The Shipping and Logistics performance and its impact to the investments in Sri Lanka; A Contemporary appraisal

1. The Shipping and Logistics
performance and its impact to the
investments in Sri Lanka; A
Contemporary appraisal
BoI Staff Seminar series
Presented by Prof. Lalith Edirisinghe, PhD

2. Presentation
agenda
1. Introduction
2. Trading, Investments, and Global Supply Chain
3. Global Perception on Logistics Performance in Sri
Lanka
4. Sri Lanka’s Investment Related Ranking
 Global Competitiveness Index
 Doing Business Report
5. Maritime Industry andWorldTrade (Video)
6. Challenges
7. Opportunities
8. Summary
2CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells6/4/2020

3. The Flow of
Investment
and the Role
played by
Logistics
6/4/2020 CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells 3

4. Vision
&
Key (Selected)
Objectives
To make Sri Lanka the most preferred
destination for sustainable investment
in Asia
1. Encourage and promote investment
(FDI)
2. Increase export earnings
3. Promote Sri Lanka as aTrading Hub
6/4/2020 CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells 4

5. Trading,
Investments,
andGlobal
SupplyChain
6/4/2020 CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells 5
Investors
Logistics & Shipping
Investor Services
Investment
Promotion

6. BOI &
LPI’s Impact
on
Investments
1. Logistics ranking play a key role in FDI
decisions
2. This Global perception may present a
huge impact to BOI (especially to the
Investor Services Dept. and Investment
Promotion Dept.) enhancing their
performance in Sri Lanka
CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells 66/4/2020

7. 6 Pillars of
Logistics
Performance
(Source:TheWorldBank
IBRD)
6/4/2020 CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells 7
Logistics ranking is assessed
based on 6 components
Component Weight*
Customs 0.41
Infrastructure 0.41
Ease of Arranging International
Shipments
0.41
Logistics Quality & Competence 0.41
Tracking andTracing 0.41
Timeliness 0.40
*Those are not just weights, but factor loadings calculated based on variance /
covariance structure

8. Global Perception
(LPI)
Source:TheWorldBank
Indicator
India
Pakistan
SriLanka
Bangladesh
Maldives
Nepal
Bhutan
Afghanistan
Customs 46 66 79 104 83 151 134 146
Infrastructure 45 70 123 105 85 133 153 163
International
Shipments
38 62 103 77 118 129 122 152
Logistics Quality &
Competence
38 73 67 93 98 147 124 156
Tracking andTracing 42 74 82 99 102 116 141 165
Timeliness 45 75 87 86 130 119 150 154
Logistics Performance
Indicator (LPI)
42 69 86 91 100 136 140 160
South Asia’s world rank in the Logistics Performance
Indicator (LPI)
Connecting to Compete -LPI results across four editions 2010, 2012, 2014, and 2016 (No. of
countries evaluated 167) 8

9. 6/4/2020 9
Indicator
LPI Rank
Germany
SriLanka
Singapore
UnitedArab
Emirates
Somalia
Customs 2 79 1 18 167
Infrastructure 1 123 3 16 167
International Shipments 7 103 4 13 167
Logistics Quality &
Competence
1 67 5 23 167
Tracking andTracing 1 82 9 19 167
Timeliness 2 87 6 18 167
Logistics Performance
Indicator (LPI)
1 86 3 19 167
LPI Score
Germany
SriLanka
Singapore
UnitedArab
Emirates
Somalia
4.07 2.52 4.11 3.67 1.49
4.38 2.24 4.22 3.92 1.54
3.79 2.62 3.89 3.64 1.72
4.20 2.84 4.06 3.71 1.72
4.21 2.71 4.02 3.78 1.51
4.41 3.08 4.35 4.06 2.03
4.17 2.68 4.10 3.79 1.67

10. Comparison of
key Logistics
Factors
(Imports)
6/4/2020 10
Criteria
Germany
Singapore
UnitedArab
Emirates
India
Clearance
time
(days)
Without
physical
inspection
1 0 1 2
With physical
inspection
2 1 1 3
Physical
inspection
% of import
shipments
3 1 14 22
Multiple
inspection
% of shipments
physically
inspected
2 1 4 4
SriLanka
1
2
37
13
Source: IBRD –TheWorld Bank (2016)

11. Improving
Logistics inSri
Lanka
1. Competence Building through
Enhancement of Knowledge
2. Smart Capacity Building
3. Optimization of available
Resources
4. Identifying and Elimination of
Obstacles in the Operational
Process
6/4/2020 CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells 11

12. Smart
Capacity
Building
6/4/2020 CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells 12
PublicTraining
Collaborative
Learning
TailoredTraining
Participation in
Reforms

13. Sri Lanka’s
Investment
Related
Ranking
1. Global Competitiveness Index of
World Economic Forum
2. Doing Business Report of
International Bank for
Reconstruction and Development
(IBRD) -TheWorld Bank
6/4/2020 CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells 13

14. Investment
related Factors
(Source:Global
Competitiveness Index
WorldEconomic
Forum)
6/4/2020 CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells 14
GCI Rank(out of 138 countries)
Sri Lanka
71
1st pillar: Institutions 2015/16 2016/17
Irregular payments and bribes 88 78
Favouritism in decisions of
government officials
98 88
Burden of government
regulation
64 56
Transparency of government
policymaking
80 81
Strength of investor
protection, 0–10 (best)*
50 49
Switzerland
1
Remarks
2016/17
11 Finland ranks 1& New
Zealand 2
(No corruption)
7 Singapore ranks 1
7 Singapore ranks 1
3 Singapore ranks 1
90 Singapore ranks 1

15. Investment
related Factors
Source:Global
Competitiveness Index
WorldEconomic
Forum
6/4/2020 CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells 15
Switzerland
1
Remarks
2016/17
7
2
55 Netherlands ranks 1;
New Zealand ranks 2
8 Singapore ranks 1
GCI Rank (out of 138 countries) Sri Lanka
71
2nd pillar: Infrastructure 2015/16 2016/17
Quality of roads 27 43
Quality of railroad
infrastructure
37 43
Quality of port
infrastructure
58 60
Quality of air transport
infrastructure
45 58

16. Investment
related Factors
(Source:Global
Competitiveness Index
WorldEconomic
Forum)
6/4/2020 CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells 16
GCI Rank (out of 138 countries) Sri Lanka
71
6th pillar:Goods market
efficiency
2015/16 2016/17
No. of procedures to start a
business*
104 94
No. of days to start a business* 59 56
Prevalence of non-tariff barriers 92 73
Trade tariffs, % duty* 138 136
Prevalence of foreign ownership 61 79
Business impact of rules on FDI 38 68
Burden of customs procedures 59 63
Imports as a percentage of GDP* 98 107
Degree of customer orientation 30 38
Buyer sophistication 33 45
Switzerland
1
Remarks
2016/17
54
56
58 Singapore ranks 1
57
19 United Kingdom
ranks 1
12
14 Hong Kong ranks 1
48 Hong Kong ranks 1
3 Japan ranks 1
3

17. Investor related
Logistics
performances
(Sri Lanka
2007/15)
(Source:Doing BusinessReport
ofIBRD-TheWorld Bank)
CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells 17
Indicator 2015 2014 2013 2012 2011 2010 2009 2008 2007
No of countries
considered
189 189 185 183 183 183 181 178 175
Trading across borders 69 51 56 53 72 65 66 60 99
Documents to
export(number)
7 5 6 6 8 8 8 8 8
Time to Export(days) 16 20 20 21 21 21 21 21 25
Cost to export (USD per
container)
560 595 720 715 715 715 865 810 797
Documents to
import(number)
7 7 6 6 6 6 6 6 13
Time to import(days) 13 17 19 19 19 20 20 21 27
Cost to import (USD per
container)
690 775 775 745 745 745 895 844 789
Ease of Doing Buseness 99 85 81 89 102 105 102 101 89
6/4/2020

18. CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells 18
Indicator Year: 2017 Sri
Lanka
New
Zealan
d
Nethe
rlandsNo of countries
considered
No. of Countries: 190
Starting a business 74 1 28
Trading across borders 90 55 1
Time to Export(days) Documentary
compliance(hours)
76 3 1
Border compliance(hours) 43 38 0
Cost to export (USD
per container)
Documentary
compliance(US$)
58 67 0
Border compliance(US$) 366 337 0
Time to import(days) Documentary
compliance(hours)
58 1 1
Border compliance(hours) 72 25 0
Cost to import (USD
per container)
Documentary
compliance(US$)
283 80 0
Border compliance(US$) 300 367 0
Ease of Doing Business 110 1 28
Investor related
Logistics
performances
(2017)
(Source:DoingBusiness Report
of IBRD-TheWorld Bank)
6/4/2020

19. Leverage on
Sri Lanka’s
Comparative
Advantage
6/4/2020 CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells 19

20. Port of
Colombo
Performance
(Containers)
Source:CASA/SLPA
Type 2011 2012 2013 2014 2015 2016
Transshipment
TEUs
Laden 2766086 2717246 2855514 3278475 3395328 3873272
Empty 357742 347521 352603 421235 492993 481989
Sub
total
3123828 3064767 3208117 3699710 3888321 4355261
Total handling
TEUs (Domestic
+Transshipment +
Re-stow)
Laden 3561674 3490696 3625098 4098284 4269749 4820622
Empty 701213 696424 681108 809631 915718 914301
Total 4262887 4187120 4306206 4907915 5185467 5734923
Transshipment as a % of
total
73% 73% 74% 75% 75% 76%
Empty containers as a % of
Total
16% 17% 16% 16% 18% 16%
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21. 30% of India’s
Export/Import
Cargo is
Transshipped
at Foreign
Ports
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22. Sri Lanka: the
preferred hub
inSouthAsia
CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells 226/4/2020

23. Optimizing
Existing
Resources
Maritime Industry Plays a major role
in Sri Lanka’s LPI
It is Beneficial for Sri Lanka to
Promote Investments in Logistics
Services and Logistics Infrastructure
CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells 236/4/2020

24.  Video
1. Shipping IndustryToday
2. Shipping IndustryTomorrow
6/4/2020 CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells 24

25. The Need for
New
Investments in
Logistics
Sector
256/4/2020
Investment into Logistics Infrastructure
Additional Logistics Infrastructure
Increased Efficiency
Better Reliability and Service Quality
Multiplication of Added Value
Lower Logistics Cost Shorter Transit Times Business Expansion
Productivity of Port Centric
Logistics Systems
Competitiveness of Small Countries Economic
Systems and their Port Centric Logistics System
Economic Growth of Small Countries
Source: L. Sujeta andV. Navickas, "The Impact of Port Logistics Systems on a Country's Competitiveness (Case of
Small Countries)," Economics and Management, vol. 19, no. 1, pp. 44-53, 2014.

26. Competitive
PortTerminal
Facilities inSri
Lanka
CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells 266/4/2020
Deviation Time in Vessel FuelCost Port Access Cost of Total
Port Time Port DeviationTime ($)*** Charges time in Marginal
(Days*) Cost ($)*** ($)*** Port ($)** Cost ($)
Chennai 1.10 1.00 24,750 18,840 28,000 22,500 93,730
Chittagong 2.25 1.00 50,625 37,800 22,500 22,500 130,925
Cochin 0.13 1.00 2,925 2,184 22,500 22,500 56,109
Dubai 2.37 0.50 53,325 39,816 5,500 11,250 109,891
JNPT / NSICT 0.85 1.00 19,125 14,280 26,500 22,500 82,405
Karachi 1.33 1.00 29,925 22,344 20,000 22,500 94,769
Mundra 1.30 1.00 29,950 21,840 28,000 22,500 101,590
Tuticorin 0.09 1.00 2,025 1,512 33,500 22,500 59,537
Colombo 0.06 1.00 1,350 1,006 10,000 22,500 34,858
Notes : All figures in US$ * At 23 Knots, ** At US$ 22,500 per day for a 4,000TEU vessel ***At 120 tpd x US$ 140/t
{Source: Drewry Shipping Consultants Ltd/SAGT)

27. Maritime
industry and
world trade
 Shipping is a “derived demand” of world
trade
 Demand for shipping is derived from the
demand of goods between countries
 Size of world trade decides the demand for
shipping
 WorldTrade Organization (WTO) provides a
platform to decide future strategies related
to trade
27CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells6/4/2020

28. Trade
Agreements:
the Key to
Booming
Maritime
Logistics
28
Sri Lanka Participation in Goods and Services RTAs
CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells6/4/2020

29. Growth in
merchandise
trade volume
by selected
country
grouping,
2013–2015
(Percentagechange)
29CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells6/4/2020

30. "Shipping:
Indispensable
to the world"
 A single ship can carry enough grain to feed
nearly four million people for a month;
 Another, enough oil to heat an entire city for a
year,
 And others can carry the same amount of
finished goods as nearly 20,000 heavy trucks on
the road.
International Maritime Organization
30CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells6/4/2020

31. Ownership of
World fleet:
the Regional
Strength
Source: UNCTAD secretariat calculations, based on data from Clarksons Research.
Note: Propelled seagoing merchant vessels of 1,000 gross tons and above, as at 1 January
CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells 316/4/2020

32. Challenges in
Maritime
Industry
1. Global shortfall of competent workforce in maritime sector and
declining demand for freshers
 World fleet is registered in over 150 nations
 Manned by more than a million seafarers of virtually every
nationality
2. Security threat
3. Environmental regulations
 Maritime transport emits around 1000m tonnes of CO2 annually
 This accounts 2.5% of global greenhouse gas emissions
4. The container inventory imbalance costs USD 15 Billion a year
globally
20% of containers transported by sea and 40% by land are empty
5. Alliances and M&As
32CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells6/4/2020

33. Challenges
specific toSri
Lanka
1. Volatility of Freight (being the last loading port E/W
and oversupply)
2. Ever increasing Empty Reposition Cost in Sri Lanka
over USD 100 Million a year
3. Deteriorated vessel deployments for Sri Lankan
Cadets
4. Heavy dependency onTranshipments
 Currently, over 27.4% of India's export/import cargo is
transhipped at foreign ports
 Sri Lanka depends on transhipment volumes of Indian
t/s cargo
 The Indian Cabotage rules allow the foreignflagged vessels
to carry cargo only if Indian flagged vessels are not
available
33CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells6/4/2020

34. Customs and
Border
Management
Issues
 Relatively slow progress of implementing the Revised Kyoto
Convention (RKC) of the World Customs Organization (WCO)
 Trade FacilitationAgreement (TFA) of theWorldTrade
Organization (WTO).
 Sri Lanka signed the RKC in 1999, subject to ratification.Appeals
Directorate was established in November, 2014
6/4/2020 CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells 34

35. Opportunities
Source: www.containersindia.in (2016)
'Strengthening Maritime Cooperation for a
Peaceful, Stable and Prosperous Indian Ocean'.
Indian Ocean Rim Association (IORA)
35CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells6/4/2020

36. Opportunities
for Regional
Cooperation
1. The region is showing greater opportunities for shipping and
logistics businesses
2. One Belt- One Road Initiative
 India High-speed rail cooperation;
 industrial parks, Gujarat and Maharashtra
 PakistanChina–Pakistan economic corridor
 roads and railway
 port upgrades, including airport
 power plant and roads
3. Sri Lanka Deepwater port in Hambantota
4. China Merchants Holdings International investment in Port of
Colombo
Source:The MaritimeTransport Review- 2016
366/4/2020

37. Regional
Cooperation
to Improve
Occupational
Standards
IORA team inspecting Port Patrick-
in Sydney Australia
Sri Lankan
representatives of IORA
Port Occupational
project in the SL High
commission office in
Canberra to brief the
project development
The members of IORA Port
Occupational project in port of
Colombo
2015
Team visiting the “Ship
in Campus” at CINEC
–Malabe- Sri Lanka
2016
376/4/2020

38. Solutions
Through
Collaboration
Virtual Container Pool -VCP®
Virtual Container Pool –VCP is created by Dr. Lalith Edirisinghe
Developed by Dalian Maritime University and CINEC Maritime Campus. All Rights Reserved.
®
38
Container Exchange Mathematical Model

39. Summary
6/4/2020 CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells 39
1. Relationship between Investments, and Global
Supply Chain
2. Capacity building in BOI is vital particularly the
Investor Services Dept. and Investment Promotion
Dept.
3. Logistics Performance in SL
4. Sri Lanka’s Investment Related Ranking
 Global Competitiveness Index
 Doing Business Report
5. Need for Logistics related Investments to SL
6. Challenges &Opportunities

40. Credits:
1.InternationalMaritimeOrganization
2.TheWorldBank
3.WorldShippingCouncil
UnitedNations
4.IndianOceanRimAssociation
5.CeylonAssociationofShippingAgents
6.SriLankaPortsAuthority
7.CINECMaritimeCampus
8.DalianMaritimeUniversity
9.www.marineinsight.com
10.www.pridel.com
11.www.containersindia.in
12.D.-WSong,&P.Panayides
13.IBRD
14.SujetaandV.Navickas
CINEC Maritime Campus- Malabe, Nugegoda, Trincomalee, Jafna, Fiji, Seashells 406/4/2020