Initiatives such as the Colombo Port Expansion Project (CPEP), which will add three more terminals and make Sri Lanka’s capital home to one of the largest ports in the world, are consolidating the country’s position as a shipping hub. Shashi Dhanatunge, Chairman of the Ceylon Shipping Corporation Ltd., highlights the need for more infrastructure and the far-reaching benefits of creating a coastal shipping industry in Sri Lanka.
The world economy is highly dependent on shipping, which meets approximately 85% of the global demand for transport. Looking ahead, we are in for a period of change regarding world economic power; the Asia-Pacific region appears to be the functional ‘growth engine’ for now. The IMF predicts steady growth rates of 5.6% year-over-year in 2015 and 5.5% in 2016. What is the region’s real impact on global seaborne transportation development and trends?
The shipping industry in South Asia is set to thrive over the upcoming decades, as the region is picking up new momentum. India is showing a strong recovery and a promising growth.
Manufacturing and retail markets will expand, which we already have experienced in Bangladesh, Pakistan and Vietnam. The demand for consumer goods, raw materials, and energy products will keep on rising.
In line with this the demographics will change too. People will have a greater disposable income and the South Asia region will further expand its economic and trading activities and links throughout the world as a major manufacturing region, as well as increase growth in intra-Asia trade.
If we look at China-India in this region, their strength alone depicts the future of maritime growth; these nations are set to grow their GDP by more than 7% per annum.
The region is also showing greater opportunities for shipping and logistics businesses as maritime reforms are taking place to encourage greater investment to service the global and regional demands of the shipping industry.
In 2015 the Sri Lankan government introduced 24-hour customs services; other major concessions for the industry were introduced as connectivity from Colombo increases speed to market for products.
In addition, South Asia also offers skilled, low-cost resources, and attractive investment projects.
Around 90% of world trade is carried by the international shipping industry. The top three routes connecting Asia with North America, northern Europe, and the Mediterranean reflect spikes in seaborne trade and account for over 70% of the world’s shipping. Tournadre reports the changes in shipping traffic will reflect on the strong economic growth coming from the Asian states. What is Sri Lanka’s infrastructure capability to support the regional efforts in meeting the challenges posed by the growth of maritime sector in Asia?
Sri Lanka is just getting there, but it’s not fully ready. We have a strong growing demand for international logistics services, which is reflected in the Colombo Port Expansion Project (CPEP).
Prior to the project, there were three terminals in the Port of Colombo: Jaya Container Terminal, Unity Container Terminal and South Asia Gateway Terminal, with seven main container berths and four feeder berths.
Following the completion of the CPEP, three more terminals will be available. The first of these, the South Container Terminal, has already commenced operations.
This is the first terminal in South Asia that can accommodate a mega-sized vessel. The East Container Terminal (ECT) will come into operation in late 2015, while the West Container Terminal is still at the planning stage.
It is expected that the container handling capacity of Port of Colombo could be increased from slightly more than 4 million TEUs to 12 million TEUs per year, making it one of the world’s largest container ports.
However most of the maritime activities are concentrated in Colombo Port, and the city’s “Fort” is the most congested [district] in the country.
It is very challenging to have your busiest international commercial port in your busiest city; companies on a daily basis are facing the issue of maneuvering around the city’s congested roads in order to deliver the cargo around different spots of the island.
Ideally we should be looking at the development and investment of further ports outside Colombo, not for the ships to load and unload, but a fully geared port city that can accommodate warehousing, value-added services, bunker facilities on-shore and/or off-shore, ship repair and shipbuilding, and interconnectivity with rail and air.
What investment opportunities exist alongside Sri Lanka’s maritime ambitions?
Sri Lanka has very limited capacity of onshore bunker storage facilities. We have 85,000 metric tons in Hambantota and only 35,000 metric tons in Colombo, but with more ships coming over, more opportunities are being created by international shipping lines and the international maritime industry.
We should have different forms of supply, which can easily increase efficiency and accessibility to state-of-the-art facilities at competitive prices, thereby increasing its marketability.
However, due to business sensitivities I cannot spell out what the Ceylon Shipping Corporation (CSC) is currently planning and its diversification strategies in these areas.
Secondly we are looking at warehousing facilities, so they can be for Sri Lankan expats, the diplomats and for the region as well.
Then I’m looking at coastal shipping services, and despite being an island we don’t have such a facility at the moment.
Look at Australia and United Kingdom: those are the perfect island states that have utilized the water to maximize transportation links.
In order to extend connectivity the state needs to build roads, rail lines, water systems, and electricity lines, whereas coastal shipping only requires the bare minimum of investment.
Also, it would be the most environment friendly and least disruptive method of cargo movement that we could look for at present.
We can connect different parts of the island through the water, which as a result will have a strong socioeconomic impact around the island, especially outside Colombo.
You don’t need people coming from the south, east or north of Sri Lanka to find a job in the west; you don’t need people to come from all over looking for jobs in Colombo.
They will have jobs created in their own regions where they live. That will actually build much greater understanding among different communities, create better family atmospheres, offer a highly motivated and productive workforce, and a much more peaceful society.
These factors would enable us to stimulate the economy in the entire country, and thus help create a more even and rapid socioeconomic growth.
Industries and businesses can operate from any part of the island without having to be established in or around Colombo at a colossal setting up cost with high land prices etc.
With a bit of national planning and assistance from the government initially, a coastal shipping service could be made affordable and feasible, and thereby encourage local entrepreneurs to use this mode of transportation and be competitive both nationally and internationally.
The Minister of Ports and Shipping, Arjuna Ranatunga, stated that the Ceylon Shipping Corporation would be converted into an institution that will operate vessels in the future. Please discuss.
At the 44th anniversary of the Ceylon Shipping Corporation we presented the business plan formulated to develop the institution during the next five years.
One of our objectives is to become a competitive corporation that owns and operates our own vessels. The first vessel will arrive in December and the other will arrive in April next year.
The vessels will be equipped with billets for trainee cadets as a national service and would be utilized to import coal to Sri Lanka in cooperation with the Ministry of Power and Energy.
You have recently partnered with the Sri Lanka Tourism Bureau in order to accommodate and assist in the number of cruise ship travelers. How can the Tourism Bureau work alongside the Ceylon Shipping Co in order to facilitate the growth of cruise travelers?
In 2012/13 the cruise travel business attracted around 19,615 travelers, with the numbers on the rise to 27,317 in 2013/14 with over 40 cruise liner arrivals.
We expect the visitor numbers to rise up to 40,000 this year. However, we see the potential as greater than this.
The Ceylon Shipping Corporation is working hand in hand with the Tourism Promotion Bureau to identify the required improvements to increase supply chain efficiency, such as in customs and emigration formalities, luggage handling, passenger liaison, and vehicle logistics for easier access into the city and back.
In the 2016 tourism master plan, the cruise segment was not included, and the new enthusiasm and drive is very positive given that there has been a 9% growth in the last nine years globally, even when the whole world was in recession, which is a clear sign of the purchasing power of cruise travelers.
We will support the Tourism Bureau and the government on the development plan agreed.
We must make this segment reach 100,000 tourists within the next two years, by working hand in hand with the port authority, international cruise lines and the Tourism Promotion Bureau to actively advocate Sri Lanka as a cruise travel destination.
We do not need to struggle with constraints, but spell out the challenges and the opportunities, get the correct investment into the infrastructure, and make it ready to accommodate the rising numbers of cruise travelers.
What is the Ceylon Shipping Corporation’s key contribution to Sri Lanka’s growth ambitions?
I’m very keen to make sure the Ceylon Shipping Corporation will get its absolute required level of recognition as a very important state institution, which cannot only support its economic activities, but of course bring in the required energy security and a brand to be associated with as well.
We need coal for power generation; otherwise we’d have to depend on hydro and diesel facilities at the moment, which are expensive sources.
Therefore, we are wholly dependent on coal imports for low-cost power generation. Properly planned port expansions will accommodate and could help to reduce the cost of imports of coal to Sri Lanka.
We discussed the importance of commencing coastal shipping services, bunker facilities and warehousing, which could act as stimulators for regional trade and industries and socioeconomic growth.
Also, we have spoken about people-to-people connectivity through cruise and ferry operations. Furthermore, I indicated our hidden ambitions to diversify into value-added services and facilities with the proper strategic partners.
For those reason, I strongly believe that if Sri Lanka is to progress there has to be much greater recognition, greater investment, greater support at every level of the state to develop very good goods transport facilities, especially maritime.
Also, I have no doubt that this would complement the national agenda of establishing 45 industrial zones around the island.
What is the legacy that you would like to contribute to the Ceylon Shipping Corporation?
My main objective was actually for the Ceylon Shipping Corporation (CSC) to attain its due status as ‘The National Sea Carrier’ and have its head office positioned in a more appropriate building close to the port.
Look at this building, my office is probably the poshest in this building and for me still it is not good enough.
I’m not at all happy with the location, arrangement and facilities my staff has been provided. We want Sri Lanka to be the shipping hub of the region by 2020, and so, we need infrastructure and the latest facilities and state-of-the-art offices and services.
If we consider the Sri Lanka Ports Authority (SLPA) as the heart of the nation, I would position CSC as the veins of the nation with nerve!
Perfect positioning is key to the success of any product or service. Sri Lanka, this little island, is blessed and placed very well naturally.
Therefore, I am on a mission with the wholehearted support from our Minister Arjuna Ranatunga to develop a ‘Maritime House’ within the port and house all the state institutions coming under the ministry – the Minister’s office, Ministry Secretary, SLPA, CSC and Department of Merchant Shipping – and the remaining space of the development to be offered to the shipping community, customs, banks, training institutes, and restaurants etc.
If we have the heart to be the shipping hub of South Asia by 2020 then here with this proposed commercial development I am extending the hands to the shipping community with a gentle reminder that the time is up to team up and demonstrate we all have the nerve to achieve it.