Anushka

Wijesinha WiLAT AGM Keynote Address 6 April

KEYNOTE ADDRESS BY ANUSHKA WIJESINHA

AGM of Women in Logistics and Transport, 6th April 2016

All of you here are part of an exciting story shaping Sri Lankas economy. And
today, I will highlight why I believe that is so why logistics and transport are
key to Sri Lankas strategy of becoming a serious player in international
commerce.

Logistics and transport services is now an important sub-sector of the
economy. Although its share hasnt changed much over the last five years, it
now accounts for 11% of GDP, and 20% of the total services sector. Year on
year growth has been above overall GDP growth, and between 2010 and 2015,
the sector expanded by 40%. Over the last five years, the sectors contribution
to growth has averaged around 12%.

Before I get in to the meat of my presentation, let me state at the outset how
impressive it is to see a professional forum dedicated to bringing together and
promoting women in a sector that is seen as fairly non-traditional.

We need more of this, particularly considering where we are right now.

Sri Lanka is at a unique point in its economic trajectory, and this makes it a
very interesting as well as challenging time.

The country is going through a transition on three main fronts.

On one side, we have the democratic and institutional transition. We are in a
unique and challenging transition right now in terms of political systems,
electoral systems, governance systems, and of course encompassing it all is
the new constitution. All of these matter for business. The political and
electoral transition determines the ability to undertake politically tricky
structural reforms. Governance transition is trying to reset the relationship
between the state and the private sector and the state and citizens. We are
seeing a huge amount of consultation and dialogue between the public sector
and Chambers of Commerce on the economic reform agenda. Translating that
to comprehensive action, though, is yet to get fully underway.

The second transition, is that the country is transitioning through middleincome status. Currently we are classified as a lower middle-income country,

Anushka Wijesinha WiLAT AGM Keynote Address 6 April

but soon to be an upper middle income country. Then we aspire to be high

income. But that jump doesnt come easy. This transition brings with it many
challenges in terms of growth drivers, governance, inclusiveness, etc.

A comprehensive study led by the World Bank estimated that out of 101
middle-income countries in 1960, only 13 had graduated to high-income
status by 2008. It is argued that this was essentially due to a slowdown in
productivity growth. And so, getting out of that situation also depended on
productivity growth. The estimates showed that around 85% of the slowdown
in output experienced by those countries was explained by a slowdown of
productivity, and not merely a slowdown in returns to physical capital.

What does this mean for Sri Lanka? That improvements in productivity,
improvements in efficiency in the system, improvements in competitiveness
of particular sectors, all will matter if we are to chart a path to high income.


The third transition that is taking place is on the international stage - Sri
Lankas international relations. After several years of a particular foreign
policy stance, Sri Lanka is now trying to reset its relations with the West,
consolidate ties with China and India, and forge new alliances with countries
like Singapore, Turkey, etc. This rebalancing and resetting is important. Sri
Lanka needs good partnerships with many countries in order to remain
globally relevant and globally positioned. Our relations with these countries
ultimately affect business if we are to truly leverage on our location and
attract business relationships from many places, then we must forge
diplomatic relations from many places too.

We are seeing a huge amount of international goodwill towards Sri Lanka
right now. We have seen so many visits by top diplomats, envoys, and trade
delegations recently. At the Chamber we had visits by the New Zealand Prime
Minister, the Norwegian Foreign Minister, the Prince of Bahrain. A big part of
their agenda while they were here was trade and investment. It wasnt just
political.

In my view, this comes down to one simple but powerful fact. That Sri Lankas
unrivalled geographic location is its strongest asset.

Recently the Ceylon Chamber hosted the countrys first Chamber-led
international investor conclave, and we had participation of over 120 foreign

Anushka Wijesinha WiLAT AGM Keynote Address 6 April

investors. A colleague and I went around interviewing and surveying the

prospective investors to get an insight into their thinking - We conducted a
snap survey using a mobile app. We asked them questions about what factors
influence their decision to invest.

Overwhelmingly, Sri Lankas Geographic Location and Access to Regional
Markets were seen as the top reasons.

Access to Regional Markets was reported as the top factor of attraction by
over one-third of respondents, and Geographical location was ranked highest
among factors that shape their decision to invest in Sri Lanka.

Meanwhile, another factor like tax incentives was a low consideration,
reported by just 6% of respondents.

When asked to rank (on a scale of 1 to 5, with 1 being lowest and 5 being
highest) various factors that influence their decision to invest in Sri Lanka,
Geographical location had the most number of respondents ranking it high at
4 or 5.

We are in an enviable location. This was reiterated by a leading global risk
consultancy when they wrote recently, Sri Lanka is set to become a
destination of choice among businesses looking to tap opportunities in panIndian Ocean trade due to its strategic location.

The busy East-West shipping route passes just six to ten nautical miles south
of the island. More than 60,000 ships ply this route annually, carrying twothirds of the world's oil and half of all container shipments.

We are at the doorstep of a dynamic market India. Already, 75% of Colombo
port volumes is transshipment from India. The Indian middle class market
alone is set to be 10 times our entire population. Imagine the opportunities
there - even if our companies just slice off 0.1% of that market. E-commerce is
thriving there imagine the opportunity to be a hub for warehousing and
logistics for e-commerce companies into South Asia.

We also have an FTA with Pakistan, which is going to be expanded to cover
services and investment. We will be unique in having preferential market
access to both India and Pakistan.

Anushka Wijesinha WiLAT AGM Keynote Address 6 April

And soon we are likely to have an agreement with China. Then, Sri Lanka will
be truly unique in having preferential trade access to around a 2.7 billion
market one of the few countries that can say that!

All of this means that we must focus on our trade and investment policies to
leverage on this opportunity, and our openness to trade is important.

But over the last decade or so, we have slipped back substantially on trade
openness.

Trade (exports plus imports) now forms a smaller share of our GDP than ever
before. We used to be a nation where trade formed close to 80% of our GDP
(around 2005). By 2015 this had fallen to a paltry 55%. Lets compare to some
other leading regional economies that are doing well. Vietnams trade to GDP
ratio is now around 170%, Malaysias is 150%, and Thailands is 120%. Of
course Singapore is an outlier at 350%, but indicates the degree to which
trade drives their economy. We are a small country with a small domestic
market. Without external trade we cannot achieve high growth. So this low
and declining trade to GDP ratio needs to be reversed.

Some steps are already underway. We hear that there is comprehensive
review of our trade and tariff policies, in order to see how and where to
liberalize, and there are efforts to improve trade facilitation, and also efforts
to streamline investment approvals.

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When visiting investors asks me what sectors do you think will grow in Sri
Lanka? I mention a few that are rather clear to me in terms of opportunity
tourism; IT-enabled services and software; niche value added manufacturing;
agri-business, property development; urban infrastructure and of course
international logistics. Given the countrys geostrategic location
international logistics linked to our ports and airports, seems a no-brainer.

Within Sri Lankas services exports, transport services that is shipping,
aviation and related activities, amounts to 35% of total services exports. This
is positive, and shows that we have begun to leverage on the location
advantage. Compared to our 35%, Vietnam is around 20%, Thailand 10%, and
Malaysia 12%.

Anushka Wijesinha WiLAT AGM Keynote Address 6 April

A few thoughts specifically on shipping and also on aviation, of course bearing

in mind that I am in the midst of sector experts, here are some things I found
interesting.

Sri Lanka is expected to attract an increasing share of trans-Indian Ocean
trade. According to estimates by KPMG, the Asia-Pacific freight industry is set
to grow at around 12% each year, and the Port of Colombo already seeing
around a 15% annual growth in trans-shipments.

SAGT is running profitably and pushing regional boundaries in efficiency and
performance. CICT is making waves. When the CMA CGM Marco Polo until a
couple of years ago the worlds largest container ship with a capacity of
16,020 twenty-foot-equivalent units arrived in Colombo last September, it
showed Colombos emergence as a growing transshipment hub capable of
handling the increasing number of mega-ships that are plying Asia-Europe
trade. Fourteen services using mega-ships call CICT weekly.

A lot of prominent global carriers come to our Port, but according to some
indicators we still have some way to go in terms of connectivity. The Liner
Shipping Connectivity Index1, which measures how well countries are
connected to global shipping networks, scores Sri Lanka at 53, above that of
Vietnam at 47, and Thailand at 45, but well behind Malaysia at 104 and
Singapore 114.

Lets also focus briefly on air transport, as its a topic close to my heart. It was
the first South Asia-wide research projects I undertook, and it has now been
widely published by ADB and others. In that study we looked at Sri Lankas
(and South Asias) air connectivity.

It may not be immediately convincing that the aviation services should be
considered a key policy issue for developing countries like ours there are a
lot of other things on the table too, demanding attention. The traditional
wisdom that air transport is a luxury transport mode is still common in much
of Asia. However, this industry is essential for us, to gain more from
globalization and international trade.

number of ships, their container-carrying capacity, maximum vessel size, number of services,
and number of companies that deploy container ships in a country's ports
1

Anushka Wijesinha WiLAT AGM Keynote Address 6 April

Globally, nearly 35% of international trade is carried by air. It is also

noteworthy that close to 50 percent of air cargo is transported on passenger
flights as opposed to designated cargo flights. And so, a growth in passenger
flights has automatic spillover benefits for cargo transport.

We have ample evidence to show that liberalising air services reduces the
costs of trade, especially in high-value added supply chains such as parts and
components, electronics, perishable food, or cut flowers, and supports
tourism.

Especially if Sri Lanka wants to get into global production networks air
services connectivity will be important. In this, we have to look at the Bilateral
Air Services agreements and how restrictive or not they are. For instance,
across South Asia, all of our Bilateral ASAs with each other are more
restrictive than what we have with countries outside South Asia! We also have
to look at the ownership and operation of our airports, airlines, ground
handling services, MRO, etc. All these will have to be looked at.

I feel that this area has received relatively little attention from economists and
policy experts in Sri Lanka, but must become a priority, given our
geographical location and our interest in being part of global production
networks.

Let me move to some concluding thoughts.

Firstly, to where I started. The value of what WiLAT does.
Women being underrepresented in industry and commerce is not a new thing.
We see it everywhere in Sri Lanka today. In government, in tourism, in IT, in
engineering these are all industries that have a low participation of women.

In this sector especially, the ratio is rather staggering. Out of total
employment, 97.1% are men and 2.9% are women.

Societal values and norms have stereotyped women into
traditional employment lines doctors, lawyers, teachers, bank officers, etc.
We must recognise this as a serious issue, and work in partnership with
government and private sector to provide an enabling environment for
women to thrive in new sectors of the economy. We can also do this by
nurturing role models in the industry many of you are these role models and

Anushka Wijesinha WiLAT AGM Keynote Address 6 April

you must go out there and fly the flag high for the industry and attract more
women to the sector. Thats the only way this can sustainably grow.

Sri Lankas female labour force participation rate is just 35%. We cannot
expect to have 7-8% economic growth with such a large segment of our
population not participating in the economy. Its not just a womens issue, or
an equality issue, its an economic issue.

Secondly, let me wrap up with reiterating my key message.

The fact that, overwhelmingly, the investors we meet say that Sri Lankas
location and access to big markets like India, Pakistan, and eventually China, is
a key attraction in their decision to invest here reiterates the case for
focussing on our trade, investment and logistics policies.

Leveraging on location will be a big game-changer for economic growth in Sri
Lanka. We must become an attractive regional hub, and all of you have an
important role to play.

- ENDS -