Ceylon Association of Shipping Agents (CASA) and Sri Lanka Logistics and Freight Forwarders Association (SLFFA) the voices of the shipping and logistics industry, have strongly object to the Government’s budget proposal to lift the remaining restriction of 60% on foreign ownership on shipping and freight forwarding agencies.
CASA and SLFFA says the proposal will not bring any significant benefit to the industry and the economy and instead will have an adverse impact to the national interest of the country.
“The removal of restrictions on foreign ownership will not bring in any additional investments or benefits to the country as envisaged. There will be no new investments by shipping lines and freight forwarders as a result of this policy change. Local companies have already invested in the required infrastructure to support the shipping lines’ and logistics activities such as in container depots, freight stations, logistics parks, transportation etc. Such a policy change would enable shipping lines and freight forwarders to repatriate hundred percent of profits instead of reinvestment locally. They will convert the agencies to cost centers reducing the employment of Sri Lankans and depriving the government of substantial tax revenue,” CASA and SLFFA said.
CASA and SLFFA said that all major shipping lines and freight networks are currently represented in Sri Lanka and the lifting of restrictions will not bring any new shipping lines or freight networks into the country.
“With the expansion of capacity (eg. CICT ) in the port of Colombo shipping lines brought in new services with larger vessels and more volumes in a short period of time. With continuing expansion of capacity, shipping lines will bring in further new services/volumes predominantly due to Sri Lanka’s strategic location, the availability of deep water terminal facilities coupled with competitive port and terminal tariffs and service excellence comparable to competing hubs,” CASA and SLFFA said.
They said that the contention that the shipping lines and logistics operators will base their operations in Sri Lanka as a result of this legislative change is incorrect due to the fact that currently there is no restriction on shipping lines or logistics operators setting up their hundred percent owned headquarters or regional offices in Sri Lanka. The shipping industry in Sri Lanka, is, in fact, already liberalised where any foreign ship owner can freely operate their vessels in Sri Lanka.
The existing restriction applies to shipping agency / freight forwarding functions only and not to investments in other facets of the shipping lines/logistics activities.
The restriction in foreign ownership of shipping agencies/ freight forwarding has not inhibited shipping lines’ interests in investing in port terminal capacity in Sri Lanka as displayed in the expression of interest for ECT where all major shipping lines and terminal operators submitted bids. An example would be the case of SAGT where there have been investments from major shipping lines.
There are currently in excess of 750 local shipping and freight forwarding and clearing agents employing over 12000 direct staff most of whose jobs would be at risk as would the enterprises themselves.
Further, the management positions will be filled by expatriate staff depriving Sri Lankan professionals. The indirectly linked staff would be as much as 100,000, whose employment also would be at stake.
Shipping agents have also diversified into seafarer training and education and over the years have produced a pool of some 35,000 employed and employable personnel for global carriers and contribute in excess of USD 250 million per annum. Shipping agency and freight forwarding business contribute an estimated USD 400 million per annum to the economy.
“We are concerned that with this policy change the foreign owners will get controlling interest of agency/ freight forwarding companies and not only will these companies be restricted in their growth but they would be limited in their capacity to invest in related or unrelated business as hitherto done by local entrepreneurial shipping agencies/ freight forwarding companies over the past several decades. Sri Lankan owned shipping agencies have always endeavoured to assist exporters in securing space in tight situations which will not be the case when control of shipping agencies shift to foreign ownership,” they said.
A majority local ownership in shipping agencies/ freight forwarding companies have led to local entrepreneurs promoting the Principals/ freight networks to maximize their business through Sri Lanka as opposed to other regional hubs benefiting the port of Colombo as well as the country. CASA and SLFFA said this position will be entirely jeopardized with this policy change.