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It is time for the policy makers to take a deep hard look at the reasons that why the Shipping Policy has failed

May 20 -June 02, 2002

For years PAGE has spent tremendous energy, and time, to convince the policy makers about the merits of building a strong merchant marine fleet. Time and again it has severely criticized the performance of state-owned Pakistan National Shipping Corporation (PNSC), the only shipping line registered in the country.

PNSC is lifting less than 5 per cent of the total 39 million tonnes of Pakistan's seaborne trade annually while the country is threateningly dependent on foreign shipping companies to lift the rest of the cargo costing the country 2 billion dollars annually. With PNSC's depleting fleet and with new induction in the merchant marine fleet the dependence on foreign shippers and their service bills would only increase in future.

Finally, on July 10 last year the government announced the Pakistan Merchant Marine Policy 2001 aimed at deregulating the shipping sector to provide level playing field to both the private and the public sector thus encouraging investment in a sector which somehow has never been accorded the priority that it deserved all along.

Ten months later today, the policy which offers such financial incentives as duty free import of ships and a range of other related port vessels as tugs, dredgers, survey boats, etc., and income tax break till 2020 has failed to attract any investment, local or foreign. As reported in the issue number 53 last year, the policy did attract a group of expatriates willing to invest in the shipping sector along with local participation. However, the interest did not materialize in action due to investors' concerns about PNSC's and its subsidiary National Tanker Corporation (NTC) of resistance to creation of level playing field by resorting to backdoor tactics to influence contract for the shipment of crude oil for Pak Arab Refinery Company, the major importer of crude in the country.

The potential investors were interested to induct a used crude oil tanker of 85,000 Dead Weight Tons (DWD) in the Pakistani merchant marine fleet. They were ready to initially invest between $ 8-10 million to procure a 1981-built container in good condition and to have it registered under the national flag within as little as three months.

With no takers, the policy can hardly be expected to meet other noble objectives, namely, to expand and upgrade Pakistan flag merchant marine fleet to increase the present share of cargo from 5 per cent to 40 per cent so as to take the maximum advantage of the UNCTAD parameters, to augment national ship building capacity to meet 20 per cent ship construction requirements of the country, and to expand ship repair facilities.

This is not the first time that a government has announced a shipping policy to attract investment in the shipping sector. The industry was first deregulated in the early 1990s when the private sector was allowed to bring investment in to the shipping sector. Once such shipping company, Tri-Star went bankrupt after few years of operation.

The question is: do the incentives help induct more vessels into the national maritime fleet. The former government also announced similar duty free incentives for the shipping industry which did not bring any fresh induction in the marine time fleet except allowing PNSC to bring its container vessels, which since their induction in 1996 were chartered outside of the country, into to the country.

Observers say that incentives alone will not help induct additional tonnage in the national maritime fleet unless the government offers cargo protection to the other operators like the one it offers to the PNSC. In addition, PNSC is also accorded a preferential treatment to lift substantial quantities of such captive cargoes as wheat, iron ore, cotton, rice and fertiliser.

Perhaps nothing else highlights the importance of a strong merchant marine fleet than the present tension between India and Pakistan. With clouds of war blowing across the horizon do we expect the foreign shippers to risk catering to needs of Pakistani trade if God forbids an eventuality breaks out? And with PNSC owing a single dilapidated tanker, depending on charter hires to ship rest of the crude, can be trusted with the supply all important oil in times like these? Your guess is as good as mine.

The cold response to the Shipping Policy is feared to further increase an already frightening dependence on foreign shipping companies in the years to come due primarily to two factors the dilapidated state of PNSC's fleet and its inability to meet the stricter International Security Codes of the International Maritime Organization in near future.

Perhaps it is also time for the policy makers to take a deep hard look at the reasons that why the Shipping Policy has failed to draw the investment despite offering a range of unmatched financial incentives. This would also help them make any necessary changes in the policy to better address the concerns of the potential investors with particular regard to the availability of cargo at par with the PNSC to really create a level playing field for other operators.