Can an E-Hub Be the Answer to Sri Lanka’s Trade Facilitation Troubles?

Sri Lanka is a small open economy dependent on trade to drive economic growth. In the past decade, Sri Lanka’s trade to GDP ratio has slipped substantially behind peer countries. Yet, with its strategic geographic location, Sri Lanka is uniquely positioned to become an attractive Hub for international commerce in this region; being at the crossroads of trade between East and West and at the doorstep of a dynamic consumer market in India. A key feature of becoming such a dynamic trade Hub is efficient and modern trade facilitation.

The importance of trade facilitation has been recognized at the multilateral level with the passing of the WTO Trade Facilitation Agreement in December 2013, which Sri Lanka has now ratified. Sri Lanka can become an early adopter of the trade facilitation reforms and be a regional beacon of good practice if it expedites trade facilitation, particularly focussing on improved information and workflow. Leveraging on digital technology is key to this strategy.

A long overdue necessity towards fulfilling Sri Lanka’s regional hub aspirations is facilitating the seamless flow of information between all stakeholders directly and peripherally connected with the supply chain to, from, and through Sri Lanka’s borders. A recent survey by the Institute of Policy Studies found that an overwhelming majority of respondents in the trade sector highlighted the need for ICT and electronic single-window reforms at the Port.

Sri Lanka currently has no central data exchange that facilitates the flow of information, which results in the same information having to be entered and transmitted multiple times bilaterally between parties. This results in significant inefficiencies caused by:

  • Repeated data entry in multiple formats (time and accuracy);
  • Individual stakeholders requiring multiple linkages,
  • Varying costs for data transmission in non-standard formats;
  • Manual data transmissions among other issues.

The depiction below is shows the multiplicity of information flows with respect to cargo moving to/from or over Sri Lanka as currently experienced. Whilst there is nascent automation in a few areas such as parts of Customs, some terminals and some shipping lines and airlines, a sizeable volume of transactions are manual and require a great deal of physical intervention and waste of paper.

screen-shot-2017-02-14-at-6-12-18-pm

Global best practice, particularly at major hub and gateway points, have installed electronic hubs/exchanges that link all stakeholders and stakeholder community networks through a single switch. Significant advances in technology, combined with the availability and affordability of secure internet connections, gives Sri Lanka the ability to leap-frog in developing an information exchange platform, using current technologies rather than costlier legacy systems. Such a development would essentially organize the transactions depicted above into a process that would be closer to the depiction below

screen-shot-2017-02-14-at-6-12-54-pm

A system/exchange of this nature can be implemented wholly as an initiative of the Government Of Sri Lanka as has been in the case of Singapore, which is one of the most successful examples globally (See Annex 1). However, in order to ensure best practice, stakeholder engagement and speed of implementation, it is recommended that the GOSL facilitates a public/private partnership (PPP) between the key stakeholders [Regulators, Ports, Airports and Terminals, Airlines, Shipping Lines and their Agents, Freight Forwarders and Customs], rather than implement it as a wholly Government initiative

The PPP will be effected through a limited liability company which should be capitalized by all the stakeholders. The Company will draw-up the terms of reference (possibly using expertise and funding from a multi-lateral agency) and issue an international Request for Proposals (RFP) through qualified parties to set-up and operate a data hub in Sri Lanka. Based on the ability of the company to fund the initial costs, the company would either procure the necessary equipment and software on an outright basis with annual support and maintenance from a successful vendor, or procure the service from a successful vendor/application service provider who would be reimbursed on a transaction basis

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