SRI LANKA LOGISTICS & FREIGHT FORWARDERS ASSOCIATION

Transcription

1 SRI LANKA LOGISTICS & FREIGHT FORWARDERS ASSOCIATION COUNTRY REPORT For 45 th Executive Council Meeting The Federation of Asia Pacific Air-cargo Associations in August 2018, Bangkok, Thailand

2 SRI LANKA LOGISTICS & FREIGHT FORWARDERS ASSOCIATION Sri Lanka Logistics & Freight Forwarders Association (SLFFA) was established in 1981 with the objective of bringing all freight forwarders under one umbrella and with a view of institutionalizing and professionalizing the trade. Today the Government, relevant Government agencies and the trade have recognized SLFFA as the Apex body representing the industry. SLFFA currently has 117 leading freight forwarding companies in its membership. SLFFA is a member of the regional freight forwarding body Federation of Asia Pacific Air cargo Associations (FAPAA) and the international freight forwarding body FIATA. SLFFA is also an affiliate member of the Ceylon Chamber of Commerce. SLFFA works toward maximizing the benefits to the logistics & freight forwarding industry by exploiting to the maximum the potential of Sri Lanka s strategic geographical location. It has identified the need for greater investment for the development of Air and Sea freight facilities, infrastructure and in the development of human resources to sustain the fruition of Sri Lanka becoming the hub port in the region. Towards this, the SLFFA has played a participatory role in developing a comprehensive shipping policy for Sri Lanka and in formulating a National Civil Aviation Development Plan. SLFFA is mindful of the developments taking place in the international freight forwarding arena and tries to keep the Sri Lankan Logistics & Freight Forwarding industry abreast with the rest of the world. SLFFA is working towards raising standards within the industry and making the Sri Lankan Freight forwarding industry a dynamic and more responsive trade sector by :- Reducing the inconsistencies in vital areas such as documentation, liability insurance, standard trading conditions and settlement of claims to be in the best interests of the trade. We are heading human resources development within the industry through international training programs for member of the staff who is aspiring to the industry. Gearing up the industry to face challenges and meet demands of an electronic trading environment. Having a close relationship and an active dialogue with the Airlines, Shipping Lines, Customs, Port Authority and relevant Government agencies and industry stakeholders & trade bodies. In order to regularize the logistics & freight forwarding industry in Sri Lanka, SLFFA played a vital role in the formalizing of the freight forwarders licensing regulations implemented by the Director General of Merchant Shipping (DGMS). In 2013 SLFFA along with other stakeholders and with the guidance of the DGMS was able to agree upon a suitable DO fee for the industry. 2

3 CHAIRMAN : Mr. Jagath Pathirane VICE CHAIRMAN : Mr. Roshan Silva TREASURER : Mr. Dinesh Sri Chandrasekara IMMEDIATE PAST CHAIRPERSON : Ms. Tania Polonnowita Wettimuny ADVISORY COUNCIL : Mr. Dushmantha Karannagoda Mr. Mohan S. Mohanadas Mr. Tony De Livera Mr. Niral Kadawatharatchie Mr. D R Hallock EXECUTIVE COMMITTEE Ace Cargo (Pvt) Ltd DHL Global Forwarding Lanka (Pvt) Ltd Expelogix (Pvt) Ltd MAC Supply Chain Solutions (Pvt) Ltd Mack International Freight (Pvt) Ltd Maersk Lanka (Pvt) Ltd Speedmark Transportation Lanka (Pvt) Ltd SECRETARIAT Sri Lanka Logistics & Freight Forwarders Association No. 37 D, Torrington Avenue Colombo 07 Sri Lanka 3

4 Democratic Socialist Republic of Sri Lanka Capital - Sri Jayawardenapura Kotte Commercial Capital - Colombo Official Languages - Sinhala, Tamil Language for inter-ethnic Communication - English Ethnic Groups % Sinhala, 11.2 % Sri Lankan Tamils, 7.2% Sri Lankan Moors, 4.2% Indian Tamils and 0.5% Others. Independence - February 4, 1948 (From the United Kingdom) Total Area - 65,610 sq km Total Population - 22,409,381 (estimate 2017) Sri Lanka is divided into 9 provinces: 25 Districts. Each province is administered by a directly-elected provincial council. 4

5 OVERVIEW OF THE ECONOMY As per official data released by the Department of Census and Statistics (DCS), Sri Lanka s real GDP growth decelerated further during 2017 to 3.1 per cent, from the growth of 4.5 per cent recorded in Agriculture related activities recorded a contraction of 0.8 per cent against the backdrop of adverse weather conditions that continued from 2016, while a slowdown in economic activity in both services and industrial sectors was observed. Amongst the sub activities of agriculture, growing of oleaginous fruits, vegetables and rice reported negative growth rates. However, the growth of forestry and logging, fruits and tea helped contain the contraction in agriculture activities to some extent. Industry related activities, accounting for 26.8 per cent of real GDP, grew by 3.9 per cent in The growth in industrial activities was primarily supported by manufacturing activities, construction activities, and mining and quarrying. However, the growth of construction activities that supported overall economic growth throughout the post conflict period, with the exception of 2015, decelerated notably during Services activities, which accounted for 56.8 per cent of real GDP, grew by 3.2 per cent in 2017, on a year-on-year basis, driven by the expansion in financial service activities, wholesale and retail trade, and other personal service activities. On the other hand, public administration and defense activities recorded a contraction, dampening the services sector growth, while the slowdown in transportation activities also contributed towards the moderation in overall economic growth during the year. According to the expenditure approach of GDP estimates, economic growth in nominal terms was supported by the expansion of both consumption and investment expenditure in Consumption expenditure, which accounts for the largest share of total expenditure of the economy, recorded a growth of 9.0 per cent in nominal terms during 2017, compared to the modest growth of 3.1 per cent in Higher growth of consumption expenditure was a result of the expansion in both public and private expenditure. Meanwhile, investment expenditure continued to support growth, with an expansion of 16.6 per cent in nominal terms. However, the slowdown in the growth of construction activities during 2017 contributed towards lowering the growth momentum in investment expenditure, compared to Exports rebounded during 2017 to record the historically highest value in terms of earnings, thus reversing the lacklustre performance in exports, which has seen them declining from 33.3 per cent of GDP in 2000 to 12.6 per cent in Accordingly, earnings from exports increased by 10.2 per cent to US dollars 11,360 million in The increase in exports was supported by the restoration of the EU GSP+ facility, recovery in external demand, expansion in investment in export related industries, increased commodity prices in the international market, conducive external trade policies together with strong institutional support and the favourable impact of the flexible exchange rate policy maintained by the Central Bank. Increase in earnings from exports of tea (20.5 per cent), textiles and garments (3.0 per cent), petroleum products (51.4 per cent) and spices (28.1 per cent), mainly contributed to the improved export performance during the year. Earnings from textiles and garments exports, which accounted for around 44 per cent of total exports, surpassed US dollars 5 billion for the first time in history. However, in spite of the notable performance in some sectors, export earnings from coconuts (- 4.9 per cent), gems, diamonds and jewelry (-6.0 per cent) and leather, travel goods and footwear (-4.4 per cent) declined during The USA remained the single largest buyer of Sri Lanka s exports in 2017, accounting for 25.6 per cent of total exports, followed by the UK (9.1 per cent), India (6.1 per cent), Germany (4.8 per cent) and Italy (4.6 per cent). In line with the increase in earnings from exports, the overall export volume index increased by 7.6 per cent, while the export price index, in US dollar terms, increased by 2.4 per cent. 5

6 The growth rate of services related activities, which accounted for over 56 per cent of real GDP, also moderated during The growth of services activities, which was recorded at 4.7 per cent in 2016, decelerated to 3.2 per cent in 2017, particularly due to the contraction in public administration and defence activities, and the slowdown in transportation activities. Accordingly, transportation activities that contributed to over 10 per cent of GDP in 2017, grew marginally by 0.9 per cent. However, the growth in services activities was supported by the notable growth of 9.4 per cent in financial services during as a percentage of GDP, central government debt declined to 77.6 per cent by end 2017 from 78.8 per cent recorded at end The reduction in the debt to GDP ratio in 2017 was mainly attributed to the deceleration in the growth of debt accumulation and the increase in the nominal GDP growth. Headline inflation also reverted to mid single digit levels in the first quarter of 2018 with the decline in volatile food prices. The moderation in inflation in the first quarter of 2018 and the favourable inflation outlook as well as the continued negative output gap compelled the Central Bank to end its policy tightening bias and reduce the SLFR by 25 basis points on 4 April (Source Central Bank of Sri Lanka Annual Report) OVERVIEW OF THE INDUSTRY The country s civil aviation sector registered overall positive growth in terms of passenger and cargo handling during Passenger movements at the Bandaranaike International Airport (BIA) grew by 5 per cent to 9.8 million, compared to 9.3 million in Further, the total cargo handling at the BIA increased by 4.7 per cent to 265,786 MT in 2017 in comparison to the previous year. However, the number of aircraft movements at the BIA increased only marginally by 0.3 per cent to 64,903 during 2017, due to the closure of the runway for 8 hours per day for the runway overlay project from 6 January 2017 to 6 April The Mattala Rajapaksa International Airport (MRIA) aircraft movements increased by 6.9 per cent to 978 in 2017, in comparison to 915 in The total passenger kilometers flown by Srilankan Airlines increased at a higher rate of 8.8 per cent in 2017, compared to 0.8 per cent growth in Meanwhile, the container traffic (Twenty Foot Equivalent Units - TEUs) and cargo handled by Srilankan ports grew by 8.3 per cent and 8.5 per cent, respectively, in 2017, in comparison to respective growth rates of 10.6 per cent and 11.5 per cent in Moreover, the freight ton kilometers transported by SLR increased by 3.5 per cent in 2017, compared to 7.6 per cent growth in In the meantime, the freight ton kilometers flown by Srilankan Airlines grew by 9.8 per cent in 2017, in comparison to the same growth in Meanwhile, the growth of postal and courier activities moderated during the year, recording a growth of 3.9 per cent in 2017, compared to the growth of 5.1 per cent in Port sector activities continued to improve in 2017 due to increased commercial operations at the Colombo International Container Terminal (CICT) and South Asia Gateway Terminal (SAGT), amidst the slowdown in activity at terminals owned by the Sri Lanka Ports Authority (SLPA). Total container handling at the Colombo port, which stood at 5.7 million twenty-foot equivalent container units (TEUs) in 2016, grew by 8.3 per cent to 6.2 million TEUs in Compared to 2016, container handling at the CICT and SAGT increased by 19.3 per cent and 10.9 per cent, respectively, in However, the terminals owned by the SLPA recorded a negative growth of 4.3 per cent in terms of container handling during 2017 in comparison to Overall transshipment container handling 6

7 registered a growth of 8.8 per cent during 2017, with the expansion in global merchandise trade activities. Meanwhile, total cargo handling also increased to 93.9 million MT in 2017, which is an 8.5 per cent growth in comparison to 2016, supported by the performance of the SAGT and CICT. However, cargo handling at the SLPA terminals in Colombo declined for the third consecutive year, recording a negative growth of 0.5 per cent in This was mainly due to the non-availability of container terminals with deeper draught berths equipped with high profile ships-to-shore cranes at the Jaya Container Terminal (JCT). Hence, CICT at the Colombo South harbour attracted ships and volumes from both JCT and SAGT. Although port activities in Sri Lanka have steadily grown due to the increase in the arrival of large ships, overall ship arrivals recorded a decline of 2.4 per cent in Major development projects initiated with the aim of enhancing productivity and competitiveness of port activities at the Colombo port as well as regional ports, such as Galle, Kankesanthurai and Trincomalee, continued during The SLPA is in the process of building the East Container Terminal (ECT) at the Colombo port with the assistance of the ADB. It will be the second-deep draught container terminal in the South Harbour with an annual capacity of 2.4 million TEUs and a 1,200m quay wall with 18m depth. Meanwhile, on 29 July 2017, the SLPA and the Government entered into a concession agreement with China Merchants Port Holdings Company (CMPort) to improve operational efficiency and future development activities of the Hambantota port. Despite the declining trend in container and cargo handling at the SLPA owned terminals, the financial performance of the SLPA improved in 2017 mainly due to lower finance expenses. The total revenue of the SLPA in 2017 increased by 2.2 per cent to Rs. 44 billion, while the operating expenditure decreased by 2.1 per cent to Rs. 28 billion in comparison to the previous year. Consequently, as per the unaudited provisional financial statement, the SLPA reported a profit of Rs billion in 2017 before taxes, in comparison to the profit of Rs. 1 billion before taxes recorded in Export performance, which was affected adversely during the past two years, rebounded strongly in 2017, recording the historically highest value for earnings. The strong growth in export earnings was underpinned by the restoration of the EU-GSP+ facility, recovery in external demand, expansion in investment in export related industries, increased commodity prices in the international market, conducive external trade policies together with strong institutional support and the flexible exchange rate policy maintained by the Central Bank. Accordingly, with the continuous double-digit growth registered in the second half of the year, earnings from exports increased by 10.2 per cent to US dollars 11,360 million in 2017, from US dollars 10,310 million in Earnings from industrial exports mainly contributed to the increase in export earnings in 2017, followed by agricultural exports. Expenditure on imports rose considerably in 2017, compared to the marginal increase recorded in 2016 and the contraction in 2015, reflecting the spill over effects of adverse weather conditions and firming of international commodity prices. increase in import expenditure was mainly driven by the increase in imports of intermediate goods. Expenditure on imports of intermediate goods, accounting for about 55 per cent of total imports, amounted to US dollars 11,436 million, in 2017, reflecting a year-on-year increase of 15.9 per cent. (Source Central Bank of Sri Lanka Annual Report) 7

8 INDUSTRY STATISTICS UPLIFT (Tons) DISCHARGE (Tons) Excluding Transshipment TRANSSHIPMENT (Tons) TTL (Tons) , , , , , , , , , , , , , , , , , , , , Airfreight volumes show a clear year on year growth in the past several years. In the year 2017, Air Exports and Transshipments had a growth compared to Air Imports had a slight drop of -1.32% and in Transshipments shown 11.42% growth, while Air exports grew by 16.67% in the year Air Export and Transshipments achieved the highest volumes compared to last 5 years. Ocean Freight Exports, Imports & Transshipments in TEU s in Total 2017 As a whole, Ocean freight volumes shows a slight increase, mainly due to its Transshipment Laden volumes. A closer look at the 2017 numbers reveal a 6.07 % increase in laden import volumes and a 3.13% increase in Export laden Volumes compared to Further the transshipment laden Volumes increase is 9.60% above than

9 INDUSTRY REGULATION, PORT, CUSTOMS & OCEAN FREIGHT During the year under review SLFFA representatives met with the official of the Sri Lanka Customs (SLC), Sri Lanka Ports Authority (SLPA) and Ceylon Association of Ships Agents (CASA) on numerous occasions to address industry related issues. Manifest Submission - One of the critical breakthroughs achieved by SLFFA was the reduction in the deadline applicable for freight forwarders related to the import manifest submission. Subsequent to successful discussions held by SLFFA with Director General Customs and CASA, it was decided that shipping lines should report electronic manifest to Sri Lanka Customs 72 hours prior to vessel arrival. Forwarders and NVOCC would have a further 24 hours to submit the sub manifest. It was further decided that SLC would maintain a 2 hour cut-off time for short hauls. Customs also agreed to reduce the penalties for late submissions of electronic manifest to a maximum of Rs. 25,000/- Forwarders/NVOCC and amend the relevant Gazette with all of the above stated decisions. DO Fees, Miscellaneous Charges, Container Deposits Meetings were held with CASA and discussed issues pertaining to high DO Fees, washing and other miscellaneous charges, container deposits and other related matters. Discussions are continuing to find practical solutions to these issues. Liberalization of Shipping - SLFFA conducted an online survey with membership and thereafter, proposals were formulated and submitted to the Ministry of Finance and Ministry of Ports & Shipping for consideration. A very significant outcome of the survey conducted was that, if liberalization was essential for Sri Lanka to achieve the Maritime Hub status, it should consist of clear-cut limitations and controls laid out by the Government for such liberalization to safeguard the local industry whilst benefiting from innovation and technology. (Source Ocean Freight & Industry Regulations Sub-committee) AIR FREIGHT & AIR CARGO VILLAGE (ACV) Overall Air Cargo Operations at BIA - SLFFA & Shippers Council had a joint meeting with Airport & Aviation Services Ltd (AASL) and discussed matters to find solutions pertaining security checks of export air cargo, issue of entry passes at ACV, overall condition of warehouses/ facilities at ACV & labor issues. With regard to the expansion of the cargo facility, AASL are making plans to build a new import terminal and will commence construction by late A very significant development was to form a special Committee on the recommendations of SLFFA, with all stakeholders involved to identify the problems/shortcomings and submit recommendations for suitable solutions to AASL. The work of this committee is in progress. Cargo Account Settlement System (CASS) One of the major achievements of SLFFA during the period was, effectively dissuading the IATA instigated implementation of CASS through Sri Lankan Airlines. Many representations were initiated by SLFFA with IATA, Srilankan Airlines, EDB, Shippers Council, JAAF, Ministry of Aviation, Ministry of Finance, Civil Aviation Authority, etc resulting indefinite postponement of the introduction of CASS in Sri Lanka. E-Air Way Bill Initiative SLFFA discussed with Srilankan Cargo on the very slow progress achieved with regard to the initiative launched by Sri Lankan Airlines as the National Career several years ago. SLFFA have repeatedly stressed the importance and advantages to all stakeholders in the air cargo industry and as a result, it was decided to form a special steering committee to review the progress, stumbling blocks etc, whilst creating a Road Map to make rapid progress with the support of all concerned. The committee is expected to commence work shortly. E-Manifesting For Import Air Cargo Initial testing of software systems for the implementation process has commenced between Customs and airlines. The forwarders role is yet to be announced. 9

10 OTHER INDUSTRY RELATED MATTERS During the period under review, SLFFA addressed the following issues and constantly initiated proactive action to address the following industry related matters; Customs Facilitation SLFFA actively participated in discussions conducted by the Ceylon Chamber of Commerce along with other industry stakeholders on the services provided by Customs such as, 24/7 availability of Customs staff in the Port, online payment facility, electronic signature, duty payment gateway, etc. When Customs provided statistics on very low usage by the stakeholders in the industry, SLFFA proposed to conduct an awareness programme in this regard after finding solutions to certain practical issues pointed out at these discussions. National Maritime Policy SLFFA was represented in the Sub-Committee on Logistics and proposals have been submitted to the Ministry of Ports & Shipping for consideration. Discussions are continuing. National Export Strategy SLFFA participated in discussions and was appointed as a member of the Advisory Committee on Logistics in this initiative chaired jointly by Export Development Board (EDB) and the World Trade Organization (WTO). SLFFA will be chairing the subcommittee To promote the image of Sri Lanka as a logistics hub in the world which it chose to support out of the 3 subcommittees on To create an enabling and efficient business environment driven by technology coordination. and To ensure the adequate facilities and availability of qualified labor force It will be a big boost to the competitiveness of small & medium enterprises (SMEs) to face local & global challenges & opportunities. Based on the initial suggestions provided by the stake holders, a policy document is being prepared for implementation. National Trade Facilitation Forum The focus of discussions in which SLFFA participated were the National Single Window Best Practices and the implementation of the National Trade Facilitation Agreement (NTFA) with the participation of the World Trade Organization (WTO). Based on the initial suggestions provided by the stake holders, they were evaluated and prioritized. Most of the border agencies were presented as a common platform. Discussions are continuing. Entrepot Trade Facilitation SLFFA has been involved in the ongoing meetings chaired by the Export Development Board(EDB) and satisfactory progress has been achieved to improve trade processes. Discussions are continuing. Corporate Tax Revision Another significant achievement by SLFFA was lobbying by way of an appeal submitted to the Ministry of Finance which resulted in freight forwarders being eligible to apply the 14% tax rate as per the new Inland Revenue Act with effect from 1 st April 2018 instead of the 24% rate proposed by the Finance Minister in its budget proposals. Smart Port System Implementation - SLPA recently introduced the Smart Port System implementation which allows web based E-bookings, tracking systems, E-billing, Payment Gateway & warehouse management for customers. SLFFA is continuing to monitor its effectiveness and advantages. SOCIAL ACTIVITIES The SLFFA Cricket Sixes SLFFA once again concluded a very successful and entertaining Cricket Sixes tournament which was held on Saturday, 11th November 2017, at the P. Saravanamuttu Stadium (The Oval), where 48 very enthusiastic teams from SLFFA member companies participated. This was the 5th instance where the Association organized this event which has now become a popular event in the SLFFA events calendar. 10

11 Salota International (Pvt) Ltd won the Championship Challenge Trophy (sponsored by Expolanka Freight (Pvt) Ltd) while the runners-up were Dart Global Logistics (Pvt) Ltd. The Main Sponsor for the event was Janashakthi PLC, while the co-sponsors were Srilankan Airlines and Mobitel. SLFFA is also extremely grateful to the Main Sponsor and Co-sponsor as well as all other well wishers for their generous contributions to make this event a tremendous success. The Association wishes to place on record its appreciation to the members for their continued support in SLFFA organized events and activities. CORPORATE SOCIAL RESPONSIBILITY (CSR) Continuing with its CSR initiatives, SLFFA donated cleaning equipment for operating theatres and wards and installed CCTV camera system to the Lady Ridgeway Hospital, Colombo. The total project cost estimated approximately Rs.1.1 Million and funds were allocated from the SLFFA Dance This is an on-going CSR project SLFFA has with the LRH. On previous occasions, SLFFA donated 31 operating theatre doors to the Hospital from funds allocated from SLFFA Dance 2012 and a total of 10 high quality patient trolleys along with the mattresses to the Hospital from funds allocated from SLFFA Dance The Lady Ridgeway Hospital, established in 1895, is considered today as the largest specialized children s hospital in the world with more than 1,100 beds. In addition, it serves approximately 3000 outdoor patients daily. As we believe that the children are the future of a country, by lending a helping hand to this project will support to build a healthy society to serve the generations to come. SLFFA collected funds for this project through sponsorships collected at its biennial Dinner Dance held in November The sponsors were; Main Sponsor South Asia Gateway Terminals (SAGT), while the Co-Sponsors were Hayleys Advantis and SLFFA Cargo Services Ltd. Platinum sponsors were Expolanka Freight (Pvt) Ltd, Freight Links International (Pvt) Ltd, Speedmark Transportation Lanka (Pvt) Ltd, Aitken Spence Maritime Ltd and Qatar Airways Cargo. SLFFA also wishes to place on record its gratitude to all Sponsors, SLFFA members and all other contributors who assisted this project through their generous contributions and support. SECRETARIAT The SLFFA Secretariat continues its daily operations from its location at the office of SLFFA Cargo Services Ltd at No. 37D, Torrington Avenue, Colombo 07, Sri Lanka... The Sri Lanka Logistics & Freight Forwarders Association continues to work towards raising the standards within the industry in Sri Lanka and helping the member organizations and its personnel to receive the maximum benefits of the industry. 11