SHIPPING INDUSTRY
Compiled by Ayesha Reza Rafiq
SAILING BEYOND BUZZWORDS
Surindha de Abrew critiques Sri Lanka’s often hyped maritime hub prospects
Q: How will the development of the CIFC (Port City) affect the shipping industry?
A: With the envisaged creation of the Colombo International Financial City, free zone privileges, and China’s plan to see its Belt and Road Initiative through, we can expect increased transhipment trade followed by greater urbanisation. This will be a boost for local consumption and trade.
For trade, there must always be ships and the required support services. Growth in the shipping industry is likely to ensue if the Port City is developed according to plan.
Q: What are the main challenges facing the industry and how can they be overcome?
A: The reality is that it’s more expensive for Sri Lankan shipowners than it is for their foreign counterparts to be operating ships locally. Sri Lankan shipowners who intend building vessels in a local shipyard will be subjected to taxes; but foreigners who build ships here in Sri Lanka receive tax exemptions on similar investments.
If a Sri Lankan shipowner builds a vessel in a foreign yard, the country concerned will offer a tax exemption – and it does the same for its nationals too. Therefore, it is more expensive for a local company to build a vessel at home.
Under previous income tax law, employment income earned by a seafarer employed on a Sri Lankan or foreign owned ship was exempted from tax. This exemption has been removed for seafarers working on Sri Lankan owned ships with the promulgation of the new Inland Revenue Act of 2017.
We have already noticed an exodus with seafarers (who are highly skilled and have globally accepted certificates of competencies) joining vessels operated by non-Sri Lankan companies. One of the requirements to flag or register a vessel in Sri Lanka is to employ local crew members, which is becoming increasingly difficult.
The shipping industry competes in a global arena so our products and services must be competitive. Being competitive in a region that is rampant with competitors is a huge challenge.
To overcome these challenges, policies need to be evaluated and made conducive to the local shipping industry. The Lanka Association of Ship Owners (LASO) is currently working to achieve this goal.
Q: How can Sri Lanka capitalise on its location advantage and transform itself into a maritime hub?
A: ‘Maritime hub’ is a buzzword these days. However, location alone isn’t sufficient for Sri Lanka to achieve maritime hub status – many mechanisms and reforms must be instituted including the Shipping Act, Customs Ordinance, insurance regulations, legal and regulatory frameworks, and service provisions – to reach the standards expected of a globally accepted maritime hub.
Q: What key support services are needed for the shipping industry to function efficiently?
A: A number of services are required for the shipping industry to function effectively – they include shipowner operations and chartering, agency, husbandry, bunkering, customs house agencies, maritime security, terminals, ports, depot operations, shipyards and maintenance companies. All these services need their own sub-sectors to operate efficiently.
There is much room for improvement. The shipping industry is fast-paced and operates 24/7 so time is of the essence, and providing efficient and cohesive services is the key.
Whilst the private sector needs to up its game and manage operations effectively, regulations and processes must also respond to this acceleration in pace.
Currently, we have limited capabilities in specialist services that a maritime hub is required or expected to provide. And very often, specialists, spare parts and equipment need to be flown down from Singapore, Dubai or Mumbai. Apart from the cost of doing so, the time factor may cripple a particular operation or task in the context of meeting deadlines.
Q: How do you view government regulation of the industry?
A: Our regulations can be considered archaic. It would be helpful to consider the policies governing the industry in successful and respected marine hubs – such as Singapore, Dubai and Malta – and implement these at home by ensuring that Sri Lankan interests are upheld and promoted. The key is streamlining the process for greater efficiency.
Q: What do you envision for there to be a more digitally ready local shipping industry?
A: Many applications, approval requests, processes and clearance related to the shipping industry in Sri Lanka are manual and on paper.
The digitising of these processes with strict transparent regulations is happening in other countries and Sri Lanka must follow suit.
