Benefits of a maritime hub
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File picture of the Colombo Port.
Although it’s two years now, the X-Press Pearl containership disaster is still making headlines in the Sri Lankan news media. When you recall each and every detail of this disaster and of its subsequent affairs up to now, they all point to one thing; the gross inability of the country as a nation, and nothing else!
And it’s the inability of an island that has been boasting about its strategic locational advantage for 100s of years. What’s the point that I am trying to get across? If we know that we are an island with its strategic location in the Indian Ocean, shouldn’t we have prepared better than this to face such unforeseen events and circumstances?
X-Press Pearl disaster
It was May 20, 2021. A Singapore-flagged MV X-Press Pearl containership anchored nine nautical miles (16.7 km) away from the Port of Colombo. It was within the Sri Lankan waters that stretch up to 12 nautical miles (22.2 km). Chemical fume emissions erupted on the ship which was carrying dangerous chemicals, fuels, and plastic pellets.
Then, five days later fire broke out, while another eight days later even the effort to tow the vessel away from the Sri Lankan waters failed. We kept watching all that helplessly days and weeks. Some help came from India and Singapore, but it appeared to be too late.
The environmental damage was disastrous, according to UN estimates. The containment and clean-up of oil spill, the shoreline clean-up of plastic pallets and other debris, and the salvage of the shipwreck and shipload, all these were short-term activities. The long-term impact on marine biodiversity and the blue economy, is perhaps, unrecoverable within our generation.
Sri Lanka should have attended to all above, at least until the international regulatory and legal issues were resolved, but the lack of national capacity in each of these activities was the major bottleneck. The capacity is related to the amount of funds needed, the skills and professionalism that we should have developed, technology and equipment which we have acquired, materials and vessels that we should have kept on standby, research and development that we have invested in etc… In short, there was little capacity readily available within Sri Lanka to face such maritime accidents and incidences.
Shipwrecks around Sri Lanka
One could ask the question as to why Sri Lanka was unprepared. The X-Press Pearl disaster may be the worst, but it is not the first. For millennia, the island was an important trading hub located on the international shipping route connecting Western, African and Arabic worlds with the Far East and the Pacific. Therefore, shipwrecks and sinking ships in the Sri Lankan waters are not strange things for us.
According to the National Shipwreck Database of Sri Lanka, over 100 historical shipwrecks deep down the Sri Lankan waters have been identified. Most of the identified shipwreck sites in the seabed were from 1850 to 1950, while the oldest one is 2000 years old – Godawaya Shipwreck Site.
It was during colonial times that Sri Lanka developed its modern international relations – travel, trade, finance, foreign investment, marine services and port services. The ancient Port of Colombo was developed to its modern version by the British during the time of their colonial rule. It was during the same time, that the main port of Sri Lanka also shifted from Galle to Colombo.
It’s a remarkable achievement to note that, according to Global Container Port Performance Index (CPPI) 2021, Colombo Port occupies the 22nd position among 370 ports globally. The ranking is based on the time duration that vessels needed to spend in the port to complete workloads – a measure of port efficiency. Colombo is also ranked as the 22nd busiest port in the world, which is based on the volume of container traffic data.
Maritime Cities
All that is true, but these indicators do not provide any insight into my question: Why is Sri Lanka’s capacity weak as a strategically located island in the Indian Ocean to handle maritime issues efficiently and effectively? It is not just the port efficiency or being busy with container traffic handling, but the entire maritime ecosystem which covers shipping industry, port and logistics, international financial services and regulatory framework.
Some useful information in these areas of maritime ecosystem are reported for comparison and contrast in The Leading Maritime Cities of the World report 2022. It covers top 50 maritime cities in the world. While Colombo is not anywhere among them, the top five maritime cities in the world are ranked as Singapore, Rotterdam, London, Shanghai and Tokyo.
Maritime City status is based on five pillars: Shipping Centres, Maritime Finance and Law, Maritime Technology, Ports and Logistics, Attractiveness and Competitiveness. When we examine the five pillars, we may understand well that they all are essentially the integral parts of a maritime ecosystem. The absence of any part does not allow a city to emerge as a “Maritime City”.
The five pillars explain why Colombo has not been able to emerge as a “maritime city” in spite of having its unique strategic location in the Indian Ocean. In order to be qualified as a Shipping Centre, which is the first pillar, the country should have a sizable shipping fleet and there should be the presence of shipping companies with their headquarters, in addition to other related indictors. They all reflect a competitive shipping industry and add up to a large shipping-based revenue for the country, which is absent in Sri Lanka.
No ship owners and managers
To say the least, Sri Lanka does not have a shipping fleet or shipping companies, but shipping agents. Since the 1970s to-date, Sri Lanka has been granting licenses for the “Shipping Agent” business, under which no shipping owners and managers would register and locate their businesses in Sri Lanka.
Maritime technology development in the country is limited largely to boat and shipbuilding industry under which some are operated with FDI partnerships. Technological advancement in shipping has a wide area of expansion covering engineering, marine services, tourism services, and the salvage industry. In an emergency, Sri Lanka has to depend on the salvage industry in its neighbouring countries. Progress of shipping industry development beyond shipping agent business, is effectively limited by the restrictive regulatory mechanism enacted by Sri Lanka’s laws.
Apparently, ports and logistics sector in Sri Lanka has earned an international reputation as a “transshipment hub”, but not as a “maritime hub”. Colombo Port has earned its reputation not because of any sizable export and import trade generated within the country. The top-most maritime city in the world – Singapore – generates over US$ 450 billion worth of annual exports with a trade surplus. Compared with that, obviously it is impossible to keep Colombo Port busy with the country’s own exports amounting to just $12 billion a year.
Towards a maritime hub
Even as a transshipment hub, Colombo Port’s significant portion of transshipments are due to India’s international trade expansion. India’s exports doubled in 12 years and reached the Singapore level of $450 billion in 2022. However, India also had the regulatory barriers preventing its maritime industry growth at least to support its own trade expansion. Singapore, Colombo and Dubai are the major foreign ports that have benefitted from India’s trade expansion.
While there are 12 major ports in India along its western and eastern coasts, India too has begun to consider its strategic location in the region. Having reviewed these facts, India has been deregulating and liberalising its shipping industry, while developing its own ports with private partnerships in order to become a global maritime hub.
Perhaps, the landscape of Colombo Port as a regional transshipment hub may also change in the near future. Sri Lanka too must act fast along with its regional peers in transforming its ports to become international maritime hubs rather than being stagnant as regional transshipment hubs. It requires deregulating and liberalising the shipping industry, promoting the essential components of a maritime hub, and, of course, generating international trade within the country.
If Sri Lanka had been a maritime hub along the East-West shipping route where on average about 300 ships sail daily, the country would have become a beneficiary of its strategic location. In fact, the development of the capacity and the acquisition of knowledge, skills and resources to handle maritime issues such as disasters, security and pollution are only a byproduct of a maritime hub.
(The writer is a Professor of Economics at the University of Colombo and can be reached at sirimal@econ.cmb.ac.lk and follow on Twitter @SirimalAshoka).
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