The removal of restrictions on foreign ownership in the shipping industry has become a talking point once again, with the Government appearing to be keen on implementing the relevant Budget proposal which was put on the backburner in the face of opposition from certain influential industry players. In an exclusive interview with The Sunday Morning Business, The Ceylon Association of Shipping Agents (CASA) Chairman Ruwan Waidyaratne spoke about the reasons for CASA’s continuing opposition to the proposal. Q. What is your exact view on shipping agency liberalisation, which has become a talking point again of late? A. The point of view of CASA is that shipping is a liberalised industry. There’s nothing to talk about in liberalising shipping because it was liberalised in 1990. If any business is to be liberalised in a country, it should be done intelligently with some value coming into the country. I don’t see any value that is being provided by liberalisation. If the component of shipping agency is to be liberalised fully, what we’re saying is give 100%, but with a substantial investment. I think the Minister has clearly outlined that an investment of over $ 100 million is a substantial investment to be provided 100% ownership. We have no objection if there’s a substantial investment like that. Q. Won’t big lines be discouraged from investing more if they can’t have full control, full ownership? A: All the main lines are here anyway; except for one or two who are not interested in operating in this region. In fact, shipping lines will only invest in terminals and lack of ownership doesn’t prevent them from doing so. Most leading shipping lines expressed interest when East Container Terminal was on offer. So it’s just the agency business that we are talking about. Obviously we have done something right for our port to become the 23rd largest port in the world as well as the fastest growing port. So there’s nothing to prevent them from coming to Colombo unless we become inefficient or don't ensure the infrastructure in place. There’s no reason to believe that this is not attractive. Q. Are you saying the competition liberalisation will generate will not bring down the costs at all? A. Not at all. I asked this question from a leading shipping line recently at a forum and it was confirmed that, even if liberalisation happens, they will not reduce the freight rates because rates are anyway at an all-time low. I was at this forum from beginning to end; no one in the audience supported liberalisation other than the people who organised it and the Ministry of Finance. In fact some of the exporter and importer associations supported our cause. We’re as agents performing services on behalf of the principals to importers and exporters. For those services that have been extended, we’re remunerated by the principal. So we don’t act as the intermediary that is pushing the cost up because we’re not into trading. We’re an operational unit, doing local activities on behalf of the principals. Just because the locals are removed from the agency and 100% is going to be given to the foreigners, the agency operation will anyway have to happen so the cost goes up because they might have some foreigners coming in. Even then the same number of people may not be able to extend the services we do as locals. The principal will still have to need people to do it; it is only that the money that is earned by a local company will be transferred into a foreign company. It’s not that once the agency is removed the whole thing goes out the window. Q. Agency liberalisation is something the industry has been calling for a while right? A. I mean there has been this call many a time, and there were commissions appointed to go through it; and they have recommended that the way it is operating is in the best interests of the country. The agency model with 60 to 40 foreign restrictions is in no way a hindrance to free trade that is encourage by the Government. That is very clearly outlined in these reports. The shipping agency is just an extended arm of the line. One other thing I have to say is that this is a sector that has grown rapidly. We are the 23rd largest port in the world. We are the 13th best connected port in the world. We are growing at about 20% year on year, so this is the sector that is doing well and running in a very stable manner. Q. Isn't it a problem that Advantis and McLarens wield so much power in the industry in terms of shipping agents? A. This is another story that is created. Cartelising is the word they’re trying to use and saying there are one or two people who are responsible. I think that’s an absolutely false perception. Q. What is the market share of these two companies? A. Together they must be holding about 35% market share. However, the largest line Maersk is out there. So I don’t know how this test of monopolisation and cartelising doesn’t cover that. Leave that aside. I don’t think you can talk about just two companies because you can’t categorise it as cartelising. Liberalization of shipping in 1990 allowed shipping principals to select an agent of their choice and all agents are selected following a competitive bid. We can’t decide and grab agencies. Globally, consolidation is happening whether people in Sri Lanka like it or not. There will be five to six lines that will control the world. Therefore, I don’t understand how they categorise this as cartelising because every principal has the right to select the agent of their choice. Agents have no control over picking principals. Q. What are your views on Sri Lanka’s aspirations to become a maritime and shipping hub? Are you for it? A. Absolutely for it. We work towards it. If Sri Lanka is to be made a maritime hub, there are lots of things to be done. People are trying to show shipping agency liberalisation is the most important thing for Sri Lanka to be a maritime hub. Now that is a dream. There are things to be done. Singapore didn’t become a hub because of opening up the shipping agencies. Q. But they did open up, didn’t they? A. They have opened up; they have their own controls of controlling all ports but they have not given the ports to the people; the government controls all the ports. Each country has their own way of safeguarding national interest. Q. How do you suggest Sri Lanka be made a logistics hub without shipping agency liberalisation? A. If we want to make this a logistics hub there are certain things that are needed. Singapore is a free zone; as a country it’s a free country. Hong Kong is also a free country. Even our Free Zone is not as free as Singapore, right? That’s how free we are. So we need to look at many things. We need to look at policy consistency; we need to look at infrastructure. We have been asking, screaming, and crying to operationalise the East Terminal, which is the need of the hour, to increase capacity. We need to make sure we go up the World Bank Ease of Doing Business Index. We need to make sure that we go up the LPI – Logistics Performance Index. You need to make sure that we simplify the Customs Ordinance and rethink the tax regime. I mean, this is what is going to make Sri Lanka a logistics hub – not the removal shipping agency ownership restrictions. Q: So you are saying it will not contribute at all? A: Absolutely not. Q: If somebody were to accuse CASA of being opposed to this through self-interest, what would you say? A: It is false, because CASA consists of 130 members, and most of them are entrepreneurs and SMEs. We service about 8,000 ships other than container ships. Now this whole dispute is about containerised liner operation. That’s what they are talking about. But we have doubled the amount of ships that we are servicing in the ports of Sri Lanka and off ports locations. All these are handled not by big organisations. There is a large segment of SMEs and what we are saying is as an industry it will be destroyed. Q. Are you worried about some of the big companies losing their market share? A. Big companies will anyway survive. Big companies have other businesses to work on. I’m talking about the smaller companies that survive on small agency, survive on supplying ships, survive on doing various ancillary services for ships, and that is the sector that is going to suffer. So it is the responsibility of the Government to look after the national interest. To look after the SME industry and entrepreneurs in the country, without giving everything away on a platter. Q. Finally, what are your plans to prevent this Budget proposal being implemented? A. Firstly to request for a dialogue – an opportunity that has not been given throughout the whole year. It is very important to record that I’m speaking only about shipping agency business. What we have said is that we should be engaged, we should be given the opportunity to gain all these views, and if liberalisation is to happen, it should happen in an intelligent manner. We don’t object to intelligent liberalisation. Finally, I would like to say that this is a sector that is performing extremely well and therefore “Don’t kill the goose that lays the golden eggs”.