Concept of a free port
The ports of Colombo and Hambantota will be the island’s futuristic Free Ports and the government’s strategic vision can benefit Sri Lanka in converting it as a gateway for goods and services to the ISC-Region if pursued on the right path.
The strategy is to provide secure, reliable, faster and more efficient services for the processing of business transactions with all its customers, suppliers, Free Port companies and government agencies to operate with fully equipped, sophisticated systems, high bandwidth networking infrastructure and support staff with a commitment to embracing new technologies that increase efficiency and productivity.
The present Free Ports close to the ISC-Region is Singapore which primarily caters to the ASEAN region and Dubai as the free gateway to the Middle East Region. This now leaves a unique opportunity for a player in the ISC region, with neighbour India as one of Asia’s powerhouses after China. The new port of Hambantota in the south needs to provide the most state of art port infrastructure with modern warehousing facilities for the storage of inventory and performing value-added logistics functions as a major tool for ship-owners and multinational investors and global logistics players to come-in.
For all industries small and large scale the availability of power/energy at a cost effective norm is essential to establish production apart from other infrastructure including an efficient bureaucratic environment and trained technical manpower.
Sri Lanka must take quick strides to develop technically qualified manpower resources if we are to attract high return industrial investor benefits on a long term. It is imperative that we must attract more value addition industries to the country if we are to justify the unprecedented investment made in the development of ports, airports and road networks in the country.
Some high potential industries that we can engage in the manufacturing sector are various spare parts for the automotive industry to India, rubber accessories required for automobiles, light metals, packaging of pharmaceutical products, bottling of spirits and lubricants. We also should look at multinational trading conglomerates which can use Sri Lanka to hub their products for distribution in ISC Region, as today lead times play a major role in the consumer’s decisions, raw-materials or finished goods.
With Sri Lanka keen to convert the ports to Free Ports one needs to examine our competitive advantages and challenges ahead towards this conversion.
It is imperative that one must do a SWOT Analysis before even embarking on a Free Port concept to ensure success like our closest and well established competitors – Singapore and UAE.
Mandatory strengths required
Do we have strong physical infrastructure? Do we have good connectivity to major regional trading hubs and manufacturing bases (by both air and sea)?
- Is there a presence of major multinational trading organizations and international logistics service providers?
- Are political, economic and social conditions stable?
- Is there an educated workforce?
- Is there a strong legal system and business conducive tax structure?
Should the government be pro-active towards investors and have open door policies for business through bilateral and multilateral initiatives e.g. FTAs?
Weaknesses in Sri Lanka
- High cost import trade tariffs, port tariffs and energy tariffs.
- Small domestic market.
- No major industrial manufacturing, no global players.
- No major global logistics cluster.
- Lack of efficiency and responsiveness to customers.
- Shortage of skilled logistics and Supply Chain professionals.
- Inadequate technological capabilities to perform a wide range of SCM integrated activities.
- Inadequate marketing of Sri Lanka as a logistics/supply chain hub in spite of our geographical advantage in the region.
- Lack of collaboration between different players of the supply chain.
- Inadequate air, sea, multimodal route links to regional industrial cities and destinations.
Opportunities
- Sri Lanka is geographically well situated in the ISC-Region and in close proximity to international sea-routes between Asia and Europe.
- The Colombo port is expanding to accommodate large vessels.
- Sri Lanka has been established as a reputation for a secure logistics and trade hub in the ISC-region
Threats
- New ports developing in southern coast of India and eventually vessels calling directly at the Indian ports if manufacturing increases on import/export trade.
- Absence of state of the art warehousing infrastructure not available for inventory storage and management required for cross-trading and JIT services.
Rising competition
Many countries harbour ambitions to become regional/global logistics hubs.
In this regard, the traditional view of logistics being a key enabler/infrastructure for manufacturing and trade has broadened to include the recognition that logistics is also an industry to be developed in its own right.
Has Sri Lanka given sufficient thought in developing and capacity building of human resources to serve this need?
Many countries in the world today are positioning themselves to become logistics hubs, due to identifying this industry as the one of the key enablers to enhance their share of global markets. Considering such moves by other countries, the government should set up new institutional arms like a steering committee on logistics development comprising development officials and hands-on logistic professionals to promote the industry.
The government should also introduce logistics and supply chain as a subject at the G.E.C.A/L curriculum. Today the impact of globalization is fast driving the logistics and supply chain industry as the main enabler to gain more access to markets.
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