The Ceylon Association of Shipping Agents, (CASA) says the proposals on easing foreign ownership restrictions will adversely affect SMEs that handle a few ships per year.
Such a move will likely lead to large repatriation of currency overseas, depriving the Country of the USD earnings and the tax revenue. It will also have an impact on local employment. It is estimated that the jobs of the current workforce of over 12,000 will be at stake.
CASA says that in Sri Lanka, the shipping agents service over 7,300 casual caller vessels (non-container vessels) per annum. Most of this business of casual caller vessels is canvassed and promoted by the local shipping agents who are mainly SMEs.
CASA says that several proponents are advocating liberalization but they seem to have confused the distinction between the operation of a shipping line and that of an agent.
When one talks of liberalization there are many other areas and laws in shipping which could be seen as restricting the growth of the industry which should be first considered by policymakers. Some have argued in recent articles that the local agents who have represented shipping lines have not invested back in the economy is entirely false.
Most Agents have not only invested in infrastructure and assets such as Inland Container Depots, Warehouses, Free Zones, Ships and Marine Crafts but also have expanded regionally and globally earning much required foreign exchange for Sri Lanka.
Making baseless accusations such as this demoralizes local businesses that strive hard to support the Sri Lankan Economy during these trying times. These articles have also ignored the contribution made by shipping agents during the height of the war to attract ships to Sri Lanka despite the high war risk surcharges that had to be borne by the lines. Sri Lankan agents have grown the maritime industry of Sri Lanka to what it is today and is committed to further growth.
Until 1990 the Ceylon Shipping Corporation had a monopoly on providing freight services to all importers and exporters in the Sri Lankan market. This was the pre-liberalization era. The current regulations permit foreign ownership to handle all activities, with the only exception of shipping agencies and freight forwarding which is restricted by the law by up to 40%.
The Ceylon Association of Shipping Agents, (CASA) says the proposals on easing foreign ownership restrictions will adversely affect SMEs that handle a few ships per year.
Such a move wills likely lead to large repatriation of currency overseas, depriving the Country of the USD earnings and the tax revenue. It will also have an impact on local employment. It is estimated that the jobs of the current workforce of over 12,000 will be at stake.
Port/terminal owning, Ship owning, Shipbuilding, the building of terminals, warehousing, container depot, distribution, bunkering, Entrepot trading, marine lubricants, Ship Chandling, waste disposal, ship repairs, offshore services, salvage and Maritime security are a few of the many services which are open to 100% foreign ownership.
The Ship Agent’s role is to take responsibility for handling shipments and cargo and the general interests of its customers at Ports and harbours worldwide. Ship Agents act on behalf of ship owners, managers, and charterers. The Agency business requires low investment, it is asset-light, low capital-intensive, and service-oriented with local expertise and know-how. There is no evidence of significant FDIs brought into a country purely for establishing a Shipping Agency. There is also no evidence from other maritime hubs in the world that ownership restriction in the Shipping Agency business has precluded them from becoming a maritime hub.
A prime example of this is Dubai which grew to be a logistics and Shipping hub whilst requiring a local partner for shipping agency business until 2021.
Even western countries such as the USA still have regulations such as the JONES ACT which stipulates that all coastal cargo vessels need to be locally owned and have the US FLAG. Countries such as Bangladesh and Maldives also have similar policies to help the local industry to develop and retain foreign exchange earnings within the country. While the Shipping industry has been liberalized, investment in the above sectors which constitute activities of a maritime hub has been minimal with the only exception being in the Port - terminal sector. We attribute this to a less conducive macro environment and a lack of policy consistency.
We believe that merely lifting the limitation in foreign ownership of Shipping Agencies and freight forwarding companies will not have a material bearing on realizing the maritime hub aspirations of the country. This is because the Shipping Agency is one small aspect in the wider sphere of activities that constitute a maritime hub.
The restriction in investment in facilities and the maritime hub services is due to the lack of consistent policy, unattractive benefits, bureaucracy, red tape and delays in doing business. If the intention of the policy change is based on the premise of developing Colombo to be a Logistics hub. we as the industry believe that issues such as the development of Port infrastructure and improvement in ‘ease of doing business’ by digitalization, removal of bottlenecks/bureaucracy throughout the supply chain, low tax regime, and updating customs laws will attract investment, reduce unnecessary costs and bring significant relief to the consumer and trade. “The Shipping Industry is not opposed to liberalization and we share the government’s vision of achieving maritime hub status. We would like to see the country benefit from substantial FDI before throwing open this one, small and specific area to foreign parties for 100 per cent investment.
There are no other benefits in terms of the number of services, shipping freight rates or equipment as equity holding in agency businesses is not linked to these indicators. Currently, Sri Lankan exporters and importers get the best of these services as there is clear competition among the shipping lines to provide services.
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