POLICYINSIGHTS18 MARCH 2015

INSTITUTE OF POLICY STUDIES OF SRI LANKA

INTRODUCTION

TRADE AND TRANSPORT FACILITATION:PRIORITIES IN SRI LANKA

METHODOLOGY

PRIORITY AREAS OFTRADE FACILITATIONSri Lanka has undertaken key initiatives to

facilitate trade and transport, which hashelped its ranking among South Asiancountries in some of the key trade facilitation(TF) indicators. Despite the recent initiatives,the country still has a lot to do to reach TFlevels of Singapore which is cited as thebenchmark by policy makers and privatesector in the country.

This policy brief highlights main findings fromthe IPS study on Trade and TransportFacilitation Audit in Sri Lanka. The objectivesof the study were to: (i) assess the currentstatus of TF in Sri Lanka; and (ii) to identifypriority areas of TF. The main findings are thata majority of the TF measures are non-contentious and can be implemented at arelatively low cost. It is important that SriLanka pursues pertinent issues withoutfurther delay given that facilitation of trade willbe key to Sri Lankas growth throughexpansion of trade, and promotion of FDI.

As part of the study, a survey was carried outamong 121 stakeholders in the country toassess the current status of TF in the countryand related priorities. The respondentsincluded exporters, importers, shipping lines,freight forwarders, road carriers, chambersand relevant government agencies.

The study focused on the experiences of SriLankan exporters and importers trading withSouth Asian countries through (i) the ColomboPort, which handles over 99 per cent ofcountrys international trade, and (ii)Bandaranaike International Airport (BIA),which is the countrys main internationalairport. A stakeholder consultation meetingwas also held to validate the findings.

Table1 and Figures 1-2 highlight the priorityareas of TF in Sri Lanka based on the surveyresponses.

Publication and Administration of PoliciesRelated to Trade Issues

An equal number of respondents rated thepublication of related rules and regulations,and an inquiry point on export/importprocedures to be of high priority (Table 1).Although the publication of trade related rulesand regulations is carried out to some extent,it is not comprehensive, adequate oreffective. The responses also suggest theneed for an effective inquiry point.

Use of ICT for Exports and Imports

A majority of respondents highlighted theneed for a single window in the country (Table1). They stated that such a system is requiredto minimize human intervention in the tradingprocess. The need for electronic/onlinesubmission of customs documents was also

identified to be a high priority. While theexport process is almost entirely automated,the import process is yet to be completelyautomated.

Rules and Procedures for Imports andExports

The top 5 priority areas under this wereidentified to be the need to: (i) reduce timetaken to clear goods, (ii) reduce irregularpayments/bribes, (iii) increase coordinationbetween border management agencies, (iv)decrease the number/time required forexport/import documents, and (v) pre-arrivalprocessing of import documents (Figure 1).

Trade Related Infrastructure

The need to improve quality/efficiency ofports, roads, the quality of warehouses andthe need to reduce loss/damage of cargo andthe cost of using logistics services were someof the main areas of TF identified in traderelated infrastructure (Figure 2). Whileacknowledging the recent roaddevelopments, congestion on roads wasidentified as a major drawback.

Table 1: Priorities in Publication /Administration of Trade Policies and Use of ICT

Enquiry point on import/export procedures & formalities

Publication of trade related rules & requirements

Single Window

Electronic/online submission of customs documents

73%

73%

88%

83%

18 MARCH 2015 POLICYINSIGHTS

Perceived Challenges in Accessing Markets Abroad

This policy brief is based on findings froma study on Trade and TransportFacilitation Audit in Sri Lanka carried outby IPS researchers Suwendrani Jayaratne,Dharshani Premaratne and JanakaWijayasiri. Contact us onsuwendrani@ips.lk or janaka@ips.lk formore information.

Figure 2: Priorities in Trade Related Infrastructure & ServicesFigure 1: Priority Area in Rules & Procedures for Trade

Reducing time taken to clear goods

Reducing the need to pay irregular payments/bribes

Improving coordination btwn border management agencies

Reducing number/time required of exp/imp documents

Pre-arrival processing of import documents

Issue and validity of advance ruling

Reduce physical inspection by customs

Post clearance audit

Quality/efficiency of portsQuality/efficiency of roads

Quality of warehouse/trans-loading facilitiesDecrease loss and damage of cargo

Decrease the cost of using logistics servicesQuality of telecommunication and IT services

Quality/efficiency of railwaysEfficiency of quality/standard inspection agencies

Quality/efficiency of airportsEfficiency of health/SPS agencies/quarantine

Setting up/Strengthening InquiryPoints: Setting up a single reference point,which provides all trade related informationincluding laws, regulations, procedures,tariffs, will be beneficial for the tradingcommunity. In this regard, a website thatintegrates all trade-related informationavailable on different ministries/agencywebsites will give traders access torelevant information by just entering the HScode of a product. In addition, setting up anational enquiry point which functions as acoordinating body between the traders andthe relevant regulatory bodies can play akey role in facilitating trade. It can collectrequests, direct them to relevant regulatorybodies, compile responses and inform therequesting party.

Change of Mindset and Culture:Changing the mindset of officers in keyinstitutions in the trading process andadopting new ways of conducting businessis required. Likewise, the private sectorneeds to produce the correct and requireddocumentation without resorting to irregularpayments as a relatively easier means ofclearing goods. Conducting awarenessprogrammes and holding regular forumswith the participation of all stakeholders canhelp implement reforms successfully. Moreimportantly, committed leadership and aneffective monitoring process are necessaryto push through required reforms.

Building Capacities of TestingLaboratories: Local laboratories are notequipped to issue certain internationalcertifications for a number of products andlack the capacity to handle a large numberof requests. Hence, the capacities oftesting laboratories need to bestrengthened so that (i) test reports can be

given without undue delays, and (ii) labs areequipped to undertake necessary tests. Thiswill reduce the costs incurred by importerssuch as demurrage costs and opportunitycosts of holding products idle at the port.

Establishing an Independent Non-JudicialReview/Appeal Procedure: Currently, atrader can appeal to the Director General ofCustoms if they do not agree with a decisiontaken at the operational level, and to theMinister of the Ministry of Finance andPlanning under whose purview Customsfunctions. Traders could also appeal to theTax Appeals Commission, but thisCommission is not functional. In this context,establishing an ombudsman specialized incustoms and tariff regulatory matters canassist the trading community.

Extending Pre-arrival Processing to MoreProducts: Pre-arrival processing iscurrently available for a limited number ofproducts (i.e. perishables). Extending this toother products would facilitate trade.However, this requires legal amendments tothe Customs Ordinance, which is over 200years old.

Upgrade Facilities at Colombo Port andReduce Congestion: While acknowledgingthe recent improvements at the ColomboPort, the need to upgrade the port and itsequipment were highlighted. Improvementsare needed if Sri Lanka is to become amaritime hub and not a mere transshipmenthub. Problems such as congestion at theColombo Port can also be reduced if moregates are opened. Currently only 2-3 gates ofthe 9 gates are open at any given time.

Improving Other Infrastructure Facilities

Warehouse Facilities: Traders highlightedthe lack of adequate facilities available atwarehouses, i.e. lack of proper storageracking systems, poor conditions within

them, poor handling, inadequate security. Themain reasons for losses/ damages wereidentified due to the mishandling of cargo,mainly at the port and the warehouses.

Rail Transport: The railway network and theservices offered by the Sri Lanka Railway arenot sufficient for freight transport. Currentservices only provide the function oftransporting good with little loading/unloadingfacilities. Despite railway transport chargesbeing low, when all other relevant charges areadded, it becomes more costly than roadtransport. Developing an integrated multi-modal transportations system is necessary iftraders are to receive cost/time benefits ofusing the railway system.

Scanning Facilities: Scanning facilities at theport are minimal, resulting in containers beingopened for checking. This creates delays,adds to cost and reduces the quality ofperishable goods. Airport security at BIAsometimes carry out random checks ofproducts before they are allowed to enter theairport premises, requiring exporters tounload products. Hence, there is a need toacquire necessary scanning devices whichwill facilitate trade whilst maintaining thesecurity of the country in a more efficientmanner.

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