Sri Lanka: the next Maritime Logistics and Distribution Hub in the Indian Ocean

26/12/2018

Sri Lanka: the next Maritime Logistics and Distribution Hub in the Indian Ocean

Sri Lanka harbours the aspirations to become South Asia's foremost maritime, logistics and distributions hub considering its geographical position in South Asia, which is located at the crossroads of the fastest-growing region of the world that generates the competitive edge over the other regional players. The country's proximity to many emerging markets has positioned itself favorably to be an important hub in the region.

Primarily, Sri Lanka boasts a unique locational advantage to develop a world-class logistics hub, and enter the global supply chain industry, which is rapidly digitalizing and creating a new generation of consumers. Colombo is the only chosen destination for this in South Asia, where global carriers which operate over 18,000 TEU vessels are increasing port calls to service global clients and connecting with the Indian subcontinents via Sri Lanka. This makes more shipping options with faster connectivity available in all continents to global buyers.

Sri Lanka is served by all top 20 global shipping lines and the major alliances and Port of Colombo is ranked No. 23 among the top 30 container ports in the world and has been the fastest-growing transshipment port in the world as of first half of 2018. Reliability, high productivity, supported by modern container terminals networked with sophisticated feeder network, the Colombo port is world-class in the truest sense of the word. It is now expanding and connecting into regional logistics corridors strengthening supply chains to ensure customer demands to support market demand of speed.

According to the Government, logistical services contribute around 2.5% of gross domestic production, which represents nearly US$ 2 Billion. These services include container trucking, warehousing, shipping and ports facilities, but exclude domestic transport of passengers, fisheries and interregional domestic cargo transportation. The total share of logistics in national exports is estimated at 7%. The industry provides full-time direct employment to over 50,000 people. The sizes of companies vary between 5 and 1,000 employees out of which around 70% of them are national while the rest being multinationals.

Currently, there are around 130 shipping agencies and 120 freight forwarders with over 500+ companies which have been registered with the Merchant Shipping Secretariat (MSS), that also includes clearing agents. As Logistics makes a major impact on the economic activities in any country, improving logistical performance has become a more important development policy objective for Sri Lanka.

The country's proximity to many emerging markets has positioned itself favorably to be an important hub in the region. The Sri Lankan Logistics Industry is conscious of the increase in regional competition and the systemic digitization of the industry. With the vision of becoming the Indian Ocean maritime, logistics, and distribution hub providing all services and facilities for integrated connectivity', a Strategy was formulated for the Logistics as a part of the National Export Strategy (NES) of Sri Lanka, under the aegis of the Ministry of Development Strategies and International Trade (MoDSIT), and the Sri Lanka Export Development Board (EDB). In forging ahead, this will be a promising initiative for the Logistics Industry that will boost the Logistics performance of the country in a much more competitive manner. Under the three Strategic Objectives of creating an enabling and efficient business environment driven by technology and public private collaboration, ensuring adequate facilities and availability of qualified labor force, promoting the image of Sri Lanka as a logistics hub worldwide, the National Logistics Strategy stays ahead of the game, and constantly keeps up its progress in implementing its Plan of Actions. With the extensive stakeholder consultations, field visits, and review of literature, NES has identified a number of constraints too in the Logistics sector in terms of Policy level, Institutional level and Enterprise level that challenge its growth and competitiveness. Two thirds of them require regulatory changes where prevailing restrictions need to be relaxed for the well-functioning of the trade.

Moreover, the strategy recommends the active private sector participation, proactive networking and dialogue, effective communication, and resource adequacy for implementation as the key success factors to drive the NES forward. Accordingly, the private sector has expressed willingness to operationalize the Plan of Actions by addressing the identified bottlenecks with the proper backing of the governmental institutions. The effective execution of the strategy will ensure the country gaining momentum gradually.

It is obvious that the Sri Lanka's ideal location and aspiring strategies are no more selling prepositions for the country to make it competitive among the regional players unless the public private driving forces take steps to make it happen. However, the Logistic industry players perceive the NES as a quite pragmatic endeavor to address the bottlenecks, and to recommend the remedial measures thereby to leverage its opportunities from which the sector will be geared to achieve its vision. Notably, as logistics is one of the promising sectors where the country would thrive with its locational advantage in terms of sea and air connectivity, the industry strongly believes that Sri Lanka could raise its bar challenging the regional peers with the progress of NES.