AN INTERVIEW WITH MANAGING DIRECTOR, KSEW
An interview with Rear Admiral, Arshad Munir Ahmad, Managing Director — KSEW
By Syed M. Aslam
Dec 02 - 15, 2002
Karachi Shipyard & Engineering Works Limited (KSEW) is the oldest heavy engineering complex of the country. The core activity of KSEW is shipbuilding, ship repair and general engineering and foundry works. Established in early 1950s as a project of Pakistan Industrial Development Corporation, KSEW commenced its commercial production in 1956 and was incorporated as a public limited company in 1957.
Spread over 71 acres at West Wharf, KSEW houses a large shipbuilding hall, three shipbuilding berths, couple of dry docks, three foundries, fabrication and machine shops. It has built over 430 vessels of different types and sizes, not only for the country but also for a number of other nations including China, Saudi Arabia, the then West Germany, Iran, UAE, Belgium. A number of its vessels are still in sea by the national flag carrier Pakistan National Shipping Corporation (PNSC). KSEW is fully equipped to build all types of marine crafts of upto 26,000 Tonnes Dead Weight — passenger and cargo ships, oil carriers, bulk carriers — as well as tugs, dredgers, hopper barges, ferries, fishing trawlers, port utility vehicles, etc. It has also built missile boat, floating dock, tug and other vessels for the Pakistan Navy and has put Pakistan on the map of a handful of submarine-building nations by having the honour to fabricate the Pressure Hulls of French Agosta 90-B submarine for the Navy. The first Agosta was built completely in France while the second commissioned recently was built here in Karachi under the supervision of French technical team. The third will be completely built locally and the KSEW will be once more be responsible for fabricating its pressure hulls. KSEW has also repaired over 5,000 vessels, about half of which were foreign.
KSEW which witnessed a boom in the 1970s has been reeling from severe financial crisis for want of ship-building and ship-repair works due mainly to preference by the PNSC and Karachi Port Trust. Not only the ship-building orders dried up over the years but KSEW started getting less and less of the dry-docking and ship-repair works from the PNSC while the Karachi Port preferred to put orders of port utility vehicles to foreign shipyards. The drying up of the ship-building and ship-repair works forced the KSEW to diversify its activities to general engineering activities. This was a blessing in disguise to help KSEW emerge as one of the few heavy machinery manufacturers of the country enabling it to undertake a wide variety of engineering and structural works for oil refineries and oil storage installations as well as engineering workshops, cement and sugar plants etc. KSEW offers complete sugar plants on turn key basis and has been instrumental in setting up a number of sugar plants so much so that today 80 per cent of the machines required for a sugar plant are manufactured by the KSEW. It also became the first organization in Pakistan to design, manufacture and install industrial boilers supplying over 100 of them so far.
Projects: Ongoing and in the pipeline
Despite the diversification, however, the KSEW is in the process of regaining its past glory as the nation's only and premier shipyard — the second in any Muslim country besides Turkey and one of few in the region. In last three years, it has been able to send a forceful message that it means business and is ready to meet the challenges of the time. It is a much leaner organisation today and has been much proactive under its Managing Director Rear Admiral Arshad Munir Ahmad who took charge about three years ago.
In an exclusive interview to PAGE, Rear Admiral Arshad Munir Ahmad attributed the turnaround of the KSEW on strict administrative and financial discipline. "We have been able to reduce our monthly operating expenses from Rs 78 million a month to Rs 58 million a month and are targeting to bring it further down to Rs 50 million in next few months to bring KSEW in breakeven situation. On the other hand, being proactive as we are has helped us earn increased average revenue of Rs 43 million per month to slash the revenue shortfall from Rs 78 million per month two years ago to just Rs 15 million at present. With the targeted reduction in operating expenses and increased shipbuilding and repair activities, KSEW would be in breakeven position within next few months. By mid 2003 we'll start making profit, and when that happens it would be the first time in KSEW's history excluding 1970s when the organisation made a profit due mainly to shipbuilding from overseas, particularly Iran."
The KSEW MD informed PAGE that at present the KSEW is building 4 port utility vessels for the Port Qasim — 2 pilot boats and 2 tugs. The first are near completion while the keel laying ceremony for the second was held on the 27 of this month. KSEW is also building 2 missile boats. In addition, the KSEW is also building 2 missile boats for the Pakistan Navy the keel laying ceremony of which will held on the 10th of December. In addition, KSEW has got firm orders to build three port utility vessels, including 2 GRP plastic boats, for the Karachi Port Trust.
The proactive KSEW has also a number of other ship-building orders in the pipeline. It has given a proposal to build 9 tugs for South Africa, which is in the process of finalisation. It has also bidded in international tender to build 2 roller-off ferries capable of carrying heavy loads and goods for Bangladesh. Other proposals include building of port utility vehicles and tugs for Nigeria and Iraq as well as ship for Malaysia.
Building the state of the art Floating Dock for the Pakistan Navy which allows it to carryout the repairs in the open seas without bringing the vessels to the shore has also resulted in serious inquiries from Iran, South Africa, Malaysia, etc.
The KSEW MD is confident that KSEW will be successful in securing orders for the above mentioned foreign works to push business volume, both from shipbuilding and ship-repair works, over Rs 150 million in next couple of months. "We are confident because we are not only enjoy an edge in terms of price but are also capable of offering quality which is second to none. Being a partner of the Agosta project has given a big boost to our ship-building image as Agosta is the latest and the most advanced conventional submarine. In addition, it cost us $ 52 million to built Agosta in Karachi compared to $ 120 million in France. What is even more important that there were neither cost over-runs nor time over-runs."
ADMINISTRATIVE AND FINANCIAL DISCIPLINE
Rear Admiral Arshad Munir Ahmad said it took hard decisions to slash the operating expenses to help reduce the shortfall between the revenue and expenditure and it was done without compromising the quality of the work force. " Two years ago we had a total staff strength of about 3,400 which today has been scaled down to 2,150. There used to be 13 general managers before, now there are only 5. The medical bill alone has been slashed by over one-third from Rs 85 million to Rs 25 million a year. However, we have retained the top notch professionals and have also introduced sub-contracting for building parts and accessories — in cable, pipe work and integration — to lay down the foundation for the vending industry in the shipbuilding industry."
FUTURE BUSINESS STRATEGY
PAGE was told that the KSEW is in the process of improving its ship-repair facilities which still contributes the biggest portion to its revenue — 65 per cent of KSEW's total revenue still comes from ship-repair works followed by 25 per cent from shipbuilding while the remaining 10 per cent comes from the general engineering including such low value works as cleaning of Pakistan State Oil's crude oil tanks and also LPG tanks.
KSEW plans to induct modern machinery to improve its dry docking facility which includes adding a modern synchronised lifting system. Though heavily capital intensive the induction is seen as worthy to handle the increased flow of ship-repair works as well as the shipbuilding works which according to KSEW's MD "will remain in peak form for at least another two years."
The KSEW is also looking at immense opportunities that off-shore oil and gas explorations offer. "Off-shore oil rigs not only require utility vessels but also rigs and structures which we specialise in fabricating and designing."
Rear Admiral Arshad Munir Ahmad said that the turn around has not been possible without an all-out support of the government for the revival of the KSEW. "Last December I made a number of proposals for the financial restructuring. This resulted in the writing off of certain loans while some others were converted into equity. The government has given a loan of working capital worth Rs 250 million which we expect to receive any day now. An additional Rs 325 million was provided for restructuring of the manpower, the phase 1 of which is completed. We have initiated manpower development programme which helps us upgrade the skills of our leaner but highly skilled workforce. I have a target to develop 2000 highly professional and skilled workers.
Just as 65 per cent of the entire revenue of KSEW comes from ship-repair works, Karachi Port Trust is the single biggest work supplier to the KSEW. About two-third of all the work to the organisation is supplied by the KPT while Pakistan Navy is the second top customer of the KSEW. The former provides it more with ship-building works while the later provides it with frequent ship-repair works which makes all the difference to help ease its cash flow to meet its day-to-day expenses. According to the MD, KSEW enjoys an extremely cordial relationship with the two organisations which contribute much to help earn its revenue. A sizeable work also comes from the Maritime Security Agency.
On the other hand, the state-owned Pakistan National Shipping Corporation has made it a habit to prefer dry-docking and repair works of its vessels at foreign shipyards. Does KSEW MD has qualms about that? "The ship-repair activities are on the increase and are keeping all our dry docks full. The lack of interest on the part of PNSC, thus, do not bother me as it is not a good customer. It just does not pay."
The serious and yet laid-back pro-activism on the part of the KSEW makes it just all too evident that KSEW means business to prove that it is an autonomous commercial organisation despite working under the Ministry of Defence.