annual report accounts - shipper's council

46th Annual General Meeting

ANNUAL REPORT

&

ACCOUNTS

2015/2016

SLSC Annual Report 2015/2016

SRI LANKA SHIPPERS’ COUNCIL

The Sri Lanka Shippers’ Council is the apex body representing Sri Lankan

Shippers, which was established in March 1966 to protect and promote the

interests of shippers. It was the first National Shippers’ Council to be set up in

Asia and was formed on a request made in 1965 by the local Committee of the

Ceylon/Continental Conference, and a subsequent request made by the

Director of Commerce in January 1966, to the Ceylon Chamber of Commerce.

The Council is also a founder member of the Association of Shippers’ Councils

of Bangladesh, India, Pakistan and Sri Lanka (ASCOBIPS), founded in 1981 and

the Asian Shippers’ Council, founded in 2004.

Membership of the Council consists of Chambers of Commerce, Trade

Associations & individual organisations. The Managing Committee of the

Council only consists of PA’s with voting rights. Currently, the Council

represents a large percentage of the import/export trade in the country

through its broad based representation and membership of these trade

Associations and individual Companies.

The Council has now opened its doors to individual companies as Associate

Members so that companies in the import/export trade could have access to

the Council’s resources and expertise to resolve their shipping related

problems.

The Sri Lanka Shippers’ Council is headed by an elected Chairman and

assisted by two Vice-Chairmen who are also elected by the constituent

members.

The Ceylon Chamber of Commerce provides secretarial services to the Council

and also acts as the Secretariat.

The Council actively supports the Sri Lankan Government’s vision of making

Sri Lanka the Logistics Center in the Asian region, which would result in the

generation of enhanced economic activity, employment and wealth. As such

all Council activities have been planned and prepared to support this vision

and to facilitate International trade.


OUR VISION

“To enhance the competitiveness of our members by abolishing hidden logistics costs.”

OUR MISSION

We facilitate our customers to be more competitive in their Business Logistics; performance and cost, by the following;

1. Being the APEX Body, protect the interest of our customers and being a strong Advocate to the Government.

2. Ensuring cost effective strategies are developed and implemented in the logistics and value chain to make our members more competitive.

3. Facilitating greater efficiencies in logistics by reducing logistics barriers and simplifying trade.

4. Acting as the mediator in resolving conflicts amongst our customers (members).

5. Facilitating a level playing field by developing and promoting a code of conduct / ethics for our customers (members).

6. Establishing a centre for excellence for information sharing and to upgrade competencies of members to compete globally.

7. Leveraging regional and global partnerships and facilitating global best practices in logistics in Sri Lanka.

It is the Council’s firm belief that in order to be competitive with the international market Sri Lankan shippers should;

a) Have a clear understanding when deciding on Carriers /Freight rates and be clear and free of any ambiguity with regard to the Freight rates and matters prevailing in the Market.

b) Have freight and associated costs stabled, particularly for traditional exports

such as tea, rubber, coconut products, which account for at least 70% of total export volume out of Sri Lanka. A major part of the turnover of these exports in foreign exchange is retained in the country and it is vital to protect these industries from international competition. Furthermore, these commodities are with relatively low margins and usually with forward trading patterns cannot absorb constant and continuous cost escalations.

c) Concurrently are the major exports such as garments are usually traded on

FOB terms and the local manufacturers are constantly under pressure to provide low priced services, thus are unable to absorb any additional charges keeping in mind that almost all material for these industries are being imported. Therefore the constant increases in charges could seriously affect


such industries as they are called upon to pay these charges both at the point of import of raw materials and export of finished products.

d) Have reasonable Service providers who would not take undue advantage

from their captive customers.

OUR OBJECTIVES AND KEY BENEFITS TO MEMBERS

1. To provide for consultation/dialogue between shippers and Ship-owners/

Conference Lines/Shipping Agents/Airlines/Airline Agents, Sri Lanka Ports

Authority/ Customs and Government on matters of common interest;

2. To bring together the representatives of various shippers' associations, trade and

industrial associations/organizations, for consideration and discussions of the

problems affecting shippers in Sri Lanka;

3. To represent the views of shippers in regard to the composition of freight rates,

availability and adequacy of shipping space and services including sailings / flights.

Port/ Customs efficiency. Adequacy of Ports and Customs facilities and / charges

4. The Council in principal will not come into agreement on behalf of its members in

relation to freight contracts. (The Council will encourage confidential

shipper/carrier freight negotiations) However, if the circumstances necessitate

negotiation and entering into agreements with ship owners/Conference

Lines/Shipping Agents/Airlines/Airline Agents on matters affecting shippers, which

involve general principles and policies or on such other matters, if referred to the

Council, upon receipt of such matters, the Council will act to safeguard the interest

of the shipper/Country.

5. To undertake research/studies on problems affecting shippers in Sri Lanka.

6. To circulate information and statistical data and to publish newsletters, brochures

etc., for the benefit of shippers.

7. To convene independently or jointly with other organizations, conferences,

seminars or meetings in furtherance of the objectives of the Council;

8. To accept any grants, gifts or donations whether in cash or securities and any

property either movable or immovable and/or give any grants etc., in the

furtherance of the objectives of the Council;

9. To make Rules, Regulations or Bye-Laws for the conduct of the affairs of the Council

and to add, to amend, vary or rescind them as from time to time;

10. In the interest of the shippers, the Council will wherever possible nominate its

members to institutions where key functions in the shipping industry are taking

place.

11. The Council will closely work with international Shippers' Councils in order to

interact and pass on information that could be beneficial for shippers and the

country.

12. To take all such other steps as may be necessary or conducive to the interests of the

Councils' members.


THE COUNCIL

Mr. Sean Van Dort Chairman

Mr. Nalin Silva

1st Vice Chairman (up to December 2015)

Mr. Chrisso De Mel 2nd Vice Chairman

HONORARY MEMBERS

Mr. S.S. Jayawickrama

Mr. Chullante Jayasuriya

SECRETARY GENERAL

Mr. Mangala P.B. Yapa (Until December 2015) Ms. Dhara Wijayatilake

SECRETARIAT

The Ceylon Chamber of Commerce


MEMBERSHIP – 2015/2016

TRADE ASSOCIATIONS

The Ceylon Chamber of Commerce Mr. Adrian Oswald Import Section (Representative) Mr. Nishan Nanayakkara (Alternate) Joint Apparel Association Forum Mr. Sean Van Dort (Representative) Mr. Suren Abeysekera (Alternate) The Colombo Rubber Traders’ Association Mr. Nalin Silva (Up to December 2015) (Representative) Mr. Talal Shums (Alternate) The National Chamber of Commerce Mr. Sujeeva Samaraweera of Sri Lanka (Representative) Mr. Tissa Ruberu (Alternate) The Ceylon Coir Fibre Exporters’ Association Mr. Wasaba Jayasekera (Representative) Mr. N. Ramanathan

(Alternate) The Ceylon Chamber of Commerce Mr. Chrisso De Mel (Representative)

Mr. Christopher Koilraj (Alternate)


The National Chamber of Exporters’ Mr. Shiham Marikar of Sri Lanka (Representative )

Mr. Parakrama Weerasinghe

(Alternate) The Sri Lanka Freight Forwarders’ Mr. Taniya Polonnowita Association (Representative) Mr. Jagath Pathirana (Alternate) The Sri Lanka Apparel Exporters’ Mr. Ajith Jayasekara Association (Representative)

Mr. Naren Vanigasooriyar (Alternate)

Sri Lanka Association of Air Express Mr. Dimithri Perera Companies (Representative)

Sri Lanka Logistics Providers’ Association Mr. Stanley Samarakoon (Representative) Mr. B L Rohitha (Alternate) Tea Exporters’ Association Mr. Gehan Kuruppu

(Representative)

Mr. Shiral Fernando (Alternate)

Sri Lanka Fruits & Vegetable Producers, No Representative Processors & Exporters’ Association


INDIVIDUAL MEMBERS

Agility Logistics (Pvt) Ltd Ansell Lanka (Pvt) Ltd

Anverally & Sons (Pvt) Ltd

Care Logistics (Pvt) Ltd Ceylon Tea Marketing (Pvt) Ltd

City Cycle Industries Civaro Lanka (Pvt) Ltd

CL Synergy (Pvt) Ltd Control Union Inspections (Private) Limited

20Cube Logistics (Pvt) Ltd

Expolanka Freight (Pvt) Ltd

Eskimo Fashion Knitwear (Private) Ltd

Fascination Exports (Pvt) Ltd Fanam International (Pvt) Ltd

Freight Links International (Pte) Ltd Freight Masters International Pvt Ltd

Finlays Colombo PLC

Green Horizon Enterprises (Pvt) Ltd

Hayleys PLC HDDS

Hela Clothing (Pvt) Ltd Hellmann Worldwide Logistics (Pvt) Ltd

Imperial Teas (Pvt) Ltd

Jiffy Products S.L. (Pvt) Ltd

Kokosfibre Exports (Pvt) Ltd

Leading Lady Intimates Lanka (Pvt) Ltd

MAC Supply Chain Solutions (Pvt) Ltd Mabroc Teas (Pvt) Ltd

Neil Fernando & Co. (Pvt) Ltd

Nestle Lanka PLC


Riston Teas (Pvt) Ltd

Romina General Trading Company

SALOTA International (Pvt) Ltd

Shermans Logistics (Pvt) Ltd

Singworld Lanka (Pvt) Ltd

Scanwell Logistics Colombo (Pvt) Ltd

Tea Tang Ltd

Timex & Fergasam Group (PvT) Ltd

Universal Freighters International (Pvt) Ltd

UTI Pership (Pvt) Ltd

Van Rees Ceylon Ltd


The Sri Lanka Shippers’ Council AGM 2014/2015

Seated from Left to Right Ms. Manjula Maldeniya (Secretariat), Mr. Tony De Livera (Sri Lanka Logistics & Freight Forwarders’ Association), Mr. Dinesh De Silva (Immediate Past Chairman), Mr. Nalin Silva (1st Vice Chairman), Mr. Sean Van Dort (Chairman), Mr. Chrisso De Mel (2nd Vice Chairman), Mr. Gehan Kuruppu (Past Chairman), Mr. Sujeeva Samaraweera (The National Chamber of Commerce of Sri Lanka), Ms. Manori Dissanayaka, (Secretariat)

Standing from Left to right Mr. Suren Abeysekera (Joint Apparel Association Forum), Mr. Dimithri Perera (Sri Lanka Association of Air Express Companies), Mr. Ajith Jayasekera (Sri Lanka Apparel Exporters’ Association), Mr. Naren Vanigasooriyar (Sri Lanka Apparel Exporters’ Association), Mr. N. Ramanathan (The Ceylon Coir Fibre Exporters’ Association), Mr. Shiham Marikkar (National Chamber of Exporters), Mr. Adrian Oswald (The Ceylon Chamber of Commerce – Import Section), Mr. Russel Juriansz’ (The Ceylon Chamber of Commerce), Mr. Tissa Ruberu (The National Chamber of Commerce of Sri Lanka)Mr. Stanley Samarakoon (Sri Lanka Logistics Provider’s’ Association),


OFFICE BEARERS Sri Lanka Shippers’ Council held its 45th Annual General Meeting on the 24th July 2015, followed by “the Post Business Session” and cocktails. The Chief Guest at the occasion was Mr. Tissa Wickramasinghe, General Manager – Commercial & Marketing- Colombo

International Container Terminals Ltd who delivered the keynote address. Mr. Sean Van Dort re-elected as the Chairman for the year 2015/2016. Thereafter, Mr. Nalin Silva and Mr. Chrisso De Mel were re-elected as 1stVice Chairman and 2nd Vice Chairman respectively.

HIGHLIGHTS OF 2014/2015 AGM

Welcoming Mr. Tissa Wickramasinghe General Manager – Commercial & Marketing-

Colombo International Container Terminals


Head Table: from left to right: Ms. Manori Dissanayaka (Secretariat, CCC), Mr. Dinesh De Silva (Immediate Past Chairman SLSC), Mr. Sean Van Dort (Chairman SLSC), Mr. Nalin Silva (1st Vice Chairman, SLSC), Mr. Chrisso De Mel (2nd Vice Chairman)

ACTIVITIES OF THE COUNCIL

The activities of the Council have been focused on issues faced by shippers on shipping and their operational activities. The Council always performed a lead role in resolving problems and serve as the focal point where various shipping and port, Airport & other authorities’ related matters are brought up and discussed. In addition, the Council largely contributes in advising the Government authorities on matters relating to port and shipping whenever its advice is sought after. The following ten (10) action committees were appointed for better co-ordination and guidance purposes:

Shipping and Logistics related Matters Present Market Indicators - Freight Rates/ Courier rates Customs/Sri Lanka Ports Authority/Maritime Affairs Airport Issues Education and Seminars Membership Drive, Fund Raising & Finances/Accounts SLSC Constitution Asian Shippers’ Council (ASC) Global Shippers’ Forum (GSF) SLSC Website

A detailed description of the activities of the Council appears elsewhere in this report. However, in this section for your easy reference we give below the main topics covered in the report.

Shipping Surcharges


Present Market Indicators - Freight Rates/ Courier rates Electronic Data Interchange (EDI) Sri Lanka Customs Sri Lanka Ports Authority Asian Shippers Council (ASC) & Global Shippers’ Forum (GSF) Education and Seminars

SHIPPING SURCHARGES New Notices and Guidelines on Extraordinary Gazette Notification no 1842/16 of 27/12/2013 were issued by the Director General of Merchant Shipping. During the year under review, the Council advised its members to take up any matters relating to unethical charges by the service providers to the Director General of Merchant Shipping with the supporting document.

PRESENT MARKET INDICATORS FREIGHT RATES

The year under review saw Export freight rates declining once again towards the last quarter of space well over demand. It was also noted that several new services were launched during this period, giving shippers the comfort of having more options. Also during the year, it was observed that there were several GRIs that were imposed in the second and third quarter mainly due to the unusual buildup of demand both through local exports as well as with huge transshipment volumes where shipping lines also took the advantage to create an artificial demand by a few void calls as well as down grading the vessels creating an excess demand for space in the market. Overall the local shippers continue to have the advantage of better freight rates when compared with other origins in the region. However the problem of poor quality equipment remains to be in the agenda of discussion with very little improvement.

There had not been significant fluctuations in import freight rates ,during the year under review ,there were few increases in freight rates experienced for cargo imported from China ,during seasonal and peak times ,which has remained only for a very short period .However , the overall situation had been favorable to importers , this situation could be attributed to the excess capacity of space .

COURIER RATES During the year under review there is no change in the courier rates.


SRI LANKA CUSTOMS

The Council is pleased to announce that the dialogues with the Sri Lanka Customs continued, during the year under review. Concerns of the Importers and Exporters with regard to various policy matters and operational issues were brought to the attention of the DG Customs and received positive responses to solve large number of issues during this period. Some of the issues highlighted were;

Operational issues at SL Customs Export Facilitation Centre To open up Customs payment gateway to all private banks Amendments needed for electronic Cargo Dispatch Note ( e-CDN) Request for Customs OT payment online Submission of Import Cargo Manifest Electronically Customs preventive on export manifest issues Criteria for Import/Export samples Destructions of branded items sent to Holcim

Sri Lanka Customs’ single window implementation for Border Regulatory Authorities – January 2016

Sri Lanka’s Minister of Finance Honorable Ravi Karunanayake launched the "Single

Window System" on Monday 04th January 2016 enabling Sri Lanka to be in line with the

international trade regulations of the World Trade Organisation and the World Customs

Organization. The move, the Industry believes will help increase the efficiency of the

Customs related activities.

SRI LANKA PORTS AUTHORITY

During the course of 2014, SLSC has had very productive round table discussions with the SLPA to discuss various issues pertaining to the industry. Some of the issues highlighted were; some of the issues highlighted were; shortage of equipment, shortage of space in warehouses, delays in de-stuffing of LCL cargo within 24 hours, request to link online payment with all banks, to clear Dangerous Cargo after 4.30 p.m.

Revised Port Entry Permit Charges

The Sri Lanka Ports Authority (SLPA) implemented a significant increase in its daily, monthly and annual entry permit fees, effective from 1/1/2016. This irrational increase of Annual Port Permit Charges, to the extent up to about 3-4000% in certain instances. The significant increase of entry rates have been attributed to the fact that the Port entry permit rates have not been revised for the past twenty five years.

The Sri Lanka Shippers’ Council through the Ceylon Chamber of Commerce and other

product associations had taken up this issue with Hon. Minister of Ports and Shipping to

address this key burning issue.


Two meetings had been convened to date with the Hon. Minister of Ports & Shipping and at

the request of the concerned Stakeholders, a working committee was appointed by the Sri

Lanka Ports Authority. The recommendations of the trade in respect of a realistic increase

in Port Entry Permit Charges was also presented to this Committee.

The Secretary, Ministry of Ports and Shipping had addressed a letter to the Chairman, SLPA requesting a report, based on the recommendations submitted by the Chamber on behalf of the Stakeholders. Once a response is received, the Committee will be updated on the progress accordingly.

IMO MANDATORY WEIGHING OF CONTAINERS BY SHIPPERS, FORWARDERS AND CONSOLIDATORS

The IMO’s Maritime Safety Committee Meeting (MSC 94), following discussions at previous

IMO sub-committee meetings in November 2014, has recently adopted changes to the

Safety of Life at Sea (SOLAS) Convention Chapter VI Regulation 2.

Following this regulation which comes in to effect, 1st July 2016, shippers will be compelled

to comply with mandatory weight certifications done at the origin and it would be a

violation of SOLAS, if a shipper does not have a verified container weight. In the event that

the verified weight has not been provided to the ship’s Master and his representative or the

terminal representative, the container will not be loaded on to the ship.

The Director Merchant Shipping, consequent to consultations with Stakeholders, has issued

a mechanism document outlining the manner in which shippers should comply with this

new regulation, which at present is being studied by the trade.

Shippers, Freight Forwarders, Vessel Operators and Terminal Operators will be required to

establish systematic procedures to ensure requisite implementation of this regulation.

The trade was of the view that this should not be an additional cost added to exporters.


SRI LANKA SHIPPERS’ COUNCIL 50TH ANNIVERSARY CELEBRATIONS

The year 2016 will be of special significance to the Sri Lanka Shippers’ Council, being its 50th anniversary. Since its inauguration in 23rd March 1966, the Council has played a vital role in the Sri Lankan economy by looking after the interest of Shippers’ and also to serve as a strong advocate to the Government on Shipping & Port related matters. In order to mark the 50th Anniversary of the Sri Lanka Shippers' Council, a tree planting ceremony was held recently at the Hambantota port. The ceremony was held under the distinguished patronage of Hon. Arjuna Ranatunga, Minister of Ports & Shipping

During the ceremony, 25 King Coconut and 25 Cashew plants were planted with the participation of office bearers, past chairmen and members of the Sri Lanka Shippers' Council along with the invitees. The Secretary to the Ministry of Ports and Shipping, Director General of Merchant Shipping, senior officials of the Sri Lanka Ports Authority in Colombo and Hambantota were also among the invitees for the event.

During the Programme, the Hon. Minister Arjuna Ranatunga also unveiled the Sri Lanka Shippers Council 50th Anniversary Logo.


ASIAN SHIPPERS’ ALLIANCE (ASA)

THE ASIAN SHIPPERS’ COUNCIL ANNUAL MEETING In January 2015, the Council was made aware of a new Shipping Alliance called “Asian Shippers Alliance’’ (ASA) formed joining ASC and ASM. When enquired from the current ASC Chairman, he had confirmed that this alliance was formed at an informal meeting held on 12 September 2014 in Thailand with the participation of Thailand National Shippers’ Council (TNSC), Hong Kong Shippers Council (HKSC) and European Shippers’ Council (ESC).

GLOBAL SHIPPERS’ FORUM (GSF)

The Annual General Meeting of the Global Shippers' Forum took place from 2 to 4 June 2015 in Toronto. Over 35 delegates attended from shipper councils including those representing Canada, Germany, Hong Kong, Korea, South Africa, Sri Lanka, Thailand UK, US and other observer shipper associations. There were also representatives from numerous countries in the membership of the Union of African Shippers' Councils as well as individual shippers taking part in the meeting.

The meeting discussions included:

Actions for a global surcharges campaign for 'all in' container shipping and air cargo rates and to identify regulatory approaches to improve shippers bargaining power

The new joint BIMCO/GSF standard container contract and how the contract can be used by small and medium sized shippers to enhance their bargaining power

Verification of container gross mass weights with GSF best practice advice and activities to assist members with implementation

Anti-trust reforms in Australia and New Zealand, and current reviews in Singapore and Hong Kong of anti-trust immunity and other enforcement activities, including the European Commission price signalling case

GSF's involvement in International Maritime Organization policy work on shipping emissions

An air cargo session to raise awareness of how shippers and carriers are working together to promote sustainable air cargo

Speakers at the meeting included:

Dawn Desjardins, Assistant Chief Economist, Royal Bank of Canada Stephen Brooks, President, Chamber of Marine Commerce US Federal Maritime Commissioner, Honourable Michael A Khouri Sam Brand, International Civil Aviation Organization Celine Hourcade, International Civil Aviation Organization Jan Hoffman, Environmental Office, UN Committee for Trade and Development


The meeting also included a freight and logistics field trip to see some unique Canadian logistics operations, including the Welland Canal and freight operations at the Port of Hamilton on Lake Ontario.

The GSF is indebted and would like to extend its thanks to the Freight Management Association of Canada for its superb arrangements for this year's annual meeting.

The Council agreed that the 2016 annual meeting would take place in Sri Lanka following the kind invitation of the Sri Lanka Shippers' Council who offered to host it.

FEDERATION OF ASEAN SHIPPERS' COUNCILS (FASC)

There were no significant activities under FASC after the AGM held in New Delhi 2008.

SHIPPERS COUNCIL CONFERS HONORARY MEMBERSHIP ON CHULLANTÈ JAYASURIYA

The Sri Lanka Shippers Council conferred honorary membership on Mr. Chullantè Jayasuriya the former Secretary General of the Ceylon Chamber of Commerce, on March 16, 2016, at a ceremony which was held at The Ceylon Chamber of Commerce. Mr. Jayasuriya was recognized by the Sri Lanka Shippers Council for outstanding services he rendered to the Shippers Council as the Assistant Secretary of the Council, from 1986 to 1992 and as the Secretary General of the Council, from 1992 to 2002. He was also the Secretary General of The Ceylon Chamber of Commerce from 1992 to 2002.


"We recognized Mr. Jayasuriya for the excellent leadership he gave to the Sri Lanka Shippers' Council during his tenure as the Secretary General and also recognize the continuous support he is providing to the Council even after leaving office,” said Sean Van Dort, Chairman of the Sri Lanka Shippers' Council

EDUCATION & SEMINARS

SLSC- CINEC Scholarship program for Logistics and Trade Industry

Colombo International Nautical and Engineering College (CINEC) offered four scholarships to employees of SLSC membership who are involved in logistics, freight forwarding and supply chain to excel in higher education and enhance their career prospects on those fields. Scholarships on offered were as follows;

1) Professional Diploma In Freight Forwarding 2) Certificate in Logistics Services, Freight Forwarding and Multimodal Transport

(Course approved by Ministry of Ports, Highways and Shipping)

APSN Workshop on Improving Port and Supply Chain Connectivity

Chairman, Mr. Sean Van Dort was invited to represent Global Shippers’ Forum at the above workshop held from November 10-11, at the Radisson Blue Hotel in Cebu City, the Philippines.

APSN is a regional organization networking for stronger port industry and better community. This Workshop was an enhanced effort of APSN to explore the port and supply chain connectivity that would contribute to the APEC’s priority of “enhancing the regional economic integration”.

He was invited to be the honoured Panelist for the Panel Session: Shippers’ Perspective at the Workshop, to share perspective on improving port and supply chain connectivity.

TRADE COMPLAINTS

The Council continues to facilitate the trade by assisting in the mediation of trade disputes among the shipping lines, freight forwarders, NVOCC Operators, and shippers.

REPRESENTATIONS The Council continues to maintain its close association with the Government and Private sector organizations and also with the Trade Associations with a view to have a continued improvement on the required service levels.


Some highlighted direct representations made during the year were as follows;

EDB Advisory Committee on Trade Facilitation

Maritime Advisory Council on Ports, Shipping & Maritime Affairs–Ministry of Ports &

Shipping

Representations at the Leadership of the Approved Associations meetings of the

Ceylon Chamber of Commerce

Representations at the Steering Committee on Ports, Shipping, Aviation & Logistics

of Ceylon Chamber of Commerce

THE CEYLON CHAMBER OF COMMERCE (CCC) The Chairman of the Sri Lanka Shippers’ Council is a member of the Committee of the Ceylon Chamber of Commerce, the oldest Chamber in Sri Lanka with a history of over 175 years. The Council members have had several meetings with the Chamber officials on policy matters relating to port and shipping.

MEMBERSHIP

The membership of the Council is open to all Trade Chambers and Associations engaged in Shipping and Port related activities as well as individual companies in the import/export trade. The membership committee is responsible for developing and increasing the membership of the Council. During the year under review, the Council approved membership for the following companies/organizations as Individual Members:

1. Green Horizon Enterprises (Pvt) Ltd 2. Eskimo Fashion Knitwear (Private) Ltd 3. Kokosfibre Exports (Pvt) Ltd 4. UTI Pership (Pvt) Ltd 5. Expolanka Freight (Pvt) Ltd

Hub Operators Association of Sri Lanka has joined the Council as a member product association with voting rights. Members Terminated - Canro Exporters Pvt Ltd.

FINANCE

The Ceylon Chamber of Commerce manages the Council funds on behalf of the Council.

WEB SITE www.shipperscouncil.lk

http://www.shipperscouncil.lk/


Shippers’ Council website was revamped with a new outlook. The site is regularly updated with

trade related information and hosts value added services.

SECRETARIAT

The Ceylon Chamber of Commerce provides Secretarial services to the Council. The

infrastructure of the Chamber is readily available to the Council.

BY THE ORDER OF THE COUNCIL

Sgd.

Manori Dissanayaka

For Secretary

THE SECRETARIAT

Sri Lanka Shippers' Council

C/o. The Ceylon Chamber of Commerce

50, Nawam Mawatha, Colombo 2

Direct Tel:+94 11 2392840, 5588871, 5588880

General Tel: +94 11 2421745-7, 5588800

Fax:+ 94 11 2449352, 2437477

E-mail: [email protected]

Website: www.shipperscouncil.lk

Tel:+94

mailto:[email protected]




FINANCE STATEMENTS

FOR THE YEAR ENDED

31 MARCH 2016

SLSC Annual Report 2015/2016 Page 23


OVERVIEW OF THE ECONOMY

Economic Growth

In 2014, the Sri Lankan economy showed its

resilience in the face of domestic as well as

external challenges. Real GDP grew by 7.4

per cent in 2014, in comparison to the

growth of 7.2 per cent in 2013. Accordingly,

GDP per capita increased to US dollars

3,625 in 2014 from US dollars 3,280 in the

previous year. The economy was driven by

domestic consumption expenditure that

constitutes the largest share of aggregate

demand, while investments, particularly on

construction, also provided an impetus to the

economic expansion during the year. On the

production side, the Industry and Services

sectors continued to perform well, while

adverse weather conditions dampened the

performance of the Agriculture sector during

the year. Inflation remained at single digit

levels for the sixth consecutive year, with

year-on-year and annual average inflation

declining to 2.1 per cent and 3.3 per cent,

respectively, by end 2014, from 4.7 per cent

and 6.9 per cent, respectively, at end 2013.

Prudent monetary policy as well as the

considerable decline in global commodity

prices in the second half of the year enabled

the deceleration of inflation to low single

digit levels during the year. In spite of the

relatively relaxed monetary policy stance,

the effect of declining pawning advances as

a result of lower international gold prices

shrouded the pickup of credit obtained by

the private sector, particularly in the first

seven months of the year. In the absence of

demand pressures on inflation, the Central

Bank took measures to facilitate further

credit disbursements by banks. However,

these measures, along with volatile global

conditions, caused some portfolio

investment outflows and encouraged

imports, increasing the pressure on the

external sector and the exchange rate

towards the latter part of the year. Overall,

the trade deficit widened in nominal terms

during the year, although inflows from trade

in services and workers’ remittances

supported the reduction of the deficit in the

current account. This, together with other

financial inflows, helped strengthen the

balance of payments (BOP), and hence gross

official reserves. The continued inflow of

funds from the expatriate workforce in the

form of remittances and investments aided

an increase in national savings, which

helped reduce the savings-investment gap.

Meanwhile, in the fiscal sector, despite the

government’s announced commitment

towards fiscal consolidation, the overall

fiscal deficit increased to 6.0 per cent of

GDP in 2014 from 5.9 per cent of GDP in

the previous year, mainly as a result of the

continued shortfall in revenue collection.

Nevertheless, central government debt as a

percentage of GDP declined to 75.5 per cent

by end 2014 from 78.3 per cent by end

2013. In the financial sector, the

strengthened regulatory and supervisory

framework, improved risk management

capabilities and adequate buffers to mitigate

risks, enabled financial institutions to remain

resilient during the year.

Going forward, the Sri Lankan economy is

projected to reach upper middle income

levels and sustain the favourable high

growth and low inflation nexus in the

medium term, supported by appropriate

economic policies. The new government is

expected to uphold policies of good

governance and transparency, which would

support a high growth path through an

improved investor friendly environment.

The government faces the enormous task of

articulating a coherent medium term policy

framework, which enhances positive effects

while addressing possible shortcomings of

previously announced policies as well as the

challenges ahead. Some of these challenges

are, the urgent need to address the continued

decline in government revenue as a

percentage of GDP in order to achieve a

better fiscal balance; increasing productivity

of all sectors of the economy, including the

public sector; raising resources required for


sustained growth through non debt creating

sources, in particular, foreign direct

investments (FDI); developing appropriate

pricing policies for public utilities; better

identification of beneficiaries in

implementing social safety nets and subsidy

programmes; improving the equity and

quality of health and education service

provision; addressing the issue of public

transportation; continuing physical

infrastructure development on a sustainable

basis; formulating policies to address the

challenge of aging population including

improving labour productivity and

promoting the development of

superannuation and insurance products; and,

improving the doing business environment

and policy predictability. Addressing such

challenges would be essential to realise the

projected growth path as envisaged,

enabling the economy to achieve its full

potential while maintaining macroeconomic

stability in a more equitable environment.

Exports grew at a healthy rate in 2014

supported by improved external demand

along with a stable domestic

macroeconomic environment. Earnings from

exports grew by 7.1 per cent in 2014

compared to the previous year and reached

US dollars 11,130 million, reflecting

increases in all major categories. The

highest contribution to export earnings was

from industrial exports, supported by the

substantial increase in exports of textiles and

garments. Earnings from textiles and

garments exports, which accounted for about

44 per cent of total exports, recorded an

increase of 9.4 per cent in 2014, reflecting

increases in garment exports to both

traditional and non-traditional markets.

Meanwhile, earnings from agricultural

exports registered an increase of 8.2 per cent

in value terms due to higher exports of

coconut products, tea and certain minor

agricultural products. Export earnings from

coconut products and tea increased by 74.2

per cent and 5.6 per cent, respectively,

mainly due to higher export volumes.

However, export earnings from spices,

which showed a higher growth of 38.8 per

cent during the previous year declined by

25.6 per cent in 2014 mainly due to low

harvest of main export crops.

Port Services

The Port of Colombo recorded its highest

annual container throughput in history

during 2015 as a result of improved

performance of the Colombo International

Container Terminal (CICT), although the

performance of all other terminals

deteriorated. The overall performance of the

Port of Colombo in terms of total ship

arrivals in 2015 indicated an increase of 12.2

per cent, with container ship arrivals and

conventional cargo ship arrivals increasing

by 12.5 per cent and 60.7 per cent,

respectively. Total container handling in

2015 increased by 5.7 per cent to 5.2 million

twenty foot equivalent container units

(TEUs) from 4.9 million TEUs in 2014.

Transshipment container handling also

increased by 4.9 per cent during the year.

Total container handling of the CICT grew

substantially by 127.5 per cent during the

year, in sharp contrast to the negative

growth of container handling at other

terminals. Accordingly, the shares of the Sri

Lanka Ports Authority (SLPA), Air

Passenger and Air Cargo Handling Chart 3.6

0 50 100 150 200 250 0 1 2 3 4 5 6 7 8 9

2011 2012 2013 2014 2015 millions MT

('000) Passenger Handling Transit

Passengers Cargo Handling South Asia

Gateway Terminal (SAGT) and CICT in

total container handling were at 43.4 per

cent, 26.4 per cent and 30.1 per cent,

respectively, in 2015, in comparison to the

shares of 52.1 per cent, 33.9 per cent, and

14.0 per cent, respectively, in 2014.

Currently, the CICT handles mega container

vessels, which cannot be operated either at

the Jaye Container Terminal (JCT) or

SAGT. Total cargo handling at Ports of

Colombo, Trincomalee, Galle and

Hambantota amounted to 77.6 million MT,

recording a lower growth of 4.3 per cent, in


comparison to the growth of 12.3 per cent

recorded in the previous year. Break Bulk

cargo handling increased by 53.7 per cent,

due to the increased imports of fertiliser and

iron/steel at both Colombo and Hambantota

Ports. Meanwhile, total vehicle handling at

the ports of Hambantota and Colombo

increased by 17.1 per cent, driven by the

significant growth in domestic vehicle

handling by 138.0 per cent, while vehicle

transshipments, which are handled only at

the Hambantota Port, recorded a negative

growth of 27.6 per cent.

Construction of Phase I of the East

Container Terminal (ECT) at port of

Colombo was completed in 2015. Phase I

included the construction of a 440 metre

long quay wall consisting of a 30 metre rail

span, 20 metre wide back-reach area and a

two lane road, a container yard on reclaimed

land consisting of 12 dry stack lanes, one

reefer lane and 30 metre wide peripheral

roads, as well as services and utilities

consisting gates, a fuelling station, electrical

substations, sewerage treatment plant,

firefighting system, water storage and

distribution network and a storm water

drainage system. According to the Master

Plan of the Colombo South Harbour

Development Project, the ECT, once

completed, could accommodate 2.4 million

TEUs per annum, and will have a quay

length of 1,200 metres, consisting three

container berths with a water depth of 18

metres.

The construction of Phase II of the

Hambantota port continued in 2015. The

project includes four container berths, a

public terminal and an artificial island. The

total estimated construction cost of Phase II

of the Hambantota port is US dollars 808

million and construction is expected to be

completed during 2016. During the year, the

SLPA entered into a 10-year lease

agreement with Litro Gas Terminal Lanka

(Pvt) Ltd for the operations of the LPG

facility at the Hambantota port. However,

due to the poor demand for this operation,

the SLPA management is in the process of

reviewing the agreement. The bunkering

facilities and tank farm project at

Hambantota port includes 14 tanks with

80,000 cubic metre capacity. The

construction of the bunkering facility has

already been completed and handed over to

the SLPA by the contractor at the end of

2014. Due to operational losses incurred in

bunkering operations during the period from

June 2014 to February 2015, the SLPA

requested proposals to attract a strategic

partner with experience in the field to

operate the bunkering facility on lease basis.

The financial performance of the SLPA

declined marginally during the year 2015.

As per unaudited provisional financial

statements, the SLPA recorded an

operational profit of Rs. 6.0 billion,

compared to Rs 7.3 billion in 2014. This was

the combined outcome of an increase in total

revenue by 8.8 per cent to Rs. 40.8 billion

and increase in operating expenditure by

15.3 per cent to Rs. 34.8 billion. Meanwhile,

the construction of the Port City project,

which was suspended in 2015, is expected to

recommence in the first half of 2016.

EXPORT PERFORMANCE

Improved external demand along with stable

domestic macroeconomic environment

supported the local industries in achieving

enhanced export performance in 2014.

Accordingly, earnings from exports

increased by 7.1 per cent to a value of US

dollars 11,130 million in 2014 compared to

US dollars 10,394 million in 2013, with

contributions from all major categories of

exports.

Industrial exports which represent about 75

per cent of total exports contributed largely

to export growth in 2014. Earnings from

industrial exports increased by 6.6 per cent,

year-on-year, to a value of US dollars 8,262

million in 2014, mainly due to a significant


increase in textiles and garments exports,

which increased by 9.4 per cent to a value of

US dollars 4,930 million. The growth in

textiles and garments exports contributed for

more than 50 per cent of the total growth in

exports. The garments exports to the EU and

the USA increased by 10.6 per cent and 8.8

per cent, respectively. Meanwhile, exports to

non-traditional markets increased by 10.5

per cent compared to 8.9 per cent increase in

2013. The measures adopted by the

authorities and industry participants to

penetrate non-traditional markets helped

achieve a higher growth of exports to those

markets. Export earnings on leather products

grew by 80.8 per cent to a value of US

dollars 139 million in 2014, mainly due to a

higher level of exports of footwear to

Western markets. Sri Lankan footwear

exporters gained a reputation as suppliers of

fashion footwear among reputed

international brands. Export earnings on

food, beverages and tobacco, and machinery

and mechanical appliances also increased

substantially in 2014. However, export

earnings on petroleum products, which

mainly comprise of bunker and aviation fuel

declined by 21.0 per cent to a value of US

dollars 338 million, amidst intense

competition from the major regional players,

such as India and Singapore. Further, Sri

Lanka is relatively less competitive in the

bunker and aviation fuel industry, as the unit

cost increases due to heavy reliance on

imported fuel from regional markets and

also due to limited storage capacity. Exports

of diamonds also declined by 32.8 per cent

due to non-operation of a major industry

player, while gem and jewellery exports

sustained its growth momentum during the

year.

Agricultural exports which contribute for

around a quarter of total exports improved

further during the year. Earnings from

agricultural exports increased by 8.2 per

cent to a value of US dollars 2,794 million

in 2014 led by exports of coconut products,

tea and certain minor agricultural products.

Exports of coconut products increased by

74.2 per cent to US dollars 356 million in

2014, mainly due to enhanced performance

of kernel product exports, such as desiccated

coconut and coconut oil, supported by the

favourable weather conditions prevailed in

the previous year. Export earnings from tea,

which account for about 15 per cent of total

exports, grew by 5.6 per cent in 2014

compared to 9.2 per cent growth recorded in

2013. The slower growth of tea exports

reflects decelerated demand from the main

export destinations such as Russia and the

Middle East which account for about 59 per

cent of total tea exports. These countries

experienced large revenue shortfalls, as oil

prices declined, while Russia experienced

large depreciation in the Ruble amidst

economic sanctions due to geopolitical

issues. However, as Sri Lanka supplied high

quality orthodox tea which attracts higher

demand in the international markets, the

export price of Sri Lankan tea averaged at

US dollars 4.97 per kg, recording an

increase of 3.1 per cent from the previous

year and above the average international tea

price of US dollars 2.72 per kg in 2014.

Minor agricultural exports increased by 63.1

per cent to a value of US dollars 165

million, as exports of arecanuts and fruits

increased registering substantial growth of

300.5 per cent and 51.7 per cent,

respectively. Sea food and vegetables,

categorised under agricultural exports also

performed well during the year. However,

the export of spices which showed

remarkable performance during the previous

year slowed in 2014. Earnings on exports of

spices declined by 25.6 per cent to a value of

US dollars 265 million in 2014 compared to

an increase of 38.8 per cent in 2013. This

was mainly due to the lower harvest of main

export crops i.e. cinnamon, pepper, cloves,

mace and nutmeg in 2014 compared to the

bumper harvest recorded in 2013. Further,

export earnings on rubber also declined by

36.5 per cent to US dollars 45 million,

reflecting a decline in both price and the

quantity. Rubber prices in the international

market declined throughout the last four

years due to higher global supply and


reduced demand for natural rubber from

major rubber consuming economies such as

China and India. Mineral exports including

earths and stones, ores, slag and ash, and

precious metals increased by 15.3 per cent to

US dollars 59 million in 2014. Sri Lanka’s

exports sector faced many challenges in the

domestic and external front. Restriction on

sea food exports to the EU with effect from

mid January 2015, which is the main sea

food market accounting for about 40 per

cent of total sea food exports, posed a great

challenge to sea food exporters. However,

with the corrective actions being taken by

the government, the problem is expected to

be solved during the year. In the meantime,

if the Russian ruble continues to depreciate

further in 2015, it will have negative impact

on Sri Lanka’s tea exports since Russia is

the main single buyer of Sri Lankan tea

while demand for tea in the Middle East

market could also decrease due to the

continued decline in the oil income of these

economies. Further, it is expected to regain

the GSP+ facility, which provides

concessional access to the EU market,

especially for textiles and garment products.

However, in addition to these concessional

market access opportunities, more

concentration on moving up in the value

chain ladder, backward integration,

productivity enhancement and technological

innovation are essential to counter the

intense competition. Further, concentration

of export products is a main concern as two

thirds of Sri Lanka’s export earnings depend

on a few products such as textiles and

garments, tea and rubber products even

though product differentiation within those

categories have improved significantly in

the recent past.

Import Performance

Import Performance Expenditure on imports

declined in 2015, largely reflecting the

downward movement of international

commodity prices, especially crude oil, and

policies introduced by the government and

the Central Bank to rationalise imports.

Accordingly, in 2015, the expenditure on

imports declined moderately by 2.5 per cent

to US dollars 18,935 million, compared to

the US dollars 19,417 million in 2014.

Meanwhile, expenditure on non-fuel imports

increased considerably by 9.6 per cent to US

dollars 16,235 million, indicating the impact

of the decline in global oil prices. The

expenditure on non-fuel imports increased

mainly due to the significant increase

recorded in the importation of personal

motor vehicles, with the reduction of import

tariff for selected motor vehicles, as well as

the depreciation of the Japanese yen.

Expenditure on intermediate goods imports

declined significantly by 15.4 per cent to US

dollars 9,638 million in 2015, compared to

US dollars 11,398 million in 2014, reflecting

the substantial decline in expenditure on fuel

imports. The fuel import bill in 2015

declined by US dollars 1,898 million to US

dollars 2,700 million, recording a 41.3 per

cent decline over the previous year, due to

the drop in both import prices and volumes.

In line with the substantial reduction in

international oil prices, the average import

price of crude oil declined by 47.6 per cent

to US dollars 54.80 per barrel in 2015, from

US dollars 104.53 per barrel recorded in

2014. Meanwhile, the volume of crude oil

and refined petroleum products imports

declined by 2.0 per cent and 1.9 per cent,

respectively, in 2015, due to the shutting

down of the refinery for maintenance

purposes during March and April 2015 and

the substantial reduction in thermal power

generation. Accordingly, fuel imports as a

share of total imports declined to 14.3 per

cent in 2015, when compared to 23.7 per

cent recorded in the previous year.

Meanwhile, the import volume of coal

increased by 17.1 per cent, leading to a

marginal increase of expenditure on coal

imports to US dollars 159 million in 2015,

mainly due to the increase recorded in coal

power generation. In line with the reduction

recorded in garments exports, import

expenditure on textiles and textile articles

also showed a decline by 1.3 per cent to US


dollars 2,296 million, compared to US

dollars 2,328 million in 2014. However,

rubber and articles made of rubber, chemical

products, vehicle and machinery parts,

fertiliser, and unmanufactured tobacco,

classified under intermediate goods,

contributed positively towards increased

import expenditure in 2015.

Despite the marginal reduction recorded in

the expenditure on food and beverages,

import expenditure on consumer goods

increased considerably due to the significant

increase in the importation of consumer

durables. In 2015, expenditure on consumer

goods increased significantly by 22.3 per

cent to US dollars 4,713 million, mainly due

to the 39.1 per cent growth to US dollars

3,086 million recorded in the expenditure on

consumer durables, led by higher

expenditure on importing personal motor

vehicles.

Expenditure on the importation of motor

cars increased significantly by 47.6 per cent,

contributing towards increasing the vehicle

import expenditure by 51.6 per cent to US

dollars 1,360 million in 2015, from US

dollars 897 million in 2014. The

continuation of the concessionary motor

vehicle permits for government employees,

reduction of taxes on the importation of

motor vehicles, especially less than 1000 CC

engine capacity and the depreciation of the

Japanese Yen, caused the increase in

consumer durable imports, especially motor

vehicles. The significant domestic demand

for imported goods was reflected in the

increase in since April 2014, started to

decline from May 2015, due to the increase

in the import tariff, consequent to the ample

supply of rice in the local market due to the

bumper paddy harvest recorded in both the

Yala and Maha seasons in 2015. Further,

import expenditure on dairy products

declined by 26.1 per cent in 2015, mainly

due to the decline recorded in the

expenditure on milk powder imports, owing

to the significant reduction in the average

imported price of milk powder, despite the

large increase in the import volume.

Import expenditure on investment goods

increased by 10.0 per cent to US dollars

4,567 million in 2015, reflecting increases in

all sub categories. However, the largest

contribution for this increase came from

transport equipment, followed by machinery

and equipment. Import expenditure on

transport equipment increased significantly

by 31.6 per cent to US dollars 931 million in

2015, mainly due to higher imports of road

vehicles, particularly, auto trishaws, lorries,

commercial cabs and agricultural tractors.

Import expenditure on machinery and

equipment, which mainly comprise

engineering equipment, electronic

equipment, telecommunication devices and

office machinery, increased by 6.9 per cent

to US dollars 2,278 million in 2015.

Expenditure on the import of building

materials, which mainly comprise cement,

iron and steel, aluminium articles and

mineral products, increased by 3.3 per cent

in 2015 to US dollars 1,352 million, led by

the 19.4 per cent growth recorded in the

expenditure on articles of iron and steel over

the previous year.

Direction of Trade

The Western countries continued to be the

main destination for Sri Lankan exports in

2015, while the Asian countries dominated

Sri Lanka’s imports. The USA and the UK

remained the largest export destination

countries, while India, followed by China

and Japan, as the foremost import-

originating countries. India, China and the

USA continued to be the leading trade

partners of Sri Lanka recording more than

US dollars 3 billion trade with each county

in 2015. In addition, the UK, Japan, UAE

and Singapore were the other trading

partners with Sri Lanka that had trade

amounting to more than US dollars 1 billion

each in 2015. Total trade with India, China,

Japan and the USA increased in 2015,

compared to the previous year, while trade

with Russia and some countries in the

Middle East and the EU declined.


The USA remained as a key buyer from Sri

Lanka and the share of total exports to the

USA increased to around 27 per cent in

2015, compared to 25 per cent in the

previous year. In 2015, total exports to the

USA increased by 2.9 per cent to US dollars

2,810 million, while garment exports to the

USA which amounted to 46.3 per cent of

total garment exports, increased by 6.0 per

cent to US dollars 2,110 million, surpassing

the EU after 2007. Despite the significant

decline recorded in seafood exports to the

EU market, the UK continued to be the

second largest export destination in 2015,

accounting for 9.8 per cent of total exports.

Garments and rubber products were the

main export items which accounted for 79.2

per cent and 2.9 per cent, respectively, of

total export to UK in 2015. Total exports to

the UK declined by 7.8 per cent to US

dollars 1,029 million in 2015, mainly due to

the decline recorded in garment exports

followed by rubber product and seafood

exports. In 2015, total exports to India

which comprise 6.1 per cent of total exports,

increased by 3.0 per cent, to US dollars 643

million, compared to US dollars 625 million

in 2014, largely driven by exports of spices,

transport equipment and animal fodder. As

the third largest exporter of Sri Lanka, India

was the main buyer of spices, minor

agricultural products and animal fodder,

while the second largest buyer of transport

equipment exported from Sri Lanka in 2015.

China became a major buyer during the

year, raising its position up to the sixth

largest export destination from the thirteenth

position in the previous year, owing to the

significant growth recorded in transport

equipment, garments and tea exports.

India continued to be the largest source of

imports with a share of 23 per cent in total

imports in 2015. Although total expenditure

on imports declined by 2.5 per cent in 2015,

imports from India increased by 6.1 per cent

to US dollars 4,268 million, mainly driven

by the significant increase in the importation

of motor vehicles for personal use and

investment purposes, due to the reduction of

import taxes on motor vehicles, especially

for less than 1,000 CC small vehicles by the

interim budget presented in January 2015.

Accordingly, the importation of cars, motor

cycles and trishaws from India increased by

565.6 per cent, 15.5 per cent and 56.3 per

cent, respectively, in 2015. However,

petroleum product imports which comprise

the largest portion of import expenditure

from India, declined significantly by 20.3

per cent in 2015, due the impact of lower oil

prices. Meanwhile, imports from China,

which account for around 20 per cent of

imports, increased by 6.3 per cent to US

dollars 3,712 million in 2015, led by the

imports of base metal, machinery and

equipment, building materials, fertiliser,

seafood and textiles and textile articles.

Imports from Japan increased significantly

by 47.6 per cent to US dollars 1,389 million

in 2015, mainly due to the large increase

recorded in vehicle imports for personal use

and investment purposes, the significant

depreciation of the Japanese yen and the

changes in import tariff structures in Sri

Lanka. Japan, the fifth largest importer since

2012, raised its position up to third largest

importer of Sri Lanka in 2015, surpassing

the UAE and Singapore.

(Source: Central Bank of Sri Lanka

Annual Report 2015)

annual report accounts - shipper's council

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