THE POTENTIAL OF THE SHIPPING SECTOR
A large part of shipping business is going to foreign companies and ports are plagued with operational problems
By SYED M. ASLAM
Dec 07 - 13, 1996
While a population of over 120 million and 560 miles of coastline offer Pakistan immense potential to exploit the vital sector of port and shipping, both remain much unexploited since the country gained independence in 1947.
The important role the shipping and port sector plays in the economy of any country is evident from the fact that the sector is viewed by many economists as an index of prosperity of a nation.
The shipping sector which has deteriorated over the years and comprises only about 20 vessels carrying not even 7 per cent of the national cargo while the rest is being handled by foreign shipping companies resulting in a foreign exchange drain of a $ 1.5 billion annually.
Ocean freight today is the second biggest expenditure after defence. With a small fleet of about 20 ships primarily comprising 16 with the state-owned Pakistan National Shipping Corporation, an oil tanker with National `Tanker Company, an affiliate of PNSC, and 6 with the private national flag carrier Tristar Shipping, the local shipping companies are carrying an abysmal... low 7 per cent of the national seaborne trade while the bulk is being carried by foreign shipping companies.
This is indeed an alarming situation as not only a huge amount of precious foreign exchange is being drained out of the national economy but also that in case hostilities broke out, the foreign shipping companies would not take the risk of catering to the needs of Pakistan's seaborne trade.
Not only the PNSC has not been able to play its due role, it has also made it a habit to carry out expensive dry-dockings and repairs at foreign shipyards even though Karachi Shipyard and Engineering Works (KSEW) is fully equipped to carry out the jobs in Karachi. The practice adds to the drain of foreign exchange on repairs that could be carried out right here in the country while also providing work to KSEW which keeps lying idle for lack of work except for small business from Pakistan Navy and some minor works from PNSC every now and then. The practice not only keeps depriving KSEW of the much-needed work but also sends millions of dollars to foreign shipyards every year.
The movement of cargoes to and from Pakistan constitutes primarily of grain imports (which fluctuates according to requirement each year), imports of iron ore and coal, fertiliser imports, rice exports the freight value of which came to $ 50 million, $ 60 million, $ 25 million, and between $ 25-35 million respectively on an average per year. The freight value of miscellaneous exports came to $ 20-30 million.
In addition, over 500,000 containers move in and out of the country the total freight value of which comes to over $ 800 million.
While containerised cargo is in vogue and although PNSC acquired 3 container vessels this year they have been chartered out by the PNSC and thus fail to lift the national cargoes.
The total tonnage of PNSC's multi-purpose cargo vessels by June this year stood at 264,410 tonnes including container capacity of 5520 tonnes equivalent units (TEUs). Tristar's fleet comprises 6 bulk carriers with a total tonnage of 256,450 DWT (dead weight tonnes).
The fleet strength of PNSC has decreased almost by one-fourth today from 60 vessels; 46 when it was formed by the merging of NSC (National Shipping Corporation) and PSC (Pakistan Shipping Corpoartion) in addition to 14 new ships that it acquired under the Fifth Five-Year Plan.
While PNSC reverted to black in 1995-96, after being in red since 1992-93 and also in many years prior to that, by earning an operating, pre- and post-tax profit of Rs 59 million, Rs 44 million, and Rs 39 million respectively, its accumulated loss stood at a big Rs 526 million during the same period.
This was an astonishing feat as the Corporation suffered operating, post-, and pre-tax loss of Rs 528 million, Rs 434 million, and Rs 443 million in 1994-95.
On the other hand, Tristar earned operating, post-, and pre-tax profit of Rs 54 million, Rs 42 million, and Rs 41 million respectively during the first six months ended June 30, '95 compared to the respective profits of Rs 48.48 million, Rs 48.07 million, and Rs 47 million it had earned during the whole of '94.
While the volume of Pakistan's seaborne cargo is increasing, from 30,232 million tonnes in 1992-93 to 31,828 million tonnes in 1994-95 and 24,802 million tonnes during the first nine months of fiscal '95-96 (July '95-March '96) the country has only two operations ports, Karachi the premier port and Port Qasim which is situated some 50 kilometers north-east of Karachi.
While Karachi port is a 24-hour port, Port Qasim (PQ) remains strictly a daytime port as it offers no night navigational facilities.
Though PQ has been operating since early '80s it has no dredging fleet of its own and also no mechanical workshop, works which are costing it billions of rupees per year.
In addition, it has no shore gantries and other such cargo handling equipment and the job is done by stevedores at a cost of over Rs 6 billion per year. This again deprives PQ of a huge amount of revenue which PQ could earn had it been equipped with the cargo handling equipment to handle the job itself.
While port operations worldwide have become a round-the-clock business the absence of night navigation facility deprives the port of earning a substantial amount of revenue that could come its way.
On the other hand, the port of Karachi which is a deep natural sea port with 11 kilometers approach channel and can receive tankers, containers, bulk and general cargo vessels, has problems of its own.
In order to facilitate further growth, expansion and improvements the port has undertaken a comprehensive phased development programme primarily financed by the World Bank [Karachi Port Modernization Project (Ports-V)] and also certain projects in the private sector.
The former comprises of projects such as construction, completion and operation of liquid products marine terminal with ancillaries to replace outlived oil pier OP-II and OP-III. It has already been completed.
Construction of Jinnah Bridge (Phase II), which is nearing completion.
Induction of a modern diesel electric bucket dredger with two barges.
Renovating of dilapidated berths, nos. 5-10.
Also, the port charges, similar at both Karachi port and PQ, in Pakistan are reportedly the highest in the region which is discouraging the operators to operate in and out of the national ports.
The vessels arriving at the two ports are subjected to the following port charges; 0.46 cents per gross regulated tonnage (GRT), berth hire of 0.08 cent per GRT, duration charges calculated @ GRT x number of days x 0.08 cents; pilot charges of 0.15 cents per GRT for both sailing in and sailing out in addition to $500 for berthing/sailing after sunset and on holidays, a flat tugging charge of $ 2238 for both sailing in and out irrespective of the size of the vessel, and coastal light dues of Rs 3 per net regulated tonnage. Oil tankers are subjected to an additional berth cleaning fee of Rs 5000.
Thus a 14,500 tonne vessel is subjected to the port dues of $ 6670, berth hire of $ 1160, duration charge of $ 11,600 if it is berthed for ten days.
While the strength of national marine fleet has decreased tremendously during the last decade and the movement of national cargo has become more and more dependent on foreign shipping companies, the country is paying an increasing amount of foreign exchange to meet its needs of seaborne trade. Over 95 per cent of Pakistan's trade is seaborne and only a negligible part of it is airborne.
A study sponsored by the Asian Development Bank (ADB) was outlined by the consultant engaged by the Bank to draw a national master plan for the seaports of Pakistan in the middle of last year.
The consultant, Maarten Volgers, had said that the primary objective of the three-phase study included a critical view of the port sector to rationalise investment allocations to and within the sector, preparation of an investment strategic plan including recommendations of measures to attract private sector participation in financing the projects, and procedural and policy options needed to ensure effective and efficient operations at Karachi port and PQ.
He said that the port planning has assumed dimensions of great importance in recent times as ports today have to play a more dynamic role in international trade and to promote the national trade of any country.
The functions of third generation ports of post '80s, he added, have come a long way from being mere changing points of transport mode from the first generation ports of pre '60s. Today, he added, ports have become commerce-oriented, integrated transport centres and logistic platforms in the trade activities of any nation.
He stressed that the organisational characteristics of ports have also changed to be the centre of united community, integration with trade and transport chain, close relationship with the municipality and an enlarged organisational setup.
He said that the master plan aimed to provide guidelines to develop the seaports in Pakistan so that they could act as an economic agent for the country to accommodate the sea trade of the Central Asian states like Afghanistan, Turkmenistan, Tajikstan, Kirgystan, and Uzbekistan.
While the national maritime fleet strength has decreased tremendously during the last decade and the containerised cargo handling has increased at Karachi port; from some 350 TEUs in 1983-84 to about 600 TEUs in 1992-93 and substantially since then, the port still does not have a dedicated container terminal to handle the specialised trade. In 1993-94 the containers made up 22.8 per cent of total national cargo which was all handled by Karachi port.
While the study was to be finalised in December last, the outcome remains unknown as yet.
It is clear that without consistent long-term policies aimed at increasing the strength of marine fleet and improving the operational and organisational facilities at the two national ports the country would keep on paying huge sums of money to meet its seaborne trade.