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Sunday March 26th, 2023

Maersk presses for Sri Lanka ship agency, logistics ownership liberalisation

ECONOMYNEXT – Danish shipping line Maersk has said it is waiting for Sri Lanka’s government to implement plans to lift the 40% foreign ownership limit on ship agency and freight forwarding firms, which the latter have strongly opposed.

The world’s biggest container shipping line moves one in five containers in Colombo port, which it sees as a strategic hub, Maersk Lines Managing Director for South Asia Steve Felder said.

Lifting foreign ownership limits on ship agency and logistics firms would reduce costs and encourage foreign investment, he told a news conference.

Minister of Finance Mangala Samaraweera announced plans to liberalise the sector in the government’s 2018 budget presented last November, to try to make the island a shipping hub like Singapore and Dubai.

Felder said it was too early to say what Maersk would do if the shipping sector was liberalised but noted that “just the fact it opens up opportunities would be a good sign.

“We feel the sector should be fully liberalised in terms of ownership like in India.”

 “In a free market trade should flow in line with its own merits and enable importers and exporters to do business,” Felder said.

“Sri Lanka is one of the few countries today that stands out as having not liberalised the sector yet. So we’d like to see the process move to a conclusion,” he said.

“It also will send a strong signal for investors that Sri Lanka is open for business.”

The Ceylon Association of Shipping Agents (CASA),and Sri Lanka Logistics and Freight Forwarders Association(SLFFA) have opposed the move, saying it would put at risk the over 750 local shipping and freight forwarding and clearing agents employing over 12,000 direct staff.

Samaraweera told parliament during the budget debate in December 2017 that five Sri Lankan companies control the agencies of shipping lines that account for 74% of the global shipping market.

“Whilst these companies have opposed liberalization of the sector, Sri Lanka’s apparel exporters (JAAF and the Sri Lanka Apparel Exporters Association), the Tea Exporters Association of Sri Lanka and the Sri Lanka Export Association, have all hailed the move to liberalise the shipping industry since it enables more competitive pricing and better services to the entire export industry,” he said.

“Do we want to undermine the interest of thousands of export companies, and hundreds of thousands of their employees, to serve the interests of a handful of entrenched shipping agency companies?”

Samaraweera said the government will ensure competition will be fair and balanced, eliminating unfair trade practices by enacting prudent regulation.

“This is why the proposal on shipping liberalization is coupled with the proposal to implement an independent regulator for the industry.”

Advocata, a private sector think-tank, has said liberalising shipping agencies would help transform Colombo into a maritime hub.

While Sri Lanka has 750 local shipping, freight forwarding and clearing agents, Singapore’s open market has over 5,000, showing that opening up the agency business would not necessarily mean the end of the local agents, it noted.

Around 20 of the world’s top 25 logistics companies have based their global or regional operations in Singapore.
(COLOMBO, July 6, 2018)


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Sri Lanka seeks to settle India ACU debt, credit lines over 5-years

ECONOMYNEXT – Sri Lanka has requested India to settle payments due to the country under the Asian Clearing Union mechanism and credit lines given in 2022 over 5 years, Indrajit Coomaraswamy, an advisor the island’s government said.

Sri Lanka is negotiating with India to settle the money over a 5-year period, Coomaraswamy, a former central bank governor told an online forum hosted by the Central Bank.

“Our request from the Indians is to settle it over five years,” he said. “That I think is still in the early stages of negotiation. The same with the one billion line of credit.”

Sri Lanka’s central bank owed the ACU 2.0 billion US dollars to the Asian Clearing Union according to a year end debt statement, issued by the Finance Ministry.

Sri Lanka owned India, 1,621 million dollars according to ACU data by year end, excluding interest.

India has given a 1 billion US dollar credit line to Sri Lanka as well a credit line for petroleum.

Sri Lanka in March 2024 has paid 121 million US dollar out of a 331 million US dollar IMF tranche to settle an Indian credit line.

Indian credits were given after the country defaulted in April 2022 as budget support/import when most other bilateral lenders halted giving money. (Colombo/Mar26/2023)

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Sri Lanka coconut auction prices up 1.16-pct

ECONOMYNEXT- Sri Lanka’s coconut auction prices went up by 1.16 percent from a week ago at an auction on Thursday, data showed.

The average price for 1,000 nuts grew to 83,219.45 from 82,260.58 a week earlier at the weekly auction conducted by Sri Lanka’s Coconut Development Authority on March 23.

The highest price was 92,500 rupees for 1,000 nuts up from the previous week’s 90,600 rupees, while the lowest was 76,500 also up from 70,000 rupees.

The auction offered 900,010 coconuts and 583,291 nuts were sold. (Colombo/Mar 26/2023)

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Sri Lanka in talks for billion dollar equivalent Indian rupee swap

ECONOMYNEXT – Sri Lanka is in talks with India for a billion US dollar equivalent Indian rupee central bank swap, to facilitate trade, Indrajit Coomaraswamy, ad advisor to the government said.

“The amount is still uncertain it could be up to the equivalent of a billion US dollars,” Coomaraswamy told an online forum hosted by Sri Lanka’s central bank.

The money will be used to facilate India Sri Lanka trade, he said.

India has been trying to popularize the use of Indian rupees for external trade and also encouraged Sri Lanka banks to set up Indian rupee VOSTRO accounts.

However the first step in popularizing a currency for external trade is to get domestic agents, especially exporters, to accept their own currency for trade, like in the case of the US or EU, analysts say.

India’s billion US dollar credit to Sri Lanka given during the 2022 crisis is settled in Indian rupees (transaction need).

However the Indian government itself has chosen to denominate it in US currency for debt purposes (future value).

In most South Asian nations, receivers of remittances are willing to accept domestic currencies, leading to active VOSTRO account transactions.

Sri Lanka is expected to repay a 400 million US dollar swap with the Reserve Bank of India next year under an International Monetary Fund backed program for external stability and debt re-structuring.

Central bank swap proceeds sold to banks, which are then sterilized with inflationary open market operations, can trigger forex shortages and currency crises, analysts warn.

Sri Lanka went to the International Monetary Fund after two years of inflationary monetary operations by the central bank’s issue department (money printed to suppress interest rates) triggered the biggest currency crisis in its history and external sovereign default.

Sri Lanka had gone to the IMF 16 times with similar external troubles except for the April 2003 extended fund facility under Central Bank Governor A S Jayewardene which was a purely reform-oriented program with the World Bank (PRGF/PRSP) program at a time when he was collecting reserves with deflationary monetary policy and perhaps the lowest inflation since the Bretton Woods collapsed. (Colombo/Mar26/2023)

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