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Liberalization of shipping sector – Fact or fiction?

Liberalization of shipping sector – Fact or fiction?

Colombo :Sri Lanka’s Finance Minister Mangala Samaraweera wrapped up the 2018 budget debate promising to end the country’s ‘nanny state’ approach and expressed his determination to press ahead with radical liberalization.

He went on to say, “To do this, we must be open to global trade, embrace competition and take on the world and win. Whilst the government will not be a nanny state, we do not forget the vulnerable and those who need the support of the state.” Brave words no doubt, heralding a much-needed change in overall approach. Among the industries targeted by the minister for liberalization was the shipping sector. What would this entail?

In the 60s and 70s, protection in shipping was the name of the game. Developing countries were eager to develop their national merchant fleets and their efforts were encouraged and supported by the UNCTAD’s Code of Conduct for Liner Conferences that proposed a cargo split of 40:40:20 – with the higher proportion to the respective fleets of the trading partners and the lower percentage to their flag carriers. It was a radical move.

Sri Lanka was in the forefront of this development with the establishment of the Ceylon Shipping Corporation (CSC) in 1971 and the Central Freight Bureau (CFB) in 1973. The CFB was the first organisation among the developing countries to have a mechanism in the form of a central freight booking office that had the ability to allocate cargo following the guidelines of the UNCTAD Code.

The CFB model was adopted by several developing countries with the technical assistance of the CFB officials. The CSC modernized its fleet from break bulk to containers and dominated the Sri Lankan market and also performed creditably in the India-Pakistan to Europe trade against fierce foreign competition.

However, with the winds of change ushering in open economic policies in Sri Lanka, as well as in many developing countries, protection for shipping in international trades began to lose its lustre. The Sri Lankan policymakers adapted to the change and the CFB was disbanded in the early 90s. The CSC was unable to weather the heightened level of competition (a period in which several carriers ceased to exist) and departed from liner shipping in the mid-90s.

Sri Lanka’s import and export trades were fully opened up for free competition. Any shipping line was able to call at Sri Lankan ports and shippers were free to make their choice of carrier at freight rates determined by market forces and the lines were permitted to select a local agent of their choice. Shipping was liberalized.