LEVERAGING ON LOCATION: COLOMBO AS A GLOBAL HUB

STRATEGIC GEOGRAPHIC LOCATION Geographic location was attractive yesterday ! close proximity to sea routes can just be one useful factor Sea routes ? They will make them if freight is available Location is of no use if: Right connections to the markets are not available Right capacity is not provided ahead of demand Right management and systems are not provided Right cost structure is not facilitated (port costs, bunkering and supply costs)

Inter port competition- the battle for survival ? Strategic Location can be a common factor for many regional ports

It looks as if strategic location is where freight is collectible when ports are adequately developed

Winning Independence from Dependence Regional penetration of Colombo Winning Independence from Dependence This market share of 12% of Indian Container throughput represents 74% of Colombo’s total TS Throughput COLOMBO HAS TO BROAD BASE ITS MARKET – RELAY AND NEW MARKETS

South Port moves Colombo from regional to global hub VLCC AND ULCC ARE GRADUALLY ENTERING SERVICES THROUGH COLOMBO Capacity enhancement needs to precede demand

PORT OF COLOMBO development master plan North Port Port Logistic services WCT Extension CPEP Phase II WCT ECT JCT I & II Deepening Logistic services SAGT JCT IV extension CICT Passenger Termial I 5 YEAR PLAN Passenger Termial II 10 YEAR PLAN 30 YEAR PLAN

East Container Terminal Project EOI is closing on 31st August. RFP process to conclude by year end. First berth to be operational by 2018 due to equipment procurement lead time -can Colombo survive that long ? Myths about the project are published by individuals Involvement of major shipping lines as investors would affect common user status What is common user status ? Are Singapore Rotterdam Antwerp etc. are not common user hubs just because Lines invested in Terminals ? River ports are not global hubs – Are Antwerp, Rotterdam, Hamburg, not global hubs ? Handling Transhipment requires expert experience –Is it like rocket science ? Advent of ULCC (ECT)will make SAGT and JCT redundant. (See next slide)

Entry of ULCC and VLCC to main trade route - Would JCT and SAGT become redundant ? Port of Singapore This is why PSA hasn’t closed its 40 year old Terminals to container traffic yet… They would continue to be attractive to ships if efficiently managed

Inter Terminal Competition The Good Competition on quality of service between operators Competition on technological advancement The Bad Individual goals take priority - Cannibalization is the strategy Goal of the Port and the country takes a second priority Utilization of Port facilities is not optimised – leads to artificial congestion And the ugly Price becomes a tool of competition – Shipping Lines set one terminal against the other Overall profitability of the Port sector suffers New investors are discouraged due to low revenue and too much price competition

Inter port competition Quality of service on par with any competitor Facilities continue to grow Price is highly competitive Should we drop the pants too to attract business ?

Hambantota first stage is an industrial port hub that Facilitates the development of the region Creation of a 15000 acre Industrial estates to develop cargo generation- No freight no future for a port Bunkering hub between Singapore and Gulf-(No bunkers –No hub) Ship building and ship repairs Expansion capability enormous- A tribute to SLPA Planners Next Generation Container hub ? Only the time will tell

The way forward National port master plan is a priority – No more ad-hoc creations State owned vs. private terminal operators- Port regulatory mechanism - a priority irrespective of ownership SLPA has to be institutionally restructured to take on port development Broad base the market – Total dependence on Sub continent is not healthy Attract Major Lines to handle Relay- move from Hub and spoke to Relay Right pricing of the products & services - not cheap pricing

Window of opportunity Capacity optimization -a must – Port should act as one Terminal –Our competitors are monopolies Capacity building should not be based on demand - This is a supply driven market- West Terminal should start by 2020 Passive marketing to aggressive marketing Marine Terminals will not stabilise the Hub business without development of Logistics arms. Capacity building should incorporate value added logistic services – Mega polis plan has identified this as a priority Hub business is a gamble. Once in there is no return- big winners are the biggest gamblers-Need to plan the North Port If we do not grow to meet the competition we perish If Colombo loses Hub status country will lose the export market

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