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Port development in Pakistan

Published on 28th Apr, Edition 17, 2014

 

Port benefits are increasingly distributed across different players and concern a geography that transcends the local community. This trend skews the assessment of the benefits of port investments, where the local impacts can be much less significant than the regional or national. Ports are considered as funnels to economic development since they act as a catalyst and incite development to take place in specific economic sectors and locations at nearby ports or along corridors. The economic benefits of port can be categorised as direct, indirect and induced. These benefits are usually measured at an aggregate level by indicators such as value added, employment and investment. This can evolve through different methodologies. In our case we failed to make it value added, although FDI (foreign direct investment) on BOT (build-operate-transfer) basis of investment was induced. Port activities have multiplier effects within an economy and the container terminals Karachi International Container Terminal (KICT), Pakistan International Container Terminal (PICT), Port Qasim International Container Terminal (QICT) are living example in our case.

With the settling of global supply and transport chains, there is a mismatch between the port benefits. On aggregate level port investment do have economic benefits, the spatial and sectoral distribution of these benefits is far less evident.

Significant increase in port throughput, particularly in the containerized sector, did put pressure on existing facilities and thus PICT, KICT, QICT developed the existing facilities, except Gwadar and Pakistan Deep Water Container Port (PDWCP) at Keamari are new port infrastructure. Port development and world trade are interrelated. Seaborne trade has increased substantially due to massive redistribution of manufacturing to low cost locations such as China, India, Bangladesh and Vietnam, allowing these countries to reduce the dependence on agriculture. We have miserably failed to take advantage of this development in Pakistan. Due to technical changes, i.e. growth in ship size to achieve economies of scale with post-Panamax vessel, special carriers of Car and Bulkers, ports have to respond to technical and market developments by upgrading facilities as the Karachi Port Trust (KPT) has invested in PDWCP attracting foreign investment, but due to delays in completion, it is hoped that we have not lost the window of opportunity to Sohar or Salalah or West coast Indian ports.

The shipping companies and terminal operators have engaged in strategic alliances as well as merger and acquisitions. The goal is to provide a level of vertical and horizontal integration, thus improving the port performance chains. This has led to setting of inland terminals by QICT and PICT at Prem Nagar in Lahore.

When Gwadar was conceived, obviously feasibility, economic viability and return on investment as reflected in the internal rate of return (IRR) must have been worked out as investment in port has long gestation period. The concessionaire, PSAI from Singapore, signed the concession agreement in 2006, however, except staged handling of a vessel from PNSC, at the time of inauguration in 2007, there has been no serious activity. The viability of Gwadar has been in focus from the start. Ports developed to support industries and population centres, the obviously missing cogs in the wheel of long term infrastructure development for Gwadar.

I have been associated with Gwadar, in its primary stage and relinquished my role prior to signing of concession agreement with PSAI. A lot more brain power and long term hard work are needed to make Gwadar work for Pakistan and the region. The recommendations of the relevant consultants may have been suspect from the start, leading to the current predicament. It is reported in the media that PSAI has relinquished the concession in favour of the Chinese. It is hoped that this is not same old medicine in new bottles and that there is substance to this change to bring in the cogs to the whole wheel of port infrastructure development. We have to recognize and painfully accept the ground realities and plan for the long term, instead of staging short term appeasement moves, with no concrete plans. We should join hands to make Gwadar operational and I volunteer on gratis basis to assist in realising dream of Gwadar may come true in my life time, as precedent auditing on behalf of International Maritime Organisation (IMO) as their expert on secretary general panel of experts for standards of training, certification and watch keeping, placing Pakistan on IMO white list on gratis basis, issuing compliance certificate so that Pakistani seafarer can be employed on foreign flag ships.

KICT, PICT and QICT increased their volume of handling. The PDWCP conceived in 2006 to be completed by 2009, did suffer significant delay but concessionaire have continued their support of KPT to bring about the vision of the most advanced deep sea port in the West Indian subcontinent region, despite failures by the KPT to stay on the agreed time line. This is a good news despite delays and the long wait and the port will be operational by end 2015, heralding a new era for post- Panamax vessel to call Karachi, Pakistan.

Overall, except for Gwadar, we in Pakistan developed existing facilities for containerized cargo to cater out volume of 2.1 million TEU, whilst Sohar in Oman developed and now handling container vessels of deep draft to cater for Sohar Industrial Zone. Interestingly, the CEO at Sohar Port is a Pakistani Merchant Mariner. The volume has increased due to shifting of cargo from Mina Qaboos Muscat port. It is a food of thought that Sohar is operational but Gwadar with better location is idle. We have to work harder to find out the reasons.

Although KPT failed to keep its agreed time line but PDWCP will become functional by end 2015, if KPT lives to its commitment and we don’t lose the advantage of developing a deep water port, catering to post-Panamax vessel on the economy of scale, offering depth of 16 meter, whereas Karachi and Port Qasim remain restricted to 12 to 13 metres. KPT since December 2013 has no trustees, thus decisions are being delayed awaiting appointment. There are no committees of trustees functional up-to date. Ad hocism may delay projects, which is the case in all Public Sector Organization.

Our planners for future development of port may bear in mind, economic changes, technical changes and organizational changes worldwide as we have to compete with Salalah, Sohar, Jabel Ali and West Coast Indian ports. It was heartening to note from media report that a shipyard is planned at Gwadar and Port Qasim. The port plan has provision for shipyard, and I wish well to our Finance Minister, hope he may complete that appointment of trustees at that KPT for smooth operation.

The writer is adviser to Karachi Chamber of Commerce & Industry
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