services, and some other criti- cal factors. Sri Lanka lags behind its regional competitors on these indicators ( see table 1 ).
[ Sri Lanka : AN IMPORTANT REGIONAL TRANS-SHIPMENT AND COMMERCIAL HUB ] 12
Table 1 : Detailed Logistics Performance Index rankings of Sri Lanka and regional peers in 2014
Singapore Malaysia Thailand India Pakistan Sri Lanka Myanmar LPI rank 5 25 35 54 72 89 145 LPI components Customs 3 27 36 65 58 84 150 Infrastructure 2 26 30 58 69 126 137 International shipments 6 10 39 44 56 115 151 Logistics quality and competence 8 32 38 52 75 66 156 Tracking and tracing 11 23 33 57 86 85 130 Timeliness 9 31 29 51 123 85 117
Figure 6 : Container throughput in millions ( TEUs ) for Sri Lanka and regional peers, 2008–2014
35.000.000 30.000.000 25.000.000 20.000.000 15.000.000 10.000.000 5.000.000 0 2008 2009 2010 2011 2012 2013 2014
India Malaysia Pakistan Singapore Sri Lanka
Source : World Development Indicators.
Compared with regional peers, Sri Lanka’s LPI rank- Despite stronger economies and currencies, Malaysia and ing and performance in values is lower than Singapore, Singapore are both able to perform better than Sri Lanka Malaysia and India ( see figure 6 ). However, there is sta- in terms of lower shipping costs and time. While the cost ble growth of container throughput handling for Colombo of shipping is higher in Sri Lanka compared with Malaysia Port. Total container handling in 2016 increased by 10.6 % and Singapore, it has a very strong advantage compared to 5.7 million TEUs from 5.2 million TEUs handled in 2015.9 with India ( see figure 7 ). The time required to ship contain- The only port to register double-digit growth was Port Klang, ers is higher in Sri Lanka compared with South-East Asian Malaysia with 10.8 % growth in 2016 to 13.2 million TEUs. countries and it has a slight advantage compared with India That put it in twelfth position globally. ( see figure 8 ).
9.– Central Bank of Sri Lanka ( 2016 ). Annual Report 2016.
[ SRI LANKA LOGISTICS STRATEGY ] 13
Photo: (cc) Anushka Wijesinha
Figure 7 : The average cost incurred to import and ex- Figure 8 : The average time taken to import and export port one TEU for Sri Lanka and regional peers ( US $ ) one TEU for Sri Lanka and regional peers
$1.600 25 $1.462 $1.400 21 $1.332 20 $1.200 17 16 $1.000 14 $760 15 $800 $690 13 13 $560 11 $460 $595 $560 $600 $525 $440 10 8 $400 6 $200 5 4 $- - India India Malaysia Singapore Thailand Sri Lanka Malaysia Thailand Singapore Sri Lanka Cost to Import (US$ per container) Time to Import (days) Cost to Export (US$ per container) Time to Export (days)
Source : World Bank Source : World Bank
• Because of its position on the main east-west and north- • Setting up free ports and bonded areas to facilitate import south shipping corridors connecting Asia to Europe and and export of goods and services through the Commercial Africa, Sri Lanka has not diversified its business model to Hub Regulation of the Finance Act provided investment op- attract other types of ships and related services, and 75 % of portunities to carry out specific logistics business activities. freight in Sri Lanka is trans-shipment. • To attract multimodal transport and logistics operators • Three terminals in Colombo Port are already reaching maxi- and investors, key points – namely the cost of operations mum capacity. and turnaround time – must be considered. • Warehousing and transportation services for domestic sup- pliers of perishable fruits, vegetables, processed food and other products are limited.
[ Sri Lanka : AN IMPORTANT REGIONAL TRANS-SHIPMENT AND COMMERCIAL HUB ] Photo: © advantis.world 15
LOGISTICS SERVICES MAP
The logistics industry includes various services provided to Figure 9 includes three main types of services provided in domestic and international clients. The map of the logistics Sri Lanka : overall logistics operation, trans-shipment and services industry ( see figure 9 ) consists of four components : commercial hub activities. Even though the nature of activi- inputs, inbound logistics, operations and outbound logistics. ties for each of them is the same, each type of service has The map’s analysis enables a better understanding of the its own specificities and constraints. specific processes of logistics operations. Understanding the dynamics of logistics services is essential for identifica- tion of the issues affecting industry performance.
Photo: © advantis.world
[ Logistics services map ] 16
Figure 9 : Logistics services map center (e.g. After market technical and Distribution services, e.g. Outsourced call reverse logistics, return and repairs warranty enquiries) Shipping Carriage Shipping Customs Customs Customs other order other order other order administration administration formalities and formalities and administration formalities and (Re-)packaging Outbound logistics Logistics services provider Logistics services provider Logistics services provider Carriage Order Order Shipping Carriage Labelling Labelling processing Warehousing processing Consolidation Warehousing Consolidation (Re-)packaging Project logistics Project Lead logistics provision Operation of supply chain provider provider Packaging Conversion processing Arrangement of transport operations Conversion Packaging Assembly and Assembly and Logistics services Operations Logistics services minor processing Selection and integration of multiple carriers Logistics consulting and supply chain design Information services, including track and trace Management of supply chain (including transport, warehousing and inventory) provider Carriage Carriage control provider
handing handing control
Materials Materials Inventory Inventory
Warehousing provider Warehousing Logistics services
Logistics services Inbound logistics Logistics services Logistics Logistics services provider TRANSSHIPMENT LOGISTICS OPERATIONS LOGISTICS COMMERCIAL HUB ACTIvITIES COMMERCIAL Input Legend National for export international Required only Required National and or Technical testing Technical Quality inspection insurance brokering collateral management and Financial services, such as Documentation compliance
[ SRI LANKA LOGISTICS STRATEGY ] 17
Figure 10: Long list of constraints faced by the logistics industry
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[ Logistics services map ] 18
FOCUSING ON THE MOST PRESSING ISSUES
Extensive stakeholder consultations, field visits and review of There is no industry apex body and no single ministry is in literature have revealed a number of constraints in the logis- charge of overseeing the logistics sector. MSS, under MoPS, tics sector that challenge its short- and medium-term growth. and Airport and Aviation Services ( Sri Lanka ) Limited, part- In order to ensure the Strategy is efficient and precise, only ly fulfil this role but there is little coordination with other the most critical bottlenecks are detailed below. agencies.
Constraints are identified along three dimensions – policy, An independent unit of the Government should be creat- institutional and enterprise. ed to facilitate the expansion of logistics activity and cover not only ports but the maritime sector as a whole. This unit Policy constraints refer to legislative and regulatory bot- would coordinate shipping and logistics services between tlenecks that limit effective functioning of the trade sup- land, rail, air and sea transport to support Sri Lanka’s de- port function in line with international best practice. velopment into a leading logistics hub with physical and vir- Institutional constraints refer to supply-side issues re- tual excellence. A panel of independent personnel will be lated to trade and investment support institutions’ ( TISIs ) needed to strategize and continuously adapt the latest and service delivery to enterprises; specifically in terms of best practices to set up the logistics industry with reliability the capacities and resources available to institutions to and speed. The Singapore model of a maritime authority to achieve effective service delivery. facilitate the maritime economy can serve as an example. Enterprise constraints refer to demand-side issues re- lated to logistics infrastructure. These constraints are addressed in PoA : 1.1.1, 1.1.2.
Inadequate policies and outdated regulations concerning POLICY ISSUES logistics activities impede the development of shipping business operations Current model of port structure does not enable industry development Regulatory stability and predictability will enable an efficient business environment, allowing Sri Lanka to develop into a The current port structure does not facilitate and support leading global integrated logistics hub. There are a number shipping business operations in a highly competitive glob- of bottlenecks in Sri Lankan legislation that hinder the ex- al shipping industry. SLPA is the state-owned operator that pansion of the industry, as listed below. controls commercial ports in Sri Lanka and is responsible for the shipping operations of Jaya Container Terminal. SLPA A policy for liberalizing MCC / LCL was presented in the does not receive financial allocation from the Government last budget but the issuing of the relevant Gazette and and operates on its own revenue. However, it lacks autono- guidelines amendments has been delayed. my in decision-making even for small operations and a re- The Customs Ordinance is outdated. The proposed new quest must go to the Cabinet. More autonomy must be given Act, which has been drafted to facilitate trade in line with to SLPA to facilitate independent decision-making for TF and World Trade Organization Trade Facilitation Agreement finance activities in order to compete with other terminals lo- commitments, needs to be adopted as a priority. The cally and globally. The creation of an independent regulator overall result would be reduced transaction costs, in- for ports is strongly recommended to build a fair and com- creased speed and a paperless environment with maxi- petitive environment in port services and to stop anti-com- mum automation through a national single window. petitive practices ( including anti-dumping ). The Government The Commercial Hub Regulation of the Finance Act gives needs to limit its management of logistics to creating an Sri Lanka as opportunity to connect its services to re- enabling environment for direct competition in the business gional and global value chains. The legislation provides of shipping and terminal operations. The landlord model is an avenue to increase exports out of Sri Lanka. Because prevalent in almost all hubs and the Government can in- the law is new, operators have encountered practical dif- vest up to 33 % in different businesses in the national in- ficulties increasing business activity and from time to terest, plus introduce a transparent tax regime for revenue time have requested amendments to the guidelines to purposes. The management of commercial shipping, ports expand the overall business climate for hub operators. and logistics currently fall under MSS. SLPA acts as regula- It is strategically very important to strengthen this sector tor, operator and landlord at the same time. and accommodate the reforms proposed by operators as a priority. One of the key issues is to retain the current
[ SRI LANKA LOGISTICS STRATEGY ] 19
tax structure relevant to operators at 0 %, as originally es- INSTITUTIONAL ISSUES tablished and intended. An e-commerce platform for imports and exports should Weak coordination among stakeholders and lack be facilitated – taking into consideration industry require- of an industry-led mechanism to support logistics ments – to achieve the lowest transaction costs and fast- hinders logistics industry development est clearance in order to enhance B2C activity. Due to inadequate refinery capacity, Sri Lanka currently The Association of Container Transporters is an organiza- has to import bunkers, which results in a cost disadvan- tion whose members include the major container transport tage. A call to international investors to build new stor- companies in the country. However, it does not encompass age tanks for crude oil and other petrochemicals to be all players in the sector. Only 25 % of logistics small and stored and distributed to the region should be promoted medium-sized enterprises ( SMEs ) are organized under this as FDI. The whole petroleum industry should be liberal- Association. Its main function is to encourage and promote ized to promote refinery building and offshore distribution professional conduct in the container transport industry for global operators. and to improve the quality of container transport services,10 Strengthen antitrust laws and increase transparency and it currently focuses on problems and solutions for con- through competition laws, where there are gaps for anti- tainer transport in Sri Lanka. Another association, SLFFA, competitive behaviour. Reforms should ensure fair com- brings together freight forwarders under one umbrella. petition in an open-market economy, which will support The Sri Lanka Shippers’ Council and the Hub Operators the export and manufacturing sectors. Association of Sri Lanka connect shippers and commercial Sri Lanka is a member nation of the International Maritime hub operators. Nevertheless, logistics operators / stakehold- Organization and there are a number of gaps in laws in ers are not organized in any form for collective marketing or relation to international conventions that the country has promotion activities. committed to but have not been fully ratified by the parlia- ment and annexed to national laws. As a result, legislation There is no formal public–private dialogue or collaboration is ad hoc and does not reflect a fully fledged maritime between different industries and various components of the nation’s needs. This must be rectified to ensure ship op- logistics industry. This impedes the development of the sec- erators increase their services through Sri Lankan ports tor. Policies and coordination need to be aligned among all and territorial waters stakeholders to ensure that the needs of the logistics sec- To ensure an enabling and efficient business environment tor are met. Strengthening the governance of the industry to for logistics sector development, it is crucial to maintain improve public–private coordination is vital. consistency in the laws that govern ports, free zones and commercial hubs to encourage more capital inflows and These constraints are addressed in PoA : 1.1.1, 1.1.2. to attract more FDI.
These constraints are addressed in PoA : 1.1.3, 1.1.6, 1.1.7, Insufficient dialogue between academia and industry 1.1.8, 1.1.9, 1.1.10, 1.1.11, 1.1.12, 1.1.13, 1.1.14, 2.2.3. results in limited partnership and no alignment to serve industry needs
Absence of proper guidelines for the Electronic Lack of cooperation between academia and industry results Transactions Act delays use of integrated electronic in a shortage of professional competencies and absence solutions of practical experience and training. Logistics manage- ment staff lack sufficient capacities in analytical and strate- Even though the Electronic Transactions Act of 2006 author- gic thinking for industry development. There is also limited izes e-payments, e-signatures, e-documents and tracking, awareness of industry professional opportunities. Students institutions have not been using the system. The reasons are not aware of careers in logistics and there is a limit- are an absence of proper guidelines from the Ministry of ed number of training programmes for them during their Telecommunication and Digital Infrastructure ( MoTDI ), lim- studies. Building strong links between academia and indus- ited awareness and lack of capacities to follow the proce- try will increase outreach to youth and young profession- dures of integrated electronic solutions. Government and als and raise awareness about professional opportunities Customs payments improved in July 2017 when e-payment in logistics. gateways were launched. Proper guidelines for the Electronic Transactions Act need to be implemented, including facilita- These constraints are addressed in PoA : 2.1.1, 2.1.2, 2.1.3. tion of B2C transactions and the regulator enabling institu- tions to use integrated electronic solutions.
10.– Association of Container Transporters ( 2017 ). Website. These constraints are addressed in PoA : 1.1.5. Available at www.actsrilanka.com/.
[ Logistics services map ] 20
Rail networks are underused for transportation Limited marketing and promotion of Sri Lanka of containers and reefer containers, and integrated as a logistics hub in Asia hinders industry expansion multimodal connectivity networks are missing and investment attraction
The inadequate railway infrastructure results is low use of Insufficient promotion of Sri Lanka as a logistics hub has rail for transportation of containers and reefer containers. been highlighted as one of the many factors restricting in- There are no designated stations for freight and no equip- dustry growth. The country has not actively marketed its ment at loading and unloading points. The type of slepers strengths by promoting, advertising and organizing road which could take the weight of laden containers are also shows in a planned manner except for a few private sec- lacking and there are no dry port connections to ports. tor efforts. Stakeholders also noted limited efforts in foreign MoMWD is planning to connect dry ports to Colombo Port missions to promote logistics services to freight forwarders in five years within the framework of the Western Region and logistics companies abroad. Moreover, there is no co- Megapolis Master Plan Project. The Ministry of Transport ordinated promotion campaign by EDB, BOI, Federation of and Civil Aviation ( MoTCA ) is not aware of the opportunities Chambers of Commerce and Industry Sri Lanka ( FCCISL ), for industry development. MoF, the Department of Commerce ( DoC ) and other relevant agencies to attract investment. These constraints are addressed in PoA : 1.1.14, 3.2.1. Even at national level, there is limited awareness about lo- gistics services provided in the country. Local exporters, Limited data on value of exports and lack of students and professionals are not aware of the commercial centralized data on transport, logistics and shipping hub and other logistics operations opportunities to store or in Sri Lanka to provide value added services.
There is no central statistical repository for the sector and The Government will need to position the country as the there is minimal data available on the logistics and shipping leading re-exporting centre in South Asia, which is a huge industry. Lack of information and statistics makes it difficult business for logistics. Action will be needed to develop and to analyse and plan industry development, as well as de- enhance connectivity capabilities to be on a par with other terring investors. An R&D and data centre for shipping and regional hubs in the business of re-export. Increasing aware- logistics will help identify the bottlenecks that inflate logis- ness and promoting the strengths of the Sri Lankan logistics tics costs, simplify processes and reduce overall logistics industry globally is necessary to attract global logistics com- costs. University-level inputs for R&D as well as transparent panies to locate and establish a regional hub for distribu- data for Government should be established with the CBSL tion and value added service in Asia and beyond. This can Statistics Division. be achieved by attracting and anchoring high profile global networking and conference events in Sri Lanka annually to A proper information portal will give both Government and market the country and build its image as a new destination the private sector the ability to allocate resources, funding for logistics and as a platform for leading logistics solutions and international donor assistance to develop both interna- for global customers. tional and domestic requirements to strategically expand and provide logistics services. Information will create a All Government websites relating to trade / logistics should conducive environment for businesses to expand invest- be upgraded with more information, including processes, ment / volumes that can be moved via Sri Lanka as a base. forms, applications and frequently asked questions with help Without proper data management, Sri Lanka will find it dif- desk links. These should be managed by dedicated staff ficult to compete successfully in the long run. and monitored quarterly for gaps in information by a body like EDB. The market intelligence unit to be established under the Department of Census and Statistics and CBSL should re- These constraints are addressed in PoA : 3.1.1, 3.1.2, 3.1.3. flect demography, population density, per capita incomes of probable markets, consumer choices, current trading vol- umes and products, etc. to facilitate logistics services. For example, the data for South Asia alone must be looked at. This can give answers on how to service different states in India, where the five southern states alone have a gross do- mestic product of US $ 500 billion.
These constraints are addressed in PoA : 1.1.4, 2.2.1.
[ SRI LANKA LOGISTICS STRATEGY ] 21
ENTERPRISE ISSUES No plug and play solutions are available for new players to easily establish their operations. Global players need Limited capacities of port terminals limits to be attracted to start operations and distributions im- volume growth mediately. Therefore, identified locations should be al- located quickly, with infrastructure such as rail and road There is huge potential for growth in logistics services but connectivity so cargo clearance and movements can be the three terminals in Colombo Port are already working at performed fast and at low cost. Such plans should be maximum capacity. The overriding issues that need to be amalgamated with the Megapolis project and other re- resolved are as follows. gional development plans. The decision about West Terminal of Colombo harbour has not been taken. Expanding the terminal capacity in One of the root causes of the above-mentioned issues is Colombo Port is critical to attract trans-shipment busi- the limited availability and the cost of land near the Port ness. Large container vessels experience delays – in some of Colombo. There is no clarity on allocation of land in cases up to eight hours – as the deep draught capacities Colombo and Katunayake EPZ from the Government, so a of the Colombo International Container Terminal, South land bank and an attractive price should be available for lo- Asia Gateway Terminal and Jaya Container Terminal are gistics investors. In coastal areas, the land is owned by three almost full. organizations : the Ports Authority ( MoPS ), Ceylon Fishery There are not enough good MCC facilities, as evidenced Harbours Corporation and the Sri Lanka Navy ( Ministry of by the lack of modern warehouses at the port. According Defence ). For commercial hub activities, a new Government to stakeholders, there is only one warehouse with ade- provision on allocation of land has not yet been implemented quate facilities. This issue partly stems from no land being ( 5 km radius to convert existing land and warehouses in the made available for the private sector to operate closer to free zone for anybody having more than 50m2 ). It is crucial Colombo Port. There is no reclaimed land adjacent the to allocate land to set up operations within ports and airports Colombo International Container Terminal or at produc- corridors and attract investment to expand capacity. tive areas around Colombo Port. The logistics corridor between Colombo Port and the international airport in These constraints are addressed in PoA : 1.1.8, 2.2.2, 2.2.4, Katunayake has a number of suitable locations that can 3.2.2, 3.2.3, 3.2.4, 3.2.5. be developed for this purpose but the land bank proposed by the Government is to identify logistics services areas and MoMWD has already identified the proper land in the The limited capacities of airports reduce the number Megapolis plan, implementation of which will start from of logistics operations 2018. According to stakeholders, land is available on the northern side of Colombo Port and several facilities and Air cargo facilities are limited. Traffic into BIA is increas- institutes can be easily relocated there in the short term. ing and more cargo and passenger arrivals are expected. LCL de-stuffing and handling time is long, which af- There is a higher frequency of connections, including rap- fects import-related charges. It can take up to 3–7 days id growth to Indian destinations. As a result, air craft belly or more to unload a consignment due to current inad- capacity / space is expanding, which will increase trans- equacies within the port. Problems range from lack of shipment and e-commerce business. To make use of this infrastructure and equipment to both shortages and development, the Government should encourage more hub overstaffing of labour, to limited automation and labour companies and local companies to set up warehouses and allocation, and productivity inefficiencies. Pilferage and operation zones for businesses to move to Sri Lanka to cre- damage due to organized sabotage is also a serious ate distribution services and air / sea operations via Colombo problem for inbound consignees that depend on import- Port. The ground handling monopoly should also be re-ex- ed inputs for manufacturing and processing. As a result, amined and competition created, with at least two opera- export processing is delayed and clearing costs increase. tors, as the current cost is one of the highest in the region. There is no multi-user facility for buying/storage/process- ing of fresh produce. There are no bonded logistics cen- These constraints are addressed in PoA : 3.2.3. tres and existing facilities are not always well connected. A feasibility study by Expolanka determined there is no clear need for such facilities since private operators are using their own facilities and transport using dry ice. However, no clear market demand to develop such fa- cilities is explained by limited information and statistics to support the development of a cold chain industry and the absence of a detailed study on the need to establish such facilities.
[ Logistics services map ] 22
Absence of a cold chain management system and limited facilities for value adding activities along logistics corridors and in the regions diminishes opportunities for export expansion
Existing cold storage facilities are insufficient for fisheries products and there are no major cold storage facilities in the country for perishables storage in key locations at the regional level, which leads to high postharvest losses : ap- proximately 30 % loss of fresh produce and 60 % of export products. Assuring consistent temperature as a product moves through the value chain or during its transportation is a fundamental part of ensuring basic health and safety as well as compliance with international regulations. Without re- liable temperature-controlled facilities and appropriate value adding services along logistics corridors, it will be impossi- ble to increase exports for sectors that require special con- ditions for storage and transportation.
High capital expenditure is required to develop these kinds of facilities. They are required in the Northern Province, North Central Province, Eastern Province, Central Province and Photo: © advantis.world Southern and Sabaragamuwa regional centres. A proper supply chain study is important to identify volumes and the best locations to set up facilities to collect perishable items an additional logistics cost. This results in produce losses for storage and processing. In addition, there is very limited of 30 % or more, especially when in transit. land provided by the Government for lease to develop these facilities ( 99-year lease model at a discount rate ) and no tar- These constraints are addressed in PoA : 2.2.2, 3.2.2. geted incentives to drive development of such facilities. A public–private partnership or build-operate-transfer ( BOT ) model is needed. BOI does not have clear direction on the Limited FDI in the logistics sector affects long-term provision of such a support mechanism from the Ministry of growth Finance ( MoF ), even though the lack of cold chain facilities is a public utility and health issue. The bottlenecks in the business environment described above and the political, economic and regulatory instability There is also low capacity utilization of vehicles and reefer make it difficult to attract big companies to install their main trucks to transport frozen food. Because they are not used or secondary office in Sri Lanka. Relocating headquarters to return fresh food from Jaffna to Colombo and they travel of shipping and logistics companies to Sri Lanka will be empty, the cost to operate these trucks is high. Moreover, the catalyst for growth and build confidence in the coun- there are not enough electrical power points for reefer trucks. try. It will also benefit the country’s trading environment and In addition, transporters need to use plastic containers for help exports with greater choice, more services and price transportation of fresh foods because of a Government di- competitiveness. rective. However, using these plastic crates drops load ca- pacity and taking the empty crates back to the provinces is These constraints are addressed in PoA : 1.1.9.
Most of the issues identified in the logistics industry are related to With Sri Lanka in a favourable geographical position and well- institutional and regulatory frameworks. They highlight the urgency connected with aviation, sea and land transport capabilities, it is of amending current regulations based on best international models possible to develop the county into a leading global integrated and investment needs to create an enabling environment to allow logistics hub that can support the national economy and global trade. industry growth.
[ SRI LANKA LOGISTICS STRATEGY ] 23
DEVELOPING SRI LANKA INTO A GLOBAL LOGISTICS HUB
Logistics stakeholders created the following industry vision to bring Sri Lanka to the next level of logistics industry per- formance and sophistication :
Sri Lanka : The Indian Ocean maritime, logistics and distribution hub ‘providing all services and facilities for integrated connectivity THE FUTURE OF THE INDUSTRY ”
Unlocking the potential of Sri Lanka’s logistics industry will added services through MCC, LCL de-stuffing and com- require fostering an adequate regulatory environment and mercial hub activities. The targeted efforts detailed in the implementing enabling procedures and guidelines for pro- Strategy PoA will address the constraints identified earlier. vision of efficient logistics services. This will help to create The future logistics service map will be characterized by an the conditions for the private sector to lead development enabling regulatory framework and increased market devel- of the logistics sector, attract the necessary investment to opment, improved overall coordination and governance, and install the proper facilities across the country ( cold stor- enhanced forward planning and promotion. age solutions and multi-user facilities ), and provide value
Strategic objective 1: To create an Creating a conducive business environment for industry enabling and efficient business expansion by providing efficient logistics services through environment driven by technology and operational procedures and guidelines is the main priority. public-private coordination
Creating conditions (land, logistics zones) for the private sector Strategic objective 2: To ensure to lead development of cold storage solutions and multi-user adequate facilities and availability of a facilities across the country and attracting skilled labour will qualified labour force allow industry capacity to expand.
Strategic objective 3: To promote the Increasing market outreach and building the country s image will image of Sri Lanka as a logistics hub help build awareness of the country s locational advantages and worldwide attract more FDI.
[ Developing Sri Lanka into a global logistics hub ] 24 Improve marketing center (e.g. After market technical and Distribution services, e.g. Outsourced call promotion and reverse logistics, return and repairs warranty enquiries) Shipping Carriage Shipping Customs Customs Customs other order other order other order administration formalities and administration formalities and administration formalities and (Re-)packaging Outbound logistics Logistics services provider Logistics services provider Logistics services provider Carriage Order Order Shipping Carriage Labelling Labelling processing processing Warehousing Consolidation Warehousing Consolidation (Re-)packaging Improve policy Project logistics Project Lead logistics provision Improve access to land Operation of supply chain provider MCC provider provider Packaging Conversion processing Entrepot Arrangement of transport operations Conversion Packaging Assembly and Assembly and Logistics services Operations Logistics services Logistics services minor processing Logistics consulting and supply chain design Information services, including track and trace Improve industry coordination and recognition Establish HQ of global logistics compagnies in Sri Lanka Improve management of supply chain (including transport, warehousing and inventory) provider Carriage Carriage control provider
handing handing control
Materials Materials Inventory Inventory
Warehousing provider Warehousing Logistics services
Logistics services Inbound logistics Logistics services Logistics Logistics services provider TRANSSHIPMENT LOGISTICS OPERATIONS LOGISTICS COMMERCIAL HUB ACTIvITIES COMMERCIAL Input Legend National for export Investment international Required only Required National and or Technical testing Technical Quality inspection insurance brokering Enhanced component collateral management and Financial services, such as Documentation compliance Future logistics services map Figure : 11
[ SRI LANKA LOGISTICS STRATEGY ] 25 Outbound logistics Market perspective Institutional adjustments Regulatory amendments Investment requirements Legend: Operations Position Sri Lanka as the leading logistics re-exporting centre and commercial hub in South Asia : Develop a national logistics and shipping marketing plan Develop promotional materials for transport and storage solutions, integrated SCM services other value added or specialist services For targeted markets, promote products and services such as supply chain solutions systems, product configuration, data hosting, inventory management, reverse logistics, and financial treasury functions Attract and anchor high-profile global networking conference events in Sri Lanka on a regular yearly basis to market the country Inbound logistics to serve industry needs better by: to expand industry growth: availability by: Input proper regulation logistics data most regional traffic and new business to the port provide all-round services facilities for ship management operations: Main areas of improvements in the logistics sector Restructure the institutions relevant to logistics provide adequate support for industry: Create specific divisions in MSS areas such as logistics, boat services and ship Establish an independent ports regulator MSS and SLPA restructured through revision of their processes systems Increase the autonomy of SLPA Attract investment by targeting investors to expand capacities of ports and airports, improve the rail network, increase refinery capacity and diversify shipping beyond containerized cargo Attract Engage shipping lines, ship operators, terminal operators and ancillary service providers in policymaking to offer value added services clients investors Bring decision-making headquarters of shipping companies into Sri Lanka Establish and promote private zones under BOI regulations in order to create logistics warehousing ‘plug play’ facilities Implement Guidelines for the Electronic Transactions Act, including facilitation of B2C transactions and implementation through regulator MoTDI Revisit the free trade zone and hub concepts to eliminate double handling Enable institutions to use integrated electronic solutions (e-payment, e-signature, e-document) Allow logistics operators to break-bulk and consolidate within their own facilities reduce costs improve turnaround time Establish an industry-led coordination mechanism: Hold quarterly meetings of the logistics advisory committee chaired by private sector, and including public sector stakeholders, to discuss development needs enlarge analytical strategic thinking for industry development, to plan and track implementation of strategic orientations Establish a twice yearly advisory round table between MoMWD and MoNPEA specifically to define common plan for ‘supply chain solutions’ logistics development, allocation of land public–private partnership (PPP) in Western Province Strengthen the link between academia and industry Developing a partnership and better alignment of skills R D programmes to serve industry needs Holding an annual dialogue between academia and industry to identify skills gaps Carrying out a feasibility study on the necessity of creating multi-user facility to provide services for fresh produce processing and temperature-controlled storage facilities (bonded logistics centres) Provide internship opportunities and training programmes for students to obtain relevant practical experience Improve Establishing a specialized unit under the Department of Statistics and CBSL for gathering analysis data on logistics shipping Creating a credible data centre for strategic decision-making purposes Launching the information portal and providing data to enable traders get accurate real time Figure 12:
[ Developing Sri Lanka into a global logistics hub ] 26
Sri Lanka aims to transform itself into South Asia’s leading maritime, logistics and distribution hub that will support the national economy and global trade. Existing logistics services provide many opportunities for intraregional mar- kets, e-commerce and services for integrated connectivity.
Box 5 : Existing services to existing and new markets
Description of the service Rationale Target market Trans-shipment and relay • Geographic location South Asia services • Competitive pricing and timing East Asia • Connecting feeder services and mother vessel to mother vessel Africa Mediterranean • High level of port productivity Europe • Existing container handling facilities for over 7 million TEUs and can Middle East be expanded to 12 million TEUs within three terminals in Colombo United States of Port America ( east • The only port in South Asia capable of handling deep draught ultra- coast ) large crude carriers • Entrepot trading • Geographic location South Asia • MCC cargo handling • Increased trans-shipment volumes will reduce handling costs East Asia East Africa • LCL handling • Increased main line callers/services will attract more feeder services and frequency for reworking of container cargo in South Asia Mediterranean Europe Middle East Maritime services : • Proximity to the east-west shipping route and regional high traffic East-west shipping ( locational advantage can increase and attract more vessels to both routes and north- • Ship supplies inshore and offshore value addition to ships ) south ship traffic • Bunkers and maritime • Two-thirds of world energy ships, one-third of bulk cargo ships and corridors security services 50 % of container traffic passes through the sea lanes adjacent to • All other ancillary services Sri Lanka including dockyard facilities • E-commerce • Connects with speed to the fastest-growing economies, a growing South Asia • Storage and distribution middle class and increasing purchasing power in Asian countries India centres • Increasing industrial production in the region requires raw materials and accessories for on-time manufacturing • Rapidly expanding Internet access • Online buying population in China – 411.7 million, India – 53.8 million, Japan – 73.2 million, Indonesia – 51 million, Viet Nam – 31 million • Existing offering of e-commerce hub operations and value added services near BIA • Strong location for sea-air operations and increasing regional air traf- fic connectivity End-to-end logistics solutions • Strong and growing infrastructure to facilitate speedy turnaround United States through commercial hubs times Europe • Focused policy to create better TF Sri Lanka • Availability of hardware : product storage facilities, shared warehous- China es, shared equipment Indonesia Viet Nam • Effective management and know-how in SCM, product design and Malaysia development, marketing and sales • Short delivery time : better logistics connectivity time to the port and reduction in Customs clearance time • Various services are already provided by commercial hubs : inbound operations, break-bulk, sorting, knitting, cross-docking and global distribution • Located within the main shipping routes connecting east and west
[ SRI LANKA LOGISTICS STRATEGY ] 27
INSTITUTIONAL ADJUSTMENTS development and support enterprises through training, tools and assistance to find adequate market entry channels and TISIs are crucial to supporting companies’ efforts to ex- international partners. The quality of a country’s business pand their performance and to export. TISIs assist SMEs ecosystem hinges on the quality of each of its TISIs. to improve their competitiveness and help them connect to value chains.11 They provide essential intelligence on trade These institutions, presented in box 6, are divided into four main categories : policy support, trade services, business services, and academia and civil society. They are the driv- 11.– International Trade Centre ( 2017 ). SME Competitiveness Outlook ers for future logistics industry growth but certain issues of 2017 : The Region – A Door to Trade. Geneva. Available from www.intracen. org/publication/SME-Competitiveness-Outlook-2017---The-region-A-door- capacity and resources must be addressed to ensure their to-global-trade/. efficient support of the sector.
Box 6 : TISIs supporting logistics industry
Policy support • MoTCA • MoPS • Ministry of Higher Education and Highways • Ministry of Industry and Commerce ( MIC ) • MoDSIT • Ministry of Local Government and Provincial Councils
Trade support • Road Development Authority • Civil Aviation Authority • SLPA • Central Provincial Council • Sri Lanka Railways • Sri Lanka Customs • Exchange Control Department ( Current Commercial Transactions Division ) • Department of Import and Export Control • MSS
Business support • Sri Lanka Shippers’ Council • SLFFA Cargo Services Ltd • Association of Container Transporters • SLFFA • Ceylon Association Of Shipping Agents • Sri Lanka Association of Air Express Companies • Hub Operators Association of Sri Lanka • Sri Lanka Institute of Packaging • Ceylon Chamber of Commerce • Ceylon Shipping Corporation Ltd
Academia and civil • Shippers’ Academy Colombo society • Chartered Institute of Logistics and Transport Sri Lanka • Department of Transport and Logistics Management of the Faculty of Engineering at the University of Moratuwa • Department of Logistics and Transport of the Colombo International Nautical and Engineering College • Institute for Higher Education of the Faculty of Management Studies and Commerce at the University of Sri Jayewardenepura • Institute of Supply and Materials Management • Institute of Chartered Shipbrokers – Sri Lanka • Sri Lanka Society of Transport and Logistics
[ Developing Sri Lanka into a global logistics hub ] 28
Some key institutional adjustments will be required to unlock sector growth. These changes are crucial in the areas of sector coordination and regulatory adjustment.
Box 7 : Institutional adjustments
Institutional adjustment How to implement? Strengthen governance of Successful implementation of the Strategy, as well as industry growth, relies on the ability the industry of all stakeholders to jointly coordinate activities to support industry development. Regular public–private dialogue is essential to set priorities and monitor the progress of industry growth. Currently, no single ministry is in charge of overseeing the logistics sector, nor is there an industry-led mechanism to track industry development. Logistics is a complex industry that provides trade support functions for various activities, which is why there is a need for public– private collaboration among different associations, including those for fruits, vegetables and the food processing sector; spices; and electronics and other manufacturing industries.
Improve cooperation The education system does not cater to the rising needs of the logistics industry. Lack of between academia and the cooperation between academia and industry results in a lack of awareness about industry industry needs and opportunities for graduates. There is limited education available for areas such as supply chain, logistics and international trade at vocational and tertiary institutes. There should be an annual dialogue between academia and the industry to identify skills gaps and industry demand. More internship and sponsorship programmes should be supported to provide training programmes for students to obtain relevant education and practical experience in logistics and international trade.
Enhance use of technologies Use of modern technologies and electronic solutions needs to be improved to provide timely and develop skills to use and efficient services. Currently, integrated e-solutions such as e-payment, e-signature and integrated e-solutions e‑documents are lacking. The Electronic Transactions Act of 2006 authorizes these types of e‑solutions* but institutions are not aware of them and do not use them. Proper guidelines for the Act must be provided, including facilitation of B2C transactions. Implementation of the guidelines must be completed through MoTDI to build capacities of public servants and enable institutions to use integrated electronic solutions.
Restructure the institutions Providing adequate support for logistics operators is crucial to facilitate operations and boost relevant to logistics to industry growth. In order to achieve this, a number of adjustments need to be made to the provide adequate support for structure of TISIs. MSS and SLPA should be restructured through revision of their processes industry and systems. SLPA’s autonomy to make decisions on terminal management for TF and finance activities needs to be increased. An independent ports regulator should also be established. Specific divisions within MSS in areas such as logistics, boat services and ship services should provide supportive services to logistics companies.
* See more details in the business environment constraints section above.
REGULATORY AMENDMENTS
The regulations governing the conduct of the logistics in- effectively.12 For Sri Lanka, creating an enabling environ- dustry and its structure are interrelated and influence market ment by updating regulations and infrastructure is a key performance. Regulation serves to establishing institution- element of logistics industry development. The key adjust- al frameworks to ensure effective operation of the logistics ments to be carried out are summarized in box 8. sector, guiding the logistics sector towards safe, energy-ef- ficient and environmentally friendly operations and reducing negative externalities, and developing appropriate policies 12.– International Trade Centre ( 2017 ). Reforming logistics services for ef to address areas where market mechanisms may not work fective trade facilitation. ITC, Geneva. Available from http ://www.intracen.org/ uploadedFiles/intracenorg/Content/Publications/Executive_summaries/ Logistics %20and %20trade %20facilitationFinal_Low-res %20with %20cover.pdf
[ SRI LANKA LOGISTICS STRATEGY ] 29
Box 8: Regulation adjustments
Purpose Regulation adjustment Number of regulation Increase the decision- To facilitate independent decision-making to grant more autonomy for terminal management for making autonomy of SLPA TF and finance activities to compete with other terminals locally and globally. Sri Lanka Port Authority Act No. 51 of 1979 Merchant Shipping Act No. 52 of 1971 Merchant Shipping ( Amendment ) Act No. 36 of 1988 Restructure the To change the current port structure by restructuring the administrative and regulatory framework administrative and regulatory to serve the sector in a more effective and efficient manner and best suit future demand from the framework of the port maritime and logistics industry. Specific divisions should to be created by MSS in areas such as structure model logistics, boat services and ship services. Sri Lanka Port Authority Act No. 51 of 1979 Merchant Shipping Act No. 52 of 1971 Merchant Shipping ( Amendment ) Act No. 36 of 1988 Implement the proposed To simplify processes through the inclusion of a new automated system as required by the Trade amendments to the Customs Facilitation Agreement. In order to facilitate international trade and improve the competitiveness Ordinance and establish new of Sri Lankan exports, it is important to ensure that the Customs Ordinance facilitates logistics regulations and operational operations, encourages operators and contains the following points : procedures • Modern paperless transactions are included for Customs services/BOI; • The Customs service station is fully equipped and interconnected and document submission is possible through the introduction of digital signatures; • All end users, including other Government institutions, are provided with Customs interfaces and infrastructure to avoid duplication. Customs Ordinance No. 17 of 1869 Implement guidelines for Consolidation of various fees through a single window electronic payment system will facilitate e-payment through one cross-border transactions and improve sector competitiveness. window for Customs through Electronic Transactions Act of 2006 all commercial banks
Publish all proposed MoF has finalized a number of requirements which were proposed in 2015 / 16 and awaiting amendments to the amendment to the regulation and Gazette publication. The guidance for commercial hub Commercial Hub Regulation activities, if not included in the amendment, should be revised and include : in the Gazette • The minimum balance required to set up Commercial Hub activities : currently there is imbal- ance between working capital and fixed assets requirements, which are valued at US $ 5 million each; • Allow free movement for the products to be shipped to domestic territory based on demand : currently only 20 % of enterprise export turnover is allowed to be shipped for domestic con- sumption; • Allow shipping of capital goods to Sri Lankan duty-free BOI projects for storage, to attend to supply chain demand within a short time frame; • Allow goods to be sent to the Free Zone for finishing or adding value and shipping back or do some manufacturing inside the Free Zone ( which is currently restricted to Mirijjawila Zone ); • Allow pre-clearance of hub cargo; • Recognize activities in hubs as export-related; • Avoid double handling fees. Finance Act, No. 12 of 2013 Finance Act – Commercial Hub Regulation No. 1 of 2013 Amend the Petroleum To provide adequate oil refinery and refuelling services to attract more ships. Right now Products Act to liberalize Sri Lanka has to import bunkers, which results in a cost disadvantage. If more crude oil can be offshore and storage and refined in key ports such as Hambantota / Trincomalee, more port calls can be attracted and distribution of bunker and increase offshore ship bunkering. crude oil The Petroleum Products ( Special Provisions ) Act No. 33 of 2002 and Ceylon Petroleum Corporation Act No. 28 of 1961 Enact an antitrust law To prevent cartelization, monopoly and anti-competitive practices by international shipping lines, introduce legislation in conformity with international best practices. Consumer Affairs Authority Act No. 9 of 2003 BOI Investment Law The BOI Investment Law needs to be updated in order to attract more FDI. The shipping and logistics ( freight forwarding ) restrictions come from the Merchant Shipping Act issued by two separate Gazettes for shipping agencies and freight forwarders. Board of Investment of Sri Lanka Law No. 4 of 1978 and amendments up to 2012; Board of Investment of Sri Lanka ( Amendment ) Act No. 3 of 2012
[ Developing Sri Lanka into a global logistics hub ] 30
INVESTMENT OPPORTUNITIES
Investment in key strategic areas will be needed to expand logistics infrastructure capacity. The following are foreseen as key investment focus areas to achieve industry growth.
Box 9 : Investment opportunities in the logistics sector
Investment opportunity Description Allocating a start-up fund for Why? To provide proper understanding and guidance to support exporters, domestic R&D to establish domestic distribution and collection of cargo ( such as perishable vegetables, fruits and fisheries logistics centres, increase products ). This can be achieved by : distribution efficiency and • Establishing R&D centres at university level; create a credible data centre • Creating a data-collection department within the CBSL Statistics Division; for strategic decision-making • Setting up logistics centres, including modern dry ports, to lift standards and reduce time and purposes wastage in the current logistics supply chain. How? Incorporate into the CBSL Monetary Law Act No. 58 of 1949 Sources of financing : Government, MoF
Building storage and Why? To provide appropriate storage facilities for perishable products distribution centres How? Through targeted promotions to attract investors Sources of financing : FDI
Expanding the capacity of Why? To expand capacity ( cargo and passenger handling services ) BIA How? Following the Japan International Cooperation Agency feasibility study, and through a BOT concept, allocate land around BIA to install additional infrastructure Sources of financing : FDI
Making the second Why? With increasing tourist arrivals and a growing volume of trans-shipment and e-commerce international airport business, to increase capacity to make Sri Lanka a regional turnaround location for air cargo functional How? Government to encourage more hubs and local companies to set up warehouses and business operation zones for distribution services and air operations. Sources of financing : FDI
Building and expanding the Why? To attract trans-shipment business activities, increase port capacity and diversify shipping West Terminal of Colombo beyond containerized cargo harbour How? Finalize the tendering process for West Terminal to identify the winner Sources of financing : FDI
Improving railway Why? To provide services through existing and new railways connecting the three main ports connectivity for and proposed dry port transportation of cargoes How? Through targeted promotion to attract investors Sources of financing : FDI
Installing logistics-related Why? To expand supply of cranes and other transportation and shipping equipment equipment manufacturing How? Promote FDI to locate assembly and manufacturing of equipment and parts for logistics- related cranes in Sri Lanka Sources of financing : FDI
[ SRI LANKA LOGISTICS STRATEGY ] 31
MOVING TO ACTION
THE STRATEGIC FRAMEWORK
The strategic objectives define the main thrusts that will addressing the sector’s constraints and leveraging opportu- guide Strategy implementation to achieve the vision laid nities in a comprehensive manner. To this end, particular ef- out by the industry. The PoA will respond to the vision by forts will be made along the following strategic orientations.
To create an enabling and efficent To ensure adequate facilities To promote the image of Sri Lanka business environment driven by and availability of qualified as a logistics hub worldwide technology and public-private labour force coordination
Implement key Strengthen the Provide adequate Build a strong Increase market regulations to governance of the Attract skilled labour facilities to increase marketing campaign outtreach to attract expand industry industry to improve to satisfy growing the number and to stimulate export investment growth public-private industry needs quality of logistics growth of the operations logistics sector
STRATEGIC OBJECTIVE 1 : TO CREATE STRATEGIC OBJECTIVE 2 : TO ENSURE AN ENABLING AND EFFICIENT BUSINESS ADEQUATE FACILITIES AND AVAILABILITY ENVIRONMENT DRIVEN BY TECHNOLOGY OF A QUALIFIED LABOUR FORCE AND PUBLIC–PRIVATE COORDINATION While the policy and institutions framework needs strength- The greatest priority for industry expansion is urgent im- ening, logistics capacity should be expanded. Labour-force plementation of operational procedures and guidelines for skills need to be improved and awareness must be raised provision of efficient logistics services to create a condu- about opportunities in the logistics industry. To provide ef- cive business environment. Predictability of regulations and ficient logistics services, it is crucial to install bonded logis- procedures is vital to manage operations efficiently and re- tics centres to provide value added services through MCC duce costs of doing business. Industry development should and LCL de-stuffing. It is important to create the conditions be governed by a strong and active formal public–private ( land, logistics zones ) for the private sector to lead the de- governance mechanism to plan, coordinate and track the velopment of cold storage solutions and multi-user facilities progress of implementation of this strategic orientation. across the country. This strategic objective has two opera- This strategic objective is composed of two operational tional objectives : objectives : Attract skilled labour to satisfy growing industry needs. Implement key regulations to expand industry growth. Provide adequate facilities to increase the number and Strengthen governance of the industry to improve pub- quality of logistics operations. lic–private coordination.
[ Moving to action ] 32
Photo: © advantis.world
STRATEGIC OBJECTIVE 3 : TO PROMOTE THE IMAGE OF SRI LANKA AS A LOGISTICS HUB WORLDWIDE It is important to improve collection, analysis and dissemina- tion of information at regional and international level in order to understand market opportunities and promote Sri Lankan logistics services. This strategic objective will focus on build- ing Sri Lanka’s image to attract FDI and raise awareness of the country’s locational advantage. This strategic objective is composed of two operational objectives :
Build a strong marketing campaign to stimulate export growth of the logistics sector. Increase market outreach to attract investment.
Photo: ITC
[ SRI LANKA LOGISTICS STRATEGY ] 33
IMPLEMENTATION FRAMEWORK
Photo: © advantis.world
The strategic development of the logistics industry in Sri Lanka aims to transform the country into a leading mar- MANAGING FOR RESULTS itime, logistics and distribution hub in the Indian Ocean. Achieving this ambitious objective will depend heavily on It is the translation of priorities into implementable projects the ability of the industry to implement the activities defined that will achieve the substantial increase in export compet- in this Logistics Strategy. As a primary intervention to struc- itiveness and export earnings envisaged by the Strategy. ture sector development, it is recommended that the follow- These goals will be achieved by reforming the regulatory ing interventions be implemented with priority : framework, optimizing institutional support to exporters and strengthening private sector capacities to respond to market Urgently implement operational procedures and guide- opportunities and challenges. The allocation of human, fi- lines for provision of efficient logistics services ( amend- nancial and technical resources is required to efficiently co- ments to the Commercial Hub Regulation under the ordinate and implement, and monitor overall implementation. Finance Act, Customs Ordinance, Electronic Transactions Act ); and Successful execution of activities will depend on the abil- Create the conditions ( land, logistics zones ) for the pri- ity of stakeholders to plan and coordinate actions in a tacti- vate sector to lead development of cold storage solutions cal manner. Diverse activities must be synchronized across and multi-user facilities across the country and provide public and private sector institutions to create sustainable value added services through MCC, LCL de-stuffing and results. Hence, it is necessary to foster an adequate envi- commercial hub activities. ronment and create an appropriate framework for Strategy implementation. These immediate quick win activities are necessary to initi- ate Strategy implementation successfully and to create rapid Key criteria for achieving the targets will be to coordinate industry growth. activities, monitor progress and mobilize resources for im- plementation. To that effect, industry representatives rec- ommended that a public–private ‘advisory committee’ for the logistics industry be rapidly established, operational- ized and empowered. The logistics advisory committee is to be responsible for overall coordination, provision of policy guidance and monitoring of industry development along the strategic orientations.
[ Implementation framework ] 34
Figure 13 : Institutional framework for logistics industry development
MoDSIT
Advisory committee on Logistics EDB act and coordination Private: Ceylon Association of Shipping Agents (CASA), Shippers’ Council, Shippers Academy Colombo, Sri Lanka Freight Forwarders’ Association (SLFFA), Sri Lanka Air Cargo Association (SLACA), HUB operators Association, Colombo International Nautical and Engineering College (CINEC), Joint Apparel Association Forum (JAAF), representatives of express companies Public: Sri Lanka Ports Authority, Board of Investment of Sri Lanka, Sri Lanka Customs, Ceylon Shipping Corporation Ltd., Airport and Aviation Services Sri Lanka Ltd., Ministry of Megapolis and Western Development, National Trade Facilitation Committee
Implementation through Investment and private sector Development partners national institutions and initiatives aligned to strategic projects national budget priorities
LOGISTICS ‘ADVISORY COMMITTEE’
The Export Development Act ( 1979 ) grants EDB : ‘On advice Representatives of private companies from the Board, the Minister may by Order in the Gazette, Ceylon Association of Shipping Agents (CASA) establish advisory committees for the development and pro- Shippers’ Council motion of certain products, product groups and commodi- Sri Lanka freight Forwarders’ Association (SLFFA) ties as well as functional aspects of trade’. Additionally, ‘each Joint Apparel Association Forum (JAAF) – Logistics such advisory committee shall have the power to fix and reg- committee ulate its own procedure, including the power to determine Ceylon Shipping Corporation Ltd the number of members necessary to form a quorum at its Sri Lanka Port Authority meeting’. The advisory committees are ‘to advise the Board Board of Investment on any or all of the matters which the Minister considers nec- Sri Lanka Customs essary for the purposes of giving effect to the principles and Airport and Aviation Services Sri Lanka Ltd provisions of this Act’. Ministry of Megapolis and Western Development Sri Lanka Air Cargo Association (SLACA) A logistics advisory committee was established by the Colombo International Nautical and Engineering College Minister of MoDSIT in February 2018, and effectively organ- (CINEC) ized by EDB to enable the industry to strategically steer its Ministry of Development Strategies and International development. The logistics advisory committee is composed Trade of the following members: Sri Lanka Export Development Board
[ SRI LANKA LOGISTICS STRATEGY ] 35
The advisory committee is empowered to meet quarterly and implement the following functions : i. Create a shared understanding of key market challenges and opportunities facing the sector; ii. Set goals and targets that, if achieved, will strengthen the sector’s competitive position and enhance Sri Lanka’s overall capacity to meet the changing demands of markets; iii. Propose key policy changes to be undertaken and pro- mote these policy changes among national decision makers; iv. Support the coordination, implementation and monitor- ing of activities in the sector by the Government, private sector, institutions or international organizations to en- sure alignment to goals and targets; and, as required, contribute to resource identification and alignment.
KEY SUCCESS FACTORS FOR EFFECTIVE IMPLEMENTATION
The presence of the advisory committee to oversee the im- Photo: © advantis.world plementation of the Strategy is a key success factor but it is not sufficient to effectively fulfil its assigned functions. Resources for implementation
Private sector support and participation The advisory committee, in collaboration with EDB and NES in implementation Management Unit at MoDSIT, will need to leverage addition- al support for efficient implementation. Effective planning The private sector clearly expressed its willingness to con- and resource mobilization is indispensable in supporting tribute, directly or in partnership with public institutions, to Strategy implementation. Resource mobilization should be implementation of the Strategy. Their implementation ef- carefully planned and organized. forts can range from providing business intelligence to in- stitutions to contributing to project design, promotion and As the logistics industry is a priority of the National Export branding, policy advocacy, etc. In brief, the private sector’s Strategy, the Government of Sri Lanka should define annual practical knowledge of business operations is essential to budget allocations and support to drive industry growth. This ensuring the Strategy remains aligned to market trends and commitment will demonstrate clear engagement in strength- opportunities. ening the sector and encourage private partners to sup- port development. In addition to national budget support, resource identification will require BOI to effectively target Proactive networking and communication foreign investors in line with the priorities of the Strategy such as capacity expansion of Colombo Port and BIA, and The key implementing institutions detailed in the PoA need improvement of a rail network between ports, airports and to be informed of the content of the Strategy and the impli- commercial hub zones. Investment flows to Sri Lanka should cations for their 2018–2022 programming. This networking also be considered as a valuable driver of Strategy imple- and communication is essential to build further ownership mentation and overall industry development. and provide institutions with the opportunity to confirm the activities they can implement in the short-to-long term. It The various implementation modalities detailed will deter- will be important for EDB, MoDSIT and members of the ad- mine the success of Strategy implementation. However, visory committee to reach out to relevant institutions nation- high-level support from the Government, in collaboration ally to create awareness and support for logistics industry with strong championship by the private sector, will be the development. real driver of successful implementation.
[ Implementation framework ] 36
To achieve the vision and strategic objectives discussed, a robust, • Leading implementing partners : One single account- actionable and realistic strategic PoA is required. This is provided in able lead institution per activity. ( The institution may also the section below and constitutes the heart of this Strategy. have a technical role or may have solely an oversight and coordination role. ) The PoA is structured along the three strategic objectives and the operational objectives described above. For each objective, the PoA • Supporting implementing partners : Any institu- outlines detailed activities and their implementation modalities, tion that should be involved at any stage of the activity’s which include : implementation. • Existing programmes or potential support : Existing • Priority level : Priority 1 being the highest and 3 the lowest. initiatives ongoing in the specified area of the activity. • Start/end dates : The desired time frame of the activity. • Cost estimation ( US $ ) : An estimate of the activity’s cost • Targets : Quantifiable targets that allow completion monitor- for the total implementation period. ing of each activity during implementation.
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[ SRI LANKA LOGISTICS STRATEGY ] PLAN OF ACTION 2018-2022 38 – – – – 50,000 Indicative costs (USD) ------Supporting implementing partners and Ministry of National Policies Economic Affairs; Ministry of Finance; Exporters Association Logistics Sri Lanka of Sri Lanka; Association Forwarders & Freight (SLFFA); Ceylon Association of Ship Shipping Agents; Sri Lanka per's Council; Ceylon Chamber (CCC); National of Commerce Chamber of Exporters of Sri Lanka (NCE); Prime Minister's Office and Ministry of National Policies Economic Affairs; Ministry of Fi nance; Prime Minister's Office and Ministry of National Policies Economic Affairs; Ministry of Ministry Industry and Commerce; of Development Strategies and Sri Lanka International Trade; Customs; Export Development Department of Commerce; Board; Facilitation Com National Trade mittee Ministry of Finance; Sri Lanka Customs; Department of Com Prime Minister's Office; merce; Facilitation Com National Trade mittee and Ministry of National Policies Economic Affairs; Central Bank Ministry of Finance; of Sri Lanka; In Export Development Board; formation and Communication Agency (ICTA) Technology - - - Leading implementing partners Ministry of Ports and Shipping Ministry of Ports and Shipping Ministry of Fi nance Ministry of Industry and Commerce Ministry of Tel ecommunica tion and Digital Infrastructure - Merchant Shipping Merchant Act No. 52 of 1971 and Act No. 36 of 1988 amended Shipping Merchant Act No. 52 of 1971 and Act No. 36 of 1988 amended; Maritime Port Authority created Customs ordinance 17 of 1869 and its amendments will be visited to facilitate re trade. Targets SLPA Act No. 51 of 1979 amended; • SLPA Act No. 51 of 1979 amended; • • • Information portal launched Guidelines for Elec Act Transaction tronic of 2006 provided 31/03/2019 31/12/2020 31/03/2019 31/12/2018 31/12/2018 End date 01/04/2018 01/04/2018 01/04/2018 01/04/2018 01/04/2018 Start date 1 1 1 1 1 Priority ------Financial autonomy: presenting a landlord model to a landlord Financial autonomy: presenting FDI and joint ventures; promote handling by MCC/LCL cargo MCC and LCL: to promote to compete upgrading and investing in new infrastructure in the new liberalized policy framework. by establishing an port structure Change the current (maritime and port authority) independent regulator model; based on the Singapore specific divisions under the maritime and port Create such as logistics, boat services and authority in areas ship services. included for Customs Modern paperless transactions are services/BOI; The Customs service station is fully equipped and and document submission is possible interconnected of digital signatures; the introduction through All end users, including other Government institutions, with Customs interfaces and infrastructure provided are to avoid duplication. Activity the decision-making autonomy of SLPA 1.1.1 Increase amendment to the existing Act and financial regu through to logistics operators. Areas related lations for processes for amendment are: • • frame the administrative and regulatory 1.1.2 Restructure the maritime and demand from work to best suit future effective logistics industry to serve the sector in a more based on global models such as the and efficient manner, Authority of Singapore: Maritime Port • • final draft of the new Customs the proposed 1.1.3 Review the Act to ensure Act and have MoF submit it to Parliament facilitates logistics operations and encourages operators, namely: • • • PMO is essential to success leadership through Political fully implement paperless, digital trade submissions. the information portal that is being developed 1.1.4 Launch Organization Trade by DoC and Customs (under the World This portal is ac project). Facilitation Agreement Trade countable and legally binding. It should be tri-lingual data to enable traders get accurate, real-time will provide information Trans guidelines for the Electronic 1.1.5 Implement proper actions Act, including facilitation of B2C transactions, and solutions enable institutions to use integrated electronic e-docu (e-payment, e-signature, the regulator through ments, tracking). Operational objectives 1.1: Adopt key regulation to expand industry growth. 1: To create 1: To an enabling and efficient business environment driven by technology and public-private coordination. Strategic objectives
[ SRI LANKA LOGISTICS STRATEGY ] 39 – – – – – Indicative costs (USD) ------Supporting implementing partners Ministry of Development Strate gies and International Trade; and Civil Ministry of Transport of Investment Aviation; Board Customs; Export (BOI); Sri Lanka Development Board Ministry of Development Strate HUB gies and International Trade; Operators Association Of Sri Lan Department ka; Inland Revenue and Ministry of National Policies Economic Affairs; Ministry of De velopment Strategies and Interna and Ministry of Lands tional Trade; Reforms Parliamentary and Ministry of National Policies Economic Affairs; Ministry of Development Strategies and In of Invest Board ternational Trade; ment (BOI) Prime Minister's Office - Department of Fiscal MoF Policy Department of Fiscal MoF Policy Leading implementing partners • • Ministry of Megapolis and Devel Western opment Ministry of Ports and Shipping Ministry of Ports and Shipping - Finance Act, No. 12 of 2013 Finance Act Hub Commercial No. 1 of Regulation 2013 amended Once framework is done, drafting of the provision relevant completed Targets • • 0% rate for Commercial Hub activities kept Within six months to gazette selected lands and call for EOIs regulations Current under Ministry of are and Shipping. Ports Gazettes, regulations, and guidelines issued Shipping by Merchant Division, BOI and Cen tral Bank of Sri Lanka should be amended Framework within 6 months by legal team to be developed; • 31/12/2018 31/12/2018 31/12/2018 31/12/2019 31/12/2021 End date 01/04/2018 01/04/2018 01/04/2018 01/04/2018 01/04/2018 Start date 1 1 2 1 1 Priority ------Identify the locations to be allocated for international distribution companies within the logistics corridors and of international ports and airports;operating areas to attract investors of interest Call for expression set up operations within ports and airports corridors and the Megapolis project developed by Western Southern Development project Activity Hub Regu 1.1.6 Amend the Gazette 1818/30 Commercial lations by amendment to the Finance Act 12/2012 & 2013. for setting up Commercial Balance minimum requirements to facilitate entry of new Hub activities should be revised operators. hub to commercial relevant the tax structure 1.1.7 Keep operators at 0% as originally established and intended (in case 14% is applicable as of 1 April 2018, have the Minis ter of Finance amend the Act). land 1.1.8 Include logistics operations in the proposed bank: • • FDI and head the ecosystem to attract more 1.1.9 Create quarter operations of multinational corporations to be located in Sri Lanka. shipping equity for foreign restricts regulation The current and logistics companies. The Government needs to re model based on best international models and investment requirements. to at The Government needs to study the requirements the to create in order tract global operators to Sri Lanka ecosystem needed to develop ports and airports beyond a tax and other constraints trans-shipment location. Equity, capital inflows from to encourage more should be removed operators to Sri Lanka. to antitrust laws related 1.1.10 Develop and strengthen as Sri Lanka maritime and logistics matters to strengthen legislation in conform a maritime nation and introduce ity with international best practices. Antitrust provisions should also be included in maritime policy. Operational objectives 1.1: Adopt key regulation to expand industry growth. 1: To create 1: To an enabling and efficient business environment driven by technology and public-private coordination. Strategic objectives
[ PLAN OF ACTION 2018-2022 ] 40 – – 10,000 100,000 Indicative costs (USD) - - - Supporting implementing partners and Ministry of National Policies Economic Affairs; Prime Minis ter's Office and Ministry of National Policies Economic Affairs; Prime Minis ter's Office and Shipping; Ministry of Ports Department of National Planning; Prime Minister's Office; Sri Lanka Railways; External Resources Department Ministry of Development Strate gies and International Trade; and Civil Ministry of Transport and Aviation; Ministry of Ports Customs; Shipping; Sri Lanka HUB Operators Association Of Sri Lanka Department of Fiscal MoF Policy Ministry of Leading implementing partners Ministry of Ports and Shipping Ministry of Ports and Shipping be finalized To by and Transport Civil Aviation • - - - - Set of guidelines for PPP projects of Calls for proposal completed PPPs amended Regulation and circulated, Targets IMO and other interna tional transport conven having tions which are shortfalls in law should to be ratified Drafted Maritime and policy docu Logistics ment to Ministry of and Shipping Ports headed by Dec 2017 to be submitted for ap of Cabinet proval • • • 31/12/2022 31/12/2018 31/12/2020 31/12/2022 End date 01/04/2018 01/04/2018 01/04/2018 01/01/2019 Start date 0 1 1 2 Priority - - - - - MSS to update the Minister of Ports and Shipping on the MSS to update the Minister of Ports conventions. status of current for plan with timelines in prioritized order A roll-out is proposed. conventions to be ratified by Parliament Activity com has already 1.1.11 Ratify conventions that Sri Lanka to the International Maritime Organiza mitted to in relation tion and other transport conventions: (International Convention for the Prevention • Air Pollution Ships Annex 6); from of Pollution Management; • Ballast Water • Limitation of Liability on Maritime Claims; • Bunker Conventions on marine fuel supplies; Prevention; • Oil Pollution Noxious Substances protocol; • Hazardous Convention (the for the Unifica • The Montreal tion of Certain Rules for International Carriage by Air). required: The following steps are • • maritime and logistics policy, 1.1.12 Finalize Sri Lanka now, and submit it for Cabinet which is being prepared approval. amendments should be included regulation All previous which maritime policy, dependent on the proposed and are 2017. has to be finalized by 31 March existing barriers to private sector invest 1.1.13 Remove ments and operations in railway networks encourage in rail master plan design and implementation of pro PPPs rail transportation ( network expansion, grams for improved maintenance and management) within international airports and ports1.1.14 Enable areas Customs to receive/hold/deliver/ authorized by Sri Lanka related to be allowed carry out Entrepot import cargo to the sea port of restricted activities, which is currently hub operators. Colombo and commercial Operational objectives 1.1: Adopt key regulation to expand industry growth. 1: To create 1: To an enabling and efficient business environment driven by technology and public-private coordination. Strategic objectives
[ SRI LANKA LOGISTICS STRATEGY ] 41 5,000 10,000 150,000 Indicative costs (USD) ------Supporting implementing partners Ministry of Industry and Com Ministry of Development merce; Strategies and International Trade; and Civil Ministry of Transport Aviation; Ministry of Finance; and Shipping; Ministry of Ports & Freight Logistics Sri Lanka Association (SLFFA); Forwarders Ceylon Association of Shipping Shipper's Coun Agents; Sri Lanka cil; Ministry of Megapolis and Development Western and Ministry of National Policies Economic Affairs; Ministry of In Ministry of dustry and Commerce; Development Strategies and Inter Ministry of Trans national Trade; port and Civil Aviation; Ministry and Shipping; Ministry of of Ports Reforms; and Parliamentary Lands Prime Minister's Office; Central Authority Environment and Ministry of National Policies Economic Affairs; Ministry of and Shipping; Department Ports of National Planning; Airport & Aviation Services Sri Lanka De Limited; External Resources partment - - Ministry of Leading implementing partners Export Develop ment Board Ministry of Megapolis and Devel Western opment be finalized To by and Transport Civil Aviation Quarterly meetings held; Minutes available Annual academia- industry meeting held R&D programme developed; with Partnership international institute Research established; Shipping and Aviation Research Institute transferred to Institute of Policy Studies Research assessments R&D, HR, (industry, etc) conducted. Targets • • Bi-annual meeting held • • • • • 31/12/2022 31/12/2022 31/12/2021 End date 05/04/2018 01/04/2018 01/01/2019 Start date 1 2 2 Priority - Confirm strategic orientation of the industry; Plan annual implementation of the strategic orientations; by lead implementing implementation progress Track partners; Assess the need to establish adequate support institutions, etc.). regulations, mechanisms (policy, Institute (SARI) Shipping and Aviation Research Transfer Studies (IPS) to conduct logistic to Institute of Policy industry research, Cooperation Develop partnership with Singapore Enterprise to get the technical assistance and expertise development experience, Singapore’s from and Develop a curriculum on Supply chain, Logistics for selected education institutes, Transport and upgrade skills of HR at Assess labour requirements institutions of MoTCA. Activity 1.2.1 Hold quarterly meetings of the logistics Advisory including public by the private sector, committee chaired sector stakeholders to: • • • • table between 1.2.2 Establish a twice yearly advisory round MoMWD and MoNPEA specifically to define a common plan for ‘supply chain solutions’ and logistics develop ment, allocation of land and PPPs. the link between academia and industry 2.1.1 Strengthen to develop the partnership and better alignment to serve industry needs, namely by: • • • • Operational objectives 1.2: Strengthen the governance of the industry to improve public-private coordination. 2.1: Attract skilled labor to satisfy growing industry needs. 1: To create 1: To an enabling and efficient business environment driven by technology and public-private coordination. ensure 2: To the adequate facilities and availability of qualified labor force. Strategic objectives
[ PLAN OF ACTION 2018-2022 ] 42 50,000 30,000 100,000 100,000 100,000 Indicative costs (USD) ------Supporting implementing partners Ministry of Industry and Com Ministry of Development merce; Strategies and International Trade; and Shipping; Ministry of Ports Sri Export Development Board; Shipper's Council Lanka Ministry of Development Strate gies and International Trade; Ministry of Skills Development Export Training; and Vocational Sri Lanka Development Board; Shipper's Council Minis Central Bank of Sri Lanka; try of Development Strategies and Ministry of Fi International Trade; and Ship nance; Ministry of Ports ping; Export Development Board; Authority; Sri Lanka Port Sri Lanka Forwarders & Freight Logistics Association (SLFFA); Ceylon As sociation of Shipping Agents and Ministry of National Policies Economic Affairs; Ministry of Fi nance; Ministry of Higher Educa tion and Highways and Civil Ministry of Transport Aviation; Ministry of Finance; and Shipping; Ministry of Ports Authority; Project Port Sri Lanka Management and Monitoring (PMM) - - - - - Leading implementing partners Ministry of Higher Educa tion and High ways Ministry of Higher Educa tion and High ways Department of Census and Sta tistics Ministry of Ports and Shipping Ministry of Development Strategies and International Trade - Unit for data gathering and analysis on logistics and shipping functional; Methodology defined; Data available in 2019 Feasibility study completed; Recommendation implemented.; Action plan implemented KPIs indicators developed under each institution Targets Sponsorship pro grammes established Internship programs established • • • • • • • 31/12/2021 31/12/2020 31/12/2021 30/06/2019 31/12/2022 End date 01/01/2019 01/04/2018 01/01/2019 01/06/2018 01/05/2018 Start date 2 0 2 2 1 Priority ------Activity 2.1.2 Under the PPP with Shipper's Council, establish funded by the industry for eligi sponsorship programmes ble underprivileged youth. Private sector to participate and fund education for talented but underprivileged students, selected on established and criteria who have done well in examination at ordinary advanced level but does not get selected to university or does not have a financial capability to do further studies in private institutions or in the university. with private industry to be created A scholarship program as Cor funding focused on the sector would be considered (CSR) for associations/stake porate social responsibility holders involved in the sector. 2.1.3 Under the PPP with Shipper's Council, provide for stu internship opportunities and training programmes dents in the supply chain, logistics and international trade education and practical experi to obtain relevant stream ence. practi companies providing This can be achieved through cal training and experience to students in the subject areas academic on a short-term basis so that they graduate from to per knowledge and geared institutions with background productivity. form better and with greater 2.2.1 Establish a specialised unit for data gathering and analysis on logistics and shipping to identify the bottle overall logistics and reduce necks, simplify the processes cost. 2.2.2 Carry out a feasibility study (private sector experts and University of Moratuwa) on the necessity installing stor temperature-controlled multi-user facilities to provide storage, of reefer Release age (bonded logistics centres). of multi-user containers in ports and creation using reefer facilities, cold storage, etc. would help transportation and sector, collection of perishables and the food processing of post-harvest suffers a high percentage which currently losses. Implement recommendations. 2.2.3 Formulate an action plan to build scale and volume implemen key performance indicators and ensure through to TF tation. For this, all Government institutions related (SLPA, MoPS) to develop and maintain key performance indicators to monitor institutions’ performance and im the county's LPI, Ease of Doing Business and Global prove Competitiveness Index rankings. Operational objectives 2.1: Attract skilled labor to satisfy growing industry needs. 2.2: Provide adequate facilities to increase the number and quality of logistics operations. 2: To ensure 2: To the adequate facilities and availability of qualified labor force. Strategic objectives
[ SRI LANKA LOGISTICS STRATEGY ] 43 50,000 50,000 100,000 1,000,000 30,000,000 Indicative costs (USD) - - - - - Supporting implementing partners and Ministry of National Policies Economic Affairs; Ministry of Fi of Investment (BOI) nance; Board and Shipping; Ministry of Ports Information and Communication Agency (ICTA) Technology and Civil Ministry of Transport and Aviation; Ministry of Ports Af Shipping; Ministry of Foreign of Investment (BOI); fairs; Board HUB Export Development Board; Operators Association Of Sri Lanka Ministry of Development Strate gies and International Trade; of Investment (BOI); De Board partment of Commerce Ministry of Industry and Com Ministry of Finance; merce; Affairs; Export Ministry of Foreign Development Board - Leading implementing partners Ministry of Development Strategies and International Trade Port Sri Lanka Authority Ministry of Development Strategies and International Trade Export Develop ment Board Ministry of Development Strategies and International Trade - Zones for “plug and play” logistics and warehousing operations allocated; Investment activities promotion carried out Marketing plan developed (by first quarter 2018); Marketing materials created web Promotional portal launched in countries; targeted shows per 2 road year in selected countries organized Targets • • A port community system set up and op eration. • • 2 major MICE events held yearly • • 31/12/2018 31/12/2020 31/12/2018 31/12/2022 31/12/2022 End date 01/04/2018 01/04/2018 01/04/2018 01/04/2018 01/08/2019 Start date 1 1 1 1 1 Priority - - - - BOI to allocate zones where international distributors and BOI to allocate zones where assembly companies can set up operations to perform value addition; where basic ‘plug and play’ infrastructure, Provide minimum time and effort would be taken for companies to start work. This will include buildings, electricity, minor assembly plants and transportation water, connections; these facilities to investors. BOI to promote a national logistics and shipping marketing plan Prepare of the first Advisory Committee meeting); (as a result marketing materials; required Create Establish country image as logistics hub (MCC+LCL e-commerce). warehouses, cargo, Activity private zones under the BOI 2.2.4 Establish and promote logistics and warehousing to create in order regulations ‘plug and play’ facilities. • • • informa Community System to share 2.2.5 Develop a Port terminals to facilitate trans-shipment tion among different that trucking. It is also recommended and inter-terminal terminals have contracts to optimize ship handling make efficient. of Colombo more the Port 3.1.1 Develop a national logistics marketing plan and of the country awareness materials to increase promotional location advantage to attract FDI. Following steps required: • • • MICE events to in international high profile 3.1.2 Organize vite global logistics and shipping companies to showcase the location and what it offers in terms of competitiveness as the next logistics hub, inter Sri Lanka and to promote nationally. 3.1.3 Formulate a marketing budget and trade promotional logistics industry portal for global branding of Sri Lanka's markets (East Africa, South East Asia, Bangla in targeted show in a road and to organise desh, India, China, Pakistan) UAE (Dubai), UK, Denmark. centre the country as a leading re-exporting Positioning potential to attract global in South Asia, has tremendous logistics solutions to Total B2C business to Sri Lanka. multinational companies can be designed to suit different clientele. to be segmented A marketing and a branding campaign can Africa, Middle East, South and East Asia, Europe, Operational objectives 2.2: Provide adequate facilities to increase the number and quality of logistics operations. 3.1: Build a strong marketing campaign to stimulate export growth of logistics sector. 2: To ensure 2: To the adequate facilities and availability of qualified labor force. promote 3: To the image of Sri Lanka as a logistics hub in the world. Strategic objectives
[ PLAN OF ACTION 2018-2022 ] 44 100,000 100,000 1,500,000 Indicative costs (USD) - - Supporting implementing partners Ministry of National Policies and Economic Affairs; Ministry and Civil Aviation; of Transport and Shipping; Ministry of Ports AirportDepartment of Commerce; & Aviation Services Sri Lanka Limited Ministry of Industry and Com merce of Ministry of Finance; Board Investment (BOI); Department of National Planning; Airport & Avia Limited; tion Services Sri Lanka Department External Resources - Ministry of Leading implementing partners Ministry of Megapolis and Devel Western opment Ministry of Ports and Shipping be finalized To by and Transport Civil Aviation Investment profiles Investment profiles prepared; show per One road year in targeted country organized; B2B meeting with 5-7 investors in each country organised per year Decision about allocation of Colombo East taken; Terminal Construction of the terminal commenced Plan for airport development desiugned with private sector logistics operators Civil Aviation Act amended to enable PPPs Investor targeting completed Targets • • • • • • • • 31/12/2022 30/06/2019 31/12/2022 End date 01/04/2018 01/04/2018 01/04/2018 Start date 2 1 1 Priority ------Develop a plan with track allocation initially between terminal; Colombo port and BIA cargo for investors in target investment profiles Prepare countries; activities in selected Carry out investment promotion and B2B meetings; countries including roadshows diplomats and embassy representatives, Engage foreign visits. to support and plan promotional representatives of East terminal to identify Finalise the tendering process the winner; Assist with the beginning of administrative procedures for construction of the terminal. Activity a rail network between 3.2.1 Attract investment to increase ports, hub zones to facilitate fast airports and commercial and establish an integrated multi transfer of sea/air cargo BOT modal connectivity network. PPP can be set through the land and legal clear model when government releases infrastructure. ance and private companies invest in hard activi investment promotion This can be achieved through countries (India, China, Japan). ties in targeted Following steps required: • • • • capacities in the port of Colombo to facili 3.2.2 Increase tate trade growth. Following steps required: • • has to be expedited as con of Colombo project The Port indicated within the next twelve strains for mega ships are months. 3.2.3 In line with new government policy on further expan sion and opening of the logistics sector (budget 2018), stimulate the development of airports (domestic and includ business models, sustainable through international) complete the necessary legislative As required, ing PPPs. investment for the construction of amendments. Promoted handling (hub operations) in key airport. cargo Operational objectives 3.2: Increase market outreach to attract the investment. 3: To promote 3: To the image of Sri Lanka as a logistics hub in the world. Strategic objectives
[ SRI LANKA LOGISTICS STRATEGY ] Strategic Operational Activity Priority Start date End date Targets Leading Supporting implementing Indicative objectives objectives implementing partners costs (USD) partners 3: To promote 3.2: Increase 3.2.4 Diversify shipping beyond containerized cargo to 2 01/01/2019 31/12/2022 • Feasibility studies Ministry of Ports Ministry of National Policies and 150,000 the image of market outreach increase activity of non-containerized cargo in Sri Lankan completed; and Shipping Economic Affairs Sri Lanka as a to attract the ports. • Blueprint through logistics hub in investment. • Conduct a feasibility study on the possibility of the national ports the world. developing Hambantota and Trincomalee ports for bulk, and shipping policy roll-on/roll-off and energy services for the growing and incorporated; fast-developing Bay of Bengal region; • Call for expression of • Carry out a feasibility study on converting one or two interest announced ports to turnaround ports for cruise tourism –Colombo/ Galle; • Based on feasibility studies, develop a plan for converting ports to turnarounds ports with various non- containerized cargo activities; • Announce a call for expressions of interest to install the facilities in the selected location. The overall port strategy should work towards increasing all types of ships calling at Sri Lankan ports 3.2.5 Attract investment to increase refinery capacity in 2 01/04/2018 31/12/2022 • One road show per Board of Invest- Export Development Board 100,000 order to bring more ship arrivals. This can be achieved year in targeted ment (BOI) through investor targeting and promotion of bunker / crude country organized; oil storage both onshore and offshore. For this activity, off- • 5 investors in shore liberalization is important and is the first step (linked selected countries to 1.1.10). reached per year • Carry out investment promotion activities through roadshows and B2B meetings in target countries (India, United States, Japan, China, Gulf countries and South- East Asia); • Announce a call for expressions of interest. Photo: (cc) - Anushka Wijesinha 47
ANNEXES
[ ANNEXES ] 48
APPENDIX 1: LIST OF PARTICIPANTS IN THE PUBLIC- PRIVATE CONSULTATIONS
No. Name Designation Name of Institution 1 Mr. K.V.P. Ranjith De Silva Vice Chairman Airport & Aviation Services (Sri Lanka) Limited 2 Mr. D.J.U. Purasinghe Senior Assistant Airport Manager Airport & Aviation Services (Sri Lanka) Limited 3 Mr. Kingsley Abeywickrama Managing Director APL Lanka (Pvt) Ltd 4 Mr. Nimal Ameresekere Chairman Association of Container Transporters (ACT) 5 Mr. Rezvan Rasheed Managing Director BAZ World 6 Mr. N.N. Kumaratunga Director - (Investment Appraisal) - Services & Board of Investment (BOI), responsible for Utilities Sector EPZs and Commercial hubs (Commercial hub section) 7 Mr. Ananda K. Rajakaruna Senior Deputy Director Board of Investment (BOI) 8 Mr. Ruwan Waidyaratne Chairman Ceylon Association Of Shipping Agents (CASA) 9 Ms. Manori Dissanayaka Assistant Secretary General Ceylon Chamber of Commerce 10 Mr. Dinesh De Silva Chairman - Import Section Ceylon Chamber of Commerce 11 Ms. Chitra Jayasinghe Deputy General Manager Ceylon Shipping Corporation Ltd 12 Mrs. Yamuna Wettasinghe Assistant General Manager -Business Ceylon Shipping Corporation Ltd Development & Marketing 13 Dr. E.K.D. Lalith Edirisinghe Associate Dean - Faculty Of Management, Colombo International Nautical & Engineering Humanities & Social Science College (CINEC) 14 Dr. Dan Malika Gunasekera Legal Counsel/Legal Consultant Danmar 15 Mr. Dimithri Perera Country Manager DHL Keells (Pvt) Ltd 16 Mr. Harin De Silva Chairman Exporters Association of Sri Lanka (EASL) 17 Mr. E.R.C. Moraes Senior Advisor Finlays Colombo Limited 18 Mr. Amal Rodrigo Director Hayleys Free Zone 19 Mr. Sean Van Dort Director - Logistics & Digital Service MAS Capital Integration 20 Rear Admiral. D.E.C. Jayakody Project Director - Maritime Cities Ministry of Mega Polis & Western Development Project Development 21 Mr. Sanjeeva Abeygoonewardena Director/CEO Mountain Hawk Express (Pvt) Ltd (FedEx Express) 22 Mrs. Vijitha Weerasinghe Director/ Planning National Transport Commission 23 Mr. Kumar Senevirathna Manager Logistics Penguin Sportswear (Pvt) Ltd (Emjay Penguin) 24 Mr. S. Mahesan Director (Exports) Sri Lanka Customs 25 Mr. Dushmantha Karannagoda Past Chairman Sri Lanka Freight Forwarders' Association (SLFFA) 26 Mr. Jagath Pathirane Chairman Sri Lanka Logistics and Freight Forwarders Association (SLFFA) 27 Mr. Roshan Silva Vice Chairman Sri Lanka Logistic and Freight Forwarders Association (SLFFA) 28 Mr. H. D. A. S. Premachandra Managing Director Sri Lanka Ports Authority 29 Mr. Upali De Zoysa Director – Logistics Sri Lanka Ports Authority 30 Mr. Jayantha Perera Director- Ports Operation Sri Lanka Ports Authority 31 Mr. Suranga Walpola Manager (Logistic) Sri Lanka Ports Authority 32 Ms. Zavia Miskin Dy. Chief Operations Manager Sri Lanka Ports Authority 33 Mr. N.J. Chrisso De Mel Chairman Sri Lanka Shipper's Council
[ SRI LANKA LOGISTICS STRATEGY ] 49
No. Name Designation Name of Institution 34 Mr. Suren Abeysekara Vice Chairman Sri Lanka Shipper's Council 35 Mr. Clifford Rodrigo Cargo Sales Manager Sri Lankan Airlines Limited 36 Mr. Hiran Fernando Cargo Sales Executive Sri Lankan Airlines Limited 37 Eng. Nishal Samarasekara Senior Lecturer - Department of Transport & University of Moratuwa Logistics Management 38 Capt. A Banerjee Managing Director ZIM 39 Mr. S.R.P. Indrakeerthi Director - Trade Facilitation & Trade Export Development Board Information 40 Mr. M.K.S.K. Maldeni Director – Export Services Export Development Board 41 Ms. Dhanushka Ruwanpathirana Export Promotion Officer Export Development Board
[ ANNEXES ] 50
APPENDIX 2 : CURRENT LOGISTICS INFRASTRUCTURE IN SRI LANKA
Road Inland water
Transport in Sri Lanka is based primarily on the road network In addition to road and rail, Sri Lanka has 160 kilometres and is centred around Colombo. Road transport accounts of navigable waterways.18 With 103 natural river basins and for about 93 % of land transport in Sri Lanka.13 A number of total length of about 4,500 km,19 there are unused oppor- road networks remain in poor condition, while recent invest- tunities for inland water freight transportation services. In ment has focused on major highways. Sri Lanka’s road net- 2016, MoMWD conducted a feasibility study that identified work is dense and extensive, providing connectivity to the that a speedy transport system could be introduced through population and economic activity centres. The present net- canals and reservoirs to connect Colombo East–West and work comprises about 12,000 km of national highways, 152 North–South and Wellawatta–Battaramulla ( through canals ), km of expressways, 15,500 km of provincial roads, 65,000 Fort–Union Place ( across Beira Lake ), and Mattakkuliya– km of local authority roads and 24,000 km of roads owned Hanwella ( through the Kelani River ).20 or controlled by irrigation, wildlife and other authorities.14 The road density is among the highest in Asia and is about 5.19 Ports km per 1,000 people, compared with 2.00 in Bangladesh and 1.69 in Pakistan. National roads are 100 % paved, pro- There are four deep-sea ports in Sri Lanka : Port of Colombo, vincial roads 67 % and local authority roads 13 %. In recent Hambantota, Trincomalee Harbour and the Port of Galle. The years, expressways and national highways – as well as pro- port system is governed by SLPA. The main port services vincial, district, and rural roads – have been built or up- are container handling, trans-shipment and cargo. Container graded with financial support from the Asian Development handling in Colombo Port is increasing year to year, main- Bank.15 The National Road Master Plan 2008–2017, devel- ly supported by increased operations in the Colombo oped by the Ministry of Highways and Road Development, International Container Terminal and South Asia Gateway aims to ensure that the road network will be planned, main- Terminal.21 Total container handling in 2016 increased by tained, constructed and developed to enhance national in- 10.6 % to 5.7 million TEUs, from 5.2 million TEUs handled tegration and economic growth. in 2015.22
Rail The performance of Hambantota Port has been weak, main- ly because of an absence of hinterland industries that can The rail network connects the main cities with Colombo and exploit the full potential of this industrial port. The activities of consists of 1,508 km of track. The Government took steps to this port are concentrated on vehicle trans-shipments, roll- develop railway transportation but most efforts were main- on / roll-off operations, bulk and gas shipping. Trincomalee ly to support the rail network at basic level16 as the perfor- Port, the second-best natural harbour in the world, serves mance of Sri Lanka’s rail network weakened. Currently, only passenger ships and also caters to bulk cargo and port-re- 1 % of the freight market is catered to by Sri Lanka Railways.17 lated industrial activities including heavy industry, tourism The Government expects to increase the share of railway and agriculture. The Port of Galle is currently a small port freight transport by 2020 through the Public Investment but SLPA plans to develop facilities to accommodate freight Programme 2017–2020. handling of international vessels, as well as develop a fully fledged yacht marina.
13.– Asian Development Bank ( 2017 ). Sri Lanka : Railway Master Plan, project data sheet. Available from www.adb.org/projects/51108-001/ 18.– Central Intelligence Agency ( 2017 ). The World Factbook. Washington, main#project-pds. D.C. Available from www.cia.gov/library/publications/the-world-factbook/ 14.– Sri Lanka, Ministry of Highways and Road Development ( 2007 ). index.html. National Road Master Plan 2007–2017 : Executive Summary and the 19.– United Nations Educational, Scientific and Cultural Organization ) Investment Plan. Colombo. Available from www.rda.gov.lk/supported/ and Ministry of Agriculture, Irrigation and Mahaweli Development ( 2006 ). noticeboard/publications/nrmp_executiveSummary.pdf. Sri Lanka Water Development Report. Available from http ://unesdoc. 15.– Asian Development Bank ( 2015 ). Roads and highways in Sri Lanka, unesco.org/images/0014/001476/147683E.pdf. 27 January. Project Result / Case Study. Available from www.adb.org/ 20.– Sri Lanka, Ministry of Megapolis and Western Development Sri Lanka results/roads-and-highways-sri-lanka. Land Reclamation and Development Corporation in collaboration with 16.– Asian Development Bank ( 2017 ). Sri Lanka : Railway Master Plan, Western Region Megapolis Planning Project ( 2017 ). Pre-Feasibility Study project data sheet. Available from www.adb.org/projects/51108-001/ Inland Water Based Transport Project ( Phase I ), Western Province. main#project-pds. 21.– Central Bank of Sri Lanka ( 2016 ). Annual Report 2016, chapter 3. 17.– Ibid. 22.– Ibid.
[ SRI LANKA LOGISTICS STRATEGY ] 51
Figure 14 : Sri Lankan rail network
Source : http://dlca.logcluster.org.
Table 2 : Performance of port services, 2013–2016
Item 2013 2014 2015 2016 Growth rate ( % ) 2013 2014 2015 2016 1. Vessels arrived ( no. ) 3 976 4 264 4 728 4 998 -3.8 7.2 10.9 5.7 Colombo 3 667 3 742 4 197 4 405 -5.2 2 12.2 5.0 Galle 36 60 72 96 -47.8 66.7 20 33.3 Trincomalee 134 127 164 216 -16.8 -5.2 29.1 31.7 Hambantota 139 335 295 281 308.8 141 -11.9 -4.7
2. Total cargo handled ( thousand tons ) 66 243 74 410 77 579 86 519 2 12.3 4.3 11.5 Colombo 63 482 70 794 73 718 81 879 2.9 11.5 4.1 11.1 Galle 207 394 542 771 -50.9 90.3 37.5 42.4 Trincomalee 2 435 2 748 3 027 3 514 -14.8 12.9 10.2 16.1 Hambantota 119 474 293 355 495 298.3 -38.3 21.2
3. Total container traffic ( thousand TEUs ) 4 306 4 908 5 185 5 735 2.8 14 5.7 10.6
4. Trans-shipment container ( thousand TEUs ) 3 274 3 781 3 967 4 435 3.4 15.5 4.9 11.8
5. Employment ( number ) 9 886 9 598 9 550 9 651 -3.1 -2.9 -0.5 1.1
Source : SLPA.
[ ANNEXES ] 52
Aviation
Sri Lanka’s aviation network is built around 17 airports, of To eliminate double handling and shorten the sea to air which three are international : BIA, Ratmalana Airport and ( or vice versa ) turnaround time to maximize the bene- Mattala Rajapaksa International Airport. Most international fits of transport, logistics and trading, a number of EPZs traffic is routed through BIA, located 35 km north of the capi- have been successfully created. EPZs in Sri Lanka have tal. All three airports have cargo handling facilities. They are a long history. The first EPZ became operational in 1978 in administrated by Airport and Aviation Services ( Sri Lanka ) Katunayake. Currently there are 14 EPZs around the country, Ltd. Total cargo handling at BIA increased 18.1 % in 2016.23 covering different areas. They are managed by BOI, which The airport has good connection with Katunayake EPZ and provides assistance at each stage of the investment pro- Colombo through the Colombo–Katunayake Expressway. cess. EPZs are meant to attract FDI and promote economic Mattala Rajapaksa International Airport handled 916 aircraft and industrial development, and also to generate exports, movements in 2016, compared with 884 aircraft handled in foreign exchange and employment through various fiscal the preceding year.24 and non-fiscal incentives offered to investors. The relevant legislation allows for exported items to be exempt from im- To link logistics activities, minimize congestion and max- port duty on capital goods and raw materials, and from ex- imize efficiency, a logistics corridor concept is current- change control. The incentives also include tax holidays and ly being developed to accommodate trans-shipment concessionary tax. facilities, storage, collection and local-level distribution of cargo. MoMWD proposes, through the Megapolis pro- ject, to develop logistics services focusing on four major corridors : Colombo–Hambantota, Colombo–Trincomalee, Colombo–Kandy and Colombo–Jaffna, and within Colombo Metropolitan Region. This will allow the development of spe- cific clusters to accommodate trans-shipment facilities, stor- age, collection and local-level distribution of cargo. Rail and expressway networks for freight handling will be built to minimize congestion and maximize efficiency for logis- tics services.
23.– Ibid. 24.– Ibid.
Figure 15 : Air passenger and air cargo handling in Sri Lanka, 2012–2016
Air Passenger and Cargo Handling
10 300 9 250 8 7 200 6 5 150 millions 4 100 MT (000) 3 2 50 1 0 0 2012 2013 2014 2015 2016 Passenger Transit CargoHandling Handling Passenger (Right Axis)
[ SRI LANKA LOGISTICS STRATEGY ] 53
Figure 16 : Expressway network in Sri Lanka
Figure 17 : Locations of export processing zones in Sri Lanka
[ ANNEXES ] 54
The Government plans to develop logistics centres and expressways and a railway network for freight handling economic corridors, and to provide a full range of services and transportation and to include distribution centre, for exporters. This will offer more opportunities to producers warehousing, cold storage, dry port, cargo distribution and processors by connecting with warehouses, logistics and trans-shipment facilities. centres, cold storage facilities etc. and overall will maximize With assistance from the Asian Development Bank, SLPA efficiency and enhance trade and economic development. is also preparing a master plan for national ports aimed at developing the port infrastructure in an optimal manner, The Western Region Megapolis Planning Project 2030, given that it will cover all ports. This includes restructur- aside from infrastructure development and social infra- ing SLPA and addresses emerging business activities in structure around Colombo for various industries, aims oil and gas handling, and passenger and cruise ship op- to establish a logistics city located close to Colombo erations as well as transport sector development plans. Port and BIA. It is planned to connect the city through
Figure 18 : Concept Plan for Logistics Corridor of Western Region Megapolis Master Plan
Box 11 : Existing infrastructure and logistics development projects
Projects for logistics and infrastructure development : Financing infrastructure development projects : • Western Region Megapolis Master Plan Project • United States Agency for International Development support • Urban Transport Master Plan for Colombo Metropolitan for a PPP framework as a tool for financing hard infrastructure Region and Suburbs ( towards 2020, 2025 and 2035 ) • Japan–Singapore study on Trincomalee Port development • National Road Master Plan 2007–2017 • Oil tank development project with India in Trincomalee • Maritime Cities Development Project • Railway development with India • Expansion of BIA – Japan International Cooperation Agency
[ SRI LANKA LOGISTICS STRATEGY ] 55
REFERENCES
Alphaliner ( 2017 ). Website. Available at www.alphaliner.com. Transportation Management, International Transportation Management, Warehousing and Distribution, Software ) and Asian Development Bank ( 2017 ). Sri Lanka : Railway Master Segment Forecasts To 2020, 2015. Plan, project data sheet. Available from www.adb.org / pro- jects / 51108-001 / main#project-pds. Organization for Economic Co-operation and Development and World Trade Organization ( 2017 ). Aid for Trade at a Asian Development Bank ( 2015 ). Roads and highways in Glance 2017 : Promoting Trade, Inclusiveness and Connec- Sri Lanka, 27 January. Project Result / Case Study. Available tivity for Sustainable Development. from www.adb.org / results / roads-and-highways-sri-lanka. Sri Lanka, Ministry of Highways and Road Development Association of Container Transporters ( 2017 ). Website. Avail- ( 2007 ). National Road Master Plan 2007–2017 : Executive able at www.actsrilanka.com / . Summary and the Investment Plan. Colombo. Available from www.rda.gov.lk / supported / noticeboard / publications / nrmp_ Central Bank of Sri Lanka ( 2016 ). Annual Report 2016, chap- executiveSummary.pdf. ter 3. Sri Lanka, Ministry of Megapolis and Western Development Central Intelligence Agency ( 2017 ). The World Factbook. Sri Lanka Land Reclamation and Development Corpora- Washington, D.C. Available from www.cia.gov / library / publi- tion in collaboration with Western Region Megapolis Plan- cations / the-world-factbook / index.html. ning Project ( 2017 ). Pre-Feasibility Study Inland Water Based Transport Project ( Phase I ), Western Province. City of London Corporation ( 2016 ). The United Kingdom’s Global Maritime Professional Services : Contribution and United Nations Conference on Trade and Develop- Trends. London. ment ( 2017 ). Maximizing the development gains from e-commerce and the digital economy. ( Note by the Secre- International Trade Centre ( 2017 ). Reforming logistics servic- tariat TD / B / EDE / 1 / 2 ). Available from http : / / unctad.org / meet- es for effective trade facilitation. ITC, Geneva. Available from ings / en / SessionalDocuments / tdb_ede1d2_en.pdf. http : / / www.intracen.org / uploadedFiles / intracenorg / Con- tent / Publications / Executive_summaries / Logistics %20 United Nations Educational, Scientific and Cultural Or- and %20trade %20facilitationFinal_Low-res %20with %20 ganization ) and Ministry of Agriculture, Irrigation and Ma- cover.pdf haweli Development ( 2006 ). Sri Lanka Water Development Report. Available from http : / / unesdoc.unesco.org / imag- International Trade Centre ( 2017 ). SME Competitiveness Out- es / 0014 / 001476 / 147683E.pdf. look 2017 : The Region – A Door to Trade. Geneva. Available from www.intracen.org / publication / SME-Competitiveness- World Bank ( 2016 ). Connecting to compete 2016 – trade lo- Outlook-2017---The-region-A-door-to-global-trade / . gistics in the global economy, June 28. Available from www. worldbank.org / en / news / feature / 2016 / 06 / 28 / connecting-to- Maritime and Port Authority of Singapore ( 2017 ). Website. compete-2016-trade-logistics-in-the-global-economy. Available at www.mpa.gov.sg / web / portal / home. World Shipping Council ( 2017 ). Website. Available at www. Orbis Research ( 2015 ). Third Party Logistics ( 3PL ) Market worldshipping.org / . Analysis By Service ( Dedicated Contract Carriage, Domestic
[ ANNEXES ] Ministry of Development Strategies Sri Lanka Export Development Board and International Trade
Ceylon Association Hub Operators Association of Shipping Agents
Developed as part of the EU-Sri Lanka Trade-Related Assistance project, funded by the European Union (EU)