Fast-tracking digitalisation essential for industry growth: SLFFA Vice Chairman Andre Fernando
The Sri Lankan freight forwarding and logistics industry, currently generating over $ 8 billion in revenue, contributes approximately 2.5% to the country’s GDP and directly employs at least 40,000 people. In addition to that, given the industry’s scale, many additional individuals are employed within it indirectly, including shipping agents, truckers, courier companies, warehouses, and customs brokers.
In an interview with The Sunday Morning Business, Sri Lanka Logistics and Freight Forwarders Association (SLFFA) Vice Chairman and MAC Holdings Managing Director Andre Fernando stated that by 2030, the industry could realistically aim to become a sector worth $ 12 billion. He also outlined several strategies to unlock its full potential.
Following are excerpts:
How has the freight forwarding and logistics industry progressed, especially considering global headwinds?
The industry has shown consistent growth, with volumes generally increasing. Infrastructure development, particularly at the port, has been notable.
However, Sri Lanka has yet to fully embrace technology. I believe this is beginning to change. Despite the slow pace, I expect broader digitalisation soon. In order to remain competitive, especially against regional giants like India, China, the UAE, and Singapore, we must improve in this area.
Key challenges include the complexity of Customs procedures and the continued reliance on manual documentation. Several infrastructure gaps exist in rural and regional areas and connectivity issues within the port remain, largely due to ongoing construction. Once completed, traffic flow should improve. It’s essential that the port maintains free and unimpeded access throughout its premises.
In recent months, we have experienced delays in inter-terminal transfers and vessel movements, but these are gradually improving. Regarding container handling, industry stakeholders are actively engaging with us and making efforts to enhance the situation. While some progress has been made in this regard, more work is needed.
Moreover, the industry also faces cost pressures, inflation, and the impact of taxes. These factors affect both companies and individuals, leading to a decline in productivity and staff morale. We must fulfil our obligations and pay our taxes, even though the amounts are substantial.
When comparing Sri Lanka to competitors, Singapore, like us, is a natural hub. Moreover, Dubai and the UAE, despite being off the main sea route, have successfully positioned themselves as regional leaders and attracted major shipping lines. Sri Lanka must follow suit. Additionally, while some competing countries have already developed new airports, we are still deliberating on our terminal projects.
Looking ahead, key developments include the expansion of the Colombo North Port, the expedited completion of the East Container Terminal, and the second phase of the West Container Terminal. Once these projects and the port’s internal infrastructure are completed, I believe Sri Lanka will have a more efficient and competitive port.
We must also prioritise the digitalisation of various sectors to eliminate manual documentation. This process advanced significantly during the Covid-19 pandemic but was largely reversed afterwards. It’s crucial that we resume and accelerate these efforts.
In addition to that, developments such as tenders for the National Single Window and the launch of an ASYHUB digital trade facilitation system stand out.
What major bottlenecks do we face in maximising the potential of Sri Lanka’s strategic geopolitical position, and how does this impact the industry?
Sri Lanka is not maximising the country’s potential as it should and a lot more remains to be done. We are strategically located between the East-West sea route and have excellent ports, especially the Ports of Colombo and Galle.
While leveraging these to the best extent, Sri Lanka must also look at becoming an air cargo hub to maximise growth. While currently Sri Lanka remains an ocean hub for shipping lines, in aviation, most airlines are passenger carriers and not freighter carriers.
This requires transformation and attracting more freighter carriers so that cargo from destinations such as Bangladesh, Pakistan, and South India can be consolidated and exported to the rest of the world.
Furthermore, the facilities offered for free zones remain quite small-scale, since most of the free zone facilities are located on two or three acres of land. In contrast, free zones in the UAE can be as large as 25 acres. It raises the question of whether we are truly planning or just focusing on the present. We face strategic bottlenecks in achieving this vision.
We also need to actively market both our ports and airports at international events to develop Sri Lanka as a hub.
What have been the developments in transshipment and freight throughput in the recent past?
On the ocean side, we handle about 7.5-8 million TEUs annually, and there are plans to expand this to 12 million TEUs through terminal expansions. Air freight throughput was about 190,000 MT in 2024, which was a 20% increase over 2023.
However, this increase could have been owed to the fact that 2023 was a year of financial crisis with low volumes. Therefore, it is more a normalisation of industry rather than a steep increase.
The industry faces concerns regarding the development of facilities, infrastructure, and even human resource development. Have adequate measures been taken recently in this regard and how has the SLFFA addressed these?
Human resource concerns are a core area identified as a problem. I do not believe our schools are producing the type of skilled workforce the industry needs.
The English language is a barrier to many, and this industry of logistics, shipping, and multimodal transport is all about international trade, where a strong command of English is essential. My personal view is that we need to incorporate tourism, shipping, and aviation into the school curriculum so that students understand and like the business.
Regarding human resources, we are also facing a significant brain drain. At the SLFFA, we have a training institute that trains both industry professionals and school leavers. As an association, we also offer scholarships annually to students. We engage in a lot of Corporate Social Responsibility (CSR) work and collaborate with industry stakeholders to find solutions to the problems of our member companies.
In terms of infrastructure, while expansions are happening in Colombo, Sri Lanka should also consider developing Trincomalee in partnership with India.
Additionally, we need to develop off-port infrastructure, such as better facilities for import consolidation and Customs inspections. These could be implemented as public-private partnerships between the Sri Lanka Ports Authority (SLPA) and freight forwarders.
In fact, SLFFA Cargo Services, which currently handles imports and exports at the Bandaranaike International Airport (BIA), has the potential to contribute to this development and has already submitted an Expression of Interest (EOI) to the SLPA for a joint venture to upgrade the port’s import infrastructure and move it to a different location.
With the need for attracting more investments, especially Foreign Direct Investments (FDIs), what key strategies must the industry and the Government undertake? What is the extent of investment targeting the industry ideally hopes for, especially considering the development of competing countries?
We should be targeting FDIs of $ 1-2 billion over the next few years. In order to attract FDIs, we need to review and reform our maritime policies and foreign investment laws.
For example, a ridiculous policy in the shipping industry is requiring a No Objection Letter from the current agent if a new agent is added or changed. This is done to protect a few individuals.
There are gaps that could be improved. Another concern is whether investors will be attracted by the current 40% foreign investment limit, whether they would prefer 49% or 51% (in local favour), or whether they would prefer at least a 50/50 split.
How has the progress of tourism impacted the industry? What more developments are expected and required?
Tourism numbers are certainly growing. As the tourism industry grows, more airlines are coming in, which increases belly space capacity. However, the capacity to grow as a cargo hub requires dedicated cargo freighter capacity.
Sri Lanka is still a small-scale market which is primarily serviced by carriers with belly capacity. While some freighter carriers operate, it is not on the same scale as many markets. So while tourism growth helps, we need to focus on attracting more freighter carriers to truly develop as a cargo hub.
Sri Lankan maritime policy is accused of being outdated. How does this impact the industry?
The policy is outdated. I understand that the Director General of Merchant Shipping has sent out a questionnaire to various associations to gather comments on how to update it. We hope there will be a good outcome.
Sri Lanka needs comprehensive maritime and aviation policies. For the trade sector to develop, it is crucial to implement digital trading platforms. These are in the pipeline. The National Single Window and a Port Community System are currently also at the EOI or tender stages. These projects must be fast-tracked and connected to the National Single Window.
How important is the development of industry for overall economic growth within the country?
The freight sector has been quite responsive and responsible in its business practices. We have grown significantly from the past, and logistics companies are now more system-driven and digitalised than even airlines and shipping lines. We have made progress, but we can improve these efforts further.
I want to emphasise that Sri Lanka has the potential to become a cruise and yacht hub, with the Port of Galle being the ideal location. While a tender has been issued for this and even the MAC Group participated, the project has since slowed down. I sincerely hope the new Government will fast-track it.
With increasing tourism numbers, there will be a significant demand from cruise ships and yachts looking to visit our country.
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