GSA: A HISTORIC LEADER
Interview: Mr Mohammed A Rajpar, Managing Director, General Shipping Agencies.
SADAF AUARNGZAIB, Senior Correspondent
May 28 - Jun 03, 2007
General Shipping Agencies (Pvt) Ltd (GSA) was established by Mr. Anver M. Rajpar in 1974 and it currently represents several liners of international repute. The family had the distinction of being the first terminal operators at Port Qasim. They also transported all the construction material for Port Qasim and Gawadar ship harbor at the time of their construction.
The company is considered to be one of the leading shipping agents in Pakistan and operates at both Karachi and Bin-Qasim ports. GSA maintains a comprehensive P&I cover from ITIC (London) thereby affording its principals a secure relationship. They are also members of FIATA, Karachi Chamber of Commerce and Industry, Pakistan German Business Forum and Pakistan Belgium Business Forum. Precisely, GSA enjoys an excellent reputation in local and international shipping and trade circles.
PAGE met Mohammed A Rajpar, the Managing Director of the company and also a member of many of government programs and departments.
PAGE: Give us a bit background of your company; how it started and carried its work forward?
RAJPAR: General Shipping Agencies (Pvt) Ltd was established in 1974 by my father, Anver Rajpar. Basically, we are ship agents, which means we serve foreign ship owners for all their requirements in Pakistan so once a ship arrives at the anchorage of the port till the time she berths; we got involved in loading and discharging operations as well as meeting equipment and labour needs. We are also engaged in canvassing, marketing or booking. A ship agent bears the responsibility of obtaining clearances from port trust, customs, health, and immigration authorities.
PAGE: How do you see the performance of Pakistani ports vis a vis other regional ports, where do you think we are lacking in this regard?
RAJPAR: The comparison as far as the type of infrastructure or type of equipments is concerned, we are more or less equivalent to whatever is prevailing not only in the region but in the world as well. And the reason for that of course is two-fold.
One is the ship owner today has become so demanding and his requirements are so exacting that he wants the same sort of equipment, the same sort of facilities to be available wherever his ship is going. It is a market-driven demand which forces the concerned people who are engaged in infrastructure to provide that sort of standard and level of service.
Second issue is that a lot of privatization and outsourcing has been witnessed in the last 10 years so naturally the private sector would always bring in the best or the latest; so in that sense the comparison is very equal but in terms of productivity we still have some labour issues. Though our equipment is very good, our facilities are very good but our labor is very bad. What I mean is that it is overpriced because it is basically a monopoly situation. We have something called the Karachi Dock Labour Board (KDLB) which is a government mandated pool from which you have to engage the workers. You cannot engage any other worker except the card holders of KDLB. That basically means that they have a lot of protection, they have a lot of rights. A dock labour gets 3 to 5 times higher wages depending on the type of work he does. So in that case we are not competitive. Then also they are not productive. Apart from the cost, KDLB asks us to employ more than needed. Now if my crane needs four or six or ten people, they make us employ 17 or 18 people so you can see that not only the labor is expensive, the number of workers you need is also more than usual. KDLB exists at Karachi port while there is no dock labor board at Port Qasim but there is a private pool of labor which is just as bad. Actually, there are three to four stevedores who are controlling this pool. Hence at Karachi port, it is a governmental board that is in control while at Port Qasim there are three to four people who possess control and naturally they don't want any competition.
Third issue I think is the cost of the facilities. Our port dues are still expensive both on the ship side as well as the cargo side; those charges which are attracted on the vessels and those charges which are attracted on the cargo. In other words to the importers and the exporters, we are still high priced in both of them. If we compare it with India, we are 10-20% high, from Colombo we are 3 - 5% high, and from Dubai we are 8-10% high. The government has recognized the matter and on our industry's demand port tariffs were reduced twice. Port tariffs were so high that it will take a lot of time to bring them down.
PAGE: How do you see the policies of the government; what is your view on the PNSC?
RAJPAR: As far as PNSC is concerned, it has a much checkered history. When it was created, it was a public sector management. By nature the public sector management is inefficient, it can't respond to business needs as fast as the private sector can, then there were a lot of political interferences but to the credit of President Musharraf who brought in such a wise man like Vice Admiral Tauqeer Naqvi in PNSC who turned around the corporation. He secured a 10 year contract of afreightment from the public sector refineries; so in other words from 2003-2013 whatever cargo comes to these public sector refineries that has to be carried on by PNSC vessels. If we look to it positively then we could analyze that President wants to secure the PNSC and also wants it to prosper and become a self-reliant and self sustaining organization and in order to attain this, they give them this opportunity. While giving them this monopoly, government did a very intelligent pricing mechanism. Pricing mechanism is market based, it is a hybrid formula where few factors are of charter higher cost, and few factors are of capacity constraint. Actually PNSC is using these very large tankers but they are not able to load fully. And because of not having many drafts at the Karachi port, these vessels can't be accommodated. Then there are two market based rates. One is world scale, another is AFRA. World Scale is an internationally known system or a yardstick to measure the distances and cost for those distances. AFRA is a monthly average freight rate which is announced by the London Inter Tanker Market Rate Association; so this rate got changed every month. The idea is that over a ten year contract everything should average out. Refineries have also taken the decisions after long sessions. Private sector should accept that the government has given this opportunity to PNSC but there are many other things to look at. PNSC caries 20% of the national trade so the 80% is still open. Private sector should endeavor in that.
PAGE: After nationalization, Pakistan Shipping Industry could not attain the same position, what are the predicaments in this regard?
RAJPAR: In Pakistan private sector ship owning hasn't flowered; the basic reason for that is the lack of confidence. Policies are good, government has given licenses in 1991, also announced a revised policy in 2001 and a new policy in 2006. The 2006 policy has covered almost all the things which are the demand of private sector ship owners. There are two issues, one is financing where we think that a bit of awareness is needed in the banking community and in the investment community. Another predicament is the confidence as people have this point of view that the government policies keep on changing every year. It will also take time to induce and encourage people to take initiative.
PAGE: The movement of cargo is being controlled by international foreign lines which monopolize the trade through heavy freight rates. How shipping industry can find its way in this situation?
RAJPAR: As the world is going towards consolidation and mergers, we can see that previously there were ten foreign lines, today there are five to six foreign lines, and their market share has increased. In Pakistan, there is one shipping company which has 25-30% market share while the top five have 60-75% so the concentration of power is an issue. There are many lines but the market control is in few hands. For freight rates there are market dynamics where you have to see the international market dynamics; what is the balance of the East and West, what is the extent of capacity, what is the repositioning situation, etc. In Pakistan, the trend is that yes we are paying a little bit more than perhaps what we should be paying but we are not in a worse position. These liners got the power but they cannot walk over us. There is one another thing which is what these big liners like APL do. They make deals with Wal-Mart, Target or K Mart that they will bring in their bulk, later the Wal-Mart ask the suppliers (Gul Ahmed, Nishat, etc.) to send it on that line and pay the extra charges. Hence in that way those ships charge many other expenses in rupees. Here the industry needs to work. The importers and exporters need to educate themselves. They have to negotiate the freight directly and they should be in commanding position as they are giving the business and they should not pay those extra charges. If the importers start taking FOB and exporters start giving CNF, then the power equation will shift in our favor and we will have a more balanced situation.
PAGE: How do you see the Gawadar port and its progress?
RAJPAR: Gawadar has a lot of potential and things will happen. Port of Singapore Authority (PSA) is a very big company and it will not cost its name for any purpose. Initially the Gawadar port will focus on the transshipment, the idea is not to hurt Karachi port or Port Qasim but to bring in new business. Out of 28 million containers market of the region, if Singapore attracts 5%, that means quite a lot for us. Later they will target the transit trade. Hence Gawadar will be very different in five to 10 years time.
PAGE: How do you see the recent protocol been granted to India and Pakistan?
RAJPAR: The protocol was one of the demands of the ship owners committee. We have a bit more advantage as India is a big country with a lot of trade but they are lifting less than us despite we have only one PNSC whereas India has a lot of companies and dozens of vessels but on a larger pie, they carry less than 15% of their national cargo on the national flag so if we are carrying 20% although ours is 55 million tones and they have 550 million tones but percentage wise we are better off. We have more advantage in the sense that our ship owners used to say that if we buy ships and we bring a bulk cargo from Australia to Pakistan, what would we take while returning back as Pakistan doesn't have a bulk exports; but if you open India for us then from India we can load other bulk cargo and go to other countries so the idea was to give return cargo to prevent ballasting for Pakistani ships. Obviously PNSC is taking advantage of the situation and has fixed three or four ships for that purpose.
PAGE: What are your proposals for the upcoming budget?
RAJPAR: For shipping agencies, these are few of the many proposals for the budget:
1: TAX ON AGENCY COMMISSION:
(a) PTR should be abolished
(b) Tax should only be charged on income
(c) If collection of tax through withdrawing mechanism is necessary then it should only be collected as 'Advance Tax' at reduced rates which are adjustable against final assessment.
2. RETURN OF INCOME FOR SHIPPING BUSINESS OF NON-RESIDENTS
(a) Return filing criteria for scheduled vessels and non-scheduled vessels should be differentiated;
(b) Filing of return for scheduled vessels be made same as in the case of air transport of non-residents.
3. BULK CARGO PENALTIES UNDER CUSTOMS ACT
The working of the Customs Act-1969, Clause 24 (i) of Section 156, has made Customs treat the local agent as the ship-owner, and consequently the agent is being made liable for both shortages and excesses based on outturn report. The law needs amendment so the ship-owner or ship is made liable through their P&I Club. Furthermore, shortage/excess should be based on contractual obligations between ship-owner and consignee.
4. TOLERANCE LIMIT ON LIQUID AND DRY BULK CARGO
In case of shortages beyond permissible tolerance limit (i.e. 0.25% on non-POL cargo, 0.5% on POL cargo and none on dry bulk cargo), Customs penalizes ship agents on the full amount of shortage, rather than on the differential/incremental amount beyond the permissible limit. Also the tolerance limits should be increased to 0.50% for all bulk cargoes in accordance with international practice.
The Rajparor thing is to reduce the interface between tax payer and tax collector. To automate the system so to curb corruption like the way government has introduced the CARE system in customs and the electronic clearances system that has now started working in KPT; government did a lot of policy intervention. We should continue on the same path, make things easy, and make life easy.
PAGE: Is there any other thing that you would like to mention?
RAJPAR: Yes, I want to tell you about the National Trade Corridor Improvement Program. This is a Prime Minister's personal initiative. He has made a taskforce which he reviews quarterly and Dr. Akram Sheikh (Deputy Chairman Planning Commission) is reviewing it monthly. I am one of the two private sector members on this taskforce. The National Trade Corridor Improvement Program (NTCIP) is a high-powered body aimed at improving the country's logistics chain in a holistic manner, encompassing ports, shipping, highways, aviation, railways, customs and trade facilitation bringing about performance standards benchmarked against international best practices with a view to reducing the cost of doing business, improving competitiveness and boosting economic growth.