Maldives Ports Limited (MPL) first announced it was shifting back to charging stevedoring fees in US dollars on March 05th, 2024.
The decision would become effective from April 01st, and will be applied to all shipping agents and ship operators.
Stevedoring fees are the charges incurred by shipping agents and ship operators for loading and unloading cargo from a ship to and from a quay wall, bay or harbor at the port.
While an MPL spokesperson spoke with 'Sun' confirmed the said charges are only levied on shipping agents or operators instead of importers and consignees, the core details about the concept and the impact of this decision remains elusive for the public.
To rectify this, MPL held a designated meeting for the purpose on Wednesday, April 03rd, to disseminate relevant information about its decision of changing back to charging in US dollars for the service.
The Original Process
Speaking at the said meeting was MPL's Deputy Chief Executive Officer Ali Hashim. He explained in the last 12 years, stevedoring charges included in MPL tariff has remained unchanged.
Explaining about the recent decision, Hashim said it was aimed towards a positive impact for the Maldives in terms of correcting the issue of dollar constaints.
"In CIF freighting, the money is paid by the consignee to the shipping agent or operator in dollars. Shipping agents then go on to exchange said dollars at an increased price, and then pay us in Rufiyaa," Hashim detailed the situation.
He also stressed this practice contributed to elevating black market exchanges in the country, and the decision of MPL to accept stevedoring charges exclusively in US dollars is an important cornerstone in the Maldives' economy's collective efforts to de-escalate the rising dollar scarcity. He added this would also ensure US dollars are circulated within proper financial institutions; or the banking system of the Maldives.
Stevedoring Charges - As Per MPL Tariff
According to MPL, it charges USD 211.14 for every 20 feet container, USD 422.28 for 40 feet units, and USD 583.95 for 45 feet containers for loading and unloading of laden containers.
For empty containers, MPL charges USD 74.52, USD 149.04, and USD 206.10 for 20-foot, 40-foot, and 45-foot containers respectively.
Not All Are Pleased
It has been learned that majority of the shipping agents and ship operators currently active or dominating in the Maldives' shipping scene are mainly Sri Lankan-origin firms.
These firms have found a strong footing in the Maldives shipping industry by providing competitive rates by ensuring they held a tighter control over US dollars than the local counterparts.
Moreover, said shipping agents and operators receive CIF (Cost, Insurance, Freight) payments from exporters directly to them in dollars, which they then exchange in the local market for Maldivian Rufiyaa - but at a higher exchange rate. This allows them to acquire a profit from the difference, while utilizing the back equivalent value of the stevedoring charges from MPL, to pay the commercial harbor operator.
TL;DR: Shipping agents were exchanging dollars for local currency at a higher rate and paying MPL in Rufiyaa due to which MPL's dollar earnings are not sufficient per each fiscal year.
However, MPL's decision to strictly demand US dollar payments for stevedoring would mean shipping agents or operators can no longer take undue advantage of the situation. Meaning they are now required to pay the dollar they receive from exporters, in its exact sum and without an exchange, to MPL.
How Did This Start?
Back in 2011, the Maldives government decided to float the US dollar against Rufiyaa approximately between the rate of MVR 11 and 12. Right after this, shipping agents met with MPL requesting to change stevedoring charges to Rufiyaa.
The government greenlit this, and conditioned shipping agents to exchange US dollar at bank rate and pay MPL.
Throughout this entire episode, MPL never revised its stevedoring charges.
The situation would come to a change when the dollar scarcity became one of the most prevalent and concerning matters for the Maldives economy. This was where MPL held discussions with the Ministry of Economic Development to seek a solution.
The ministry had conducted a research into the shipping industry and found that due to the practice of shipping agents converting dollars into Rufiyaa to pay to MPL, the said dollars were being exchanged twice within the Maldivian economy; which grossly devalued the local currency.
Simply put, when one the value of a base currency decreases, the quote currency strengthens. This explains why the rate of Maldivian Rufiyaa against the dollar increased in recent years.
The Actual Reason for MPL's Decision
MPL claims it is important to retain a sizeable portion of its earnings in US dollars. This allows them to make necessary international procurement without having to rely on exchanging large quantities of local currency into US dollars; that too at a disadvantage.
Until recently, to achieve international purchases; for machinery and equipment or other necessities, MPL had to rely state-owned enterprises with a stronger US revenue such as the Maldives Airports Company Limited (MACL) or STO.
With the recent move, MPL projects to generate approximately USD 20 million per annum to its collective revenue. From this total, the corporation added, only half would be utilized per year for international procurement while the rest would be flowing within the Maldivian banking system.
The Bottom Line
There is little to no doubt that the Maldives has been experiencing a serious deficit in US dollar circulation within the country's economy; which has resulted a gradual and alarming increase in the exchange rate against the local currency.
But regaining control of the dollar circulation and ensuring it stays within regulated financial authorities, MPL envisions the country's economic condition observes an overall relief in the long-term.
