Budget proposal not in national interest says CASA, SLFFA
View(s):Sri Lanka’s shipping sector on Friday strongly objected to the government’s budget proposal to lift the restrictions on foreign ownership in shipping and freight forwarding agencies.
“The proposal will not bring any significant benefit to the industries and the economy and in fact will have an adverse impact to the national interest of the country,” a joint statement to the media by the Ceylon Association of Shipping Agents (CASA) and Sri Lanka Logistics and Freight Forwarders Association (SLFFA), said.
The removal of restrictions on foreign ownership will not bring in any additional investments or benefits to the country as envisaged. There is unlikely to be any 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 100 per cent of profits instead of reinvestment locally. They will most likely convert the agencies to cost centres, reducing employment of Sri Lankans and depriving the government of substantial tax revenue, the release stated.
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.
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 own 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, it said.
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.
There are currently in excess of 750 local shipping and freight forwarding and clearing agents employing over 12,000 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.
The industry noted that there will be absolutely no knowledge transfer or technology transfer as a result of this change in ownership as the latest state of the art systems of Principals are currently deployed and these systems are integrated with locally developed interfaces customized to support local operations efficiently and to the satisfaction of Principals/ Freight networks by local staff.
“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,” the industry 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. This position will be entirely jeopardized with this policy change.
The government needs to realise that for the maritime and logistics industry to grow it is the local industry leaders that would promote the utilisation of all ports in Sri Lanka. The beneficiaries of the budget proposal would focus only on the container segment and would not be interested in developing or promoting the other segments of the shipping and logistics industry, the statement added.
Any policy change should be discussed with stakeholders, it was noted, adding that this proposal comes as a great shock to the industry stakeholders concerned. It appears policy makers are misled to believe that this change will lead to Sri Lanka becoming a leading maritime and logistics hub.