PAKISTAN SHIPPING INDUSTRY CHALLENGES & WAY FORWARD

SEA BORNE TRADE

1.
International trade always plays an important role in stimulating
economic growth. The economic growth can be accelerated by openness
to international trade. Sea is the cheapest and the most efficient mean of
transportation and more than 90% of the international trade is routed ugh
the sea. Pakistan is largely dependent on sea for its international trade,
which is roughly accounted for 36.3% of the Gross Domestic Product
(GDP). Over 95% of countrys global trade is directed through the sea.
SHIPPING INDUSTRY
2.
Globally, shipping industry constitutes one the largest sphere of
human endeavor. Strong shipping industry reshapes the economy of a
country leading towards stable economy which is essential for political
stability. Shipping industry and economic development are closely linked.
The growth of the shipping industry is therefore of great significance to all
nations.
3.
Shipping Industry of a country is described as an umbrella with
established sequence of following linkages:
a.
First and foremost, a large number of ships are needed for the
purpose of handling various types of cargo; such ships include
container vessels, crude carriers, chemical carriers, LNG carriers,
break-bulk cargo carriers, general cargo carriers and the list goes on.
b.
Secondly, these ships have to be berthed in ports to load and
off-load their cargo; and hence the need for ports. Ports are not only
a place for simply handling cargoes, it is much more than that. The
more diverse the range of integrated services it offers, the more
competitive it becomes and the more productivity it generates.
c.
Last but not the least, these ships have to be constructed in
commercial yards, which is another profitable enterprise. These ships
also need periodical maintenance and repairs and hence the need for
ship-repair yards.

SHIPPING INDUSTRY OF PAKISTAN

4.
Brief history and current outlook of shipping industry in Pakistan in
covered in ensuing paragraphs:
a.
Shipping Sector. In 1947 Pakistan inherited a fleet of four
privately owned cargo ships which increased to 14 in 1950. In 1963,
the National Shipping Ordinance was promulgated and National
Shipping Corporation (NSC) was established in 1965. The national
fleet comprised of 53 vessels which were owned by 10 private
shipping companies. The national fleet strength grew to a record 71
vessels just prior to the separation of East Pakistan and its
emergence as Bangladesh in 1971. The fleet strength declined to 57
vessels after the separation. In 1974, nine private shipping
companies were nationalized. In 1979, Pakistan National Shipping
Corporation (PNSC) was formed which is still the sole state-owned
shipping corporation. The total fleet strength increased to 60 ships
with the induction of 14 vessels in late 1970s and early 1980s. Steady
deterioration for the next two decades reduced the fleet from 54
vessels in 1982 to 13 ships in 2002-2003. Old vintage vessels were
replaced with under ten years old secondhand Japanese vessels and
new build/ buying resale vessels were also embarked as part of
PNSC development/ expansion plan during the last decade.
Presently PNSC operates nine ships with a total dead weight tonnage
of 742207 dwt.
b.
Total deadweight tonnage of Pakistan National Shipping Fleet is
considerably less than most private ship-owners in Greece only. By
contrast, Japan, which controls the largest number of merchant ships,
possesses a fleet of over 132 million tons. Pakistani merchant ships
transport only 6% of the total maritime trade as against the 40%
declared by the United Nations Commission on Trade and
Development (UNCTAD) for national carriers. In the result of which
country is spending around $1.5 billion of foreign exchange annually
on cargo charges, which is about 2.2 percent of the GDP.
c.

Ports & Services.There are three national ports of Pakistan:

(1) Karachi Port.

Karachi Port is the largest port of
Pakistan having 30 berths and 3 oil piers. It has two separate
container terminals, Karachi International Container Terminal &
Pakistan International Container Terminal for handling
containerized cargo. The Port is operated under Karachi Port
Trust (KPT) and handles 60 % of the sea borne trade of the
country. Its annual cargo tonnage averages 26 million metric
tons and annual container volume averages 6.5 million Twenty
Foot Equivalent Units (TEUs). Major expansion/ development
projects include construction of Pakistan Deep Water Container
at Kemari, Bulk cargo terminal at East Wharf and 100 acre
cargo village.
(2) Port Qasim.
Port Qasim is the first industrial and
multipurpose commercial port of Pakistan. It has 14 berths
including and Oil Terminal, Liquid Cargo Terminal and an LPG
Terminal. It also has Qasim International Container Terminal
(QICT) for handling containerized cargo. The port operates
under Port Qasim Authority (PQA) and handles 40 % of the
seaborne trade. Its annual cargo tonnage averages 24 million
metric tons and annual container volume averages 0.37 million
TEUs. Major expansion/ development projects include
construction of LNG floating terminal, coal and cement terminal
and another oil terminal.
(3) Gwadar Port.
Gwadar port is the third port of Pakistan
which is currently in its initial stage of development. It has 3
multipurpose berths and has the capacity to handle 50,000
DWT bulk carriers having draught upto 12.5 meters. The port is
not yet commercially operational as it lacks required support
infrastructure and is not connected with the rest of the country.
The master development plan of Gwadar Port visions to have
15 berths including four container terminals, bulk cargo terminal
and two oil terminals.
d.
The largest port in the country that of Karachi, is presently
handling around 1.4 million TEUs of containerized cargo and 26
million tons of other general and bulk cargo per annum. By contrast,
the Port of Singapore handled 32.5 million TEUs of containerized
cargo and 227 million tons of other cargo per annum. The Port of

Singapore, moreover, earns over five billion dollars in revenue, simply

because it provides an array of value-added services.
e.
Ship Building and Repair.
The only heavy engineering unit
equipped with shipbuilding, ship repairing and heavy/general
engineering works is Karachi Shipyard and Engineering Works
Limited (KS&EW) which was established in 1957. Since inception the
fully government-owned organization, has built over 400 vessels of
various types and sizes not only for the country but also for many
other nations in the region. It is fully equipped to build passenger and
cargo ships, oil tankers, bulk carriers of up to 26,000 dwt. It has built
three vessels for PNSC, the biggest of 17,200 dwt vessel. It built its
last ship in 1992, a 17,300 dwt vessel for China. It has also built a
number of vessels for port operations such as tugs, dredgers, hopper
barges, ferries, fishing trawlers, launches and special purpose craft. It
has built ships not only for PNSC but also for such foreign
organizations as National Shipping Corporation of Dubai, China
Ocean Shipping Corporation and China National Machinery
Corporation. In addition, KS&EW has repaired over 4,000 vessels,
half of which were foreign flagships. Many navies and shipping lines
have a regular customer of KS&EW.
f.
KSEW has not been able to partake of the requirement of
building new ships for national Shipping Corporation since 1983.
Moreover, it has also not received any major contract for building
ancillary craft for KPT and Port Qasim. Similarly, KS&EW is not
providing any support in maintenance and support of existing national
fleet. Its profits are however mainly dependent on ship-building orders
from the Pakistan Navy and its competitive edge is not being put to
the test.
CHALLENGES AND WAY FORWARD
5.
Major challenges to the shipping industry in upcoming years and way
forward are enumerated as under:
a.
Sizeable Fleet of International Standards
Limited number
of vessels in national fleet are unable to meet the requirements of
country. Major chunk of import and export relies on foreign shipping
services costing billions of dollars. PNSC claims to share 20% of total

sea borne trade of dry, liquid and container cargo. Major portion of
which is contributed by the crude oil imports. Induction of new ships
in national fleet is considered to be of prime value with equal attention
towards all types of cargo in the coming years for meeting national
requirements as per UNCTD. An effective maintenance plan for
present ships and sound procurement plan, in absence of indigenous
construction, must exist to avoid dilapidation of ships. Compliance to
Stricter maritime codes of conduct for maritime safety, security and
protection of the environment by international maritime organization
(IMO) are also important for running the national fleet on commercial
lines.
b.
Procurement of Container Carriers.
The global trends in
the shipping industry have drastically changed with containerized
cargo shipments taking over the bulk cargos. From cost effectiveness
of shipment to increased convenience coupled with the high level of
security, the growth in containerized cargo is ever increasing. This
consistent growth in containerized cargo is evident across the globe,
depicting the need for vessels for handling container cargo. In this era
of container business the national flag carriers has no container
vessel and it is imperative to induct container vessels to meet the
container traffic of the country.
c.
Private Sector Investment. There is no denying the fact that
despite addition of new ships by the national carrier the country
remains heavily dependent on foreign lines. Availability of funds
remains the key constraint for government to meet the revitalization
plan for shipping. In order to handle Pakistan's international trade,
active involvement of the private sector is a must. However, without
offering incentives convincing the private sector to play any role is
hoping against hopes. In 1970s, there were some 70 to 80 cargo
ships with PNSC and private businessmen but after being
nationalized, the private sector is reluctant to remain involved in the
shipping business. Apart, one of the biggest private company got
bank corrupted in 1990s which also fears the private sector for
investing in shipping industry. Despite of the recent exemptions by
the government on Customs duty, general sales tax and withholding
tax on imports of ships and other floating crafts, investors are not
ready to jump into the business. It is important to attract private

investors and encourage them to participate for sake of national

interest.
d.
Implementation of Policies. Shipping had no place on the list
of priorities of the government which evidently from the absence of a
clear cut shipping policy for years. For the first time the shipping was
accorded the status of an industry in the Shipping Policy announced
by the government in 2001. The government did not only abolish duty
on the import of ship but also removed any restrictions of the age and
type of the ship to encourage investment by private sector. Lack of
interest on the part of the private sector is mainly as policies hardly
ever materialize in the whole-hearted manner. Legal cover to the
policies and its true implementation is important to attract private
investors. In addition, provisions to ensure that the local shipping will
be accorded cargo preference and protection is also imperative.
Restricting the business opportunities for investors by long term
contracts like, the ten year exclusive contract to the PNSC for the
shipment of crude oil of major three national refineries are also not
viable for growth of shipping industry.
e.
Global Competition.
While the volume of seaborne trade is
increasing, national ports, must be well equipped to handle the ocean
freight. Karachi Port and Port Qasim being the major ports of the
country should work together to construct the most modern terminals/
berths and piers to competing with the international ports of the world.
In addition, they must work to improve the infrastructure, modernize
their crafts and equipment in order to meet the challenges of
globalization. Along with professional management the ports must
have good networking and Information Technology port community to
enhance their projection. Lucrative tariff rates should also be
introduced to make our port receptive and investment friendly in the
region.
f.
Development of Gwadar Port.
Currently, Pakistan has two
main operating ports: Karachi Port and Port Qasim. During the
coming years, their capacity expansion programs are unlikely to keep
pace with the expected growth in demand, resulting in a need for a
third port to fill the gap. In particular, Karachi Port has significant
physical limitations and will not be able to grow at the same speed as
the national growth in demand over the coming decades. To ensure

that national development is not hampered by a lack of national port

capacity in the future, it is likewise important to continue expanding
the capacity of Gwadar port over the coming decades. Gwadar port
needs to be equipped with necessary technology and infrastructure
so that it may not only become a starting point for an economic
corridor towards China Pakistan Economic Corridor (CPEC).
g.
Revitalization of KS&EW.
KS&EW which in better times
bustled with activities today stands more or less idle as it has
received no orders of ship-building during last years, except for a
number of orders from Pakistan Navy. PNSC, Karachi Port and Port
Qasim prefer to give tenders to foreign companies. KSEW has
expensive rates of construction and least technological sophistication
in terms of machinery, electronics, ship building designs and material.
KSEW must regain the trust of national corporations and endeavor to
regain its status and has to be competitive either in terms of
production costs or in terms of technological sophistication to enjoy
good national and international customer ship. Apart from focusing on
uplifting of KSEW, it also important to plan for other shipyards in the
country. It would not only create competition for acquiring better
shipbuilding skills, but also will enhance the ship building capacity of
country.
CONCLUSION
6.
Pakistan due to its position is in two most important regions of the
world, South Asia the world biggest consumer market and Central Asia
famous for its riches. Years of neglect, absence of long-term policies and
the non-implementation of the ones which were ever devised, have taken a
heavy toll on the local shipping, port authorities and ship building in
Pakistan. If these industries flourish, they would not only put the economy
of Pakistan on strong footing but also lead to economic independence.
Contribution of these industries to economy of Pakistan will improve its
GDP. Its time to exploit the real potential to make shipping the backbone of
the economy not only to save enormous foreign exchange but also to
ensure smooth flow of seaborne trade which only a dedicated national
merchant marine could do in times of peace or war.