Interview : Julian Bevis
What role does logistics play in the economy?
JULIAN BEVIS: In Sri Lanka the relationship between the economy and logistics is particularly significant, inasmuch as the country’s geographical position allows it to act as a hub for all the littoral economies in the Indian Ocean. Many of these are growing rapidly and have the potential to become leading global economies. This offers a key opportunity to boost economic activity. What is needed is the willingness and the foresight to seize that opportunity and change what is already a major – and truly substantial – pillar of the economy.
How will foreign direct investment (FDI) help the country reach $20bn in export earnings by 2020?
BEVIS: FDI plays three important roles in the logistics sector. First, the attraction of inward investment takes pressure off the national balance sheet and increases the resources available to the country to drive the economy. Second, inward investment generally brings with it skills, expertise and knowledge from overseas that the domestic economy commonly lacks. Third, it often entails the ability to connect to global networks, which offers the prospect of enhancing the access that Sri Lankan importers have to markets overseas.
FDI brings benefits, but the full extent of such benefits cannot be secured unless the entities attracting such investments are able to operate in an effective market with open competition. This, in turn, depends upon a light-handed regulatory environment that encourages competition and allows the market to regulate itself. Only then will logistics services be able to deliver a fully competitive suite of services to exporters.
How do you gauge the progress of the country becoming a regional logistics centre?
BEVIS: While Sri Lanka has been very successful in attracting and retaining container trans-shipment business, it is important to look at the nature of that industry. The country has attracted a significant share of the Indian Ocean basin’s trans-shipment business, which – while of considerable volume and economic significance – is ephemeral. Transshipment is highly competitive, so if carriers can see the slightest competitive advantage, they will move quickly.
For the time being Sri Lanka retains a commanding position, but that cannot be assumed to continue indefinitely. If another country were to establish a competing centre, especially in an area with significant domestic cargo volumes of its own to supplement the trans-shipment business, Sri Lanka could begin to lose ground.
To avoid this the country must consider three lines of development. First, the ports have to keep developing appropriate capacity ahead of demand to accommodate growth and send a clear signal that the country remains committed to retaining its pre-eminence. Second, it must ensure that the standards of port and terminal services are second to none. Third, it needs to look at developing a suite of value-added services to help it retain the basic trans-shipment business.
Such value-adding capabilities might include multi-country consolidation, warehousing, cargo storage and rehandling, quality control, and interconnections between sea and air. Financial and legal services similar to Singapore’s and Dubai’s – relevant models for possible emulation – might also be developed.
If these steps can be taken, Sri Lanka will start to emerge as a maritime hub. However, this can only happen if policymakers are clear that developing infrastructure goes beyond quays, rails, cranes and the like. Rather, it must also include the provision of an enabling regulatory environment that will allow such services to operate efficiently. Ultimately, regulation should largely come from the market. While this does not mean that regulation and the place of regulators can be entirely disposed of, such interventions should be limited to areas in which the market is imperfect, and policy direction should be focused upon enabling the market to develop and operate without distortion.
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