Report

88 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA
The Potential
The potential for Colombo Port comes not from
increased Indo-Sri Lanka trade but from its potential
as being a hub for trade from South Asian countries to
the rest of the world. The Sri Lanka port authority
(SLPA) aims for the Colombo Port to become a
significant international player providing market-driven
facilities and services to shipping lines. ADB (2007)
estimates Colombo saw rapid growth in the early 1990s
which averaged 20% per annum until 1998 when the
growth stopped and the overall traffic volume remained
static at about 1.7 million TEU per year despite India’s
accelerated GDP growth. It was only in 2003 that
growth resumed at 11%. The main reasons for stagnation
of container traffic are attributed to increased direct
calls JNPT; competition from the new ports of Salalah,
Aden, Tanjung Pelepas and Port Klang; high tariff levels
at Colombo compared with competing ports, and
failure to respond to falling prices; civil strife; low
operational efficiency: low productivity, congestion and
ship delay at the port.
ADB (2007) forecasts a positive business climate
for Colombo Port. The container traffic forecast for
container traffic both from domestic and Indian subcontinent
(i.e. Bangladesh, India, and Pakistan) sources
is shown in Table 9.20. It is noted that the economic
growth of Indian subcontinent economies and the
resulting growth in their import and export trades is
the fundamental determinant of container transshipment
volumes originating from these economies and
hence Colombo Port’s traffic opportunity.
Table 9.20 Forecast of Traffic at Colombo Port
(000’ TEU)
Indian Sub-Continent Container Transshipments
Domestic Forecast % Trans- TEU (000)
Container shipped via Trans-
Growth Colombo, shipped
Forecast
Singapore,
Salalah, etc.
2002 546* 4,739* 45* 2,133*
2005 727 6,658 39 2,597
2010 1,118 11,219 35 3,927
2015 1,643 17,262 33 5,696
2020 2,414 24,211 30 7,263
2030 4,975 47,626 26 12,383
2040 9,786 93,688 16 14,990
Note: * represents actuals which was used as the base for
projections. 2040 forecast assumes unconstrained by
port capacity limitations (000 TEU).
Source: ADB (2007)
It is expected that the potential transshipment share
of the Indian subcontinent market will decline over time
due to increased direct calls. ADB’s Colombo South
Harbor project represents a landmark in project
procurement and inward investment as well as recognising
necessary reform. The impacts upon Colombo are
expected to be significant, not only to the port users
but to the entire community.
The Colombo port also needs to cater to the
increase in domestic exports. Overall, Sri Lanka’s
exports accounted for 28% of GDP and imports for
37% in 2005. Almost all national imports and exports
are containerised. Most exports are destined for Europe
and the US. However, imports are often materials for
use in export industry and they come from the Far East
and significantly from the Indian sub-continent.
Hence potential to expand the Colombo port needs
to consider the following points (ADB 2007):
• Significant volumes of Bay of Bengal container
cargo are transshipping across Singapore or Port
Klang for Europe and North America which is
probably more expensive and longer than
transshipment at Colombo. Colombo needs to
investigate ways of supporting and encouraging
more frequent and more regular feeder services,
notably to Chittagong by offering other special
deals.
• Capacity limitations at JNPT are prompting carriers
to seek alternatives. Colombo offers a real
alternative for European and Far Eastern cargoes
and current users of JNPT should be targeted.
• The potential for partnering with a range of small
ports, of which Vizag could be a key example, to
modify cargo flows for joint benefit requires
investigation. This must be done in a way that does
not adversely affect other significant port
relationships.
• The port is a national asset which should promote
contacts with local exporters, importers and
development agencies by demonstrating to them
how the port is able to assist them. The growth of
national cargo base is an important objective and
direct foreign investment in local industrial exportoriented
business is to be encouraged
The Project
ADB’s Colombo Port Expansion Project aims at the
enhancement of operational efficiency at all of
Colombo port’s container terminals and investment in