CILT Keynote Speech
(Hon. Ravi Karunanayake, Hon. ArjunaRanatunga, Hon. NimalSiripala de Silva),CILT ChairmanNiralKadawatharatchchie,distinguished guests, Ladies and Gentleman. I commend CILT for selecting this important topic of “Logistics to Power the World” for the CILT International Conference 2015.
In a world that is increasingly interconnected, the success and resilience of Sri Lanka’s economy will depend in part on its ability to contribute and integrate itself to those interconnections. The logistics industry therefore is constantly growing in importance and I am glad that Sri Lanka is investing in and growing its logistics industry, because this is essential for our success in the world.
The huge potential of the logistics industry is driven to an extent by Sri Lanka’s unique geographic position. We need to capitalise on this potential to increase re-exports from Sri Lanka, which would in turn contribute to our GDP. Moreover, logistics are important not only as a process of movement but also for manufacturing today. Manufacturing isn’t vertically integrated the way it was in the past. Part of the art of manufacturing is putting together things from various sources. For example, in a garment, the button might come from Pakistan, the fabric may come from India, the lace may come from Belgium, the design may come from France and the garment might finally be sold to Canada. Logistics plays an important role in the manufacturing industry because it delivers components at the right time and keeps manufacturing lean. Thus, supply chain logisticsare an integral part of the manufacturing chain. A strong logistics chain might be a way to attract FDI and other business into Sri Lanka.
The investment in physical infrastructure that has taken place is valuable for the logistics industry in Sri Lanka, and it will continue. But it is not sufficient. To achieve a world-class and efficient logistics system and to compete on a global scale, it is also important to develop the soft infrastructure. That is, we need to invest more in human resources, technology, and the systems that drive the success of logistics. With regard to the significant ICT infrastructure investment necessary, the private sector is at an advantage as they are substantially ahead at innovating, expanding and financing, particularly in comparison to the public sector.
In fact, soft infrastructure may often be more important than physical infrastructure for increasing trade and its profitability. According to a 2009 study by Patunru et al, cited by the ADB, it was found that in Indonesia, the limited soft infrastructure played a vital role in constraining port efficiency, more so than hard infrastructure, although the two were interlinked. Sea port competitiveness suffered from poor physical infrastructure such as inadequate channel depth, shortage of berths, and limited cargo handling equipment, storage and transit areas, but it also suffered from limitations in soft infrastructure, such as labour skills, regulation, bureaucracy, and other institutional factors affecting port capacity utilization. Moreover, the lack of direct competition between ports controlled by the same government authority was also a critical factor. This is an issue that the Sri Lankan government must explore further too.
Certainly, the government has an important role to play in developing that soft infrastructure. However, it is the private sector that should drives the process and flag to the government the priorities for action. For instance, the customs and ports in Sri Lanka need to fully adopt, as a matter of urgency, electronic document processing to increase the accuracy, speed and integrity of the logistics process. Sri Lanka’s soft infrastructure looks archaic in comparison to competing nations, and improving the soft infrastructure is a matter of priority for the present government.
We know the term ‘paper trail’ is associated with accountability, but the problem is that physical papers can go missing too! With electronic document processing, you create a more durable footprint that is vital for good governance within the private sector and the public sector. Keeping it electronic helps us to also deal with corruption problems that are endemic in this sector. This is not unique to Sri Lanka. Across the world, many people think that corruption- such as a bribe- can grease the wheels of the system. People in logistics might not think there is a problem in making payments to get things done-something as basic as getting a document. However in the long term,corruption is also sanding the wheel and preventing progress. (You co-authored an article on this in 2008) Indeed it can prevent the sort of reform that can truly improve a business. For more than 20 years, Sri Lanka has tried to make the transition to electronic processing but people who are beneficiaries of the incumbentsystem generally block it. As a result, Sri Lanka’s logistics won’t be ascompetitive on as it could be on the global scale.
Good governance does come into other areas of logistics as well, and we should look into issues like the role of the Sri Lanka Ports Authority as both a regulator and an operator (in competition with the private sector).
Moreover, there are a number of government ministries involved in managing logistics in Sri Lanka. For example, Sri Lanka Ports Authority, the Aviation Authority Sri Lanka, and SriLankan Airlines Cargo all come under different ministries. Is there sufficient coherence in the way the Ministries of Ports, Transport and Public Enterprises operate with regard to Sri Lanka’s logistics?
It is understandable that businesses and industries today are confused because in the past when they had a problem,there was someone in politics and government that they could go to. Issues could be resolved by a conversation with someone that had the power to unlock problems. However, good governance means that we want to work differently, not on the basis of patronage and favours for a few, but on the basis that we will change the system to work in the industry’s favour. That is the basis on which we talk about good governance.
I wish CILT International Conference 2015 much success.
Thank you.