PORTS & SHIPPING
The government needs to take a fresh look at the shipping sector with a view to encouraging local as well as foreign companies to launch and expand their activities.
SHAMIM AHMED RIZVI, Bureau Chief, Islamabad
May 28 - Jun 03, 2007
The newly established separate Ministry of Ports and Shipping (previously a part of the Ministry of Communications) has taken many initiatives for the improvement and modernization of Pakistani ports and updating the operational plans to run them on commercial lines.
A spokesman of the ministry, in an exclusive interview told Page that the ministry has hired the services of port specialists of international repute to make the country's ports compatible to the ports of the world in order to meet the challenges of globalization. With professional management in place, the ports have established its Information Technology (IT) port community and net working. Tariff and other charges have been lowered to reduce the cost of doing business. To make our ports more receptive and investment-friendly the cargo dwell-time at ports has been reduced to 3 to 5 days. Port handling charges at Karachi Port has been reduced by 15 percent and at Port Qasim by almost 25 percent. Consequently, the cargo traffic at these ports has been considerably increased.
Continuing, the spokesman said that the present government has given various concessions/incentives to promote shipping under Pakistan flag and also to improve Pakistan Seamen Employment and increase Pakistan's share in cargo transportation from and to Pakistan such as:
* Pakistan-India Shipping Protocol to include lifting third country cargo has been signed by Pakistan and India on 14-12-2006.
* No restrictions on institutions/banks to mortgage ships as collateral for obtaining loan.
* Insurance cover for Pakistani ships allowed to offshore insurance companies.
* Exemption from income tax to such Pakistani seafarers who work on Pakistan flag vessels for 183 days or more during a year has been allowed by amending Clause (4) of Part-I of Second Schedule to the Income Tax Ordinance-2001.
* The exemption to capital gain arising from sale of ships/vessels has been allowed by inserting a new clause (114A) in Part-I of Second Schedule to the Income Tax Ordinance-2001.
* With the inauguration of Gwadar Port (in Balochistan), Pakistan has now three ports ñ Karachi port, Port Qasim and Gwadar port.
The spokesman admitted that Pakistani ports at present are comparatively inefficient and lack state-of-the-art facilities. With a view to improve their working a benchmarking exercise has been completed with the assistance of World Bank which is reviewed after every three months by National Trade Corridor Improvement Programme Secretariat.
Directorate General of Ports & Shipping Wing and its subordinate officers in Mercantile Marine Department, Government Shipping Office and Pakistan Marine Academy have already been made responsive to current needs by introducing computerization and automation therein. All services which are required from the Mercantile Marine Department including status of various statutory certificates and its requirements have been manifested on its website which is accessible to the stakeholders. Similarly, the government shipping office has also been computerized and the relevant records pertaining to seafarers is now available on its website. However, the old record which is needed to be maintained is being updated and placed on website. The Seamen Service Book (SSB) is being made machine readable as per ILO's recommendations.
With a view to enhance capacity building and in line with National Trade Corridor Improvement Programme, the ports have taken various measures through a number of projects.
Some important projects are:
Karachi Port Trust
Deep draught container handling berths at Keamari Groyne costing US $ 510 million.
Pakistan international Container terminal (PICT)
Second dedicated Terminal at East Wharf.
Karachi International Container Terminal (KICT)
Expansion plan including deepening of quay wall for 14-meter draught vessels. Establishment of Cargo Village to house port related projects.
PORT QASIM AUTHORITY
* Second container Terminal ñ cost US $ 211 million.
* Establishment of Liquid Cargo Terminal ñ cost US $ 11.4 million.
* Establishment of LPG Terminal ñ cost US $ 25 million.
* Establishment of Second Oil Jetty ñ Cost US $ 20 million.
* Establishment of Grains & Fertilizer Terminal ñ cost US $ 50 million.
* Establishment of Coal, Cement & Clinker Terminal ñ cost US $ 50 million.
* Establishment of second Iron Ore & Coal Berth (IOCB) — cost US $ 50 million.
* Establishment LNG Terminal ñ cost US $ 450 million.
* Deepening of channel to all weather 14-meter draught.
Pakistan National Shipping Corporation through its fleet development programmes had inducted Panamaz Carrier during 2005-06. During current financial year (2006-07), they are in the process of induction of one double hull Aframaz crude oil tanker, one Panamaz bulk carrier and one double hull Aframaz crude oil tanker. The approximate investment to this activity is Rs.8 billion. The profitability position of PNSC during 2005-06 was Rs.2 billion.
Karachi Port Trust has earmarked Rs. 8 billion for its development programme to finance a number of mega projects. The profitability during 2005-06 remained about RS. 5 billion.
Port Qasim Authority has also allocated Rs. 8 billion to its development programme. The profitability position of PQA during 2005-6 was Rs. 3 billion.
The Ministry of Ports & Shipping is of firm view that with focused port management approach, sustainability and continuity in its policies and having system for an efficient monitoring, system to see implementation of National Trade Corridor Improvement Programme, the ports in Pakistan would be at par with the best ports of the world in near future.
The financial year 2005-06 was of great significance for the Karachi port. For the first time the cargo handling crossed the thrilling figure of 32.27 million tons through 1995 vessels as compared to last year i.e. 28.61 million tons; a growth of 13%. This massive rise was mainly due to increase of 21.60 million tons of dry cargo handling as compared to 16.32 million tons in corresponding year; registering 32.35% increase. In this year, 1,144,150 containers (TEUs) were handled as compared to last year's 911,936 containers (TEUs) resulting in a growth of more than 25% by crossing a magical figure of one million TEUs. Container handling has been privatized to a great extent and almost 69% of the containers are being handled at the private terminals i.e. KICT and PICT. Container ships clear the port within 24 hours and there is no waiting period for ships. Cargo handling of all types of cargo handled at the KPT berths is being privatized through cargo handling companies (CHCs). Bids for award of contracts to cargo handling companies have been received.
Since inception, Port Qasim, the second deep-sea port of Pakistan has been contributing significantly in the development of national economy. Cost effective and time efficient port services have greatly helped in attracting foreign direct investment at the port. The port is geographically located on the trade route of Arabian Gulf and has excellent multi modal connections.
Port Qasim is one of the largest contributors to national economy of Pakistan. It has an impressive growth in all facets of port operation. PQA is currently pursuing a large number of projects for capacity enhancement and industrialization, attracting Foreign Direct Investment (FDI) and simultaneously undertaking major infrastructure development to enhance efficiency.
The port currently caters more than 40% of sea trade requirements of the country. Port Qaism has singular attraction and advantage for investment both in port facilities and port-based industrial development. These advantages include:
* Full range of port facilities to handle all types of general, gagged, bulk, break ñ bulk, liquid cargo and containerized cargo with backup infrastructure.
* First rate multi modal connections with inland transport network
* Close proximity to hinterland saving logistics expenses
* Immense possibility for expansion and upgrading of port facilities in terms of number of berths to meet dynamic requirement of international shipping.
* Availability of basic utilities like water, power, gas, telecommunications, rail/road connectivity, banking etc, as part of infrastructure for industrial development.
* Vast areas of land with direct access to waterfronts for setting up import based and export oriented industrial cum commercial undertakings.
PRIVATE SECTOR'S PARTICIPATION IN PORT DEVELOPMENT.
Port Qasim has actively sought participation and involvement of private sector in areas both for port facilities as well as investment in industrial zones of the port. Port Qasim pioneered the inauguration of terminal operation by private sector in the country. The entire range of cargo handling activities i.e. from opening of the hatch of vessel to delivery to the consignee for imports and vice versa is carried out by cargo handling companies (CHCs) and terminal operators under one window operation system.
The performance of Pakistan National Shipping Corporation (PNSC) has also improved significantly. It is now running in profit with its 16 vessels. PNSC is continuing with its efforts to add more vessels to its fleet. It is expected that two Aframax crude oil tankers and one Panamax bulk carrier vessel will be added during the year 2006-07 and this should enable the corporation to achieve its growth targets in the coming year. However, with unprecedented increase in the world oil prices and the resultant steep rises in bunder prices, the operating expenses and business profitability is likely to come under strain during 2006-07.
PNSC continues to be in a consolidation phase. Due to rise in international prices of shops, the corporation was able to acquire only one Panamax bulk carrier vessel in January 2006. The additional 5th & 6th Aframax tankers & second Panamax bulk carrier will now be acquired during this year.
PNSC's share in Pakistan's sea trade is as under:-
(in mln tons)
Total Exports (Dry)
Total Imports (Dry)
Total Exports (Liquid)
Total Imports (Liquid)
Total Imports & Exports
Share of PNSC in total trade
Gwadar port is the third port of Pakistan — Karachi and Port Qasim being the other two. Gwadar borders on Arabian Sea and lies in the Balochistan province. It is about 433 km from Karachi and 120 km from the Iranian border. Gwadar port is located at the mouth of the Persian Gulf and outside the Straits of Hormuz. It is near the key shipping routes used by the mainline vessels in the region with connections to Africa, Asia and Europe and enjoys high commercial and strategic significance. Various professional studies manifest that Gwadar port's location is the most advantageous one as an alternative port, which could handle mother ships and large oil tankers in due course.
China has extended technical know how and financial assistance to Pakistan. It has once again helped Pakistan in the shape of development of the Gwadar port, and provided 80 percent of the port's $ 248 million initial development costs. It would make Balochistan the hub of economic activity.
The Central Board of Revenue (CBR) has issued an SRO amending the Second Schedule of the Income Tax Ordinance-2001, to grant exemption from six percent withholding tax to importers of ships and floating crafts, including dredging and survey vessels and other specialized craft that may be registered in Pakistan. Notably, custom duty and sales tax exemptions have already been available on the import of different categories of vessels but not from withholding tax, which created an anomaly. That has now been removed on the request of an international company that is interested in importing as many as 20 maritime vessels.
At one time the shipping sector buzzed with robust economic activity. It had as many as 60 ocean going ships. But things ran aground consequent to the Bhutto government's nationalization policy in the early 1970s. Even when the denationalization process began under successor government, and a number of ineffective incentives were introduced to rejuvenate the private industry, maritime industry received little help. A few brave souls who tried to venture into the field to make a new start found the environment too unfavourable, with the result that at present there is hardly any activity in the private sector with regard to shipping. The government needs to take a fresh look at the sector with a view to encouraging local as well as foreign companies to launch and expand their activities. That has become all the more important in view of the huge business prospects that the deep-sea port at Gwadar holds. We must begin preparing sooner rather than later to benefit from the big opportunities that are to become available and, of course, also to utilize the existing ones. Once the port is up and running it will become a major hub of commercial activity, transporting goods and, possibly, oil and liquefied gas to and from this region and Central Asian Republics as well as other parts of the world.
It is, therefore, imperative to chalk out a maritime policy with a long-term perspective. First of all, the government must focus on removing bureaucratic hurdles that lend a helping hand to corrupt officials and also promote red tapism. The existing rules and regulations need to be revisited so that unnecessary and cumbersome producers are dispensed with. Secondly, the government must inject a heavy dose of incentives into the sector.