Logistics

1. A Contemporary Appraisal of Logistics Performance in Sri Lanka
Dr. Lalith Edirisinghe
Logistics, in general, refers to the detailed organization and implementation of a complex operation.
Logistics refers to a series of services and activities, such as transportation, warehousing, and
brokerage, that help to move goods and establish supply chains across and within borders (Arvis, et
al., 2016). Gani, (2017) identified eight factors that causes poor logistics services namely, (i) limited
co-ordination among countries on border procedures; (ii) inefficiency of customs clearance process
at the ports; (iii) fragmented and inferior quality of transportation related infrastructure; (iv) costly
and infrequent shipping (with long and indirect shipping routes);(v) delays in tracking and tracing
consignments; (vi) delays in terminal handling and clearance of goods; (vii) absence of cool storage
facilities at ports; and (viii) the inability to certify product quality. Logistics performance plays a
crucial role in servicing and attracting investment to a country (Edirisinghe, 2013). Therefore, a clear
understanding about the status of logistics performance is the key to identify the potential gaps that
needs to be bridged to compete with other countries in the region. Logistics services provide sectoral
connections within the local economy. It also connects the domestic economy to the international
economy (Gani, 2017).
A crucial role is played by logistics in terms of sequential impact to investment promotion of a
country and lower performance is a common challenge to maximize FDIs particularly for developing
countries. Despite logistics play an integral role in supporting commercial activities, there has
generally been a low level of analysis and trade policy research focus from trade practitioners (Gani,
2017). Poor logistics leads to uncompetitive supply chain performances. A trade supply chain is only
as strong as its weakest link. Progress in one area cannot always offset a lack of progress elsewhere.
The policymakers must strengthen the weakest links with targeted development interventions
(Edirisinghe, 2017). Poor logistics can cause significant hindrance to international trade thus may
have serious negative consequences on investments. On contrary, improvements in logistics and
transport services of a country will promote investments to a country. Investors are more particular
about the access of their end products to foreign markets more competitively. Investing in a new
location (country) is usually one-time activity, but the logistics and transportation of raw materials
and finished goods are recurring activities. With respect to Sri Lanka shipping is the key mode of
international transport. Shipping is highly sensitive with respect to timely delivery of cargo
(Edirisinghe, 2017) Therefore, if the country’s logistics and transport services (LTS) cannot provide
a competitive edge to investors the investor attraction will be seriously declined. Exporters have
limited patience and container shipping is a highly competitive sector (Edirisinghe, Jin, & Wijeratne,

2. 2016 b). This article provides qualitative assessment regarding the logistics performance which, in
return provides insights and invites innovative mechanisms for the way forward. It mainly examines
internationally published reports that contain different indexes and rakings in relation to logistics.
Logistics Performance Index (LPI)
Logistics comprises a network of services that supports the physical movement of goods within
and across borders. Logistics is understood as a network of services that support the physical
movement of goods, trade across borders, and commerce within borders. It is a $4.3 trillion industry
(The World Bank, 2018). The global perception about the logistics performance of the country can
surely has an impact to the investments in Sri Lanka. The International Bank for Reconstruction and
Development (IBRD) and The World Bank’s Connecting to Compete report analyses countries in six
components ascertaining various countries’ performances namely, logistics performance indicator
(LPI). This is a unique benchmarking tool, providing the same measure for more than 160 countries.
The 2018 Logistics Performance Index scores countries on how efficiently they move goods across
and within borders.
Sri Lanka is geographically located in a highly strategic position. The main East-West sea route
runs proximity to the country. The country is located very close to India- the Emerging Giant. This
has been an enormous fortune for Sri Lanka to improve its logistics performances though scale of
economies. However, Sri Lanka’s logistics performance is not, in any way, commensurate with these
comparative advantages.
Table 1: Logistics performance in Sri Lanka 2010-2018
Indicator Rank
(out of 155 countries) (out of 160 countries)
2010 2012 2014 2018
Logistics Performance Indicator 137 81 89 94
Infrastructure 138 89 126 85
Logistics Quality and Competence 142 68 66 109
Customs 143 71 84 79
International Shipments 117 50 126 112
Tracking and Tracing 142 86 85 78
Timeliness 125 110 85 122
(Note: In 2016 Sri Lanka was not ranked in this report)
Selection of most economical transport modes and facilitate them in a sustainable manner
through an effective logistics system has been a continuous challenge to any country. Transport and
logistics are fundamental in supply network management. It helps satisfy mobility needs, and to
support economic development and to participate in the global economy more effectively.
Although the LPI and its components offer the most comprehensive and comparable data on
country logistics and trade facilitation environments, the report claims that it has a limited domain of
validity because of the limited experience of survey respondents and, for landlocked countries and
small island states, the dependence of their logistics on the logistics of other countries. To provide a
bigger, better-balanced picture of country performance, this report publishes the current 2018 results
alongside a composite score of the four latest surveys (2012–18). According to (IBRD, 2018), this
approach reduces the noise and random variation from one LPI survey to another and enhances the
comparison of aggregate scores for the 167 countries in the 2018 edition.
Sri Lanka is an island thus sea transport is the most ideal mode in international business. The port
of Colombo in Sri Lanka records approximately 75% of its throughput with the help of transhipment
containers and the main contributor of this container volumes is India. The transport and logistic
sector facilitate international trade as it allows firms to effectively complete imports and exports of
goods and services and associated transactions (Gani, 2017). Logistics powers the supply chain

3. (Edirisinghe & Zhihong, 2016 a). table 2 provides the LPI results of the South Asian Association for
Regional Cooperation (SAARC) Charter countries.
Table 2: Aggregated international LPI results across four editions: 2012, 2014, 2016, and 2018
Indicator
India
Pakistan
Sri
Lanka
Bangladesh
Maldives
Nepal
Bhutan
Afghanistan
Customs 43 104 77 120 97 141 134 161
Infrastructure 48 100 104 109 72 159 153 163
International Shipments 38 79 108 99 104 164 122 159
Logistics Quality & Competence 39 80 85 94 115 124 124 163
Tracking and Tracing 37 112 81 89 103 138 141 167
Timeliness 50 112 113 108 96 155 150 159
Logistics Performance Indicator (LPI) 42 95 92 100 97 151 151 165
Apart from the above six pillars it may also be vital to compare the industry perception about certain
key operational factors with Singapore, United Arab Emirates, and India for obvious reasons.
Table 3: Responses to some crucial questions in the LPI survey
India
Singapore
Sri
Lanka
United
Arab
Emirates
Percentage of shipments meeting quality criteria (%) 77 94 40 86
Number of agencies -Imports 3 2 4 3
Number of agencies - Exports 3 2 - 2
Number of forms -Imports 3 1 4 4
Number of forms - Exports 3 1 4 3
Clearance time (days) Without physical inspection 1 0 2 1
Clearance time (days) With physical inspection 2 1 4 1
Physical inspection-% of import shipments 19 2 6 10
Multiple inspection% of shipments physically
inspected
3 2 6 3
It is clear from above comparison that the percentage of shipments meeting quality criteria in Sri
Lanka is much lower than our neighbouring countries those who compete with us in the logistics hub
operation. Further, it was noted that 26 countries out of 160 countries have obtain more than 90% in
the quality component.
Global Competitiveness Index (GCI)
Global Competitiveness Index published by the World Economic Forum is another source used in
this desk research. As reported in the Global Competitiveness Index (GCI) 2018, Sri Lanka was
ranked 85 out of 140 economies with a score of 4.08. this is a decline from 71 with 4.12 score in the
2017 report. The overall GCI ranks countries under 3 sub-indexes namely. Basic requirements;
Efficiency enhancers; and Innovation and sophistication. This annual report defines competitiveness
as the set of institutions, policies, and factors that determine the level of productivity of an economy,
which in turn sets the level of prosperity that the economy can achieve. The GCI combines 114
indicators that capture concepts that matter for productivity and long-term prosperity. These
indicators are grouped into 12 pillars namely, institutions, infrastructure, macroeconomic
environment, health and primary education, higher education and training, goods market efficiency,

4. labour market efficiency, financial market development, technological readiness, market size,
business sophistication, and innovation. Sri Lanka’s rank is indicated below with respect to selected
component in the infrastructure pillar. In addition to statistical data from internationally recognized
organizations the GCI includes indicators derived from the World Economic Forum’s Executive
Opinion Survey that reflect qualitative aspects of competitiveness. Accordingly, a justifiable variation
between LPI and GCI is evident in the ranking for the same component. For example, LPI ranked Sri
Lanka in 85th
position out of 160 countries under Infrastructure while GCI ranks it at 79 out of 137
countries. Table 4 provides a comparison of selected logistics related components with Switzerland
that ranks no. 1 in 2018 It is clear from the comparisons that even the best performing country has
performed lower in certain factors.
Table 4: Selected indicators of the Global Competitiveness Report 2018
CGI Component Rank out of 137 Value
Sri Lanka Switzerland Sri Lanka Switzerland
Quality of overall infrastructure 79 1 3.9 6.6
Quality of roads 61 3 4.2 6.3
Quality of railroad infrastructure 55 1 3.2 6.6
Quality of port infrastructure 57 56 4.5 4.5
Quality of air transport infrastructure 75 7 4.2 6.2
Available airline seat kilometres
millions/week
55 30 349.9 1,121.5
These analyses provide some insights as to what factors may critically important in making the Sri
Lanka’s rank better. For example, the quality of port infrastructure in Switzerland is almost like the
ranking of Sri Lanka but they are number one in the overall performance. Transparency of
government policymaking, Quality of railroad infrastructure, Quality of air transport infrastructure,
Degree of customer orientation, and Buyer sophistication has primarily helped Switzerland to achieve
superior performance (W.E.F., 2017).
Doing Business (DB) Report
Doing Business Report of International Bank for Reconstruction and Development (IBRD)
provides various logistics related data. Doing Business measures aspects of business regulation
affecting small and medium-size domestic firms defined based on standardized case scenarios and
located in the largest business city of 190 economies. The Doing Business data are collected in a
standardized way through a questionnaire using a simple business case to ensure comparability across
economies and over time with assumptions about the legal form of the business, its size, its location
and the nature of its operations. The Doing Business methodology is transparent, using factual
information about what laws and regulations say and allowing multiple interactions with local
respondents to clarify potential misinterpretations of questions (The World Bank, 2018). With respect
to “Trading across borders”, Netherlands ranks the topmost position. The annual comparison of rank
during last four years about Sri Lanka is tabulated in table 5. These performances are not attractive.
However, it is encouraging to note improvements in the overall “Ease of Doing Business” rank in
2019 after gradual decline in the previous consecutive years.
Table 5: Comparison of Doing Business Report -2016-2019
Indicator 2019 2018 2017 2016
No of countries considered 190 190 190 189
Trading across borders 93 86 90 90
Documents to export(number)
Time to Export(days) Documentary compliance(hours) 48 48 76 76
Border compliance(hours) 43 43 43 43
Domestic Transport(hours) 6
Documentary compliance(US$) 58 58 58 58

5. Cost to export (USD
per container)
Border compliance(US$) 366 366 366 366
Documents to import(number)
Time to import(days) Documentary compliance(hours) 48 48 58 58
Border compliance(hours) 72 72 72 72
Domestic Transport(hours) 6
Cost to import (USD
per container)
Documentary compliance(US$) 283 283 283 283
Border compliance(US$) 300 300 300 300
Ease of Doing Buseness 100 111 110 107
In addition to above three global reports, the Review of Maritime transport 2018 issued by the
United Nations Conference on Trade and Development indicates the level of maritime connectivity,
2018 based on liner shipping connectivity index. As per the level of maritime connectivity, in 2018
Sri Lanka holds 4th
position in Asia. Sri Lanka, which has long been a stopping point for trading
vessels and a key gateway to the Indian Ocean, weighs in at only 61.2. Out of the 190 countries
surveyed, Sri Lanka ranks at 100. Even India, a notoriously frustrating place to do business, earns a
higher score (67.2) and a better global ranking (77). The best performer in the Bay of Bengal region
is Thailand, with a score of 78.45 and a global ranking of 27.3 (Frost, 2018). Port development and
refurbishment projects under the Belt and Road Initiative, for example in Pakistan (Gwadar), Djibouti,
Myanmar (Kyaukpyu), Greece (Piraeus), and Sri Lanka (Hambantota and Colombo) are contributing
to the upgrading and upscaling of port infrastructure in Africa, Asia and Europe.
The need for improved logistics is critical in the present context to Sri Lanka given the slow phase
of new investments. If the market perception about Sri Lanka is further deteriorated even the existing
manufacturers and exporters may look for alternatives. There was a boom in FDIs to the country
given the somewhat open economy in Sri Lanka in 1977. Subsequently, the Board of Investment of
Sri Lanka (then Greater Colombo Economic Commission) took certain critical decisions in terms of
trade facilitation and particularly with respect to Customs and border management aspects that plays
a crucial role in logistics. In 1990 the regulations in international shipping was liberalized to great
extent paving the way for international carriers to operate their services freely in Sri Lanka. The
process of export shipment was made very efficient and customer friendly by removing certain
bottlenecks. The involvement of Central Freight Bureau in exports freight booking was made
inactive.in today’s context Sri Lanka need focus on two fundamentals namely, 1) providing a better
service to the existing investors and retain them and 2) Create competitive advantages and attract new
FDIs. The quality of logistics plays a key role in both these endeavours.
The paradigm of interconnectedness continues to hold command in today’s global community
(Edirisinghe, 2017). The intensifying global interconnectedness make it vital for the respective
countries to cross their borders, thus customs administrations will be increasingly important for
managing the impact of the changes at the border (Edirisinghe & Jayathilake, 2014). Logistics Quality
& Competence is an area that has more potential for improvement in the present scenario. Logistics
has now been introduced in the G.C.E. (Advanced Level) syllabus in the commerce stream. This is a
very good move, but logistics education is not popular in Sri Lanka due to lack of social awareness
about the substantial carrier benefits and job opportunities prevail in this industry. Even the maritime
sector is not popular in tertiary education in many countries (Edirisinghe, Zhihong, & Shen, 2016).
A sensible approach may be required to change this situation that could be advantageous to the society
as well as capacity building perspectives of the industry. Collaboration between government
authorities and private education institutes can play a substantial role (Edirisinghe, Zhihong, &
Wijeratne, 2017). It is important that education and industry move forward hand in hand. The
organization need to recognize the value in qualified logisticians who could save substantially with
the help of transportation and logistics planning models and techniques. Transportation and logistics
companies are lagging other sectors in terms of recruiting and hiring (Edirisinghe & Rashika, 2017).
The social awareness needs medium and long-term policy plaining by authorities. Logistics and
maritime education may effectively begin from schools at secondary level education subject. The
post-secondary education is a real turning point for most of students (Edirisinghe, Jayakody, Ranwala,
& Shen, 2016). Since there are government and private universities in Sri Lanka have already
commenced undergraduate and postgraduate degree programs in Logistics, transport and Supply

6. chain management the students can visualize their future academic progress during the post-
secondary stage.
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