Financial Times

Air-sea transport hub ambitions
Recent moves by the private sector to play a bigger role in the shipping and aviation industries augurs well for Sri Lanka's ambitions of emerging as an air and sea hub in the South Asian region in much the same way as Hong Kong is to China and Singapore to South East Asia.

Although successive governments have boasted of plans to turn the island into a transportation hub that would exploit its superb geo-strategic location astride the main East-West sea-lane across the Indian Ocean, little had been done towards achieving that goal.

Nor would it have been possible without the involvement of private entrepreneurs willing to risk their money and reputation, in the hi-tech, high-risk world of air and sea transport. For an island nation on a major trade route and boasting of a trans-shipment hub port, Sri Lanka has remarkably few ship owners. For more than a century the involvement of business in shipping has been in ship agency work. Apart from the national line, Ceylon Shipping Corporation, only a few companies had ventured into ship owning, most notably Mercantile Shipping and Master Divers.

The industry has long stressed the importance of encouraging ship ownership and the need for a nationally owned fleet that could help sustain the island's export-import trade in case of emergency.

The absence of such a fleet was acutely felt after the July 2001 Tamil Tiger terrorist suicide attack on the international airport. That led to a sharp hike in war risk insurance premiums and forced many merchant ships to bypass Colombo, threatening our import-export trade.

Now, some of the country's biggest companies are buying merchant ships and expanding their interests in shipping in an encouraging display of confidence in an industry notorious for its 'boom and bust' cycles. All three top conglomerates listed on the Colombo bourse have important interests in logistics or transportation either in running port terminals or container yards and distribution parks, or in ship agency business. The shipping arm of the Aitken Spence group has acquired two merchant ships while Hayleysline, the subsidiary of the Hayleys conglomerate, is in the process of buying its second container ship, both in joint ventures with established shipping lines. Hayleys also has a 20 percent stake in Colombo Dockyard Ltd., a subsidiary of Japan's Onomichi shipyard.

It seems that the mental block, as some have called the mindset that made the private sector work as agents with no investment risk and not go into ship owing, which bear's a huge risk, is now being overcome.

There is a belief that the ship agency business is a dying one with the number of lines shrinking owing to mergers and acquisitions and ship owners setting up their own offices in overseas ports. The third conglomerate, John Keells Holdings, does not own cargo ships, but has a stake in South Asia Gateway Terminals, the P&O run operator of the privatised Queen Elizabeth Quay in Colombo port.

It also owns Lanka Marine Services, the former government bunkering monopoly, which operates bunker barges. JKH's transportation sector, in which bunkering and terminals operations are the main businesses, is now the largest contributor to group profitability and is seen by market analysts as a key growth area.

While the aviation sector may not be as big as shipping, plans by two domestic operators, ExpoAir and Aero Lanka, to launch international flights are a positive indication of private sector interest in the industry.

The island was an important transit stop for international flights before the advent of jet aircrafts and can still make use of its location, as the national carrier SriLankan Airlines is trying to do.

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