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Ports & Shipping scenario

Published on 17th Aug, Edition 33, 2015

 

Ports are considered universally gateway of the country and Pakistan is blessed due to its strategic position, for transit to Afghanistan and Central Asian land locked countries.

The Merchant Marine plays a vital role in the economic and industrial development of a country. The founder of Pakistan realising the need of ship’s for newly created Pakistan pursued with Muslim and Parsi entrepreneurs to acquire ship’s under Pak flag firstly in 1947, two ships were chartered so that on 14th August 1947, the two vessels may show Pak flag, but first vessel to be bought was “Fatima” in 1948, followed by Alahmdi, Karachi and Chittagong were declared port of registry by a notification signed by Mr. Jinnah, which is in the archive of mercantile marine department.

The ship owning under Pak flag flourished and a private ship owning companies operated 25 ships, whilst in 1963 National Shipping Corporation was established, but in 1974 the government decided to nationalise the shipping companies and subsequently merged all nationalised companies in PNSC with strength of 71 ships, thus in 1979 Pakistan. National Shipping Corporation was established by an-ordinance. The nationalisation chased all private entrepreneurs abroad some of them decided to operate vessels on flag of convenience. All efforts to induce private ship owning virtually failed, last being in 2006, thus Pakistan has only one ship owning company in public sector i.e. PNSC.

The world seaborne trade is about 18.2 trillion and 90% is carried by sea. The current scenario is that PNSC is the only national flag carrier with 9 ships with total deadweight capacity of 610,167 tons, has lifted 10.3 million tons of cargo which is approximately 16.3% of the total country’s seaborne trade. PNSC is presently catering to crude oil and PNSC tankers are lifting 6.5 million tons per annum, by its newly-acquired double hull 3 aframax tankers, whilst its bulkers are on international tramping. Interestingly PNSC being in public sector continues to modernise and grow and it is in green declaring dividends to its share holders. Recently PNSC was given due protection by ECC and now PNSC is negotiating with PSO for carriage of processed fuel oil. Needless to mention that PNSC will not only cater to our non edible products, but may play a role of state chartering company for all public sector imports as the state chart in Delhi India, has the similar role. PNSC has made profit of 753 million after tax and its EPS is Rs5.70.

The private sector is still shy to venture in Pakistan due to cost of ship’s about 20/30 million dollars being capital intensive thus private sector may not emerge in Pakistan. The ideal situation is that public and private sector may compete with each other, but, so is not the case. There has been tremendous growth of NVOCC and freight forwarders, due to containerisation in Pakistan, but sector remains unregulated, calling criticism from KCCI.

Ports in Pakistan have played their role catering to captive cargo of Pakistan and Afghan transit, the only sad story is Gwadar, due to no hinterland connectivity.

Karachi and Port Qasim have embarked on landlord port concept, thus three private container terminals i.e. PICT, KICT and QICT have done extremely well handling 2.1 million TEU. There is only one edible bulk terminal, FAP at PQA, but with the launch of PIBT an investment of 180 million USD by a Pakistani entrepreneur will establish a dirty bulk cargo terminal on BOT basis by 2014.

The container trade is totally in hand of foreign shipping lines, so is bulk, thus Pakistan pays about USD 4 billion in freight only to foreign lines and they dictate in absence of no Pakistani company operating container vessel.

With an agreement signed on July 31, 2012 by US and Pakistani officials, Pakistan routes to Afghanistan were reopened, after its closure since November 2011, when 24 Pakistani soldiers at a border post were killed by US air raid. This is another landmark in the history of the relationship between the US and Pakistan. It also demonstrates the strategic importance of Pakistan in the logistics chain in trade and aid for the Central Asia region.

Important two routes

The two routes from Pakistan to Afghanistan were mainly used by NATO to transport fuel and other supplies. Both routes originate at Pakistan’s principal port Karachi. From there, one route crossed the Khyber Pass, enters Afghanistan at Torkham and terminates at Kabul; while the other crosses the border near Quetta and ends at Kandahar. Until the border closed November last year, around 5,000 trucks a month had made their way from Karachi port along both routes transporting NATO supplies to other NATO logistical hubs in Afghanistan. There were more than 3,800 vehicles and 1,900 containers belonging to NATO stranded at Karachi ports during the 7 months of Pakistani border closure.

Strategically, these two important routes are expected to act as the main transport backbones for goods loaded at Karachi ports and transported to Afghanistan and onward to Tajikistan, Uzbekistan and Turkmenistan. Their role of these routes through Pakistan will become significantly more important with the commencement of operation of the Pakistan Deep Water Container Port (PDWCP) at Keamari, which is planned for in the first quarter of 2014. This marks an important milestone in the development of ports in Pakistan, which will be equipped with the most advanced container handling facilities in the East region of the Indian Sub-Continent and become the gateway of goods and people to its neighbouring countries, Central Asia and beyond. Thus PDWCP may serve as regional hub for transit cargo.

Blessed with a natural geographic location, Pakistan is of great importance in trade and development of the region, bringing long term benefits to a combined population of around 100 million people in the Central Asian region. Afghanistan is a good example where the majority of its trade is facilitated by the ports of Pakistan. The US also relies on Pakistan ports and its routes for most of their equipment for its war effort in Afghanistan. It also needs Pakistani territory for meeting its fuel needs. Equipment and fuel is transported from Karachi ports into Afghanistan through the Khyber Pass. Strategic Forecasting, a Texas-based private intelligence entity noted that: “Pakistan remains the single-most important logistics route for the Afghan campaign. This is not by accident. It is by far the quickest and most efficient overland route to the open ocean.” It is obvious that Pakistan has the potential to become an important trade corridor for South Asian countries. With the opening of the PDWCP, Pakistan can further leverage its location advantage to strengthen itself as the major hub to provide transit corridors for those land locked countries, particularly Afghanistan, Iran, India and China.

Like any projects, execution is the key to success. It is comforting to note that some progress has been made with the PDWCP at Karachi, a major part in the logistic chain. However, more needs to be done to ensure that the PDWCP realize its full potential. There is a pressing need for a complete well considered plan to build the other part of the infrastructure jigsaw puzzle i.e. adequate road and rail connectivity to upcountry destinations and related logistics support facilities. Without this, the PDWCP will be under-utilised and shall remain a half completed dream hampered by inadequate infrastructure and services along the route as well as congestion in the areas surrounding the port at Karachi. In my opinion, as I have stated before, a Deep Water Port Act is imperative to recognise the efforts of all concern and to lend legitimacy to other laws and regulation needed to further boost the entire logistics industry.

 

Well functioning transport system

A well functioning transport system to connect between the seaport and its surrounding land locked countries is the pre-requisite for trade to take place and earn the wealth of the country. There is an urgent need for Pakistan to improve its transport infrastructure and ensuring the efficient management of all facilities through various public and private measures. As stated by National Trade & Transport Facilitation Committee Pakistan, means to enhance connectivity for land locked developing countries include: “improve road and rail infrastructure and regional linkages; harmonise trade and transport regulatory framework to remove barriers to trade; and enter into regional and bilateral transit transport agreements laying down procedures”. Pakistan must sign TIR carnets and guarantying Association. TIR carnet is of 20 pages and as of today 56 countries and 18 contracting parties are using TIR. We must learn from Turkish experience. We may generate substantial revenue as transit dues in foreign exchange.

These are not new to South Asian countries. The 14th South Asian Association for Regional Cooperation (SAARC) Summit held in New Delhi in 2007 has decided to pursue the implementation of Asian Development Bank-funded SAARC Regional Multimodal transport connectivity recommendations, however, solid measures are yet to be taken and consensus is yet to emerge on projects to be implemented.

Other than the ‘hardware’ i.e. the infrastructure, there is also a need to ensure that changes in the ‘software’ goes hand in hand. There is a need to examine the customs procedures, laws, and a tariff structure that caters economically to stimulating regional trade. Ghana, Africa provides a good example. In recent years, Ghana Ports and Harbours Authority has been very active in promoting transit traffic for those land locked countries. For a period of time, Ghana has been collaborating with its land locked neighbours such as Burkina Faso, Mali and Niger for the enhancement and use of the Ghana corridor. To attract transportation of goods to and from the landlocked countries many agencies in Ghana have made efforts at collaborating with their counterparts or similar agencies in the landlocked countries. For instance, Ghana Shippers’ Authority signed MoUs with its Shippers’ Councils of Burkina Faso, Niger and Mali in 1998, 2000 and 2003 respectively, for the purpose to offer mutual assistance to shippers in the transport chain, exchange relevant trade information within the region, initiate effective systems to monitor cargo movement at Ghana corridor, harmonise customs procedures, promote free flow of traffic between Ghana and land locked countries.

Pakistan can do the same! It is the mission of KPT and Pakistan Government to take the initiatives to build connecting roads and related infrastructure to cater for efficient cargo flow enabling the full utilization of the Deep Water Container Port. There are already government policies to support the growth of shipping, freight forwarding, distribution, trucking, railroad transport, etc. It is encouraging to note that some initiatives are already in good progress, for example, road transport agreements between Pakistan and Uzbekistan, Tajikistan and Turkmenistan were initiated and in recent past FPCCI hosted a meeting of CAS countries where I represented FPCCI as Transport consultant. It is expected to see more measures to be initiated by the Government as well as private sectors to capitalize on our strategic geographical location and maximize benefits to Pakistan and its citizens. The ultimate beneficiary of the use of the Pakistani corridor by the landlocked countries is the Karachi Port Trust (KPT) and by extension, the Government of Pakistan. Transit cargoes will add to throughput at the port thus increasing the revenue of the KPT.

Furthermore, it is expected new business opportunities will emerge to support the operations of the Karachi Port in the coming few years. I can see there will be investment opportunities arisen for warehouse and other storage facility providers, as these services are essential to transit trade and the demand for them in and around the seaport will increase because forwarders need a lot of time to arrange transportation of their cargoes to the consignees in the land locked countries. Another business to be benefited from that is freight forwarding providers, with cargoes originated from Karachi, these companies can provide economic solutions for movement of containers or cargoes across the region over long distance to land locked states. The ICD’s developed by PMS and QICT at Lahore with Rail Road connectivity can play a vital role as Lahore is on North/South and East/West corridor. Pakistan Railways must go on PPP by allowing private sector to acquire rolling stocks and implement track access policy, as rail road is the cheapest mode of transport after sea.

More investment attraction

The construction of the PDWCP will no doubt enhance our competitive advantage along the South Asian region further. The new terminals will enable KPT to handle and cater fifth and sixth generation ships with 100,000 deadweight tonnage (DWT) having 16 metres of draft. “The development of PDWCP will further boost the volume of trade through Asian Highway Network and Trans-Asian Railway Network.” There is only one terminal being planned at PDWCP at present. The Karachi Port Trust needs to be focused by expending its resources on the PDWCP to bring the vision to fruition. KPT needs to articulate its long term vision for the overall development of Karachi Port in a manner that will attract further investment in future. We have sustained efforts, not piecemeal, to ensure that investors continue to have interest in investing in future phases of the PDWCP and KPT, which effectively supports the vision of our country.

Pakistan has all the necessary ingredients and tremendous potential to emerge as the most efficient and advanced trade corridor for South Asia region linking Europe with China and the East, after the opening of PDWCP in few years time. As a Pakistani, I am confident that these will be done and efforts from both public and private sectors will be expended to complete the deep water seaport and other projects in the region. Much has been debated by professionals and experts on the strategic location of Pakistan. But, we must go beyond just talk and no action. Ministry of Ports & Shipping is the only vibrant Ministry inducing FDI and local investment thus must be commended. I was witness to ceremony chaired by Prime Minister of Pakistan at Governor House Karachi, where a proposal was initiated of joint venture company of PNSC and PSO, to acquire two tankers so that all PSO imports in future be carried on Pak flag ships. It is a good omen, thus efforts of Minister of Ports and Shipping and Minister of Petroleum resulted in signing of MoU for a J.V. company and lifting of furnace oil by PNSC so new purchases by PSO will be on FOB, not C&F as in the past. A commendable initiative by Public Sector Companies as private entrepreneurs are shy to invest in ship owning due to high financing cost,

The writer is the elected member of Board of Directors
Pakistan National Shipping Corporation; Ex-Director General Ports & Shipping

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