Insight – Sri Lanka’s strategic position in the global trade route

From elephants and spices to gems and timber, Sri Lanka has played a pivotal role in the East to West trade route for hundreds of years. Today, Sri Lanka is at the crossroads of the fastest-growing economies in the world and is the main transhipment port in South Asia, presenting opportunities for both Australian exporters and logistics services providers.

Sri Lanka’s strategic advantages

Sri Lanka’s two major ports are the Port of Colombo and the Port of Hambantota in the south, both of which are well connected to Colombo Airport. In 2018, the Port of Colombo alone handled seven million TEU containers, up from one million in 1995.

As a major maritime hub in the region, Sri Lanka offers:

  • a strategic position in South Asia that provides access to the emerging economic giant India. India is on track to be the third largest economy in the world by 2030, after China and the US.
  • exposure to China’s Belt and Road Initiative through terminals in the Port of Colombo and the Port of Hambantota, both of which have attracted Chinese investment. China is one of Sri Lanka’s key trading partners.
  • the ability to reach Europe and the Middle East faster .
  • deepwater ports with the capacity to accommodate post panmax or triple ‘E’ class vessels.

Competitive advantages for Australian exporters

Australian businesses that export or are considering exporting to Sri Lanka can use its ports to ship products to other markets. Australian agricultural, food and clothing companies also have the option of shipping raw materials to Sri Lanka for processing or manufacturing, then exporting the finished goods to markets around the world.

Shipping out of Sri Lanka offers the following benefits:

  • Faster speed to market – Sri Lanka provides unparalleled speed, frequency and capacity for exporters that want to ship products to Europe’s major ports, including Rotterdam, Antwerp, Felixstow, Southampton and Hamburg. Meanwhile, the Port of New York can be reached within 22 days. Dubai and Singapore – the major ports either side of Colombo – can be reached in 4.5 days through multiple carriers. Sri Lanka is highly suited for time-sensitive cargo such as garments and value-added food products.
  • Preferential market access – Sri Lanka has free trade agreements with India and Pakistan, and is concluding agreements with Singapore and China. It has preferential access to EU markets under the GSP + scheme. Agricultural produce such as grains and lentils can be processed in Sri Lankan free zones for export to neighbouring markets.
  • Greater choice and capacity – Freight capacity and frequency out of the Port of Colombo is unmatched when compared with other ports in South Asia. A Sri Lankan–based exporter can choose from multiple mainline carriers, which means multiple container cut-off times to ship goods direct to main ports. An exporter based in South India has fewer options and will need to rely on feeder vessels with capacity constraints.
  • Lower freight and logistics costs – With scale comes lower shipping and logistics costs. Exporting out of the Port of Colombo can minimise the cost of price-sensitive cargo such as agricultural commodities, minerals and construction materials.

Opportunities for logistics service providers

Australian logistics providers based in Sri Lanka can offer their services to South Asian and other international customers plugged into global supply chains.

There are opportunities to provide services such as multi-country consolidations (MCC), entrepot services, warehousing, assembly and minor processing, labelling and repackaging. Companies that offer diving services, ship repairs, bunkering, ship chandlers, sea marshals and crew may also find opportunities at Sri Lankan ports.

The Sri Lankan Government is supporting all of the above opportunities through its National Export Strategy – Logistics Strategy 2018–2022 .

Contact Austrade for more information if you wish to expand your logistics footprint in Sri Lanka or intend to make use of Sri Lanka’s position as a springboard to enter new markets.