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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Sri Lanka needs more base cargo to face future competition

Sri Lanka needs more base cargo to face future competition

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Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics

Government and SLPA on intensive infrastructure drive for the industry
By Cheranka Mendis
Despite the Colombo Port reaching its maximum capacity of 4.5 million TEUs this year and the substantial line up of infrastructure and capacity development project undertaken by the Government, Sri Lanka will not be in an ‘envious position’ to lure in main line vessels unless the country increases its base cargo in the form of exports to USA, Europe and Asia.
Officiating at the 7th Southern Asia Ports Logistics Exhibition and Conference 2012, Sri Lanka Ports Authority (SLPA) Chairman Dr. Priyath Bandu Wickrama yesterday stated that the country must focus on generating the needed base cargo in the industry to face the competition ahead.
The cargo can be created by attracting more FDI for export oriented industries and through the expansion of the country’s service line in the form of value addition. “It could also be offered by way of developing logistic capabilities to provide modern warehouse facilities for temporary storage and delivery through the Just-In-Time (JIT) supply chain management to large manufacturing companies in neighbouring Indian subcontinent countries,” Wickrama said.
Currently major shipping lines call at Colombo Port primarily to tranship the volumes of containers to the Indian sub continent. Almost 60% of Sri Lanka’s transhipment is bound for India, he said. “This makes it evident that the country needs to increase its base cargo substantially in the form of exports to major destinations.”
However, the country is also presently engaged in transforming the port from a mere interface between maritime transport and land transport into a hub of seamless logistic chain and logistic value creator, with what Wickrama identified as the ‘most modern port development strategy’.
Noting that the port industry in Sri Lanka has under gone several stages of development starting as early as 1950, he stated that as at now the country was at the fourth development phase, which had brought with it a golden era for the industry.
With the special cargo forecaster prepared by Scott Wilson of UK which noted that the Colombo Port would reach maximum capacity by 2012, SLPA made a decision to build capacities outside the Colombo Port with two mega development projects, namely Colombo Port Expansion Project and Mahinda Rajapaksa Port Development Project, in addition to the improvement plans in Galle and Trincomalee Ports and a new domestic port in Oluvil.
“We have initiated action to improve technology, connecting efficiency on a magnitude surpassing the past,” Wickrama said, adding that many shipping lines and investors had pledged to assist SLPA’s plans to make the country a mega hub of Asia.
In this backdrop, SLPA has continued its infrastructure development plans, among which are highly capital intensive initiatives and several profit making PPP projects with investment to the tune of US$ 4 billion.
The Mahinda Rajapaksa Port of Hambantota which revives the historic silk Route used by Arabs to explore Asia is an ideal example devised in line with the new port development strategy, Wickrama said. “It is located less than one hour away from the world’s busiest east-west shipping lane and is ideally situated at an intersection of major international sea trading routes.”
Complementing the development, there are also untapped land resources around Hambantota that can be used for port-related industries which could attract many logistic-related services to the area to service the maritime sector.
“Initially over 2,000 hectares of land will be made available for logistic and free zone activities adjunct to the Mahinda Rajapaksa Port, which is well connected with the newly-built Southern Highway, the railway and Mattala International Airport.”
The port is gearing up to embrace a massive investment plan worth billions of rupees and a negotiating committee has already called for proposals for a host of business ventures, he said. Several investors have already commenced their ventures. “As such, infrastructure and other facilities in and around Hambantota will improve and result in a booming shipping industry.”
Stressing on the Government’s initiative to promote development of ports in particular and the shipping industry in general, Wickrama said: “The development of port infrastructure and services takes priority in the present Government’s infrastructure development agenda. Its main policy document outlined under the chapter ‘Harnessing Blue Skies and Seas,’ is an action plan to transform Sri Lanka in to navigation, aviation trading and commercial hub linking east and west. The ongoing ports projects in Sri Lanka formulated in line with latest port development strategy mentioned demonstrates strong confluence of policy objectives.”
Making a presentation titled ‘The Colombo Port Expansion Project (CPEP),’ SLPA MD Capt. Nihal Keppetipola opined that analysing the distribution and volume movement trends in the regions of Asia/Middle East and Far East/North Europe, current global logistics networks and their alliances such as G6, CKYH, Maersk, MSC/CMA-CGM, Sri Lanka is definitely ahead of the race in port construction.
Capt. Keppetipola said: “There will be more and more consolidation within the industry both in capacity and relationship levels. Ships have gotten increasingly bigger. Ports of Sri Lanka are equal, in terms of equipment, to the task of handling mega vessels coming out of the order book.”
He stated that the 400-metre quay length of the East Container Terminal (ECT) of CPEP would be ready by Q3 2013 and the 600-metre quay length of the Colombo International Container Terminal (CICT) would be ready by Q3 2014. By the time the West Container Terminal (WCT) is up and running in 2017 as anticipated, the Colombo Port will be able to handle 13 million TEUs.
Responding to a question raised by a member of the audience on whether the SLPA has contemplated handling the demand of ISC cargo, which is forecast at 40 million TEUs by 2020, Keppetipola stated that SLPA would open up Phase II of the Hambantota Port for container operations by that time.
Keppetipola also noted that even if a port possesses the latest equipment, sophisticated IT systems or huge railroad connectivity, it cannot turn a vessel around in quicker time unless there is a dedicated human resource to man the equipment.
“In certain ports, plans are afoot to operate them sans human beings by deploying apparatus such as Automated/Automatic Guided Vehicles (AGV),” he said. “But in this part of the world our operations very much depend on efficient and dedicated labour.”
SLPA contains 26 recognised trade unions that have to be dealt with. Even though the private terminal within the Port of Colombo (SAGT) experienced a go-slow last month, the State-run JCT ran smoothly without any ripple effects due to the sound administrative procedures adopted by SLPA.
Concluding on an optimistic note, he noted that the country had been moving in the right direction to achieve the objectives.
The logistics industry, which comprises sea and air transportation, is identified worldwide as a growth segment. Valued at an estimated US$ 320 billion per year, the industry is growing at an annual rate of 3-10%. Over the years, the industry has evolved, with service offerings ranging from individual transport and storage solutions to customised supply chain management services. As the pace of Public-Private Partnerships and outsourcing gathers momentum, the industry is likely to enjoy continual growth with new supply chain management features and other value-added services.
The exhibition and conference held at the Cinnamon Grand Oak Room saw the participation of 320 delegates from 24 countries, marking a 23% participation growth from the previous year’s conference held in Chennai, India, event organisers said.
Held for the first time in Sri Lanka, the two day conference features a panel of 28 world class conference speakers, while the exhibition comprises 30 international exhibiting companies. The conference has attracted the world’s leading ports, shipping lines, cargo owners, shippers, freight forwarders, logistics companies, terminal operators, railway operators and port-rail service equipment suppliers to Sri Lanka.
The event was designed with a view to promote maritime transportation in the region and registered participants were taken on a technical site visit to Colombo Port terminals such as Jaya Container Terminal (JCT), Unity Container Terminal (UCT) and South Asia Gateway Terminals (SAGT) and were also able to witness the current progress of the Colombo Port Expansion Project.

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