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Shipping: The key issues

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Ship owning requires a successful commercial policy

By Munir I. Millwala
July 19 - 25, 1999

With the massive development in communications the world indeed is a global village. Shipping is a vital element in that development which brought the world trades closer. Pakistan currently plays an insignificant role in world shipping. Thus if Pakistan desires to keep it's presence as a maritime nation in the comity of nations it is essential that Pakistan would try and understand where we faltered and what needs to be corrected.

The fact that Pakistan today have no coastal shipping means, progress in shipping can be achieved if our ship owners are able to compete internationally. For competing internationally our policies should be universally acceptable. If the government cannot address the core issues due to myriad difficulties, it should devise policies to off set such weaknesses where they exists. Under present conditions there is very little chance of Pakistan making its presence felt in the comity of nations as a successful maritime nation unless we try and understand the problem we are faced with. Many a large successful shipping groups of yesteryear have totally withdrawn themselves from this field as our bureaucrats and the government policies continue to be managed by inexperienced and wishful thinkings.

There is a need to present a key issue which continues to be dodged or missed in the government circles so that the problem retarding our growth in the development of shipping sciences is better understood. To bring a vessel under Pak Flag is not that difficult but to survive under Pak Flag means making your life extra miserable with little hopes for profits.

If we are to achieve meaningful success in the shipping sector the core issue is to make ship owning under Pakistan Flag a profitable venture. No country, no matter where, progressed only when its private sector engaged in the trade received the recognition and the right to make legitimate profits was duly acknowledged and accepted. In such countries opportunities were provided by the government, for the private sector to capitalize and make the business a viable enterprise which subsequently generated growth and development.

In Pakistan today it is unfortunate that the bureaucracy acts as masters and works the other way round. Many officials carry little practical experience and are unwilling to share the experiences. They are obsessed with the idea of cutting on government costs regardless of the fact that, will it be fair to the progress of the industry. They look at a businessman with contempt. (A fallacy adopted after 1970). This has impeded development and progress. When the private sector is unable to make genuine profits, they have no money to innovate or invest in technology etc whereby the country in the long run becomes the ultimate looser and a victim to other progressive societies or the developed world.

After the fall of East Pakistan and unjust nationalization of ship owning, it is now difficult for Pak Flag owners to re-organize their shipping roots as we have no coastal shipping to rely or organize upon. This means Pakistani ship owners are now dependent on the international situation and therefore if they are to compete internationally, a more meaningful role the Pakistan government is required to play. To understand the situation, the difficulties are to be realized with a ship owner apprehensions. There exists no bilateral shipping arrangements with India. Therefore, a large international market in our own neighbourhood is beyond access to a ship owner under Pak Flag. This means vessels under foreign flags have much greater flexibility and cargo acceptance opportunity viz a viz vessels under Pak Flag.

There are many ways to overcome this handicap situation. It is a matter of perceptions and discussions. A simple and most successful way to do is to announce a guaranteed share in Pakistan State Controlled imports to Pak Flag vessels at a pre-determined freigntment contracts. These contracts should allow legitimate profits to Pak ship owners to manage and maintain their ships. It should not be seen as a subsidy. The government is not doling out funds to ship owners. In fixed, long term contracts when international markets firm up there could be lot of savings for the government and vice versa. Over long periods, say five years, it will be seen the government will be a net saver. There are many examples of countries placed in more difficult situations and who adopted progressive policies. Today many are well established maritime nations and their governments continue with such policies in larger national interest.

Where is the advantage for an entrepreneur to bring a vessel under Pak Flag if he has to still compete for Pakistan cargo in international competition. The success of our ship owner will eventually lead to many a positive developments for shipping in Pakistan. Ensuring their survival means more ships, opening of new Trade Routes. Creation of jobs, seafare training, ship management training, development of ports and its services, ship repairs facilities and new ship buildings etc. etc. The list could go on and on.

A successful commercial policy for shipping, listing the advantages while discussing the disadvantages, should be spelled out by the government in joint deliberations with the expectant ship owners. This is the only way to rekindle the interest of ship owning under Pak Flag.

What is the present state of affairs. Is shipping not in shambles. In 1971, Pakistan had a fleet of 72 vessel. Today it is left with 14. More than 12,000 people are registered as 'seaman' while less than 2,000 are employed. Mostly on foreign flags we carry no more than 6 % of our International Trade under Pak Flag. What have we achieved with our current policies. We have avoided for long the bitter truth. We fail to address the situation and then expect the unachievable. In the sixties when Pakistan was successfully achieving its maritime capabilities, the government of the day pursued progressive policies. East and West Pakistan home trade acted as a catalyst to profitable ship owning. Karachi Port was considered as one of the best Port, East of Suez. Hundreds of foreign vessels in a year used to anchor at the Port of Karachi for repairs and maintenance. The government and the country earned sizable foreign exchange and international goodwill. The Karachi Shipyard was booming and there were dozens or more well established marine repair workshops who employed hundreds of skilled labour and imparted apprentice trainings. The path we had successfully trudged upon was regrettably abandoned. The progress we had achieved in the maritime field was gradually lost to other dynamic societies. It is sad to say that corruption and corrupt practices gradually took deep roots. Creation of unwanted departments as a government drive for creating job opportunities though well intended has in such conditions only created obstacles which retard growth and progress.

Our bureaucrats mistakenly adopt rigid attitudes which in the long run defeats or belies the long term objectives of our country. They tend to encourage our people to engage in unhealthy competition which results in cutting conners to make ends meet. Resultantly our country gets a bad name. Unless our government and the bureaucrats accept the facts that its entrepreneurs be permitted to make genuine profits till then chaos, nepotism and cronyism will rule at the alter of corruption. Under such circumstances no genuine or long term investment particularly in shipping is expected to flow in and the country and its economic planners will ever continue to grope in darkness.

There is a great need for adopting a realistic and successful commercial policy for ship owning under Pak Flag. Without such a policy, ship owning by the private sector under Pak Flag will continue to remain elusive to the detriment of Pakistan's interest.

While the revision in the age old shipping act is being discussed by the experts, there seems to be still no discussions talking place for the commercial aspects. The entrepreneur world wide, follow a simple policy. If opportunities exist and genuine profits are allowed, investments will surely come and this is the only way to expect our country to trudge forward in solving the mirage of problems.