Dhananath Fernando  00:02
Hello, hello! Welcome to Advocata Studio, and today we are going to discuss about the future of Sri Lanka's maritime industry. And we have an expert who knows about this subject in and out. That's none other than mr. Rohan Masukorala. He has been in many forums and in many trade-related organisations, including Joint Apparel Association and also the Rubber Manufacturers Association. mr. Masukorala, thank you very much for joining again today at Advocata Studio. You have been a guest, a kind guest, to provide many insights on geopolitics. But this is a core area that you basically studied. Thank you very much for joining Advocata Studio. Thank you, Daranath, for inviting me again. Interesting topic to talk about. All right, absolutely. So, could you kindly, first of all, give us a status update about what is happening? Because I'm asking that question. Generally, when everyone gets closer to a budget. There will be some proposals related to ports. So I hope this conversation will influence some of it. At least let's try to influence some of it. And every time there'll be always a conversation about the East Container Terminal and now the West Container Terminal and some ports development that is happening in India. But first of all, I would like to know what is happening right now. Are there anything interesting that is taking place that people and the business community should notice about, which is generally not covered in newspapers? What's your take on it? Yeah, the maritime sector actually is not covered in Sri Lanka. It's what we cover here is about the transshipment, one aspect of the maritime business, which is the component of transshipment, which is a major business of Port of Colombo, but in the maritime world, it's a much bigger picture that we talk of maritime cities, maritime centres, and logistic centres. So, as I always say, Sri Lanka is still living in a dead man's vision, which was of course 1979

Speaker 1  02:00
when we created the Ports Authority Act and made transition into South Asia's first transshipment hub. So we talk about the same subject still, unfortunately. So that is a very small area of the whole thing, and this transshipment is a business that is not high revenue; it can be high volume, but not high revenue. And also, it's a business that can go away from you like instantly from one port to another because of competition. And that is being seen happening here in Sri Lanka now. So we have actually a long way to go to become a maritime centre. That also subject that we do reforms yesterday, unfortunately. So there's a heavy price that the country has paid because from politicians to bureaucrats to even some businesses, they are very focused only on talking about a location which has relatively no value today. That was probably two decades ago. Yes, that was the should have been the topic. Make the location the right place, but we have now not made the location the right place, and competition is entering into our market share and taking market value out of the business already we are in other businesses we are not in so so the future is of course there's a lot of opportunity because if you look at the global economy is about 115 trillion and it's forecasted to be around 180 trillion and majority of that's going to happen in the Asian region and intra Asia trade is going to grow and our neighbour is growing at a good pace, so potential is there. But if you don't do it the right time with the right policies and right infrastructure, you tend to keep on losing business. And it has proven beyond doubt Sri Lanka has lost millions of dollars during the last 10 years. I would say.

Dhananath Fernando  04:00
Why do you say so that there's nothing has happened in the maritime? I understand there are multiple aspects. Transshipment is just a fraction of it, but even the because last time when we had the conversation, you spoke about and you have spoken it about like in multiple forums the free port concept, and I saw the Export Development Board director general has mentioned about this concept of free port. I'm sure it's like just a one piece in the entire puzzle. But does it does it give at least and some optimism that something is happening, or at least your your constant voice over decades at least it is it is it falling under right ears or are you still seeing it just as a merely a statement? Because all right statements have also been done multiple times. How do you take on this one?

Speaker 1  04:53
Yeah. So in fact, I was involved with the conversation. I am the one who convinced him to understand the concept of the free port. Freeport. I must give him the credit. He gave a very good hearing, and he understood the value proposition of it. Because now, if Sri Lanka needs to rescue itself, we need to look at what are the low-hanging fruits that we can get going again, converting it into a more mature maritime location, which can provide practical and cost-efficient solutions to customers as a logistic centre. So we looked at we have looked at all these concepts and we actually brought in laws in 2015 around 15, actually 14. What is called the Freeport Act or Hub Act, and we didn't get the support of all the governments that came between that time and very recently, and but here I must say, although this comes under the purview of the finance ministry, which which brought in the amendment to the finance act to bring this free ports concept and handed it over to the BOI, rather than the BOI, we saw the interest coming from the EDB chairman because he has got a huge target to achieve $36 billion of exports. Obviously, he's he must be under tremendous pressure, and he wants to see where we can get these dollars turning around in the country. So when we had couple of meetings. He understood the concept of what we are talking. We gave him examples such as Dubai, Singapore, Hong Kong, Malaysia. All these critical hubs having massive free ports and millions and millions. I am talking billions of dollars of turnover happening in those free ports. For example, Jabalali free ports turnover is about 118 billion dollars for a year, and it has about 11,000 companies, 300,000 jobs created. So that adds to the whole overall shipping industry. Goods come, goods go out. The the domestic base increases. If you look at Dubai, Dubai is not in the main shipping route. It's north of the shipping route. You have to go, but it has created that atmosphere. One is through bunkering. One is through trade links. So this is something that Sri Lanka has a potential. And in fact, the president mentioned in his ministerial committee. This area has given. He has recognised the importance of supporting free ports, and tomorrow there is a meeting with the president from the Freeport Association chairman and few others to discuss on the on this matter, particularly to probably include in the budget. So yes, I would give the credit that after 10 years we have seen somebody trying to listen to it at least because we were trying to bring in companies, investors, but but the bureaucrats never wanted it properly moving like in other free zones. So yes, this is something good, but challenges are much more. Could you also? I'm sure if you follow Advocata Institute

Dhananath Fernando  08:00
and mr. Masakorala's conversations, he has explained this free port concept multiple times. But would you mind giving a quick summary if someone is joining you and if someone has forgotten what this free port is? Could you give a quick brief overlook of like why why freeports and what is looks like to begin with?

Speaker 1  08:18
Yeah, so free ports are areas where there is no duty regime working, goods come in freely and goods go out freely to multiple destinations, receives from multiple destinations. They are consolidated according to global requirements of buyers. Especially now we have growth of the e-commerce market, more and more young generation from all the generations are now buying over the phone, right? And they expect goods to be delivered pretty fast. There's something called last mile delivery, so you need locations that are kind of offshore destinations. So this is this doesn't come under the customs overview or inland revenue or central bank regulations. It is free to come, free to go under certain parameters. So companies position themselves because it's tax-free zones. They come and do value addition, partial value addition. Some some free zones allow greater manufacturing or assembly kind of situations. We also have allowed in a place called Mirjavale in Hambantota, but it has not really taken off to give assembly. So basically, it's a very free movement of free flow of cargo at a low tax rate, and it reaches markets because of its scale. So you can have so many containers going to different continents, and where there are good shipping locations, all these free ports are very successful. So it's a regime that was established about 25 years back. So we are now trying to get into it. Even our neighbour India is establishing Adani ports and free port free zone. Are establishing many free zones in India, so there's competition in that area also. But Sri Lanka again does have advantage of locality because we are connecting east west coast of India itself, and India itself is a market. So there are a lot of advantages we can deliver, do A R C cargo transfer from airport to seaport, all these things are positive things that we can establish. And already about eight companies are doing that business under certain, I would say, regulations that are not very helpful. So we've been asking to amend these things so that we can bring in more business because there are component manufacturers around the world. What you do is bring components or or manufactured small products, put them into packages, store it for them. When they say okay, send X number of volume to this place to Europe or Africa, these free ports do all that job. So it it it directly goes to kind of B to C. That is the e-commerce market that is developing, and also for B2B, also certain products and components, parts, all these things can be supplied even to the port of Colombo, even for the Sri Lankan market, it can be used. So it's a matter of, for example, you can bring Sony televisions and store it in Colombo and distribute to the whole region. That's what happens actually. Wine comes from Europe, Australia, all these places. Then Dubai has orders. Sometimes Dubai get orders, but they have to send it to Abu Dhabi. Sending between Dubai and Abu Dhabi is not possible because Abu Dhabi charges a huge tariff if it's coming from Dubai. So what they do is they send it to another place, any logistic centre, and originate out of that logistic centre to Abu Dhabi, so these kinds of trade happens through freeport. Freeport. So

Dhananath Fernando  11:46
just to just to try to explain it through a simple like example. For an example, if it's like a clothing something, there can be you know the the final product can come from somewhere, and the trouser may be coming from somewhere else, and you put it together, and maybe packaging and labelling coming from somewhere else, and you put everything together, and there'll be like particular orders to India, to Bangladesh, or to Singapore, and from this port that you are directly sending it to those particular locations based on their requirements. So there will be multiple assembling that can take place at the same port, and you basically push it based on their requirement and the

Speaker 1  12:24
need. Absolutely. So this actually concept came when we were about to lose the GSP plus. It was born at Joint Apparel Association when I was the Secretary General. So we went and proposed what's called Apparel Hub. The then Secretary to Treasury said, "Why don't you open it up for all the sectors and develop something that is covering the big picture. So that's how we went and studied what happens in other free ports and all that, and bought the concept and had a nice system organised. But it now 10 years down the line, it needs reforms and it needs commitment from government to give land and facilities. You don't need water or anything for these kinds of things, at least closer to the port perimeter and between the port and the airport, so that transfers take flap very fast. So it's the speed. The game here is the speed of things moving from one place to another, and and the turnover is very high because all over the world there are manufacturers and they would like to reach markets as they wish, so that is something. Even the Caribbean islands are looking at setting up free ports to service South America and North America. So it's a big business and it's an emerging business because, as I told you, the Generation Z or whatever X Y, all these are now working e-commerce. They are ordering things on Instagram. Yeah, exactly. So you you need to be futuristic in your thinking. Although we have got into it little late, but the potential for port of Colombo to develop through this sector is very high.

Dhananath Fernando  13:49
Just to clarify, it doesn't mean that goods goods that is crossing the border to Sri Lanka is like tax free port is a logistical centre because otherwise people may think okay. Does it mean like when sugar or dal or whatever comes in, whether it comes also tax free? No, that is not the case.

Speaker 1  14:07
If a if a product is within the free zone and if it has to be taken to Sri Lanka, you have to go to customs and pay the duties and take it out of it. So it's free zones are considered yet another destination for Sri Lanka, or Sri Lanka is considered as another destination.

Dhananath Fernando  14:21
And till when it operates under that, there'll be no custom charges, or it's it doesn't need to. Yeah, the

Speaker 1  14:26
customs normal inspections, the duties, all those things, the delays won't happen. Yeah, they are given a green clearance to the logistic centre storage, and then keep it out. There's a there's a whole set of guidelines how to how to manage it? So custom

Dhananath Fernando  14:41
monitors. So don't worry that some drug cartels will also appear here and they will do the distribution here. Custom monitors, but it is more advanced business mechanism where you assemble things depending on the things and also some products that you and I may not be able to imagine because we are only. Using a limited number of products and services, we are not exposed to all the products and services. Hundreds and

Speaker 1  15:05
1000s of products. Sri Lanka handles very small quantities of small products, so that's why we have seen the potential. So as I said earlier, take the example. It contributes 33% of Dubai's economy. This free port concept. It contributes 20% for UAE in the U in Singapore. It's around close to 20% in Malaysia. It's similar, well over 15% Our overall logistics, including shipping, contributes less than 2% to the economy. While we talk of a location, so we really need to transform ourselves with modern business requirements as well as technology and legal reforms to get there.

Dhananath Fernando  15:43
So, does it require land near the port, or how does it happen? Like, imagine, like, if there is land available, let's say somewhere in Biagama or Kurunaigala, can there be a free? I mean, free ports. You can dry port.

Speaker 1  15:55
You can. Dry ports are different. Different. They are to go and do empty containers and things like that. For this business, what you got to calculate is the cost. So trucking is one of the most expensive. Trucking is expensive mode. So more you go away from the port or the airport, your cost of handling goes up. So you become uncompetitive to the product. So you need to be very competitive in turning around a product. So closer to the port, closer to the airport

Dhananath Fernando  16:23
is the best. Is the

Speaker 1  16:24
best. So

Dhananath Fernando  16:24
do we actually have land to to be competitive? Has there been a feasibility done? And also from the conversation now on this free port, where is it now? Like what legal regulatory changes are we talking about, and what other changes are we talking about to actually make it happen? If because I got very optimistic since you mentioned like the EDB chairman probably under pressure with the export target, so he may consider it favourably, but whether the ecosystem is right to support it, otherwise it will again go back to the same place, and people will lose interest. And so he has

Speaker 1  17:03
already put a committee paper to the ministerial committee about what reforms that the industry has already requested. I mean, one of the critical thing is to set up new zones. There are East Land, but then you can remember the famous MCC. One of the areas was to identify these potential lands for zones and things like that. Also, the law has accommodated even last budget that private zones can come in.

Dhananath Fernando  17:26
Yeah.

Speaker 1  17:26
So that is a positive. So if somebody has five acres or 10 acres between the airport and closer to the seaport, these things can be also. So the port of Colombo has land that can be developed. So there was a logistic centre that was coming some time back from the Chinese, but that has gone down because of a tax issue. So, but the potential is very much there, and government. That's why we need the highest level intervention. Unfortunately, the BOI last 10 years, although it was the owner of this project, never took it seriously and marketed it and developed it. Although the industry wanted it. I was Secretary General. I am still the second now, the Secretary General again of the Freeport Association. So we have had discussions, but as I said, the baton was actually taken by the EDB chairman because he saw the value of export revenue. So credit goes there, and if anything moves forward from here onwards, the president has already given a green light, and we have been called for a meeting. So, which means there's some attraction towards this. So, with that, we will need certain legal reforms coming up to match what is equivalent to Dubai, Singapore, Hong Kong, or Malaysia, or something better. And silently, I didn't tell you India is also doing the same thing, so we'll have to compete with India also because India has a very large base load. So only disadvantage India has is a very long coastal line of 11,000 kilometres, which will not have their logistics. Colombo would be a better point to distribute to Southeast Asia, Africa, Middle East, all these places. Other factor is that Singapore, Dubai is becoming expensive. As you know, their per capita income is like way above ours. So obviously, the labour cost and other costs would be we would be more cost competitive. And provided we maintain our transshipment status somehow, Sri Lanka has a potential to get into this future market.

Dhananath Fernando  19:21
Also, generally, a reform in this nature to evaluate whether this is happening or not is to understand who is going to lose out from this reform. Now, who are the potential? I am not one like any organisations or names. Like, who are the? What are the sectors that will actually get a negative impact if it takes place?

Speaker 1  19:39
No, no, I don't see anybody medically getting. Actually, they will all benefit. For example, if the apparel industry needs needles, all the way they have to put put an order through another location. So it will take. If it's half rated, it will take two three days to come. If it is shipped, it will take three weeks to come. Whatever the accessories they need, but here. If it is stored, stocks are available. Machines are there. Showing machines are there. You just put a order and bring it in here. All our BY companies can get get the things out anytime they want. So maybe some of the direct importers could get affected. Middlemen could get affected again because goods are sitting next door, so the play around of the whole supply chain will be reduced. So cost can be reduced. So people who inflate cost, we know a lot of people inflate cost in importing. They may be the losers, but overall, all the countries who have successfully implemented free ports have an international business rather than a domestic prosecution, so in that

Dhananath Fernando  20:42
sense, actually, this has some optimism because trade unions or generally the resistance would be lower, except for few, and there's some green light that has been given, but there's a long way to go.

Speaker 1  20:55
Resistance had come from customs because it's not under the customs ordinance, right? We have seen, but they don't under they don't understand or pretend not to understand what free ports are. Free ports are very well monitored even in Singapore. They are, I mean, have a red light always. They have put a red light always. They keep a good watch. There's intelligence because all kinds of things can go through it. I mean, even in the port of Colombo, there's large amount of transshipment happening, we don't know what's exactly in that in those containers, but they do keep an eye. Even now, with

Dhananath Fernando  21:25
all security, that there has been some exactly can come and go

Speaker 1  21:30
and right. So that that is a different. That is a matter of intelligence and smartness. Correct. Now, if you look at Singapore and Dubai customs, they are using AI tools for managing all these things, so we are not thought of it. Anyway, we are still looking at a old Unctad Asikuda system. So that is why we are not maturing. It it just doesn't can't do by one party. I may have the vision, mission, everything in my hand, but if the ecosystem is not built around and there is no national leadership, right? And quick solutions. You need to. You need. You will have problems now. For example, arbitration. In the event of arbitration, Sri Lanka can take doesn't have proper arbitration centre. So everything in Singapore, Singapore generally within 48 hours, most disputes are settled. If it goes to commercial courts, Sri Lanka can drag up to 15 to 17 years. In Singapore, it's maximum three years. So you can you have to look at the overall ecosystem when investors come and confidence. But in this case, of course, hardly any confusion come. You're dealing with a buyer and a seller, and in between logistics partner. So logistics partner is the one who adds the value. So it's between a buyer and seller, and their business happens somewhere else. So we are actually doing a service. It's services exports that we can earn a lot of revenue.

Dhananath Fernando  22:49
Got it. And final question on this free port matter, since since it's something that is working, that's a that's why I want to go a little bit in in depth. Now you mentioned Mirijavila. There was there there was an attempt, but but what was why didn't work because generally Chinese are also well connected and they know how to make things happen. What was lacking there?

Speaker 1  23:11
So when we got up the law in around 2014 or 13, I can't remember another years. Five areas were demarcated for free port operations, those at that time it was called the hub concept. So the five areas were port of Colombo. Now actually the port of Colombo is a free port, but customs are inside it. So it's a conflict of interest. The law has been not properly demarcated, right? Hump the port is a free port. So now they operate under the free port concept. That's why they have just bringing this oil and trying to put 40% to the market, the free port allows only 20% Right, right. So there, there are certain limitations. Mirijawara was for assembly. Others are other ports. None of them are given assembly facility due to political reasons. At that time, the leadership of the country had a requirement at that time. Hambanthara was the ex-president, so he wanted assembly plants to come there, that was Mirijavira. Then Google was also declared Katuna Akka zone. So most of the operators are now there are about six or seven in Katona Aika zone near the airport. They do they have storage and warehousing and doing the business. And two or three more investors are on the pipeline. So there are investment limits. Those also have to be relooked. What was done 10 years back is not right. We may have to relax because we need to build the scale. If you don't build the scale, I mean, seven companies versus 11,000 in Dubai, right? So we need to understand what the mathematics is here. So I always compare Dubai because Dubai came much later than Singapore, and their leaders saw what was right and kept on reforms every six months. I mean, today also, if you go to Dubai, they keep on looking at the future how they can compete. So we need that kind of a champion here also to lead this whole thing. Otherwise, we may have the law, we may have the certain facilities, but still.

Dhananath Fernando  25:00
It won't move because we need to get the confidence of international traders. Also, moving on to shifting gears from free port to the transshipment. Now, how does it generally? Every time, sometimes the newspapers, when we hit like a certain target, we brag about Sri Lanka being a transshipment hub. How does the numbers looks like? Because earlier there was reports that we will hit the maximum capacity, and that's where we have been discussing about the Colombo North Port and all that. But where is it at the moment? Are we getting? Are we seeing the capacity? Are we in the right direction, or where is it at the moment? Okay, capacity. We are actually about 10 years behind what was required in the market. Okay. So for every year, if you put a million containers throughput of that capacity, we lost about 10 million containers of business up to now. Okay. Right. So Colombo should be handling now. If if you ask me about somewhere around 10 million to between 10 and 12 million containers, it should have handled, but it has just

Speaker 1  26:00
managed to get into 7.78, but the interesting part is the growth factor. If you look at our, we were actually the fastest growing port in the world, second fastest in 2018, because we started adding capacity at that time with the CICT, the new terminal, and the only deep draft terminal in South Asia, so obviously we had a kind of a monopoly in getting the big ships here. So we saw a growth path from 2013 onwards up to 2018 because of the capacity coming in. So, but we were supposed to start West East Container Terminal around 2016-17, right? It should have been operational. So next year it will complete 10 years, and still I don't think the full terminal will be ready because of various policy changes of government. Of course, everybody knows the disaster we had in 2021 with the Japanese and the Indians. Yeah. So East Container Terminal is still struggling. Right. So we didn't have enough capacity when the market wanted it. So obviously our business went out. For example, if you our growth has been very, I would say it has been showing a very much of a correlation between capacity building and growth. So we have had tremendous policy backwardness in bringing capacity since the late 90s. Every time we came in late, we lost business, couldn't accommodate big ships. Then we go and do it. Then again we get some business. Again we don't do it the next phase on timing due to various political interventions or union intervention. So kept on losing the potential. This cannot go on forever. Competitors have now taken the baton to their hand also, which is mainly India. I mean, I wouldn't call Singapore, Dubai anymore competitors. They are competitors, but they are far away. They are not walking into our market, basically, we have given them enough and more opportunity to take our business, which they have taken. Now the challenge is India, which never had deep terminals, have three, and also one transshipment port officially opened last year. So Colombo, if you look at, we hit 7 million in 2018. 7 million TU transshipment. Last year we hit to 7.78. We had a growth of 780,000 containers for seven years. That's about a one and a half to average of one and a half percent growth divided by seven years. It's a very low growth we have had, whereas our competitors have eight to 15% growth. Now Singapore has moved at the same time; they were about 37 million. They are now 42 mid 42 point 2 million. India, interestingly, from 19 million has gone up to 24 million. Its output same in Dubai. If you look at so the share of Indian cargo has been dropping. So we had, I mean, when I was early in the trade, we had about 30% of Indian volume going through port of Colombo. Today it has dropped to around 10% So others have been taken by the competitors, and now India has direct services, more and more direct services, and the newest addition is a transshipment port. So as a result, some of our cargo is going through Indian ports like Mundra and Visinam to connect to vessels, other vessels. So Colombo has lost out truly, and our growth rates have been. If you somebody analyses, I have analysed from 2005, we've been very poor in that sense. For example, I give you numbers. Our volumes were about 2.5 million TUs in 2005. We've reached 7.78. It's about 5 million growth for 20 years, right? Singapore was 23 million at the same time. Today it's gone to 42 million, right? Dubai was about 4 million. It's gone to 20 million, right? India was 5 million throughput total has gone up to 24 million, right? So you can see what has happened to us. We have really not grown in comparative. I'm not given even Malaysia same story. Malaysia is today now come up to within the first 10 fastest growing ports in the world, Westport Malaysia. So Malaysia has advanced itself. Then we helped to build a port in Yemen, Oman, Salalah. When Musk wanted to invest here, we didn't rob them.

Speaker 1  30:32
They went and invested in Oman, Salalah. That's a fully operational port for the last 20 years, and its full capacity, running under full capacity now expanding. Same with Westport Malaysia, Mas Quentin invested. The other side of it is Westport Malaysia. They are the main partner, and it's another top ports in the world. Much bigger volume than Colombo. So Colombo has been absolutely a pathetic story. If you look at the transshipment itself. So from the numbers that

Dhananath Fernando  31:00
you mentioned, we are at 7.7 8 million, but India, Singapore, Malaysia, Dubai, everyone needs. I mean, as a total volume, they are far above,

Speaker 1  31:10
far above, far above. So our catchment area was India. Sadly, we are losing volume from India as well. Although we although we see a growth, that doesn't mean that we are captured in that exact 30% we had 25 years ago. We dropped that to 10% but because India has grown, our number relates to be growing. Other than that, last year, if you look at our growth, is actually quite superficial. That is because of the Red Sea problem, and India-Pakistan clash this year also pushed our numbers up, so that is not strategic growth. That is due to geopolitical circumstances. Where shipping lines have not shown confidence in Sri Lanka as major hub, and actually they are moving away from Sri Lanka. We have seen very serious movements very recently. So,

Dhananath Fernando  32:00
what are the three main deep ports that are competing in India? Visingam port,

Speaker 1  32:03
Visinjam, Mundra, and there's a new one called I can't remember, but

Dhananath Fernando  32:08
okay, but mainly Visinjam. And they are developing

Speaker 1  32:10
three more,

Dhananath Fernando  32:11
three more, three

Speaker 1  32:11
more terminals. And Maersk just last week confirmed they are pumping in a billion dollars to partner those three deep terminals.

Dhananath Fernando  32:20
Okay. So all shipping

Speaker 1  32:21
lines, terminal operators around the world, all are partnering Indian ports, whereas Sri Lanka doesn't have a policy. India is going into a landlord model. Indian policy framework is absolutely clear. If you look at from mr. Modi taking office in 2015, and up to now they have a national logistics policy. They have brought in a new merchant shipping act. They have brought in so many legal reforms in taxation and port sector. It's really going in the right direction, which attracts investment. But here, I mean, it's 100% open place for foreign investors. You know, here it's. I always talking about we are only open 40% We are. We have a age old licencing system for shipping. Right? Which country, which has a hub, has a licencing regime. I I cannot even think of. We have a licencing regime in this country and one of the most backward merchant shipping divisions of the world. Right, so all these things are critical, and this is not. I am not criticising today. This has been developed for the last 25 years. It has been neglected because we have seen natural transshipment growth, which everybody thinks that is the biggest business. So we don't understand what is a maritime centre and what is a logistic centre and what it can bring to the economy. You tend to be happy with what you are getting, and suddenly when you are losing it, only you get slightly excited, and that is what has happened to us because this Visinjam port has already reached 1 million TUs within one year, and expanding into second phase.

Dhananath Fernando  33:46
Visingam Port is also partnered with Musk. It's

Speaker 1  33:49
a MSC. MSC world's largest shipping line. So recently, Sri Lanka. I must tell. I mean, I have to be fair to public. I have to tell. Recently, one of the this is this went viral. Probably, I don't know whether the president also knows about this. MSC is the world's largest shipping line, and they had a service called the Himalayan Express. We had different loops, which was the biggest service to Colombo, bringing in transshipment. So that vessel service was withdrawn out of Colombo three months ago, and now it is using its hubbest Visingam, that used to bring anything between 4000 to 8000 TUs per week, which accounts for about 500,000 transshipment volume per annum. Because with that comes feeder services. So now this whole business recently moved to Vesinjam, and with that they are expecting feeder services also to move out. So Colombo will still be stagnating. Even this year, we'll be just screaming around 7.8, 7.9. If this service is lost already, lost, I would say, that might have an impact on us also. So thankfully, the India-Pakistan thing brought us a pick up. But it we are we are in the age of things of going flat or negative. We had two years of negative growth after we reached 2018 7 million. So the transshipment story is also not very promising. So in that sense, just now I think next two weeks time you will see the World Bank's container performance index will come in.

Dhananath Fernando  35:22
Right.

Speaker 1  35:22
Sri Lanka has dropped. I understand around 50 positions. 50 positions. Yes. That's why initial indications are we were number 23. We have gone to 70s of connectivity index or port performance index. That's called the World Bank thing. You will see around the 23rd. It's coming out. So today I got a message from Dubai. Somebody has got to know information that we have dropped about 50 positions on that is on port efficiency related matters.

Dhananath Fernando  35:48
So just to provide context, because these these feeder ships are important, and why what mr. Masakorale mentioned when you have a deep port, it's same the free port concept that you explain that from on the deep port there be big what you call that

Speaker 1  36:09
big ships big

Dhananath Fernando  36:09
ships which comes and then there be small ships coming and like taking those containers that's called the transshipment and feeds into different smaller ports and when you lose out a big ship. That's what he mentioned about the Himalayan

Speaker 1  36:23
Express.

Dhananath Fernando  36:24
Express, basically, the feeder ships will also move to those that port because that ship may no longer come here. And at the same time, why these big boys' presence is needed? That Maersk and the MSC. There are

Speaker 1  36:36
10 global large carriers.

Dhananath Fernando  36:37
Absolutely. So because you cannot just go to the edge of the terminal and wave and get the ships. You have to have the big boys in because their investment because they would probably bring their ship or dock their ship in a terminal that they have an interest or an investment. Absolutely, it is like when you are going for if you are a travel agent, if you also own some hotels, most likely that you take your tourists to that same restaurant which is owned by you because you have an interest. So likewise, when you have an interest, those big boys can bring more and more ships because they have an interest, and you need not to worry about it. You may ask, like, okay, then that does that mean that they take the entire entire income away? No, because they all are liable for Sri Lankan taxes, and they create lot of job opportunities. When more and more ships comes, means there are more and more economic growth and job opportunities. Now we are not getting anything. Not getting anything means no tax revenue, no job opportunities, nothing, no revenue, because when it when it moves around, where you get the opportunity. So that's what I think mr. Masokura speaks about the importance of these big boys' presence. But unfortunately, we are not open yet to bring those big boys in, and we are basically backpedalling on most of those reforms. Absolutely. To add to that, now what is happening? Because under this concept, we gave the West Container Terminal to Adani, and East Container Terminal again. It's a deep port, so as the West Container Terminal. So, don't you think that this will bridge the gap, like the growth rates will again pick up from 7.78 million TUs to maybe I don't know the number, but doesn't it pick up? And who West Container Terminal, whom are they partnered with? And on the East Container Terminal, are they considering any partners, or what is the potential? From the little that I hear, because this was even during President Rajapaksa's time, Gotaba Rajapaksa's time, when this conversation came, I think there were protests, and that's how they said, "No, no, we'll do the East Container Terminal. You take the West Container Terminal. And now I'm, I from what I heard that the West Container Terminal is about to launch, and this container terminal. Everyone speaks that okay, we will invest money and do it. I would like to know from the expert where is it at the moment.

Speaker 1  39:08
Yes, so the west container terminal is now two berths operational.

Dhananath Fernando  39:11
Two berths operational. Yeah,

Speaker 1  39:12
so it is fully automated kind of a terminal. It's managed by Adani Group with John Keels and SLPS, the usual 15% But the interesting part is Adani has a global kind of partnership with MSE.

Dhananath Fernando  39:28
MSE.

Speaker 1  39:29
So whether there was a business connections they have, so obviously they have some potential to whatever that comes. Already they have handled 250,000 containers within two or three months. That doesn't mean that Colombia has seen a major growth. It's a very marginal growth we have seen for this year. Actually, up to six months we were negative. Then we saw growth. This other conflicts and matters, and we started seeing a growth. And obviously, that 250,000 is not a real growth. It has come from business has been taken from other terminals, and there's there's. Potential huge competition among the terminal operators within the port of Karango. So the same piece of piece of pie is now getting small, flat or smaller, and you are fighting on that probably on tariffs.

Dhananath Fernando  40:13
Okay,

Speaker 1  40:13
you are giving a discount here now. When these global operators operate, they are present in all over the world, so they can give a discount in China or something, and give that discount here and take it from there, or they can have arrangements. Whereas SLPA doesn't have global clout.

Dhananath Fernando  40:28
So I think you are making an interesting point. So just because West Container Terminal did 250 TEUs, don't think that it was additional 250,000. Probably those 250,000 probably came from not stealing the business, but probably the shifting of businesses from other terminals within the entire Colombo port. So that 250,000 is not fresh business. Yeah, we have

Speaker 1  40:51
seen a downward trend in CIC TV, the Chinese terminal. We have seen volumes down relatively, and also the Himalayan Express was calling China terminal in Colombo. Now that has been done. So the CICT will have an impact on their volumes. So as I said, there is no huge growth that the pie is growing to show that it's growing. Other than that, the regional growth, also regional capacity and regional competition is so much. I mean, Visinjam is a completely a new 1.21 million containers that was supposed to be around to others is in the new port, so it's it has affected Sri Lanka's competitiveness very much. So if we don't do the reforms, as you said, these container terminal was stopped by the unions. Actually, Colombo doesn't need capacity of two big mega terminals. That that pushes you into price competition. Right, right. If you let me give you example, if you look at 1999 or some back period, we started with 500,700, 800,000 containers throughput. After 25 years, we have just managed to got to 7.78. Now, when this Adani Terminal West, which is the largest terminal in the port of Kalambo, which can handle around 3.5 million easily, and also the East Container Terminer with another 3 million easily if it's fully commissioned. You are suddenly doubling the port of Columbus capacities from 8 million to about 50 million containers. Now we took from a million to get to 7.7 million 25 years. Now by end of next year, suddenly we have 15 million capacity, and we don't see such output coming from the region. And competition is also taking business a lot. So what happens in Colombo is there might be overcapacity. The plan was in 2021 was to finish up the East Container Terminal, so that you add capacity. But for forecasting a certain growth. Now you are doubling capacity because we took a wrong policy decision in the east container terminal. The same Adani Group is now developing a new terminal in the West container terminal. That's good for them. They even know what to. They are a global operator. Here government is trying to manage it by themselves. For 10 years they are struggling now still they are not ready right even today they look at they are half baked they don't know about the equipment requirements how it is going to operate the technology whole plant there was a blueprint at the outset that is been changed so I personally doubt now they gave dates saying it's going to be fully operational by mid this year. Then they postpend it to December. Now we can see all the work that is going on. It's not going to be ready even till next year. So it's about 10 to 11 years. This terminal has not come out. As a result, countries' position has changed. Countries' business opportunities have changed. The world around has changed. The models have changed, and we are late to the game. That's why I said what we have to do yesterday, we have not done even today. So that's the problem in the port of Colombo that is leading into some of the major ship owners moving out to other competing ports, and we cannot ever think that the mask will have interest continuously for Sri Lanka. The day that they get now, they have invested in three terminals in India with a billion dollars. They may lose interest in Sri Lanka because it's fine. The business model might change. If we got in at the right time, as I said, without closing my eyelid, I can tell we would have handled 12 million. Now, if we had the right right token, we would have been a much greater potential hub if we establish that scale at that time. Everything has to be the timing is so important. Once business move out, getting it down these mega projects, it's a kind of a waste of time.

Dhananath Fernando  44:34
So I think that's the context. Just wanted to ask since you mentioned that you have met the EDB chairman and this concept and the free port concept was very well received and taken. Has there been any conversation with the Minister of Ports? Because I think that comes under these are two different line ministries, right? It's also interesting that you know Freeport comes under Finance Ministry and the East Container Terminal comes. And has there been any conversation to

Speaker 1  44:59
unfurl? Fortunately, no. Since this gun came, I we haven't met the minister or the deputy minister to discuss or the secretary to discuss this subject. But we have had discussions with the owner of the project, that is the BOI, and also we have had discussions, thankfully, with TDB. We are all happy that we give the credit to him. Actually, if somebody didn't, and also mr. Hanifusif, Governor of Western Province, was the first investor of free ports, so he understands the concept. I think he has also spoken to the president about it. And seeing the president coming out of it itself was a encouragement. Okay, we are getting into the attention of the government, so it's a matter of policy. That policy actually doesn't come under the Ministry of Ports and Shipping. Now, this concept of logistics should not be coming under the Ministry of Ports and Shipping. In even in China, even in India, it comes under Ministry of Communications. Oh, is it different? Completely different, and they have they develop the logistics policy because it not only covers the ports, it covers the airports, the roads, everything, whole network. Right. So there is a dedicated team for that. In Sri Lanka, we don't have actually a line ministry to discuss it. Shipping ministry has no relevance to this. This is a that is the merchant shipping division. So they are the people who runs the ship operations. But this is a particular something new of business which Sri Lanka has not adopted. That's why I said at the outset we are still living on a dead man's vision. Is that vision is gone now? We have to be a much mature, different level. We should have been targeting a major logistics hub in Asia. That should have been our not transshipment hub, major logistics hub. But we missed all of those opportunities for 25 years.

Dhananath Fernando  46:41
Just just wanted to question you on for the benefit of people because not many people are involved in the shipping industry. They they wanted to know because they will have a spillover effect, but they really do not know what are the specifics of it. Now, in case of overcapacity problem, because as you said, the West Container Terminal comes out with 3.5 million TU's capacity. So, as the East Container Terminal, so all of a sudden you have now about 6.5 million, 7 million TU capacity. What is the what is the opportunity of converting or like these one of those terminals to adapt for other maritime services like let's say bunkering or something else because is there like a technical difference because when you build a terminal to a transshipment, whether can it be like quickly changed to something else or whether how does it work?

Speaker 1  47:31
No, you cannot once you decide on a container terminal. That's a container terminal, and you can adjacent. You can build if you have land logistic centres to support that, that's what the Chinese had proposed next to the CI/CT, and that was given that long-term tax benefit, and that was not approved by the IMF, which I think is the right decision because this business has lot of quick returns, very quick return return on investment. So you don't have to give unnecessary tax benefits to anybody. Every country, I mean, even some of these terminals, most of them recover that investments within five to seven years, and they have a long period. So we don't have to do unnecessary, but we need to do the things at the right time. Only hope I always talk about is after I've misery. You heard a story of misery once we have done, right? Correct, exactly. I mean, I had to be truthful. No, I can give a picture that is rosy, and again to come here in 10 years, and they talk the same thing. No, the truth is that only hope we have is this getting into the right track, and also hoping that India will grow at six to six and a half percent output economic GDP, which may still have the Columbus importance to play for some shipping lines, so we if if some of the major shipping lines move out their services, some new ones might be able to come in, provided we have the right policy, and provided the pie is getting bigger. Bigger, right? Problem is the pie is at the moment getting slowly, slowly bigger, but it's not coming here. So Singapore has now capacity bringing up to 65 million containers by another 15 years, right? Dubai is expanding. Abu Dhabi has put a new port competing with Dubai. Saudi Arabia is going to put new ports. India is putting about three or four new ports. So capacity is also coming. So we just got to get the get ahead of policy and use this opportunity to invite investments, right, in this sector and make them partners in the port. One of the reasons, if we had partnered MSC or Musk into each container terminal, they would have never left us. As you said, the hotel example, all these guys invest in this terminal because there is a return on investment for them also, so they and it's long term. You can once you establish a terminal, put equipment for a billion dollars. Nobody is going to dump it and go. You're going to make more money now. MSC is that's why they are partnership in Visinja with Adani. So MSC is definitely going to call their vessels because they have a partnership and they. The return on investment in the terminal itself. So we got to be very pragmatic in this as well. That's what the Singaporeans did in 1997. They were so pragmatic. They went into these partnerships. That model, if you study through Semache, it's amazing. In 2001, I speak about it that Sri Lanka should immediately follow Singapore model. Then,

Dhananath Fernando  50:18
so I think one important thing, not I think, if you are not quite aware of how this game works, it we are not recommending something for Sri Lankan government to give away. Basically, when MSC or MERS comes, that will I mean that will jump our our investment numbers as well because these ports to operate these terminers, it requires a couple of billion dollars worth of investment, and that should indicate in our in our FDI's as well. And as as mr. Masukar very correctly said, when you invest a billion dollars, it's not easy to leave because then you try to basically reinvest and bring more and more investment and operationalize it and optimise it because you have a greater interest, and also it helps on a geopolitical front because ultimately no one really the big companies, big boys really do not want to lose their money. So on a on a on a peaceful nature, no one really want to intervene on on this game because big boys are influential at a global scale. Yeah, when

Speaker 1  51:21
these multinationals are present in your logistic sector, what happens is it's good for your export sector also. You have choice, and then investors look at okay, all these big companies have invested in this country. When you see you see their billboards in Sri Lanka, you don't see their billboards or anything, right? Because they are not present here. They are just having a cost centre kind of operation they have because they are as I said we go through a licencing regime today these guys don't don't believe in these licencing regimes so we are not present there if you go to top top logistic centre you will see the Musk billboards the MSC billboards the CMAC GMs the Costcos they are they are advertising so when an investor lands in the airport, you can see these the big boys are in this country. I can put my manufacturing. I can rely on a speedy thing. So it's it has absolutely a multiplier effect. That's what I have studied over all these hubs. I have gone and worked in Singapore. I I know what I do. So I've seen the multiplier effect. It's so huge, right? So unfortunately, we brought that visionary leadership has to come from the political leadership to take it. Do you mean that even in countries like Singapore, Dubai, like let's say you want to start something in Dubai that you can go and start? Oh, tomorrow, tomorrow they'll encourage you. They'll chase behind you if you have the capital and the interest, they will just chase behind you to establish. I mean, that's the thirst they have. They have specialist units operating to for business development. Especially, it doesn't have to be the board of investment alone. Or in Singapore, it's called IE. It's not only them. It's about the PSA itself going and hunting for business and asking what the customers want, what can we do next? That's why they are going for greening of the Singapore port. It's going to be a fully energy-friendly port by 2040. Now they know that is the need of the customers, so they work with the customers. PSA is partnered by all major shipping lines, but they are not. They are not majority shareholders. They are minority shareholders. Singapore government controls the port very nicely. That's why I said the Temasek model, the landlord model, was way back 25 years. They set it up, and we had it in our hand. To somebody had created it, and that's what others wanted here also. When Mers came at that time, that's what they wanted a stake. And mind you, we did the right thing in 1999, SAGT, and saw the outcome of it, profitability, the efficiency, all that came. We saw it, and we reversed our policies for 25 years. And by 2020, the unions decided who should run the terminal, and the investors went off. Japanese, the and then we had to give another terminal to satisfy them, not because we needed

Dhananath Fernando  54:00
it. So I think the the point that mr. Masokurala tries to highlight is countries like Dubai. They basically come behind the investor, and on our mindset, the investor has to come behind the government and ask for a licence. So those are completely two different extremes, and that's not the way that the world works, so I think that's what he tries to push. Even if you have the right capital, and again, these are not like don't worry. Generally, when you say you connect, you think like someone without like 100 rupees coming and investing. You know, this has capital limitations. That there's a significant investment that you need to bring, and you have to bring that amount of money, and only the people who can who can afford that amount of money will come and invest. Of course, there are there are caps that how much you need to invest. It's not like you know someone just goes with 100 rupees or is going to start a shipping business in Dubai. But the the the equation works on the other way around. That when you have. Basically, they chase us and give the opportunity to start the business rather than asking you to come and take a licence and then do whatever that you want. That's the point that mr. Masokola mr. Masokoala tries to drive. Also, in the in the conference that you organised under the Shippers CIMC CIMC, I think the gentleman from Musk, regional head regional head was there. What's the sentiment now with the new? I want to slowly gear up our conversation to the geopolitics as well. What is happening? I mean, with the geopolitical tensions that is happening with now with some level of alignment with China and India and US basically to an extent having this tariff policy on India. Do you see first before we move on to geopolitics on the shipping age? I mean the the shipper I mean the big boys' point of view. Do they see some still advantage in Sri Lanka?

Speaker 1  55:55
They do. They do. Still mask is asking even they can come into management agreements in the East Container Terminal.

Dhananath Fernando  56:02
Right.

Speaker 1  56:02
Not only Musk. I met the CMA CGM North America team last last year. They said your government is not giving us a direction. That's the word they told us. If we are we have billion dollars is nothing for us. I mean, sometimes they make some years they make they need up to 100 $50 billion profit. 100 $50 billion profit. Profit. Profit. So you can put a billion dollars like sleeping. So that kind of money they had, and they were investing in ships, and so they want to establish them, but it won't be lasting forever. You see, once somebody else takes your business and establish it, as I said earlier, you you just can't move it. Once you put equipment and technology into it, you are committed. So still there is lot of interest by major shipping companies to partners of Colombo ports terminals because of that so-called advantage. But now that is also under tremendous pressure with this new Kerala port coming in India, which is going to expand up to 6 million TUs over the next five years. So that is serious competition coming up to us. Also, India is looking at other options of even in the Indian East Coast. Even they are speaking of a transshipment port in Andaman. So India is our major catchment area. 70% of it is Indian. So now the matter of is how long can we hold on to it? Whether it's already a kind of a lost opportunity that we are now chasing behind because I still don't see even in this government that there is a thirst to do PPP with foreign shipping lines. That is not they have been asking. They have declared East Container Terminal as a special purpose vehicle for management purposes. But whether they would take that extra step of partnering foreign shipping lines, but ideal

Dhananath Fernando  57:42
could have been like something like a CICT model or SAGT model. SGT model

Speaker 1  57:46
would have been the ideal. Ideal because they have two shipping lines in their partnership and IFC and originally they had 10 partners. Now it's down down to about five. So SLP also has had a percentage. I mean SLPA could have taken the funny thing is, the East Container Terminal SLP had 51% and then the Japanese and the John Keels and Adani had 49. With that, they kicked them off and said, "No, we want to get this 100. But when it came to West Container Terminal, SLPA took 15% and gave rest of it. Right? I cannot understand even the so-called the nationalistic thinking. Right? When we had something 51% with international partners, we kicked it out, and now we have overcapacitized the port, delayed every possible wrong thing we could

Dhananath Fernando  58:30
have done in this East Container Terminal. We have done, and people outside are perplexed completely. What are you talking about? What are you doing? You ask professionals from shipping profession, they look at it as are we lunatics to we have we do things here, so it's a completely a lost case. But as to your question, yes, there's still interest. Even if we can lock them in now, it's it's probably a turning point again, and we can we can face competition. And also, I think the point is definitely they are coming for the business interest. This is not like a charitable service that they are. They are not coming to Sri Lanka to do charity. And I think no one is coming to do charity. Of course, they have their charitable arms if they want to do charity, but they are coming for business because still they have the business interest, knowing that how the Indian market grows and the imports of Sri Lanka is still there, but if we miss out this opportunity, I think then things would be quite difficult. With that, I would also like to move the conversation. The last time that we have the conversation was on geopolitics when this 44% tariff was imposed by President Trump. Now, how do you reflect back? Now it is at about 19% That is

Speaker 1  59:43
on top of the MFN. So some products, for example, apparel is today attracting a 52% tax at the U.S. borders. Right. Some products were at 32% So you had 20% on top of it. 52% So it's a very. I mean, people think it is settled. First of all, Sri Lanka has. Yet come into agreement with. There's no signed document with U.S. trade.

Dhananath Fernando  1:00:04
It's all just in Singa you call katamachari da kara

Speaker 1  1:00:08
agreed kind of that right. So issue is we are so vulnerable with the US economy. I mean, 23% of our exports go there, large amount of apparel. So we are very vulnerable. Rubber is really vulnerable because rubber products were basically having a zero to 3% MFN, and then 20% on top of that is going to have a serious impact on them because there is rubber tire manufacturers in the U.S. who are using artificial rubber for manufacturing, and they have been pushing the U.S. government for tariff protection, so rubber sector will be affected definitely even with this 20% And other problem we see is now very soon our exporters will have to absorb part of this tariff of 20% Retailers or the buyers will not absorb the full. They will pass about four to 6% to the consumer, not more than that, and then they will absorb another six to 8% and we will have to take another 6% which is a low-margin revenue business, which can have a ripple effect on the whole manufacturing sector. Some may not be able to compete. So this 20% is a still a deadly thing for a country like ours, and hopefully it will reverse to the positive. Or I, I really can't think somebody. If somebody says it's a good thing, it's better than what we had-the 44 or 88% or 30% or whatever. But that doesn't mean we are out of trouble in terms of market access to the U.S. And we are yet to see the future orders books. We cannot say what it is because we are doing what called front loading for the last six months. All the countries, if you look at Sri Lanka, also had a 13% growth to the U.S. Basically,

Dhananath Fernando  1:01:52
this growth comes from because we shipped as early as possible to avoid the

Speaker 1  1:01:57
taxes. So, if you look at the numbers, there again we had about 13% growth. Bangladesh had about 48. Vietnam had about 40. Malaysia had about 40% growth because everybody was front-loading, right? So now only next six months or next nine months, if we look at the order books, how it is coming, only we can should be able to tell what is happening in the U.S. Whether the consumer is slowing, whether inflation is, we are seeing indications of going up, unemployment going up. So macroeconomic conditions changing in the U.S. itself will have a reverse supply chain hit on us. So we will have to see. It's very early, too early to comment on the repercussions. There will be. We don't know. We cannot quantify. But this year we will see a growth because of that front load situation to the US, and also we have seen a positive growth to UK, quite a bit of positive growth. One thing is it it will have another positive growth because now the accumulation has been allowed for whole of Asia or any place from to UK market.

Dhananath Fernando  1:03:00
Yeah.

Speaker 1  1:03:01
Now UK is a major discrete distributor, so we feel some of the American buyers would have shifted their sourcing to UK because companies like MAST Mast, they have their own port, own warehouses in US. So what they do is they take everything out of Asia and go to US and rework and send it to Asia or Europe.

Dhananath Fernando  1:03:23
Right.

Speaker 1  1:03:23
Maybe they are. We are seeing some of the business models changing, so that maybe United Kingdom can be a hub for Europe and rest of the world.

Dhananath Fernando  1:03:31
Right.

Speaker 1  1:03:31
So that might be the growth we are seeing higher growth to the UK side of it.

Dhananath Fernando  1:03:36
So basically, what you are saying is, since countries like Sri Lanka, Bangladesh has about like 18% 20% tariff. Mainly the MAST group will probably ship it from here to UK because that's 0% and then from there they will get it to the US because their tariff rate is quite lower from

Speaker 1  1:03:56
the yeah. So it all depends on how they can adjust the business model, business model, the supply chains and also to the European market. I don't see a European market major expansion because I mean you look at the numbers, the growth demand is not so much. But UK has seen a real big growth, so it's difficult to explain why it happened. Maybe this has some implications about it. We'll have we will understand as we go on once the order books and of course, now the UK situation is better for Sri Lanka because we can buy cheaper input from China and get duty-free access to the UK market. Because earlier China was not there, some other we were only having accumulation from South Asia. If we get the textiles and others from, then we had the market to the European Union and UK. But now UK has to relax it to even we can bring from Africa or whatever wherever the raw material is cheaper. So maybe we can get cheaper textiles from China instead of India or Pakistan and do a pricing adjustment and send it to the UK. So this year has been absolutely tough for manufacturers and buyers to maintain pricing.

Dhananath Fernando  1:05:00
It has it has been a nightmare to we have to stop pricing, so if a lot of people would have got a hit and others would have gained on this tariff uncertainty. So hopefully, now again we don't know. The U.S. courts have said that this is unlawful, right? Then where do we go? The Supreme Court will hold mr. Trump's tariffs. If he doesn't, what what is he going to do? He can he can use other mechanisms to reintroduce tariffs. So it's a very uncertain year for tariffs, and as a result, the whole supply chains are disrupted. Also, wanted to understand since you kept quite heavy weight on India's growth now with this 50% tariff, how do you see India's growth on one side? On the other side, do people also expect? Okay, because India has 50% that some orders whether it's going to shift here because India is also a apparel exporter and probably I'm not sure about rubber and rubber. So as other competing products with Sri Lanka, whether it's a good thing to see that okay out of the misery of India, whether we will get benefit or whether we will we will have severe further severe repercussions because of what has been imposed on India and also the geopolitical alignment. Now getting in between India and US is also not easy for a small economy like us. Earlier, luckily, India and US were pretty much on the same side, so we only had to like manage China. But now you have like you have complicated the problem further. How do you see, as an expert, who have been dealing with all these partners?

Speaker 1  1:06:36
I think mr. Trump has very clearly said you have to decide. You have to decide whom you are aligned with, so it's a very tough call for us. I think we'll have to follow something how the Singaporeans manage it. Of course, it's a different market, very mature market. Yeah, so India's growth is important for Sri Lanka's everything, whether it is tourism, shipping, manufacturing, free zones, India is important, and India's positive growth is something positive for us. That market is so big, so I think at some point India and United States will have to come to some kind of agreement. I think it is so much of entanglement of the Ukraine war and all kinds of China, Chinese involvement. It's so complicated. It's very difficult to read. The truth is that, right? But I mean, short term, somebody might think, okay, textiles 50% India just cannot compete. Some other orders might be sent through Sri Lanka. They will use our subcontracting or something like that. To to be shifted, or the buyers might come directly to Sri Lanka. We don't know, so there there can be a short term gain for us on that front, or whether it will be taken by Vietnam, Malaysia, Indonesia, Laos, or Pakistan. Pakistan has advantageous position of India, so they are all we are all in the competing boat. So who's going to take that is is a difficult question. We have because we are not the most competitive. Labour costs are high. Competitive energy costs are high. We have certain barriers in import side of it. So, mr. Trump has been very clear about our border taxes and indirect taxes we put on imports, and our agreement is not yet signed. We don't know what we have committed. Whether we could, we could actually make those commitments work. If not, we might get another 20% on top of it in the current situation. So things are so unclear. We we will have to watch and play accordingly. So exporters are always, I'm in a very difficult wicket right now. That much, that much, I must say, and the threat to us is not gone at all. In fact, I would say it's still looming, the threat of losing U.S. market share. So even to diversify, we have not planned ourselves. We have not looked at new markets, so obviously it's eye open all right, and we have to start from some point. So we may have a dip and go up again. So overall, I mean, the world economy-if it goes at two, 3% at least-we still know it's a strong world economy. This Trump economics, how it will end up is a very difficult thing. I feel that it might end up Americans being the losers. That kind of a feeling I get end of the day because it's so unfriendly towards rest of the world and it's so unfriendly towards the American public itself and legal itself. In a way, there are barriers coming in, so we will have issues at Congress level also, so on one side, if it was a reasonable increase of 10% I think nobody in the world would have made any fuss. But now this is going 5040, 30. It's very difficult to read. So people will either India or China. Everybody now geopo. Politically, things can change. Trump may drive countries into thinking differently, and we already seen it. So, whether it is going to good be good for the United States, we don't know.

Dhananath Fernando  1:10:11
Thank you, mr. Masuko. My final question. This is quite exclusive for our subscribers, since you spoke about this EU politics and the shipping industry, absolutely. So that content was very exclusive to our subscribers, and you can become you can become our one of our subscribers under Advocata Insider programme. It's just 12,000 a year, so just 1000 rupees a month, and of course we have multiple packages that you will have some exclusive content while you can support to disseminate the other content to a large audience that you will also have some benefit by becoming one of our subscribers, and there are multiple benefits that you will receive. mr. Masukorala, thank you so much. While your disappointment on like this delaying on reforms is clear, every time when we have a conversation with you, you always bring fresh perspectives and fresh knowledge, even by highlighting the the the dire need for reforms, you always up to you you bring the up to date knowledge, which is quite enlightening. Yeah. So

Speaker 1  1:11:12
I I always talk about it because I see the opportunity and I've seen the lost opportunity. It's a very kind of good, bad, and the ugly of everything, and and hoping for a better future for an island like this. Whatever I can contribute now and tell the policymakers in a nice way or a harsh way, I tell it because the intention is very clear. Get the benefit out of that and get 2% of contribution to GDP at least to seven to 8% which can help many of our macroeconomic problems.

Dhananath Fernando  1:11:47
Thank you very much. So subscribers on Advocata Institute, Advocata Plus is a single platform. We are also available in Advocata Kural in Tamil language. Also we are available on you name any social media platform from WhatsApp, TikTok, Instagram, Facebook, LinkedIn, YouTube-we are available pretty much all over social media. We'll see you with another conversation at Advocata Studio. Till then, take care.


Transcribed by https://otter.ai