Development of Sri Lanka’s Ports and Boat Building industry

By Ishara Gamage | Published: 2:00 AM Sep 19 2020
FT Development of Sri Lanka’s  Ports and Boat Building industry

By Ishara Gamage 

President Gotabaya Rajapaksa chaired a meeting on 15 September with the presence of the Minister of Ports and Shipping Rohitha Abeygunawardena and the newly appointed State Minister for Port Development and boat building Jayantha Samaraweera with participating government officials and private sector stakeholders.

It has been learnt that during the meeting the president righty emphasised the need to upgrade Colombo, Trincomalee and Galle with Potuvil and Kankesanthurai ports to cater to the shipping industry and make every endeavour to generate income from Hambantota Port which has been handed over on a platter by the previous regime. 

According to sources, though the need to develop Eastern Container Terminal ( ECT)  was highlighted during the meeting, there was nothing mentioned about the Indian investment to develop the terminal in the light of protests by the trade unions. 

Shipping experts explained that the transshipment business heavily depended on India and the need to maintain the inflow of business from India was highlighted and instructions issued to develop the same.

There is a possibility or talks that the Adani Group of Ahmedabad, in the State of Gujarat, India, may invest in the development of ECT terminal together with Sri Lanka’s John Keells Group but this was not mentioned at the meeting and yet need to develop this terminal with a very deep draft was emphasised. Over the years, Adani Group has positioned itself to be the market leader in its transport logistics and energy utility portfolio businesses focusing on large scale infrastructure development in India with O and M practices benchmarked to global standards. 

Dilapidated buildings which are an eyesore in the port of Colombo are to be developed to modern transshipment warehouses and the chairman of Sri Lanka Ports Authority (SLPA) undertook to accelerate the process under the guidance from the Ports Minister.

Trincomlaee needs development but no details were given except the fact that SLPA will request for proposal (RFP) for a shipyard in Mud Cove in the harbour for small and medium boats There is a requirement to develop an extension to the Ashraf Jetty in Trincomalee to cater for deploying oil rigs for lay-up but this matter needs attention of the SLPA. 

According to industry sources though various letters were communicated with the task force chaired by  Basil Rajapaksa, SLPA has not been able to take meaningful action to support the Marine and Offshore Industry to be based in Trincomalaee. 

Sri Lanka Air Force has put a restriction to heights of the oil rigs over 45 metres being deployed due to danger to their training flight paths over the harbour. Marine and Offshore Business needs rapid development but the authorities have not understood the potential, If the foreign currency income is more beneficial to the country by developing the marine industry, the government should rethink about relocating the Trinco Air Force runway for training pilots elsewhere.

According to experts, the ironic fact is that Prima Silos standing over 45 m in height does not bother Air Force training flights!

During the meeting attendees also requested the government to implement the Commercial Hub Regulation No. 1 of 2013. Then Government announced to setup Free Ports and Bonded Areas to create trade-related infrastructure to facilitate import and export of goods and services with freedom to carry out transactions in convertible foreign currency. The Free Port and Bonded Area are special areas reserved for specific activities and governed by the provisions of  Acts and Regulations  such as the Finance Act No. 12 of 2012, first announced the legislation applicable for Commercial Hub activities.  

In 2013, amendments were made by Finance Act No. 12 of 2013. Commercial Hub Regulation No. 1818/ 30 was issued on 11-07-2013 .Colombo Port, Hambantota Port, Mattala Airport, Katunayake EPZ, Koggala EPZ  and  Mirijjawila EPZ, then identified as Free Ports and  Bonded Areas Under Commercial Hub Regulation. Entrepot trade, Off-shore business, Front end services, Headquarters Operations and  Logistic Services have been approved under commercial hub regulations. 

Participants inquired about possible income generation from bunkering ( supply of fuel)  services to ships passing the Hambantota Port. Chinese management wanted to get permission from the Sri Lankan government to supply fuel to ships and tankers from their storage without paying in custom duties. President reiterated that there should be some methodology to share the profits with the Company running the port .An argument was brought in by the port management that  the price of fuel to be supplied from Hambantota should be cheaper, than the rate in Singapore to generate more port calls by ships and payment of custom duties will increase the price, thus making Sri Lanka highly  uncompetitive. 

There was s suggestion to levy a fee on bunkering licences so that there can be some form of income generation for the country. Hambantota Port management was inquiring about the possibility of obtaining permission to carry out crew changes to generate income, but due to the lack of facilities for quarantine, the government was not willing to consider it.

The general impression among the meeting participants is that handing over the Hambantota to Chinese by the previous government in the pretext of saving loan repayment was a grave mistake.

Galle Harbour to be developed as a prime destination for seafarers, as a Marina but the legal battle between local Mundo gas business partner and the principals is preventing the removal of the barge ( berthed for over 15 years in the harbour) from Galle which  deters luxury yacht owners to patronise Galle. 

According to sources, there is also an ongoing tender process for developing a Marina in Galle but excessive dust generated by a Cement Bagging Plant installed during minister Ashroff’s time is deterring luxury yacht owners to consider visiting Galle. SLPA is helpless due to the legal battle preventing them in removing the gas-barge which may sink at any time. Sources also reveal that currently low spending sailing boat owners who depend on “Choon Pan” meals keep coming but the income generated is not sufficient for the Galle Port .

With all these difficulties SLPA id proceeding with the development of the Marina and planning to call RFP for a Yacht Repair facility in Galle. 

This project was already approved by the cabinet and the Saudi Arabian Investor abandoned the project in 2015 due to a dispute with the local agent and the unacceptable bureaucracy of SLPA, after spending over 2 million Dollars.   

The local project promoter has taken action to move the project to Beruwala, where a Yacht repair Yard was to be established next to the Beruwala Fishery Harbour Basin and managed to obtain lease rights from the GA (Government Agent/Divisional Secretary or Pradesheeya Sabha) and tried to mobilise same. Unfortunately local political interference prevented the mobilisation of yacht repair yard, due to protests by the neighbours instigated by politicians.

The disgusted local promoter was then invited by the Management of Ceylon Fishery Harbour Corporation (CFHC)  to submit a proposal for shipyard development in Mutwal Fishery Harbour in Colombo ,which has been abandoned for many years after the  development of the Dikovita Harbour where all fishery activities were shifted.

CFHC obtained ministry and board approval and leased out the harbour for development  and Sri Lanka’s second shipyard which was built with a modern Ship Lift to dock  Yachts and Fishing Trawlers .Total investment for the shipyard exceeds 15 million US Dollars.

Now, there is a legal action filed by the Investor against CFHC for trying to evict them in the pretext of a low rent paid for the harbour.

Government should try to avoid such legal battles between Investors and the state agencies, as it can affect FDI  ( Foreign Direct Investment) to Sri Lanka and future investments.

The Investor also rented part of the Trincomalee Fishery Harbour for the establishment of a boat yard but due to lack of business and violation of lease agreements CHFC terminated the agreement.

Same Investor has built a state-of-the-art Floating Dock in Trincomalee and CFHC confiscated the dock for none payment of lease and the floating dock is idling and rusting for over a year without being used.  

This matter was brought to the attention of the President and hopefully CFHC and the Investor will be allowed to compromise and recommence operations. 

Sri Lanka needs, to be more FDI-friendly and try to get rid of bureaucracy and corruption if we are serious about attracting foreign investment.

By Ishara Gamage | Published: 2:00 AM Sep 19 2020

More News