Sri Lanka opens up shipping sector fully for foreign firms
New regulations are to be introduced soon to open up Sri Lanka’s shipping sector mainly controlled by five local companies to transform the country to a Singapore-style shipping hub, Finance Minister Mangala Samaraweera announced.
These five companies control the agencies of shipping lines that account for 74 per cent of the global shipping market at present.
He told a media conference in Colombo this week that the 2018 budget proposal for the removal of ban on foreign ownership of shipping and freight forwarding firms had been blocked by some ministers in the previous unity government.
Budget 2019 will be carrying forward this proposal ensuring fair and balanced competition, eliminating unfair trade practices by enacting prudent regulations shortly, he revealed.
“Restrictions on the foreign ownership on the shipping and the freight forwarding agencies will be lifted, under these new regulations,” he said adding that “it will enable major international shipping lines and logistics operators to base their operations in Sri Lanka.”
Elaborating on this initiative, a senior Treasury official told the Business Times that the Sri Lanka Ports Authority Act enacted in 1979 and the Merchant Shipping Act, enacted in 1971 will be changed to “cater to the demands of the modern day logistics and marine industry.”
According to the present law, a foreign entity cannot own more than 40 per cent of a shipping company in Sri Lanka, he disclosed adding that by introducing new regulations the country would be able to attract major global shipping companies like Maersk to make an anchor investment in the country.
Companies like Amazon could be attracted for warehousing for e-Commerce in the region. Support services such as financial services, legal services and other professional services can flourish in this environment, he opined.
The Ceylon Association of Shipping Agents (CASA) and Sri Lanka Logistics and Freight Forwarders Association (SLFFA) vehemently protested against the government’s move in the 2018 budget saying it will not bring in any additional investments or benefits to the country as envisaged.
All aspects of the shipping industry except for agency including terminals, warehouse and depot infrastructure, ancillary service infrastructure, etc are liberalised at present, a top official of a leading local shipping company said.
All profits of a shipping agency will be repatriated and not retained and reinvested within the country which is the practice at present by local agents, he added.
If the sector is allowed 100 per cent ownership of local firms then shipping lines will charge all owners costs to the agency and make it a cost centre depriving the government of tax revenue, he pointed out.
There are currently 130 shipping agents handling 35000 container vessels and 6000 non container vessels employing 12,000 people who have reinvested the earning in the local economy.
These shipping agents will lose their livelihood by the government’s move to liberalise the shipping sector, he said adding that foreign investors from countries in the region will set up small agency offices for caller vessels and reduce business available to local small agents.