PDF - Sri Lanka Shippers Council

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ANNUAL REPORT & ACCOUNTS
2014/2015
45th Annual General Meeting
ANNUAL REPORT
&
ACCOUNTS
2014/2015
SRI LANKA SHIPPERS’ COUNCIL
The Sri Lanka Shippers’ Council is the apex body representing Sri Lankan Shippers, which was
established in March 1966 to protect and promote the interests of shippers. It was the first National
Shippers’ Council to be set up in Asia and was formed on a request made in 1965 by the local
Committee of the Ceylon/Continental Conference, and a subsequent request made by the Director
of Commerce in January 1966, to the Ceylon Chamber of Commerce. The Council is also a founder
member of the Association of Shippers’ Councils of Bangladesh, India, Pakistan and Sri Lanka
(ASCOBIPS), founded in 1981 and the Asian Shippers’ Council, founded in 2004.
Membership of the Council consists of Chambers of Commerce, Trade Associations & individual
organisations. The Managing Committee of the Council only consists of PA’s with voting rights.
Currently, the Council represents a large percentage of the import/export trade in the country
through its broad based representation and membership of these trade Associations and individual
Companies.
The Council has now opened its doors to individual companies as Associate Members so that
companies in the import/export trade could have access to the Council’s resources and expertise
to resolve their shipping related problems.
The Sri Lanka Shippers’ Council is headed by an elected Chairman and assisted by two ViceChairmen who are also elected by the constituent members.
The Ceylon Chamber of Commerce provides secretarial services to the Council and also acts as the
Secretariat.
The Council actively supports the Sri Lankan Government’s vision of making Sri Lanka the Logistics
Center in the Asian region, which would result in the generation of enhanced economic activity,
employment and wealth. As such all Council activities have been planned and prepared to support
this vision and to facilitate International trade.
ANNUAL REPORT & ACCOUNTS 2014/2015
01
OUR VISION
“To enhance the competitiveness of our members by abolishing hidden logistics costs.”
OUR MISSION
1. We facilitate our customers to be more competitive in their Business Logistics; performance
and cost, by the following;
2. Being the APEX Body, protect the interest of our customers and being a strong Advocate
to the Government.
3. Ensuring cost effective strategies are developed and implemented in the logistics and
value chain to make our members more competitive.
4. Facilitating greater efficiencies in logistics by reducing logistics barriers and simplifying
trade.
5. Acting as the mediator in resolving conflicts amongst our customers (members).
6. Facilitating a level playing field by developing and promoting a code of conduct / ethics
for our customers (members).
7. Establishing a centre for excellence for information sharing and to upgrade competencies
of members to compete globally.
8. Leveraging regional and global partnerships and facilitating global best practices in
logistics in Sri Lanka.
It is the Council’s firm belief that in order to be competitive with the international market Sri Lankan
shippers should;
a. Have a clear understanding when deciding on Carriers /Freight rates and be clear and free of
any ambiguity with regard to the Freight rates and matters prevailing in the Market.
b. Have freight and associated costs stabled, particularly for traditional exports such as tea,
rubber, coconut products, which account for at least 70% of total export volume out of Sri
Lanka. A major part of the turnover of these exports in foreign exchange is retained in the
country and it is vital to protect these industries from international competition. Furthermore,
these commodities are with relatively low margins and usually with forward trading patterns
cannot absorb constant and continuous cost escalations.
c. Concurrently are the major exports such as garments are usually traded on FOB terms and
the local manufacturers are constantly under pressure to provide low priced services, thus are
unable to absorb any additional charges keeping in mind that almost all material for these
industries are being imported. Therefore the constant increases in charges could seriously
affect such industries as they are called upon to pay these charges both at the point of import
of raw materials and export of finished products.
d. Have reasonable Service providers who would not take undue advantage from their captive
customers.
02
OUR OBJECTIVES AND KEY BENEFITS TO MEMBERS
1. To provide for consultation/dialogue between shippers and Ship-owners/ Conference
Lines/Shipping Agents/Airlines/Airline Agents, Sri Lanka Ports Authority/ Customs and
Government on matters of common interest;
2. To bring together the representatives of various shippers’ associations, trade and industrial
associations/organizations, for consideration and discussions of the problems affecting
shippers in Sri Lanka;
3. To represent the views of shippers in regard to the composition of freight rates, availability
and adequacy of shipping space and services including sailings / flights. Port/ Customs
efficiency. Adequacy of Ports and Customs facilities and / charges
4. The Council in principal will not come into agreement on behalf of its members in relation
to freight contracts. (The Council will encourage confidential shipper/carrier freight
negotiations) However, if the circumstances necessitate negotiation and entering into
agreements with ship owners/Conference Lines/Shipping Agents/Airlines/Airline Agents
on matters affecting shippers, which involve general principles and policies or on such
other matters, if referred to the Council, upon receipt of such matters, the Council will act
to safeguard the interest of the shipper/Country.
5. To undertake research/studies on problems affecting shippers in Sri Lanka.
6. To circulate information and statistical data and to publish newsletters, brochures etc., for
the benefit of shippers.
7. To convene independently or jointly with other organizations, conferences, seminars or
meetings in furtherance of the objectives of the Council;
8. To accept any grants, gifts or donations whether in cash or securities and any property either
movable or immovable and/or give any grants etc., in the furtherance of the objectives of
the Council;
9. To make Rules, Regulations or Bye-Laws for the conduct of the affairs of the Council and to
add, to amend, vary or rescind them as from time to time;
10.In the interest of the shippers, the Council will wherever possible nominate its members to
institutions where key functions in the shipping industry are taking place.
11.The Council will closely work with international Shippers’ Councils in order to interact and
pass on information that could be beneficial for shippers and the country.
12.To take all such other steps as may be necessary or conducive to the interests of the Councils’
members.
03
THE COUNCIL
Mr. Sean Van Dort
Chairman
Mr. Nalin Silva
1st Vice Chairman
Mr. Chrisso de Mel
2nd Vice Chairman
HONORARY MEMBERS
Mr. S.S. Jayawickrama
OBSERVER
The International Chamber of Commerce
SECRETARY GENERAL
Mr. Mangala P.B. Yapa
SECRETARIAT
The Ceylon Chamber of Commerce
04
MEMBERSHIP – 2014/2015
TRADE ASSOCIATIONS
Mr. Adrian Oswald
Import Section(Representative)
Mr. Nishan Nanayakkara
(Alternate)
Joint Apparel Association Forum
Mr. Sean Van Dort
(Representative)
Mr. Suren Abeysekera
(Alternate)
The Colombo Rubber Traders’ Association
Mr. Nalin Silva
(Representative)
Mr. Talal Shums
(Alternate)
The National Chamber of Commerce Mr. Sujeeva Samaraweera
of Sri Lanka (Representative)
Mr. Tissa Ruberu
(Alternate)
The Ceylon Coir Fibre Exporters’ Association Mr. Wasaba Jayasekera
(Representative)
Mr. N. Ramanathan
(Alternate)
Mr. Chrisso de Mel
(Representative)
Mr. Russel Jurianz
(Alternate)
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The National Chamber of Exporters’
of Sri Lanka
Mr. Rasa Weerasingham
(Representative until December 2014)
Mr. Shiham Marikar
(Representative from December 2014
and up to now)
Mr. Parakrama Dissanayaka
(Alternate)
The Sri Lanka Freight Forwarders’
Mr. Dushmantha Karannagoda
Association(Representative)
Mr. Tony De Livera
(Alternate)
The Sri Lanka Apparel Exporters’
Mr. Ajith Jayasekara
Association(Representative)
Mr. Naren Vanigasooriyar
(Alternate)
Sri Lanka Association of Air Express
Mr. Dimithri Perera
Companies(Representative)
Mr. Rushan Samaraweera
(Alternate- Until March 2015)
Sri Lanka Logistics Providers’ Association
Mr. Stanley Samarakoon
(Representative)
Mr. B L Rohitha
(Alternate)
Tea Exporters’ Association Mr. Shiral Fernando
(Representative)
Ms. Chintha De Zoysa
(Alternate)
Sri Lanka Fruits & Vegetable Producers,
Processors & Exporters’ Association
No Representative
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INDIVIDUAL MEMBERS
Agility Logistics (Pvt) Ltd
Leading Lady Intimates Lanka (Pvt) Ltd
Ansell Lanka (Pvt) Ltd
Anverally & Sons (Pvt) Ltd
MAC Supply Chain Solutions (Pvt) Ltd
Mabroc Teas (Pvt) Ltd
Canro Exporters
Care Logistics (Pvt) Ltd
Neil Fernando & Co. (Pvt) Ltd
Ceylon Tea Marketing (Pvt) Ltd
Nestle Lanka PLC
City Cycle Industries
Civaro Lanka (Pvt) Ltd
Orient Garments Ltd – Until October 2014
CL Synergy (Pvt) Ltd
Control Union Inspections (Private) Limited
Riston Teas (Pvt) Ltd
20Cube Logistics (Pvt) Ltd
Romina General Trading Company
Fascination Exports (Pvt) Ltd
SALOTA International (Pvt) Ltd
Fanam International (Pvt) Ltd
Shermans Logistics (Pvt) Ltd
Freight Links International (Pte) Ltd
Singworld Lanka (Pvt) Ltd
Freight Masters International Pvt Ltd
Scanwell Logistics Colombo (Pvt) Ltd
Finlays Colombo PLC
Tea Tang Ltd
Hayleys PLC
Timex & Fergasam Group (PvT) Ltd
HDDS
Hela Clothing (Pvt) Ltd
Universal Freighters International (Pvt) Ltd
Hellmann Worldwide Logistics (Pvt) Ltd
Van Rees Ceylon Ltd
Imperial Teas (Pvt) Ltd
Jiffy Products S.L. (Pvt) Ltd
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08
THE SRI LANKA SHIPPERS’ COUNCIL AGM 2014/2015
Seated from Left to Right
Ms. Manjula Maldeniya (Secretariat), Mr. Rohan Masakorala (Past Chairman), Mr. Nalin Silva (1st
Vice Chairman), Mr. Sean Van Dort (Chairman), Mr. Dinesh De Silva (Immediate Past Chairman), Mr.
Chrisso de Mel (2nd Vice Chairman), Mr. Randolph Perera (Past Chairman), Ms. Manori Dissanayaka,
(Secretariat)
Standing from Left to right
Mr. Gehan Kuruppu (Past Chairman), Mr. Ajith Jayasekera (Sri Lanka Apparel Exporters’ association),
Mr. Tony De Livera (Sri Lanka Logistics & Freight Forwarders’ association), Mr. Russel Juriansz’
(The Ceylon Chamber of Commerce), Mr. Adrian Oswald (The Ceylon Chamber of Commerce –
Import Section), Mr. Shiral Fernando (Tea Exporters’ Association), Mr. N. Ramanathan (The Ceylon
Coir Fibre Exporters’ Association), Mr. Rasa Weerasingham (National Chamber of Exporters),
Mr. Dimithri Perera (Sri Lanka Association of Air Express Companies), Mr. Stanley Samarakoon
(Sri Lanka Logistics Provider’s’ Association), Mr. Sujeeva Samaraweera (The National Chamber of
Commerce of Sri Lanka), Mr. Tissa Ruberu (The National Chamber of Commerce of Sri Lanka), Mr.
Noel Priyatillake (Past Chairman)
09
HIGHLIGHTS OF 2014/2015 AGM
Welcoming the Chief Guest, Dr. P. B. Jayasundara, Secretary to the Treasury, Ministry of
Finance & Planning and Economic Development
Head Table: from left to right: Mr. Sean Van Dort (Chairman SLSC), Ms. Manori Dissanayaka
(Secretariat, CCC), Mr. Dinesh De Silva (Immediate Past Chairman SLSC), Mr. Nalin Silva (1st
Vice Chairman, SLSC), Mr. Chrisso de Mel (2nd Vice Chairman)
10
OFFICE BEARERS
Sri Lanka Shippers’ Council held its 44th Annual General Meeting on the 27th June, 2014, followed
by “the Post Business Session” and cocktails. The Chief Guest at the occasion was Secretary to the
Treasury, Ministry of Finance & Planning and Economic Development, Dr. P.B. Jayasundara who
delivered the keynote address. Mr. Ashroff Omar, CEO of Brandix Lanka limited was the Guest of
Honour. Mr. Sean Van Dort elected as the Chairman for the year 2014/2015. Thereafter, Mr. Nalin
Silva and Mr. Chrisso de Mel were elected as 1stVice Chairman and 2nd Vice Chairman respectively.
Mr. Dinesh De Silva stepped down as the Chairman of the Council after completing 2 successful
years in the said capacity.
ACTIVITIES OF THE COUNCIL
The activities of the Council have been focused on issues faced by shippers on shipping and their
operational activities. The Council always performed a lead role in resolving problems and serve
as the focal point where various shipping and port, Airport & other authorities’ related matters are
brought up and discussed. In addition, the Council largely contributes in advising the Government
authorities on matters relating to port and shipping whenever its advice is sought after.
The following ten (10) action committees were appointed for better co-ordination and guidance
purposes:
•
•
•
•
•
•
•
•
•
•
Shipping and Logistics related Matters
Present Market Indicators - Freight Rates/ Courier rates
Customs/Sri Lanka Ports Authority/Maritime Affairs
Airport Issues
Education and Seminars
Membership Drive, Fund Raising & Finances/Accounts
SLSC Constitution
Asian Shippers’ Council (ASC)
Global Shippers’ Forum (GSF)
SLSC Website
A detailed description of the activities of the Council appears elsewhere in this report. However, in
this section for your easy reference we give below the main topics covered in the report.
•
•
•
•
•
•
•
Shipping Surcharges
Present Market Indicators - Freight Rates/ Courier rates
Electronic Data Interchange (EDI)
Sri Lanka Customs
Sri Lanka Ports Authority
Asian Shippers Council (ASC) & Global Shippers’ Forum (GSF)
Education and Seminars
11
SHIPPING SURCHARGES
Matters relating to the Gazette Extraordinary No 1842/16 of 27/12/2013 Regulation
New Notices and Guidelines on Extraordinary Gazette Notification no 1842/16 of 27/12/2013 were
issued by the Director General of Merchant Shipping.
During the year under review, the Council participated meetings of the “Working Group Meeting”
set up by Ministry of Finance & Planning to discuss concerns related to the Gazette notification.
(Gazette Extraordinary No. 1842/16). Initial meetings were chaired by Dr. P B Jayasyndara, Secretary
to the treasury and later on the meetings were convened by the Director General of Merchant
Shipping to address the concerns raised by the stakeholders.
Consequent to the discussion had at the Working Group meetings, The Director General of
Merchant Shipping (DGMS) issued a notice on 25th April 2014 informing the trade of a maximum
charge of Rs. 6,000 per delivery order with effect from 30/04/2014. Warning letters were issued by
the DGMS to the service providers charged higher DO fees.
New guideline was issued on 11/08/2014, by the Director General of Merchant Shipping as follows
to clear the procedure;
Quote
“Guidelines issued under Section 7 of the Licensing of Shipping Agents Act No. 10 of 1972 as
Amended read with Regulation 9 of the Gazette Extraordinary 1 847/53 dated 31.01.2014 on the
Regulations 4 and 5 of the Gazette Extraordinary 1842/16 dated 27.12.2013
By virtue of powers vested in me under Section 7 of the Licensing of Shipping Agents Act No.
10 of 1972, as amended and the Regulations published under the provisions of the said Act,
following guidelines are issued for compliance by the licensed service providers referred to
above.
Having regard to the submission made by relevant associations representing both service
providers and service users in respect of my notice dated 25/04/2014 relating to the Delivery
Order fee is hereby cancelled.
It has now been decided that with immediate effect, ‘the quantum of the Delivery Order fee that
could be charged by a service provider from an importer in Sri Lanka shall be at the rate filed
at my office, when such service provider applied for renewal or granting of its 2014 operating
license’. No other charge, levy or consideration shall be imposed.
Any service provider who is desirous of either introducing a new Delivery Order fee or increasing
the already filed rate is required to submit all supporting documents for the purpose of verification
on such proposal for my consideration as per the provisions of the Regulations.
12
The Supporting documents shall include all documents but not limited to the documents herein
mentioned;
1. A clear business rationale justifying the introduction of a new rate or increase of the filed
rate prepared by a Chartered Accountant
2. Documents proving financial status and tax compliance of the company
3. Proof of payments of Corporate Income Tax
4. Specific details on Delivery Order fees as listed below includes:
i. Delivery Order fees if any paid by the applicant,
ii. Delivery Order fees recovered from the importers,
iii. The above details shall be submitted separately on FCL cargo and LCL cargo handled
by the applicant during the 12 months period reckoned backward from the date of
request for review or for introduction of a new rate,
iv. Any other documents that will support the said proposed increase
The above request for documents is done without prejudice to the power of the Director General
of Merchant Shipping to investigate for further documents and to conduct an oral inquiry where
necessary.
All licensed service providers are requested to be guided accordingly and any licensed service
provider who acts in contravention of the above will be dealt under the existing law, and in
particular attention is hereby drawn to Section 11 of the licensing of Shipping Agents Act no. 10
of 1972.
These Guidelines will come into force with immediate effect. ’’
Unquote
According to DGMS above guidelines, service providers should adhere to the charges filed with
DGMS. According to Sri Lanka Logistics and Freight Forwarders’ Association (SLFFA), their members
tend to charge DO fee and liner DO recovery (liner DO fee). This matter was taken up with the
Secretary to the Treasury (ST) and it was suggested that SLFFA, Ceylon Association of Ships Agents
(CASA), Ceylon Freight and Logistics Associations (CEYFFA) and SLSC to come up with a proposal
to resolve this liner recovery DO charges/ excess DO fee.
Consequent to the new regulation on local charges per Extraordinary Gazette Notification
No. 1842/16 of 27th Dec 2013, the stakeholders of the Shipping and Freight industry have had
many meetings and discussions with the Government authorities as well as those amongst the
stakeholders, in order to address the issue relating to very high Delivery Order Fees and other
charges that varied drastically from one service provider to another due to various reasons.
On the instructions of then Secretary to the Treasury, the key personnel representing both service
providers and service users held several discussions, with a view to arriving at a consensus on what
the ideal / maximum Delivery Order Charges should be.
13
As a result of those discussions, the following were proposed and agreed upon, by the SLFFA,
CASA, CEYFFA, JAAF and SLSC;
• To apply on final Consignee a maximum Delivery Order Fee of Rupees 7,500 per Bill of Lading
on FCL imports that arrives under ‘freight prepaid’ terms, subject to Govt. Taxes.
• To apply on final Consignee a maximum Delivery Order Fee of Rupees 10,000 per Bill of Lading
on LCL imports that arrive under ‘freight prepaid’ terms, subject to Govt. Taxes.
• No other Fees or Charges, other than Delivery Order Fees and relevant Taxes, should be applied
on shipments that arrive in Sri Lankan Ports under ‘freight prepaid’ terms.
• The Service Providers however reserve the right to collect their dues / fees for any special
services that they may offer on the request of the consignee and to recover the repair cost of
equipment in case the container is returned in damaged condition.
• The undersigned Associations will work closely and assist the Director General – Merchant
Shipping to streamline the local charges and to take disciplinary action against those who do
not comply with given guidelines on freight pre-paid shipments moving into Sri Lanka
The above collectively signed copy of the proposal was handed over to DGMS on 02nd February
2015 by SLFFA, CASA and CEYFFA.
The proposal was discussed in depth as to how this could proceed to implement the new D/O Fee,
and finally, advised DGMS to send a circular to the trade requesting all service providers to file their
D/O Fees, as the same was not requested at the time of renewing the Licenses, and also to conform
to the request of the service users for a single line D/O Fee.
DGMS was advised to notify the trade accordingly.
According to SLFFA, this proposal is only a guideline to the DGMS, a common understanding
of the majority of the stakeholders that the maximum DO fee for FCLs and LCLs would be the
amounts mentioned in the proposal.
STRUCTURAL CHANGE IN SURCHARGES IN
AIR FREIGHT INDUSTRY
AIRLINE’S OFFERING “ALL-IN” CARGO RATES
During January 2015, some airlines freight divisions have announced their policy to return to a
simplified “all-in” rate structure that eliminates the various surcharges e.g. fuel, security etc., The
simplification of rate structures would be a significant benefit to forwarders and shippers alike.
Forwarders have for a very long time desired these surcharges be removed as they were opaque
and complex and thereby making it difficult to quote a definite price for air cargo transportation,
which the shippers were able to understand.
Issuing a statement by FIATA, the International Federation of Freight Forwarders Associations
stated that the fuel surcharge has come under significant criticism in recent months as fuel prices
continue to fall. FIATA believed this is a long-awaited move in the right direction that may be
supportive of transparency. Transparency in the entire Supply Chain is generally applauded by
FIATA, its members and by the International Freight Forwarders client.
14
PRESENT MARKET INDICATORS
FREIGHT RATES
The year under review saw Export freight rates declining once again towards the last quarter (April
- June 2015). The main reason being that the Colombo port still having an excess capacity of space
well over demand. It was also noted that several new services were launched during this period,
giving shippers the comfort of having more options.
Also during the year, it was observed that there were several GRIs that were imposed in the second
and third quarter mainly due to the unusual buildup of demand both through local exports as
well as with huge transshipment volumes where shipping lines also took the advantage to create
an artificial demand by a few void calls as well as down grading the vessels creating an excess
demand for space in the market. Overall the local shippers continue to have the advantage of
better freight rates when compared with other origins in the region. However the problem of poor
quality equipment remains to be in the agenda of discussion with very little improvement.
There had not been significant fluctuations in import freight rates, during the year under review,
there were few increases in freight rates experienced for cargo imported from China, during
seasonal and peak times, which has remained only for a very short period. However, the overall
situation had been favorable to importers, this situation could be attributed to the excess capacity
of space .
COURIER RATES
With regards to the Courier rates, in the beginning of year 2013, the fuel surcharge was 24% but
rates have been fluctuated by +/- during the course of the year. During the first quarter of the year
2014, the rates have come down to 23.5%. The fuel surcharge is linked to the Rotterdam price index.
FUEL SURCHARGE
As you are aware, global fuel prices have been fluctuating for the past few years. It is envisaged
that these prices will continue to fluctuate in the foreseeable future, as such, most air express
companies have introduced a fuel surcharge to defer part of their increased transportation costs.
Most companies use the Monthly average spot price of the United States Gulf Coast Kerosene-type
Jet fuel to calculate a fuel surcharge and for easy reference you may click USGC Kerosene-type Jet
Fuel Spot Price to access the source data. There may however be marginal differences among the
rates applied by air express companies globally due to time lags in implementation and differing
cost structures.
Month
July 2015
June 2015
May 2015
Surcharge
13.5%
12.0%
11.5%
15
There will be a two month lag in the application of the index. For example, the monthly average
price for fuel in January is used to determine the applicable surcharge for March. This is due to the
release dates of the spot pricing data.
The applicable fuel surcharge charged by various companies will be notified to customers by their
respective service providers. Air Express users are encouraged to use this table as a guide to the
trend in fuel movements and for better understanding of it’s application.
(Source: SLAAEC)
16
ELECTRONIC DATA INTERCHANGE (EDI)
SRI LANKA CUSTOMS EXPORT FACILITATION CENTRE (EFC)
The Long awaited e-Commerce facility for the export industry is now available on a 24x7 basis
through Sri Lanka Customs’ Export facilitation Centre
In the last quarter of 2014, the Sri Lanka Customs Department initiated a new trade facilitation
tool by providing Sri Lanka’s first Export Trade Facilitation Centre (EFC) at the port access road
to enhance its automation process by reducing operational activities of exporters. The System is
mandatory and each export containers has to go through the new system, which is fast, hasslefree and transparent. Sri Lanka Shippers’ Council issued a press release in on 19th September
congratulating the Sri Lanka Customs initiative to facilitate exports.
Less paper, less work and lower cost
Under the E- Customs initiatives the one stop Export Facilitation Centre was established so that the
exporter now do not need to visit Customs Department unless otherwise there are special licensed
products to process through the Customs export declaration.
The department has introduced electronic warranting, e-Cargo Dispatch Note, e-payment, and
e-terminal information. These processes have reduced the number of copies from 18 to 1 or 2
maximum.
In addition the EFC further reduces documents, number of movements of wharf representatives
and customs officers, panel examinations, provide faster export clearance, boat note passing,
operations & charges etc. BOI Companies too can now pass the final port clearance at this location
and avoid entering the SLPA to do the same operations.
17
The new processes, have reduced time, resources and taken away hidden costs, which many are
not willing to talk about from the trade as they know they were doing the wrong process for many
years by using speed money as a tool, which costs export companies dearly as petty cash.
Sri Lanka Shippers’ Council was a part of the team which worked closely with the Customs for
over two years in getting the system and the automated transaction process done. During the
year under review, the Council had several meetings with Sri Lanka Customs officials to resolve
operational issues at EFC encountered by the members and the trade.
In addition, the Council is following up with Sri Lanka Customs requesting to fully implement the
following facilities at EFC to further facilitate the trade.
•
•
•
•
Drive-through facility
E-warranty of CusDec
Electronic Panel Examination
Green Channel Facility for exports
SRI LANKA CUSTOMS
The Council is pleased to announce that the dialogues with the Sri Lanka Customs continued,
during the year under review. Concerns of the Importers and Exporters with regard to various policy
matters and operational issues were brought to the attention of the Director Genaral Customs and
received positive responses to solve large number of issues during this period. Some of the issues
highlighted were;
•
•
•
•
•
•
•
•
18
Operational issues at SL Customs Export Facilitation Centre
To open up Customs payment gateway to all private banks
Amendments needed for electronic Cargo Dispatch Note ( e-CDN)
Request for Customs OT payment online
Submission of Import Cargo Manifest Electronically
Customs preventive on export manifest issues
Criteria for Import/Export samples
Destructions of branded items sent to Holcim
SRI LANKA CUSTOMS 24X7 OPERATION
The 24×7 operation of the Sri Lanka Customs were launched with the interim budget proposals by
the Hon. Minister Ravi Karunanayake along with the support of all liner agencies including main
stake holders like Sri Lanka Ports Authority, banks, etc. All line agencies need to support the 24×7
with extended working hours in order to have a successful operation. This initiative will reduce
transaction time and cost and would help exporters / importers to meet their stringent delivery
schedule. Customs operate 24-hours for processing of documents for imports, export up to the
end of operation. Sri Lanka Shippers’ Council participated several discussions at Sri Lanka Customs
to resolve operational issues of this system.
SLSC Executive Committee met with Hon. Minister Ravi Karunanayake, Minister of Finance to
discuss the industry issues
SRI LANKA PORTS AUTHORITY
During the course of 2014, SLSC has had very productive round table discussions with the SLPA
to discuss various issues pertaining to the industry. Some of the issues highlighted were; some of
the issues highlighted were; shortage of equipment, shortage of space in warehouses, delays in
de-stuffing of LCL cargo within 24 hours, request to link online payment with all banks, to clear
Dangerous Cargo after 4.30 p.m.
A joint press release was issued expressing concerns over the strike carried out by the truck operators
blocking IN and OUT gates of Sri Lanka Ports Authority. Import Section urged the Sri Lanka Ports
Authority and Ministry of Ports & Shipping to have an amicable & speedy solution.
19
SLSC Executive Committee made a courtesy call to the newly appointed Port Chairman, Dr.
Ladas Panagoda
THE ASIAN SHIPPERS’ COUNCIL (ASC)
THE ASIAN SHIPPERS’ COUNCIL ANNUAL MEETING
The ASC AGM scheduled to be held in October 2014 in Sri Lanka was cancelled issuing a notice by
Mr. Toto Dingantoro, Chairman of ASC.
In January 2015, the Council was made aware of a new Shipping Alliance called “Asian Shippers
Alliance’’ (ASA) formed joining ASC and ASM. When enquired from the current ASC Chairman,
he had confirmed that this alliance was formed at an informal meeting held on 12 September
2014 in Thailand with the participation of Thailand National Shippers’ Council (TNSC), Hong Kong
Shippers Council (HKSC) and European Shippers’ Council (ESC)
SLSC was invited to participate ASA’s first Annual meeting scheduled in March 2015 in Surabaya.
The Council decided not to participate at this juncture.
THE GLOBAL SHIPPERS’ FORUM (GSF)
Sri Lanka Shippers’ Council has become a member of the Global Shippers Forum in April 2015.
The Annual General Meeting of the Global Shippers’ Forum took place from 2 to 4 June 2015 in
Toronto. Over 35 delegates attended from shipper councils including those representing Canada,
Germany, Hong Kong, Korea, South Africa, Sri Lanka, Thailand UK, US and other observer shipper
associations. There were also representatives from numerous countries in the membership of the
Union of African Shippers’ Councils as well as individual shippers taking part in the meeting. The
20
SLSC was represented by Mr. Sean Van Dort, Chairman at this event.
The meeting discussions included:
1. Actions for a global surcharges campaign for ‘all in’ container shipping and air cargo rates
and to identify regulatory approaches to improve shippers bargaining power
2. The new joint BIMCO/GSF standard container contract and how the contract can be used by
small and medium sized shippers to enhance their bargaining power
3. Verification of container gross mass weights with GSF best practice advice and activities to
assist members with implementation
4. Anti-trust reforms in Australia and New Zealand, and current reviews in Singapore and
Hong Kong of anti-trust immunity and other enforcement activities, including the European
Commission price signalling case
5. GSF’s involvement in International Maritime Organization policy work on shipping emissions
6. An air cargo session to raise awareness of how shippers and carriers are working together to
promote sustainable air cargo
Speakers at the meeting included:
• Dawn Desjardins, Assistant Chief Economist, Royal Bank of Canada
• Stephen Brooks, President, Chamber of Marine Commerce
• US Federal Maritime Commissioner, Honourable Michael A Khouri
• Sam Brand, International Civil Aviation Organization
• Celine Hourcade, International Civil Aviation Organization
• Jan Hoffman, Environmental Office, UN Committee for Trade and Development
The meeting also included a freight and logistics field trip to see some unique Canadian logistics
operations, including the Welland Canal and freight operations at the Port of Hamilton on Lake
Ontario.
At this meeting Sri Lanka Shippers’ Council invited next GSF Annual meeting to be held in Sri Lanka.
The GSF Council agreed that the 2016 Annual Meeting would take place in Sri Lanka following the
invitation of the Sri Lanka Shippers’ Council who offered to host it.
21
FEDERATION OF ASEAN SHIPPERS’ COUNCILS (FASC)
There were no significant activities under FASC after the AGM held in New Delhi 2008.
EDUCATION & SEMINARS
SLSC- CINEC SCHOLARSHIP PROGRAM FOR LOGISTICS AND TRADE INDUSTRY
Colombo International Nautical and Engineering College (CINEC) offered four scholarships to
employees of SLSC membership who are involved in logistics, freight forwarding and supply chain
to excel in higher education and enhance their career prospects on those fields.
Scholarships on offered were as follows;
1. Professional Diploma In Freight Forwarding
2. Certificate in Logistics Services, Freight Forwarding and Multimodal Transport
(Course approved by Ministry of Ports, Highways and Shipping)
SEMINAR ON CUATOMS PROCEDURES ON IMPORT & EXPORTS & THE PROPER USE OF
INCOTERMS, JANUARY 2015
The National Chamber of Exporters in association with Sri Lanka Shippers’ Council conducted the
above training programme to brief on SL customs current import export procedure and the correct
use of INCOTERMS. The keynote address was delivered by Mr. Sean Van Dort, Chairman of Sri Lanka
Shippers’ Council. Sri Lanka Customs Deputy Director Revenue and Services N Ravindrakumar, Sri
Lanka Customs Additional Director General Revenue and Services M Puviharan participated at the
panel.
22
LOGISTICS & TRADE FORUM ON “SRI LANKA CUSTOMS EXPORT FACILITATION CENTRE”
(EFC), APRIL 2015
The Shippers’ Academy Colombo together with the Sri Lanka Shippers’ Council organised
a Logistics Forum To Educate Exporters, Shipping, Clearing House, Wharf, And Transport And
Logistics Companies at the Sri Lanka Foundation Institute. The Forum discussed operational issues
and ways to further improve facilities in connection with EFC.
Speaking at the forum, Sean Van Dort, Chairman Sri Lanka Shippers’ Council said implementation
of EFC is a dream come true for the export sector and the service providers. It was a long process
and a lot of hard work;
A field visit to the EFC was organised by the Council on 22nd May 2015 to familiaraise with the
operation and the procedure at the EFC.
TRADE COMPLAINTS
The Council continues to facilitate the trade by assisting in the mediation of trade disputes among
the shipping lines, freight forwarders, NVOCC Operators, and shippers.
REPRESENTATIONS
The Council continues to maintain its close association with the Government and Private sector
organizations and also with the Trade Associations with a view to have a continued improvement
on the required service levels.
Some highlighted direct representations made during the year were as follows;
• EDB Advisory Committee on Trade Facilitation
• Representations at the Leadership of the Approved Associations meetings of the Ceylon
Chamber of Commerce
23
• Representations at the Steering Committee on Ports, Shipping, Aviation & Logistics of
Ceylon Chamber of Commerce
• Meeting with Stakeholders of the Shipping Industry, the Ceylon Chamber of Commerce
• Working Group Meeting set up by Ministry of Finance & Planning to discuss the
implementation on the Extraordinary Gazette No 1842/16 on Terminal Handling and Other
Charges
THE CEYLON CHAMBER OF COMMERCE (CCC)
The Chairman of the Sri Lanka Shippers’ Council is a member of the Committee of the Ceylon
Chamber of Commerce, the oldest Chamber in Sri Lanka with a history of over 175 years. The
Council members have had several meetings with the Chamber officials on policy matters relating
to port and shipping.
MEMBERSHIP
The membership of the Council is open to all Trade Chambers and Associations engaged in
Shipping and Port related activities as well as individual companies in the import/export trade.
The membership committee is responsible for developing and increasing the membership of the
Council.
During the year under review, the Council approved membership for the following companies/
organizations as Individual Members:
1. Scanwell Logistics Colombo (Pvt) Ltd
2. 20Cube Logistics Pvt Ltd
3. Leading Lady Intimates Lanka (Pvt) Ltd
4. Universal Freighters International Pvt Ltd
5. Freight Masters International Pvt Ltd
6. Fanam International (Pvt) Ltd
7. SALOTA International (Pvt) Ltd
FINANCE
The Ceylon Chamber of Commerce manages the Council funds on behalf of the Council.
WEB SITE
www.shipperscouncil.lk
Shippers’ Council website was revamped with a new outlook. The site is regularly updated with
trade related information and hosts value added services.
24
SECRETARIAT
The Ceylon Chamber of Commerce provides Secretarial services to the Council. The infrastructure
of the Chamber is readily available to the Council.
BY THE ORDER OF THE COUNCIL
Sgd.
Manori Dissanayaka
For Secretary
THE SECRETARIAT
Sri Lanka Shippers’ Council
C/o. The Ceylon Chamber of Commerce
50, Nawam Mawatha, Colombo 2
Direct Tel:+94 11 2392840, 5588871, 5588880
General Tel: +94 11 2421745-7, 5588800
Fax:+ 94 11 2449352, 2437477
E-mail: [email protected]
Website: www.shipperscouncil.lk
25
OVERVIEW OF THE ECONOMY
ECONOMIC GROWTH
In 2014, the Sri Lankan economy showed its
resilience in the face of domestic as well as
external challenges. Real GDP grew by 7.4
per cent in 2014, in comparison to the growth
of 7.2 per cent in 2013. Accordingly, GDP per
capita increased to US dollars 3,625 in 2014
from US dollars 3,280 in the previous year. The
economy was driven by domestic consumption
expenditure that constitutes the largest share
of aggregate demand, while investments,
particularly on construction, also provided an
impetus to the economic expansion during
the year. On the production side, the Industry
and Services sectors continued to perform well,
while adverse weather conditions dampened
the performance of the Agriculture sector during
the year. Inflation remained at single digit levels
for the sixth consecutive year, with year-on-year
and annual average inflation declining to 2.1 per
cent and 3.3 per cent, respectively, by end 2014,
from 4.7 per cent and 6.9 per cent, respectively,
at end 2013. Prudent monetary policy as well as
the considerable decline in global commodity
prices in the second half of the year enabled
the deceleration of inflation to low single digit
levels during the year. In spite of the relatively
relaxed monetary policy stance, the effect of
declining pawning advances as a result of lower
international gold prices shrouded the pickup of
credit obtained by the private sector, particularly
in the first seven months of the year. In the
absence of demand pressures on inflation, the
Central Bank took measures to facilitate further
credit disbursements by banks. However, these
measures, along with volatile global conditions,
caused some portfolio investment outflows and
encouraged imports, increasing the pressure
on the external sector and the exchange rate
towards the latter part of the year. Overall, the
trade deficit widened in nominal terms during
the year, although inflows from trade in services
and workers’ remittances supported the
26
reduction of the deficit in the current account.
This, together with other financial inflows, helped
strengthen the balance of payments (BOP), and
hence gross official reserves. The continued
inflow of funds from the expatriate workforce in
the form of remittances and investments aided
an increase in national savings, which helped
reduce the savings-investment gap. Meanwhile,
in the fiscal sector, despite the government’s
announced
commitment
towards
fiscal
consolidation, the overall fiscal deficit increased
to 6.0 per cent of GDP in 2014 from 5.9 per cent
of GDP in the previous year, mainly as a result
of the continued shortfall in revenue collection.
Nevertheless, central government debt as a
percentage of GDP declined to 75.5 per cent
by end 2014 from 78.3 per cent by end 2013. In
the financial sector, the strengthened regulatory
and supervisory framework, improved risk
management capabilities and adequate buffers
to mitigate risks, enabled financial institutions to
remain resilient during the year.
Going forward, the Sri Lankan economy is
projected to reach upper middle income levels
and sustain the favourable high growth and low
inflation nexus in the medium term, supported
by appropriate economic policies. The new
government is expected to uphold policies
of good governance and transparency, which
would support a high growth path through
an improved investor friendly environment.
The government faces the enormous task of
articulating a coherent medium term policy
framework, which enhances positive effects
while addressing possible shortcomings of
previously announced policies as well as the
challenges ahead. Some of these challenges
are, the urgent need to address the continued
decline in government revenue as a percentage
of GDP in order to achieve a better fiscal
balance; increasing productivity of all sectors
of the economy, including the public sector;
raising resources required for sustained growth
through non debt creating sources, in particular,
foreign direct investments (FDI); developing
appropriate pricing policies for public utilities;
better identification of beneficiaries in
implementing social safety nets and subsidy
programmes; improving the equity and quality
of health and education service provision;
addressing the issue of public transportation;
continuing physical infrastructure development
on a sustainable basis; formulating policies
to address the challenge of aging population
including improving labour productivity and
promoting the development of superannuation
and insurance products; and, improving
the doing business environment and policy
predictability. Addressing such challenges would
be essential to realise the projected growth
path as envisaged, enabling the economy to
achieve its full potential while maintaining
macroeconomic stability in a more equitable
environment.
The Sri Lankan economy achieved a real GDP
growth of 7.4 per cent in 2014 in comparison to 7.2
per cent in 2013. Amidst diverse developments
in the global economy, continued domestic
economic activity helped sustain the growth in
the Industry and Services sectors. The Services
sector, which represents 57.6 per cent of GDP,
grew by 6.5 per cent in 2014 compared to the
growth of 6.4 per cent in 2013, with significant
contribution from Wholesale and retail trade,
Transport and communication, and Banking,
insurance and real estate sub sectors. The share
of the Industry sector within GDP increased
further to 32.3 per cent, with a sectoral growth
of 11.4 per cent in 2014 compared to 9.9 per
cent in the previous year. The Construction sub
sector recorded the highest contribution to
the growth of the Industry sector, while Food,
beverages and tobacco and Textile, wearing
apparel and leather sub sectors within Factory
Industry also made substantial contribution
to growth. Meanwhile, affected by adverse
weather conditions, the Agriculture sector, which
represents 10.1 per cent of GDP, contributed
only marginally to real GDP growth. The growth
of the Agriculture sector was 0.3 per cent in
2014, compared to 4.7 per cent recorded in the
previous year.
The expansion in both investment and
consumption activities supported the growth of
GDP in 2014. As per the expenditure approach,
increased investment expenditure was due to
both private and public sector investments.
The growth in private consumption expenditure
was supported by lower domestic interest rates
and higher disposable incomes. As a result,
expenditure on imports of consumer goods
increased significantly. Higher contribution
from the growth in imports relative to exports,
however, resulted in a marginal deterioration of
net external demand in nominal terms during
the year.
Domestic savings improved to 21.1 per cent of
GDP in 2014 from 20.0 per cent in the previous
year. The improvement in domestic savings
during the year was due to the continuous
expansion in private savings amidst an
increase in government dissaving. National
savings improved to 27.0 per cent of GDP as a
combined result of continued inflows in the form
of workers’ remittances and the deceleration in
the negative growth of net factor income from
abroad (NFIA) compared to the previous year.
These developments contributed to a narrowing
of the savings-investment gap to 2.7 per cent of
GDP in 2014 from 3.7 per cent of GDP in 2013.
The Agriculture sector grew marginally by 0.3
per cent in 2014 reducing its share in GDP to 10.1
per cent from 10.8 per cent in 2013. Impacted
by adverse weather conditions, several key sub
sectors including paddy (16.7 per cent), rubber
(32.3 per cent) and minor export crops (15.0 per
cent) contracted, largely contributing to the
deceleration of the growth in the Agriculture
sector. The paddy output declined significantly in
both Yala and Maha seasons. Rubber production
27
declined for the third consecutive year, affected
by weakened international demand for natural
rubber as well as adverse weather conditions.
However, the contraction in output of several
key sub sectors was somewhat offset by the
improved performance in the coconut and
other food crops sub sectors. The coconut sub
sector registered an increase of 7.9 per cent in
output in 2014 as against a decline of 16.1 per
cent in the previous year. The production of
other food crops increased by 7.0 per cent in
2014 compared to the growth of 4.3 per cent
in the previous year. The utilisation of paddy
lands for the cultivation of other food crops and
government policies aimed at protecting local
farmers helped increase domestic production.
Meanwhile, the tea industry performed well in
2014 backed by increased tea prices although
its output declined marginally from the highest
ever production levels recorded in 2013.
The government undertook several policy
measures during 2014 to promote growth and
improve productivity in the Agriculture sector.
The subsidy programmes to promote replanting
and new planting in the tea and rubber sectors
were continued during 2014. In the tea sector,
factory modernisation continued and steps
were taken to popularise mechanisation for tea
plucking with a view to improving productivity
and good manufacturing practices. Further,
the projects under the Livestock Master Plan
initiated by several government institutions
continued in 2014. Several measures were also
implemented to strengthen the national fishing
fleet and the construction and upgrading of
fishery harbours and anchorages to facilitate
deep sea fishing. Meanwhile, policy measures
were proposed in the Interim Budget for 2015
including an increase in the purchasing price of
paddy under the guaranteed paddy purchasing
scheme and increases in the producer prices of
potatoes and tea leaves, fresh milk, as well as
rubber to promote domestic agriculture. Also,
a 50 per cent waiver of loans and advances
28
extended to farmers by commercial banks,
which stand past due, was proposed in the
Interim Budget, subject to a maximum loan
amount of Rs. 100,000.
The Industry sector growth, bolstered by
manufacturing and construction activity,
accelerated to 11.4 per cent, enhancing its share
in the national output to 32.3 per cent in 2014.
The Manufacturing sub sector, which accounts
for 53.4 per cent of the value addition in the
Industry sector, grew by 8.0 per cent in 2014.
Factory industry, which comprises the largest
share of the manufacturing sub sector, grew
by 8.5 per cent in 2014 with improved external
and domestic demand alongside a conducive
domestic macroeconomic environment. Export
oriented industries continued to be the primary
contributor to the growth in factory industry
output. Wearing apparel industry recorded a
growth of 13.2 per cent in 2014 benefitting from
Sri Lanka’s international reputation as a reliable
and high quality manufacturer compared to
its regional peers. Despite lower domestic
production of natural rubber, the Rubber and
plastic products sub sector, which increased by
7.1 per cent, maintained its growth momentum
facilitated by an increase in raw rubber imports,
which were used as an input for the manufacture
of rubber product exports during the year. This
growth was further supported by external demand
for rubber tyres, tubes and other rubber based
products. Meanwhile, a persistently low interest
rate environment supported by low inflation
stimulated domestic demand and boosted the
output of domestic market oriented industries
in 2014. Accordingly, the Food, beverages and
tobacco sub sector grew by 8.1 per cent during
the year. This growth was further supported
by the increased performance in the leisure
industry. Meanwhile, the Construction sub sector
continued to play a vibrant role in propelling the
economy forward with a growth of 20.2 per cent
in 2014, contributing nearly 24 per cent to the
growth in 2014. The growth in the Construction
sub sector was supported by public investments
in infrastructure development activities, housing
development projects as well as large scale
private construction activities. The Mining and
quarrying sub sector also benefitted from the
expansion in construction activity.
The government continued to extend incentives
for the development of the Industry sector
by providing fiscal concessions, technical
assistance as well as upgrading infrastructure
facilities required to promote regional
industrialisation. Fiscal concessions were mainly
aimed at encouraging local value addition and
in inculcating energy at 3.2 per cent and 6.5 per
cent, respectively, in 2014. The LFPR declined to
53.3 per cent in 2014 from 53.8 per cent during
2013. The low unemployment rate coupled with
decreasing LFPR may be indicative of a labour
shortage in the market. In the meantime, labour
productivity levels continued to increase, with
positive contributions from all three sectors of
the economy.
Inflation remained at low single digit levels
throughout 2014 reflecting the impact of
demand management policies, improved supply
conditions, downward revision of administered
prices and effectively contained inflation
expectations. Headline inflation, as measured
by the year-on-year change in the Colombo
Consumers’ Price Index (CCPI) (2006/07=100),
fell further to 2.1 per cent in December 2014 in
comparison to 4.7 per cent in 2013. The year-onyear headline inflation remained at single digit
levels for the sixth consecutive year. Meanwhile,
the annual average rate of headline inflation
decelerated to 3.3 per cent in December
2014 from 6.9 per cent in December 2013.
The combined impact of prudent monetary
management, moderation in international
commodity prices, a relatively stable exchange
rate, fiscal policy measures taken to address
supply side disturbances and well managed
inflation expectations contributed to low levels
of inflation experienced throughout the year.
The downward revision to administered prices
of electricity, water, LP Gas and fuel in the latter
half of the year resulted in headline inflation
declining to 1.5 per cent in November, the lowest
recorded for 2014. Core inflation remained at low
levels throughout the year although it moved up
to 3.2 per cent, year-on-year, in December 2014
compared to 2.1 per cent at end 2013
Sri Lanka’s external sector improved its
resilience in 2014 with a narrowing of external
sector imbalance and a surplus in the overall
BOP. The current account deficit narrowed to
2.7 per cent of GDP from 3.8 per cent in the
previous year buttressed by higher inflows from
remittances and trade in services. The deficit
in the trade account, as a percentage of GDP,
declined to 11.1 per cent in 2014 from 11.3 per
cent in the previous year, although in nominal
terms the trade deficit increased with a pickup
in imports during the latter part of the year.
Meanwhile, inflows to the government, banks
and the corporate sector propped the financial
account of the BOP helping to record a higher
surplus in the BOP and an improvement in gross
international reserves of the country, despite
some volatility in the government securities and
equity markets towards the second half of the
year. These developments enabled the rupee to
remain relatively stable during the year along with
the Central Bank’s initiatives to smoothen short
term volatility in the exchange rate. Although the
trade deficit declined as a percentage of GDP, a
notable increase in the trade deficit in nominal
terms was observed in 2014. During the first half
of 2014, earnings from exports grew by 17.0 per
cent while expenditure on imports declined by
1.2 per cent, resulting in a contraction of the
trade deficit by 20.3 per cent over the same
period of 2013. However, as imports grew faster
and export growth decelerated in the second
half of 2014, the overall trade deficit expanded
by 8.9 per cent, year-on-year, to a value of US
dollars 8,287 million in 2014.
29
Exports grew at a healthy rate in 2014 supported
by improved external demand along with a
stable domestic macroeconomic environment.
Earnings from exports grew by 7.1 per cent
in 2014 compared to the previous year and
reached US dollars 11,130 million, reflecting
increases in all major categories. The highest
contribution to export earnings was from
industrial exports, supported by the substantial
increase in exports of textiles and garments.
Earnings from textiles and garments exports,
which accounted for about 44 per cent of total
exports, recorded an increase of 9.4 per cent in
2014, reflecting increases in garment exports
to both traditional and non-traditional markets.
Meanwhile, earnings from agricultural exports
registered an increase of 8.2 per cent in value
terms due to higher exports of coconut products,
tea and certain minor agricultural products.
Export earnings from coconut products and
tea increased by 74.2 per cent and 5.6 per
cent, respectively, mainly due to higher export
volumes. However, export earnings from spices,
which showed a higher growth of 38.8 per cent
during the previous year declined by 25.6 per
cent in 2014 mainly due to low harvest of main
export crops.
PORT SERVICES
The port sector performance improved mainly
reflecting increased commercial operations of
the Colombo International Container Terminal
(CICT), which is capable of handling mega
container vessels. Total container handling in
2014 increased by 14.0 per cent to 4.9 million
twenty foot equivalent container units (TEUs)
from 4.3 million TEUs in 2013. An increase of
15.5 per cent was recorded in transshipment
container handling throughput during 2014.
Total cargo handling reached 74 million MT
recording a 12.3 per cent growth compared to
the growth of 2.0 per cent in the previous year.
A large increase of 87.7 per cent was recorded
in Break Bulk cargo handling, reflecting the
handling of increased imports of fertiliser,
30
iron/steel and vehicles at both Colombo and
Hambantota Ports. Vehicle handling, increased
by 206.7 per cent while vehicle transshipments,
which is performed only at the Hambantota
port, increased by 321.7 per cent during 2014.
Container ship arrivals increased by 3.1 per cent
while the total number of vessels arriving in Sri
Lanka grew by 7.2 per cent in 2014 compared to
a negative growth of 3.8 per cent in 2013.
Large scale port expansion projects in
Colombo and Hambantota continued. Harbour
infrastructure development under the port
of Colombo expansion project continued as
scheduled. The South Container Terminal (SCT),
which has the capacity of handling 2.4 million
TEUs per annum was completed in April 2014 and
the East Container Terminal (ECT) is expected to
open for operations in 2015. The construction
of a single berth under the first phase of ECT
development plan is expected to address the
shortfall in the container handling capacity at
the port of Colombo. The Hambantota port is
expected to emerge as a service and industrial
port, given its strategic location. Towards this
end, the fuel tank project, which includes 14
tanks of bunkering fuel, aviation fuel and LPG
with a total capacity of 80,000 cubic metres, has
been completed and the provision of bunkering
facilities has commenced in June 2014. The
Hambantota port currently handles only bulk
cargo. Under Phase II of the Hambantota port
project, four berths are proposed to be built
while expanding the harbour basin to a depth of
17 metres with modern equipment and facilities.
Meanwhile, as per the provisional financial
statements, the Sri Lanka Ports Authority (SLPA)
recorded an operating profit of Rs. 8.9 billion
in 2014 compared to Rs. 2.4 billion in 2013. The
construction work of the Colombo Port City
Project (CPCP), designed as a business venture
along with luxury apartment complexes and
recreational centres by reclaiming 233 hectares
of land, commenced in September 2014. The
construction work of the project was suspended
by the new government pending a review of
environmental impact assessment.
EXPORT PERFORMANCE
Export Performance Improved external demand
along with stable domestic macroeconomic
environment supported the local industries
in achieving enhanced export performance
in 2014. Accordingly, earnings from exports
increased by 7.1 per cent to a value of US dollars
11,130 million in 2014 compared to US dollars
10,394 million in 2013, with contributions from all
major categories of exports. Industrial exports
which represent about 75 per cent of total
exports contributed largely to export growth in
2014. Earnings from industrial exports increased
by 6.6 per cent, year-on-year, to a value of US
dollars 8,262 million in 2014, mainly due to a
significant increase in textiles and garments
exports, which increased by 9.4 per cent to a
value of US dollars 4,930 million. The growth
in textiles and garments exports contributed
for more than 50 per cent of the total growth
in exports. The garments exports to the EU
and the USA increased by 10.6 per cent and
8.8 per cent, respectively. Meanwhile, exports
to non-traditional markets increased by 10.5
per cent compared to 8.9 per cent increase in
2013. The measures adopted by the authorities
and industry participants to penetrate nontraditional
markets helped achieve a higher growth of
exports to those markets. Export earnings on
leather products grew by 80.8 per cent to a value
of US dollars 139 million in 2014, mainly due to
a higher level of exports of footwear to Western
markets. Sri Lankan footwear exporters gained
a reputation as suppliers of fashion footwear
among reputed international brands. Export
earnings on food, beverages and tobacco,
and machinery and mechanical appliances also
increased substantially in 2014. However, export
earnings on petroleum products, which mainly
comprise of bunker and aviation fuel declined by
21.0 per cent to a value of US dollars 338 million,
amidst intense competition from the major
regional players, such as India and Singapore.
Further, Sri Lanka is relatively less competitive
in the bunker and aviation fuel industry, as the
unit cost increases due to heavy reliance on
imported fuel from regional markets and also
due to limited storage capacity. Exports of
diamonds also declined by 32.8 per cent due to
non-operation of a major industry player, while
gem and jewellery exports sustained its growth
momentum during the year.
Agricultural exports which contribute for around
a quarter of total exports improved further during
the year. Earnings from agricultural exports
increased by 8.2 per cent to a value of US dollars
31
2,794 million in 2014 led by exports of coconut
products, tea and certain minor agricultural
products. Exports of coconut products increased
by 74.2 per cent to US dollars 356 million in 2014,
mainly due to enhanced performance of kernel
product exports, such as desiccated coconut
and coconut oil, supported by the favourable
weather conditions prevailed in the previous
year. Export earnings from tea, which account
for about 15 per cent of total exports, grew by
5.6 per cent in 2014 compared to 9.2 per cent
growth recorded in 2013. The slower growth of
tea exports reflects decelerated demand from
the main export destinations such as Russia and
the Middle East which account for about 59
per cent of total tea exports. These countries
experienced large revenue shortfalls, as oil
prices declined, while Russia experienced large
depreciation in the Ruble amidst economic
sanctions due to geopolitical issues. However,
as Sri Lanka supplied high quality orthodox tea
which attracts higher demand in the international
markets, the export price of Sri Lankan tea
averaged at US dollars 4.97 per kg, recording
an increase of 3.1 per cent from the previous
year and above the average international tea
price of US dollars 2.72 per kg in 2014. Minor
agricultural exports increased by 63.1 per cent
to a value of US dollars 165 million, as exports
of arecanuts and fruits increased registering
substantial growth of 300.5 per cent and 51.7
per cent, respectively. Sea food and vegetables,
categorised under agricultural exports also
performed well during the year. However, the
export of spices which showed remarkable
performance during the previous year slowed in
2014. Earnings on exports of spices declined by
25.6 per cent to a value of US dollars 265 million
in 2014 compared to an increase of 38.8 per cent
in 2013. This was mainly due to the lower harvest
of main export crops i.e. cinnamon, pepper,
cloves, mace and nutmeg in 2014 compared to
the bumper harvest recorded in 2013. Further,
export earnings on rubber also declined by 36.5
per cent to US dollars 45 million, reflecting a
32
decline in both price and the quantity. Rubber
prices in the international market declined
throughout the last four years due to higher
global supply and reduced demand for
natural rubber from major rubber consuming
economies such as China and India. Mineral
exports including earths and stones, ores, slag
and ash, and precious metals increased by 15.3
per cent to US dollars 59 million in 2014.
Sri Lanka’s exports sector faced many
challenges in the domestic and external front.
Restriction on sea food exports to the EU with
effect from mid-January 2015, which is the main
sea food market accounting for about 40 per
cent of total sea food exports, posed a great
challenge to sea food exporters. However,
with the corrective actions being taken by the
government, the problem is expected to be
solved during the year. In the meantime, if the
Russian ruble continues to depreciate further in
2015, it will have negative impact on Sri Lanka’s
tea exports since Russia is the main single buyer
of Sri Lankan tea while demand for tea in the
Middle East market could also decrease due to
the continued decline in the oil income of these
economies. Further, it is expected to regain
the GSP+ facility, which provides concessional
access to the EU market, especially for textiles
and garment products. However, in addition to
these concessional market access opportunities,
more concentration on moving up in the value
chain ladder, backward integration, productivity
enhancement and technological innovation are
essential to counter the intense competition.
Further, concentration of export products is a
main concern as two thirds of Sri Lanka’s export
earnings depend on a few products such as
textiles and garments, tea and rubber products
even though product differentiation within
those categories have improved significantly in
the recent past.
IMPORT PERFORMANCE
Expenditure on imports increased moderately
in 2014 compared to the contraction in both
2012 and 2013. The increase of import growth
was higher in the second half of 2014, which was
mainly attributed to higher imports of motor
vehicles for personal use due to tariff reduction
and larger depreciation of the Japanese yen.
Accordingly, expenditure on imports in 2014
increased by 7.9 per cent to a value of US
dollars 19,417 million compared to the value of
US dollars 18,003 million of imports recorded
in 2013. Meanwhile, expenditure on non-fuel
imports in 2014 increased by 8.2 per cent to a
value of US dollars 14,819 million. During 2014,
the relative share of consumer goods in total
imports increased following a similar trend
observed in 2013 while the share of investment
goods decreased. The increase in import share
of consumer durables reflects the improvement
in the life standards of people with higher
income levels. However, decline in the share of
investment goods is an alarming factor as it may
decelerate future growth prospects.
the expenditure on imports of textiles and
textile articles, such as fabric, yarn and fiber
increased by 13.8 per cent to US dollars 2,328
million in 2014 in line with the increase in
textiles and garments exports during the year.
Import expenditure on paper and paper boards,
plastic and articles thereof, wheat and maize,
chemical products and fertiliser also increased
during 2014. Meanwhile, imports of diamonds,
precious stones and metals used as inputs for
the jewellery industry declined by 63.7 per cent
in 2014 following the decline of 17.8 per cent
in 2013, mainly due to the non-operation of a
main diamond and jewellery exporting firm in
Sri Lanka. Further, an increase in gold sales by
the banks to domestic industries reduced the
demand for gold imports. Import expenditure
on cement clinkers also declined by 6.3 per cent
in 2014, reflecting lower demand for cement,
particularly, in the fourth quarter of 2014 due to
unfavorable weather conditions for construction
activities.
The major contribution to the increase in import
expenditure occurred from intermediate goods
mainly due to higher importation of petroleum
products and textiles and textile articles.
Expenditure on imports of intermediate goods,
which account for about 60 per cent of total
imports, amounted to a value of US dollars
11,398 million in 2014, reflecting a 8.0 per cent
increase over 2013. Despite the significant
decline in fuel prices in the international market
during the latter part of the year, higher import
volumes mainly due to increased thermal
power generation resulted in the increase in
expenditure on imports of fuel by 6.7 per cent
in 2014 over the previous year to a value of US
dollars 4,597 million. The average import price
of crude oil imported by Ceylon Petroleum
Corporation declined to US dollars 104.53 per
barrel in 2014 from US dollars 109.84 per barrel
in 2013. However, the import price of crude oil
during the latter part of the year was far below
the average price level for the year. Meanwhile,
Expenditure on imports of food and nonfood
consumer goods increased largely on account
of higher volumes imported in 2014. Overall
expenditure on imports of consumer goods
increased by 21.1 per cent, year-on-year, to a
value of US dollars 3,853 million accounting
for around 20 per cent of total imports. Import
expenditure on food and beverages increased
by 19.4 per cent to US dollars 1,634 million,
while non-food consumer goods increased by
22.3 per cent to US dollars 2,219 million. Higher
importation of motor vehicles for personal use
mainly contributed for the increase in non-food
consumer goods imports. Expenditure on motor
vehicles for personal use such as motor cars and
motor cycles increased by 54.0 per cent in 2014
mainly due to the reduction in import duties
on motor vehicles and substantial depreciation
of the Japanese yen. Import expenditure on
clothing and accessories and telecommunication
devices such as mobile phones also increased.
The increase in expenditure on food imports
33
was mainly due to a noteworthy increase in rice
imports to 600,000 metric tons in 2014 (US dollars
282 million) compared to 23,000 metric tons in
2013 (US dollars 18 million) as the domestic rice
production was affected by adverse weather
conditions in 2014. Further, the reduction in
import tariff applicable to rice imports in view of
protecting local consumers from high domestic
rice prices also contributed to the increase in
rice imports.
Expenditure on milk powder imports increased
due to higher import prices, while imports of
masoor dhal and edible nuts increased due to
reduction in import duties and higher demand
for imported food items in the backdrop
of lower domestic production. However,
expenditure on importation of sugar and
confectionery products, oil and fats and sea
food products declined during the period
under review. Expenditure on imports of
investment goods declined marginally in 2014
largely due to lower imports of machinery and
equipment, and building material. Accordingly,
the expenditure on investment goods imports
declined by 2.4 per cent to a value of US dollars
4,152 million in 2014. Import expenditure on
machinery and equipment which comprises
engineering equipment, electronic equipment,
telecommunication devices, office machinery,
machinery for the textile industry and machinery
and equipment parts, declined by 4.1 per cent
to US dollars 2,131 million in 2014. Meanwhile,
expenditure on imports of building material
which comprises cement, iron and steel and
mineral products declined by 3.6 per cent to
a value of US dollars 1,309 million, reflecting
the impact of adverse weather conditions
on the construction sector. However, import
expenditure on transport equipment increased
by 5.9 per cent to a value of US dollars 707
million mainly due to higher imports of buses
and auto trishaws.
TRADE BALANCE
The trade deficit which contracted during the
first half of 2014 was reversed in the second
half, resulting in a, year-on-year, expansion in
the trade deficit. During the first half of 2014,
earnings from exports grew by 17.0 per cent
while expenditure on imports declined by 1.2
per cent, resulting in a contraction of the trade
deficit by 20.3 per cent over the same period
in 2013. However, as imports grew faster and
export growth decelerated in the second half of
2014, overall trade deficit expanded by 8.9 per
cent, year-on-year, to a value of US dollars 8,287
million in 2014 following the declines recorded
in two consecutive years.
However, as a percentage of GDP, the trade
34
deficit declined to 11.1 per cent in 2014 from 11.3
per cent in 2013. The favorable developments
observed in the trade balance during 2012 and
2013 were largely supported by the prudent
policy measures taken by the Central Bank and
the government in early 2012. However, with
the trend in declining global commodity prices,
both oil and non-oil, and the recovery of many
advanced and emerging market economies,
albeit at a lower phase than initially expected,
necessitate appropriate policy measures in the
near term to address adverse implications on
the external sector.
TERMS OF TRADE
The increase in export prices and reduction
in import prices resulted in a significant
improvement in the terms of trade in 2014. The
export price index increased by 2.7 per cent,
year-on-year, to 105.5 index points, while the
import price index declined by 1.5 per cent to
108.1 index points. Accordingly, the terms of
trade improved by 4.3 per cent to 97.6 index
points in 2014 from 93.6 index points in 2013.
The export price index increased reflecting
relatively higher prices in both agricultural and
industrial exports in 2014. In the agricultural
exports category, the average export price
index of coconut products increased by 15.0 per
cent mainly due to higher export prices received
for kernel products in the international market.
Although the average export price index of
tea increased during the first half of 2014, it
declined during the second half, mainly due to
lower demand from Russia and the Middle East,
the major tea export destinations of Sri Lanka.
However, the export price index for tea for the
year 2014 increased marginally by 1.9 per cent,
year-on-year, despite the decline in tea prices
in the Kolkata and Mombasa auctions for other
originated teas. Export price index for minor
agricultural products also increased reflecting
favourable prices of products such as fruits,
nuts and essential oils. However, export price
index for rubber declined by 10.5 per cent in
2014, reflecting global market conditions. The
industrial export price index increased by 3.0
per cent in 2014, mainly due to a 3.3 per cent
increase in prices of textiles and garments and a
9.7 per cent increase in leather, travel goods and
footwear. Improvements in the quality standards
of final products in the garment industry with the
adoption of modern technology and innovation
provided access to high end markets for Sri
Lankan products, resulting in an increase in the
unit price of textiles and garments. Meanwhile,
export price indices for petroleum products,
base metals and articles, and transport
equipment declined in 2014.
The average import price of intermediate and
investment goods in 2014 remained lower
compared to the previous year, while prices
of consumer goods increased marginally.
The import price index pertaining to the
intermediate goods fell by 2.4 per cent, mainly
due to the decline in fuel prices. Although the
import price index of fuel increased during the
first half of 2014, it continued to decline during
the second half of the year amidst lower demand
due to weak global economic activity and ample
supply especially from non OPEC countries.
These developments led to a decline in import
price index of fuel by 6.3 per cent in 2014.
Import price index of fertiliser, which declined
by 10.3 per cent, year-on-year, also contributed
significantly for the overall decline in import
prices. Meanwhile, average import prices of
wheat and maize, diamond, precious stones
and metals, and rubber and articles thereof
also declined significantly. The import price
index of investment goods declined by 2.7 per
cent in 2014, reflecting a price decline in all sub
categories. In line with the decline in prices of
raw material and base metal in the international
market, the import price index of building
material declined by 3.0 per cent. Further, the
significant depreciation of Japanese yen against
US dollar contributed for the decline in the price
35
index of transport equipment. Import prices of
food and non-food category increased by 0.1
per cent and 1.0 per cent respectively, leading to
an increase in the consumer goods price index
by 0.7 per cent. Import price index for dairy
products increased substantially in 2014 despite
the slight reduction of prices in the international
market. However, import prices of sugar and
confectionery declined due to higher supplies
in major sugar producing countries. Meanwhile,
import prices of clothing and accessories,
medical and pharmaceuticals, and vehicles for
personal use, which are categorised under nonfood consumer goods also increased.
DIRECTION OF TRADE
India remained Sri Lanka’s major trading
partner in 2014 followed by China and the USA.
Industrialised countries specially the USA and
the UK remained the largest export destinations,
while Asia particularly India and China remained
the major import origins. The value of trade
between Sri Lanka and India amounted to over
US dollars 4.6 billion in 2014, which was about
15 per cent of Sri Lanka’s total external trade for
the year, while the trade between Sri Lanka and
China was about 12 per cent of total trade of Sri
Lanka.
The USA continued to be the single largest
buyer of Sri Lanka’s exports for a long period
36
since 1979. The share of Sri Lanka’s total exports
to the USA increased to 24.5 per cent in 2014
from 24.0 per cent recorded in 2013, registering
a 9.5 per cent growth in export earnings over
the previous year. Exports of garments and
rubber products respectively accounted for
72.9 per cent and 10.4 per cent of total exports
to USA. The UK, the second largest export
destination, recorded a share of 10.0 per cent
of total exports in 2014. Garments and rubber
products respectively accounted for 80.9 per
cent and 3.6 per cent of total exports to UK.
Out of Sri Lanka’s total garment exports of US
dollars 4,682 million, exports to USA and UK
accounted for 42.5 per cent and 19.3 per cent,
respectively. India, the third largest buyer of Sri
Lanka’s exports recorded a share of 5.6 per cent
followed by Italy and Germany.
The major exports to India were minor agricultural
products,
spices,
transport
equipment,
machinery and mechanical appliances, and
petroleum products. Exports to Italy increased
by 20.3 per cent in 2014, representing 5.5 per
cent of total exports mainly due to the increase
in garment exports. Exports to Germany, which
represent 4.5 per cent of total exports increased
by 6.3 per cent in 2014. Russia and Turkey which
accounted for 14.0 per cent and 12.8 per cent
of total tea exports, respectively, continued
to be the major buyers for Sri Lankan tea in
2014. However, tea exports to Russia declined
by 5.0 per cent, year-on-year, as a result of the
unfavourable economic conditions, such as the
larger depreciation of Russian currency and
sharp decline in petroleum prices towards the
latter part of the year. Meanwhile, tea exports to
Turkey increased by 48.1 per cent during 2014.
Concentration of export markets is a main
concern as it can lead to instability in export
earnings. Sri Lanka largely depends on a few
markets namely, the EU and USA which account
for around two thirds of total exports. Further,
around 66 percent of the Sri Lanka’s tea export
to the Middle East and Commonwealth of
Independent States (CIS) countries, which are
highly dependent on oil exports. In order to
mitigate this risk, a public and private sector
combined multi-faceted approach is essential
to diversify the markets. Moreover, exporters
should utilise existing trade facilities and trade
agreements to enhance market access.
India continued to be the single largest source of
imports, followed by China and the UAE. During
2014, imports from India increased to US dollars
4,023 million registering 26.9 per cent growth.
This accounted for 20.7 per cent of Sri Lanka’s
total imports, with petroleum products, fabric
and vehicles being the main imports. China,
the second largest import origin of Sri Lanka
accounted for 18.0 per cent of total imports, in
2014, increasing by 18.3 per cent, year-on-year,
to US dollars 3,494 million. The main imports
from China were fabrics, petroleum products,
engineering equipment and, iron and steel.
The UAE was the third largest import origin,
surpassing Singapore by recording a 55.8 per
cent growth. Petroleum products accounted
for 87.1 per cent of total imports from the UAE.
Singapore and Japan were the fourth and fifth
largest import sourcing countries, accounting
for 6.5 per cent and 4.8 per cent of total imports,
respectively. However, imports from Singapore
declined by 25.1 per cent in 2014 due to lower
imports of petroleum products in the backdrop
of a 71.7 per cent increase in petroleum imports
from the UAE. Major imports from Singapore
and Japan comprised petroleum products and
motor cars, respectively.
(Source: Central Bank of Sri Lanka Annual Report 2014)
37
38
FINANCE STATEMENTS
FOR THE YEAR ENDED
31 MARCH 2015
01
02
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04
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PDF - Sri Lanka Shippers Council

Transcription

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