The South East Asian countries are generally fuel starved. However Pakistan is blessed with gas, but it is depleting fast, thus calling for more explorations, conservation and looking for alternative source of energy.
The fuel oil prices soaring at 76 USD, may touch peak of 100 USD as exploration and supply do not meet the growing demand. Our fuel bill has soared to over 6 billion USD due to import of refined petroleum products and insufficient refining capacity. Indians are also bracing the fuel crisis and their import bill soared to 44 billion USD for 95 mill tons of fuel oil.
Indian economy maintaining a growth rate of about 10%, oil imports are expected to surge to 95 billion USD in 2025, importing about 313 million tons. Indians are seriously developing alternative sources and have built 3 LNG terminals at Dahej, Hazira (Shell) at W. Coast of Indian Gujrat and third terminal is being built at Kolchi (Cochin) to meet their energy requirement by importing LNG.
Indian Private Sector Shipowners have ventured into operating LNG vessels under Indian flag. Whilst in Pakistan our 49% of energy requirement is met by natural gas, oil is 30%, Hydro Energy 13% and coal about 7% and Nuclear energy 1%.
We have not yet been able to harness wind power which is abundantly available and suited sites are Gharo, Ormara and Makran Coast where wind can be converted into energy, as data indicates availability of 5-7 meter per second of wind to convert into energy. Balochistan also has proven reserve of 52 mill ton coal in addition to Thar Coal of 175 mill tons. Serious efforts are needed to develop wind farms and coal powered energy units to combat our growing need of energy.
The oil exploration is so minimal that we will have to import fuel oil, but refineries can be developed to cut down imports of refined products. We have virtually zero share in about 5200 MW wind energy, whereas India is touching 1000 MW mark but USA, Spain, Holland have harvessed wind energy well.
America is betting on a bright future for Bio Diesel. The nascent bio fuel industry is hoping for big growth as USA tries to cut import of M.E. oil. Recently US Govt/Energy department brought Bio fuel funding to almost / billion USD with a further USD 200 million to fund small scale plants, that turn renewable sources like wood chips and switch grass into fuel Ethanol.
However Bio diesel which is made from feed stocks such as vegetable oil, animal fat and manure, remains difficult to transport and relies largely on Govt. incentives. Bio fuel can be used as transportation fuel, when as much as 20% is blended with regular diesel and for US homes in a 5% mix with regular heating oil. Capacity has gown exponentially after bio diesel producers got USD 1/- per gallon tax credit.
There are 115 Bio diesel plants in USA with a combined production capacity of 865 mill Galls/year. 80 plants are under construction to boost capacity to 2 bn Galls/year. According to National Bio diesel Board farmers will produce more corn to produce Ethanol feed stock and US Govt is looking forward for 8 bn Gall capacity by 2009, thus to have green premium product which is environment friendly. The US is using presently 6 bn gallons of Ehtanol.
We in Pakistan are now producing Ehtanol out of Molasses but the same is exported. Pakistan must concentrate on using Ethanol upto 20% by using production from Sugar mills and exploring production of Ethanol from Cellulosic sources, like wood chips and switch grass.
Govt must make it mandatory for oil and petroleum companies to blend Ethanol upto 20%. Brazil, India and USA are already blending. Interestingly Bill Gates of Microsoft and Steve case, the founder of AOL are investing in Bio Fuel, so Pakistani entrepreneurs may be lured by giving good incentives and rebates. The promising ingredient for Bio fuel is an ordinary Shrub, JATROPHA, which was brought to the subcontinent by Portuguese, locally known as Ratanjot, resembles castor. The seed contains oil which can be blended with diesel.
Govt may offer incentives to farmers to grow this plant with widening deficit of 14 billion USD. We must put our heads together to cut down fuel oil import bill and at the same time grow canola, corn etc to cut down cost of both edible and non edible imports. We must cut down our energy bill by blending Ethanol, harnessing wind energy and optimising use of coal powered generation and release ourselves partly from import of fuel oil.
It is strongly recommended that an independent National Bio diesel Board be established on the pattern of US with hard core professionals only to give a kick start of blending ethanol on war footing. We must also support development of LNG terminals as one is coming up at Port Qasim and import LNG, to meet the gas demand which is expected to exceed domestic supply by 4 bcm by 2010 as gap will further widen to 44 bcm by 2020.
"LET A NEW DAY DAWN FOR PAKISTAN":
Thursday, August 30, 2007
Monday, August 27, 2007
The changing role of ports
It is now widely acknowledged that modern ports must fulfil a multitude of different roles.
They are vital to national economic interests, especially for developing countries where port costs can make the difference between goods being competitive or uncom-petitive on world markets; they are centres for maritime, industrial and distribution ac-tivities and as such act as "growth poles" for the local, regional and even national economy, as in the case of Antwerp (Belgium) or Rotterdam (the Netherlands); and they are "functional elements" in the global logistics systems and "value chains" of international shipping lines, shippers, and multi-modal, transnational logistics companies.
It is the latter role that is perhaps the main driver of current developments, with trans-national companies seeking to integrate a variety of different transport modes and of-fer "door-to-door" services to major customers.
These companies might be international shipping lines or their subsidiaries (eg Maersk-Sealand-APM Termi-nals), global terminal operators such as Hutchison Port Holdings and PSA Interna-tional, forwarders and trucking companies (eg Kuhne Nagel and Transplace), rail operators (eg Stinnes-Railion and ABX) or "integrators" such as UPS and FedEx. These companies operate on the principle of lower port costs, higher productivity, and more reliable ser-vices covering world's major ports, where they are often willing to make significant in-vestments, as well as embark upon setting up a reliable network of "feeder" ports that make up their global network of routes/services.
To accommodate these changes, ports are now moving towards a concept based on "landlord" model of port organisation and administration. This model is not only advocated but encouraged by the World Bank, UNCTAD and port management groups such as the Southern African Development Community and the Port Management Association of Eastern and Southern Africa as an efficient management tool. In slide the landlord model is contrasted with public and private service port models (where the lead party responsible for the port provides all the major investment and essential services) and the tool port model (where the public sector provides for all the tools necessary for port services to be offered to users, but services are provided mainly by the private sector).
PUBLIC-PRIVATE ROLES IN PORT MANAGEMENT:
They are vital to national economic interests, especially for developing countries where port costs can make the difference between goods being competitive or uncom-petitive on world markets; they are centres for maritime, industrial and distribution ac-tivities and as such act as "growth poles" for the local, regional and even national economy, as in the case of Antwerp (Belgium) or Rotterdam (the Netherlands); and they are "functional elements" in the global logistics systems and "value chains" of international shipping lines, shippers, and multi-modal, transnational logistics companies.
It is the latter role that is perhaps the main driver of current developments, with trans-national companies seeking to integrate a variety of different transport modes and of-fer "door-to-door" services to major customers.
These companies might be international shipping lines or their subsidiaries (eg Maersk-Sealand-APM Termi-nals), global terminal operators such as Hutchison Port Holdings and PSA Interna-tional, forwarders and trucking companies (eg Kuhne Nagel and Transplace), rail operators (eg Stinnes-Railion and ABX) or "integrators" such as UPS and FedEx. These companies operate on the principle of lower port costs, higher productivity, and more reliable ser-vices covering world's major ports, where they are often willing to make significant in-vestments, as well as embark upon setting up a reliable network of "feeder" ports that make up their global network of routes/services.
To accommodate these changes, ports are now moving towards a concept based on "landlord" model of port organisation and administration. This model is not only advocated but encouraged by the World Bank, UNCTAD and port management groups such as the Southern African Development Community and the Port Management Association of Eastern and Southern Africa as an efficient management tool. In slide the landlord model is contrasted with public and private service port models (where the lead party responsible for the port provides all the major investment and essential services) and the tool port model (where the public sector provides for all the tools necessary for port services to be offered to users, but services are provided mainly by the private sector).
PUBLIC-PRIVATE ROLES IN PORT MANAGEMENT:
LANDLORD PORTS AND SOCIAL DIALOGUE:
While there is a clear growing tendency towards the landlord model, change is not considered as a discrete or linear process and there is possibility of considerable differentiation within the same port over a period of time. For example, a private concession for the port's container terminal under a landlord model might co-exist with a tool port model for general break-bulk car-goes.
This can raise questions about equal access to available work opportunities. For example, will workers employed at the container terminal enjoy more secure and better paid work? Will employment at the general/break-bulk terminals decline as a result, and who will pay for severance and retirement if the lion's share of the port's revenue is now generated and appropriated by the private sector in a "separate" part of the port?
When port authorities assume status as landlords, new forms of public-private sector dialogue is warranted to ensure the representation of different interest groups. There are ex-amples of good practices from outside and inside of the port industry. Many ports al-ready have institutions that provide opportunities for dialogue between the public sector port authority, private sector operators and user groups. Whereas other ports have been reformed to give users more flexibility as to how the port functions;' one such example is the establish-ment of Canada Port Authorities for the country's major commercial ports.
According to both UNCTAD and the World Bank, private sector participation in ports, and indeed any form of structural adjustment, should be primarily about pro-moting competition. UNCTAD, for example, asserts that port reform "should have a single overall objective - to make the port responsive to the market and thus satisfy cli-ent's needs. Reform will be successful as long as this objective is reached." On the more specific issue of social dialogue, the World Bank recognises the value of participation in decision-making but seems to regard the principal purpose of such activity to be the promotion of competition.
Participation will allow all stakeholders to share common concerns about competitiveness of port services and gain better un-derstanding of how any weakening of this competitiveness would be detrimental to all. If decent work is to be preserved, or in many ports to be more firmly established, then social dialogue should also address questions of employment security, fair remuneration, training and development, health and safety, equality of opportunity and the avoidance of any formal discrimination, and work-life balance.
Research evidence shows that where worker representatives are involved in the pro-cess of port reform, any adverse effects on dockers' terms and conditions of employ-ment can be alleviated. The example of Spanish port reforms, demonstrates how decent work can be an integral part of the reform process.
PRIVATE SECTOR PARTICIPATION (PSP) IN PORTS:
Most observers agree that, in an increasingly global world economy, ports must improve their efficiency if they are to become an integral part of new Interna-tional logistics networks and support their national economic objectives for trade growth and social prosperity. Private sector participation (PSP) in ports is widely regarded as one of the most effective means to achieve these goals.
In many ports, however, PSP has led to a significant reduction in employment, often accompanied by inferior pay and conditions for those who retain their jobs. Nonetheless, most port and maritime unions no longer oppose PSP as a matter of principle, but demand that any changes are introduced in consultation with port workers to keep job losses to an abso-lute minimum, to protect wages and working conditions as far as possible, and to en-sure that proper training is provided and health and safety standards maintained or improved.
The why and how of PSP in ports
Surveys of the world's major ports reveal that PSP is driven primarily by the desire to increase efficiency and reduce costs, although many ports also cite the expansion of trade and reducing the burden of public sector investment. Amongst African ports, the main objectives of PSP are, likewise, to enhance efficiency and improve the qual-ity of service, as well as the modernisation of infrastructure and the reduction of cost.
The overriding objective, it seems, is "to make the port responsive to the mar-ket and thus satisfy clients' needs. Also, "successful ports have one thing in com-mon - they are all highly market-oriented, while unsuccessful ports are not."
There are many different ways to involve the private sector in the port industry. In fact, a wider range of reform models and public-private partnership formats exist for the delivery of port services than for any other infrastructure intensive sector. Slide summarises different agreements for increased PSP.
EXAMPLES OF PRIVATE SECTOR PARTICIPATION:
While there is a clear growing tendency towards the landlord model, change is not considered as a discrete or linear process and there is possibility of considerable differentiation within the same port over a period of time. For example, a private concession for the port's container terminal under a landlord model might co-exist with a tool port model for general break-bulk car-goes.
This can raise questions about equal access to available work opportunities. For example, will workers employed at the container terminal enjoy more secure and better paid work? Will employment at the general/break-bulk terminals decline as a result, and who will pay for severance and retirement if the lion's share of the port's revenue is now generated and appropriated by the private sector in a "separate" part of the port?
When port authorities assume status as landlords, new forms of public-private sector dialogue is warranted to ensure the representation of different interest groups. There are ex-amples of good practices from outside and inside of the port industry. Many ports al-ready have institutions that provide opportunities for dialogue between the public sector port authority, private sector operators and user groups. Whereas other ports have been reformed to give users more flexibility as to how the port functions;' one such example is the establish-ment of Canada Port Authorities for the country's major commercial ports.
According to both UNCTAD and the World Bank, private sector participation in ports, and indeed any form of structural adjustment, should be primarily about pro-moting competition. UNCTAD, for example, asserts that port reform "should have a single overall objective - to make the port responsive to the market and thus satisfy cli-ent's needs. Reform will be successful as long as this objective is reached." On the more specific issue of social dialogue, the World Bank recognises the value of participation in decision-making but seems to regard the principal purpose of such activity to be the promotion of competition.
Participation will allow all stakeholders to share common concerns about competitiveness of port services and gain better un-derstanding of how any weakening of this competitiveness would be detrimental to all. If decent work is to be preserved, or in many ports to be more firmly established, then social dialogue should also address questions of employment security, fair remuneration, training and development, health and safety, equality of opportunity and the avoidance of any formal discrimination, and work-life balance.
Research evidence shows that where worker representatives are involved in the pro-cess of port reform, any adverse effects on dockers' terms and conditions of employ-ment can be alleviated. The example of Spanish port reforms, demonstrates how decent work can be an integral part of the reform process.
PRIVATE SECTOR PARTICIPATION (PSP) IN PORTS:
Most observers agree that, in an increasingly global world economy, ports must improve their efficiency if they are to become an integral part of new Interna-tional logistics networks and support their national economic objectives for trade growth and social prosperity. Private sector participation (PSP) in ports is widely regarded as one of the most effective means to achieve these goals.
In many ports, however, PSP has led to a significant reduction in employment, often accompanied by inferior pay and conditions for those who retain their jobs. Nonetheless, most port and maritime unions no longer oppose PSP as a matter of principle, but demand that any changes are introduced in consultation with port workers to keep job losses to an abso-lute minimum, to protect wages and working conditions as far as possible, and to en-sure that proper training is provided and health and safety standards maintained or improved.
The why and how of PSP in ports
Surveys of the world's major ports reveal that PSP is driven primarily by the desire to increase efficiency and reduce costs, although many ports also cite the expansion of trade and reducing the burden of public sector investment. Amongst African ports, the main objectives of PSP are, likewise, to enhance efficiency and improve the qual-ity of service, as well as the modernisation of infrastructure and the reduction of cost.
The overriding objective, it seems, is "to make the port responsive to the mar-ket and thus satisfy clients' needs. Also, "successful ports have one thing in com-mon - they are all highly market-oriented, while unsuccessful ports are not."
There are many different ways to involve the private sector in the port industry. In fact, a wider range of reform models and public-private partnership formats exist for the delivery of port services than for any other infrastructure intensive sector. Slide summarises different agreements for increased PSP.
EXAMPLES OF PRIVATE SECTOR PARTICIPATION:
Source: ADB (2000), p. 30.
There is no doubt that PSP is increasing in the world's ports, although public owner-ship of port infrastructure is still the norm. In 1992, the World Bank recorded US $304 million private sector investment in developing countries' ports.
By the turn of the millennium this figure had reached US $2,632 million. In 2003 there were 325 port investment opportunities reported for private investors, of which around a quarter were PSP projects. In northern Europe, the acquisition of current facilities made up 44 percent of the opportunities while in South Asia, in contrast, almost 80 percent were green-field, build-operate-transfers and joint partnership opportunities.
Among developing countries, African ports arguably have the greatest need for new investment to modernise equipment and improve port infrastructure. During the 1990's, however, the African continent received only 5 percent of the total investment flows to developing countries relating to PSP in infrastructure. African ports are generally viewed as a high-risk investment, local banks are often unprepared to grant long-term credit, and global operators are uncertain whether they can generate sufficient traffic to justify investment.
There have often been severe delays, numerous false starts and a number of failed attempts with PSP, as illustrated in the case of Mombassa (Kenya), when Felixowe Management made a departure for not receiving cooperation from Kenyan Port Authorities.
Saturday, August 18, 2007
Efforts on to make shipping industry more competitive
Ports and shipping being a vital sector and backbone of the country's economy in handling its trade through sea routes, has throughout been given utmost importance by the present Government. The Ministry has been pursuing the policies envisioned by the President and Prime Minister so as to make the sector compatible to the modern times.
Though sky is the ultimate limit, yet the government has significantly contributed to re-invigorate this sector in terms of its operation and profiteering, whereas a lot is on the cards to be implemented to make the sector more competitive in the region.
RATIFICATION OF CIVIL LIABILITY CONVENTION (CLC) 92 Upon inception of the present Government, the ghost of M.T. Tasman Spirit and its resulted disaster, which had adversely affected the country's beaches and ecological system, was lingering in the air.
The Government by virtue of it interest and initiative became able to have Civil Liability Convention (CLC) 92 ratified, for effecting compensation of oil spills, which was pending since last many years.
The Government has also embarked upon initiating efforts to become member of FUND-92 Convention to cover additional oil spills compensation up to 311 million US dollars. Since this Convention requires contribution from the importers of oil, the Government is negotiating with Refineries and other importing houses through Ministry of Petroleum to become member of this Convention.
RE-EMERGENCE OF PRIVATE SHIP-OWNING INDUSTRY UNDER PAKISTAN FLAG The Government has been acting as facilitator for the stakeholders and the trade by providing them the prudent guidelines so as to restore their confidence in the ship-owning business which had earlier shaken by 1970s nationalisation policy.
Besides, realising that the ship-owning under Pakistani flag, particularly in post WTO Regime, has not taken off despite efforts by allowing incentives to private sector entrepreneurs in the past, the Government with the positive encouragement from Prime Minister formed Ship Advisory Committee to come up with concrete proposals for consideration so that the private ship-owning under Pakistani flag could be put into place.
Accordingly, the proposal so formulated have been submitted for the Prime Minister's consideration and approval. Meanwhile, some of the demands of the prospective ship-owners were met and conveyed to the stake-holders by the Minister for Ports and Shipping in press conference of 29th June, 2006.
Resultant to such confidence boosting steps, the Government has been able to register one private sector vessel namely, MEGA-I, under the Pak flag. More are in the pipeline.
However, most of the prospective ship-owners are awaiting the ratification of the amendments in the Pakistan India Shipping Protocol, which would ultimately provide the better shipping prospects in the region. With this, the government has eventually become successful in marking re-emergence of private ship-owning under Pak flag.
REDUCTION IN PORT TARIFF In consideration that our ports are expensive in the region, a lot has been done, since the inception of the present Government, for reduction of port tariff. Both Port Qasim and Karachi Port were made to understand that at such expensive tariffs, their ports could not be able to compete regionally.
Resultantly, they had to reduce tariff by 25% on all Pakistani flag vessels and on those foreign flag vessels which carry 80% Pakistani compliment on-board so as to encourage employment of Pakistani seafarers on foreign flag vessels.
It is anticipated that most of the foreign flag vessels will respond positively to this decision, for getting the offered tariff concessions, thereby increasing the employment opportunities for the Pakistani seafarers which in the post 9/11 scenario are on the decline.
PORT DEVELOPMENT PROJECTS The government has undertaken various projects of important nature relating to the Ports' sector and the allied industry.
(A) KARACHI PORT At KPT, two container terminals in private sector ie PICT and KICT, equipped with modern gantry cranes have been established to enhance container handling. Even for the existing container terminal at West Wharf, expansion project has been approved and additional space provided.
This, resultantly, has enhanced the capacity of Karachi Port, which is now handling 32 million tons of cargo along with 1.1 million TEUs of containers. There are a number of projects undertaken by KPT so as to meet futuristic vision of container handling.
In this respect, a deep water port catering upto 18 meters draft is in advance stage of being built to meet the needs of 2010. Other projects being implemented by KPT include development of cargo village, development of food street, establishment of water jet fountain and port tower complex to improve the skyline as well as provide facilities to inhabitants of Karachi.
Considering the international trend where port authorities indulge in development of the city infrastructure, KPT was directed by the government to participate in Karachi package and assist in improvement of road network which not only would benefit Karachi Port but would also ease out traffic jams and provide convenience to Karachiites.
KPT has thus engaged itself in construction of fly-over at Karachi, widening of M.T. Khan Road, Mai Kolachi Road and M.A. Jinnah Road and construction of underpasses at various locations and a three tier flyover at Hino Chowk.
(B) PORT QASIM Similar developments are also the hall-mark of Port Qasim which is emerging as the largest industrial hub port of South East Asia - on the pattern of Jubail (S.A.) Jable-e-Ali. Over the period of time, Port Qasim has expanded its base and cargo handling capacity, which presently is around 23.6 million tons along with 0.6 million TEUs container handling capacity.
Moreover, a number of projects have been initiated by the Government, by inducing private entrepreneurs. These projects include, second container terminal, liquid cargo terminal, LPG terminal, second oil jetty, grain and fertiliser terminal, coal, cement and clinker terminal, etc.
Besides, the Government has successfully concluded an agreement with EMAAR, for development of 12000 acres of industrial zones, which will have positive impact on the country's economy.
The Government has also allocated 100 acres of land in Port Qasim at a distance of 18 KM from Karachi Airport, so as to establish a media city therein, the work on which is in progress. Upon establishment the project would be first of its kind undertaken for the benefit of journalists and associated members of the community.
(C) GWADAR PORT The construction work on first phase of the deep water port project at Gwadar has been completed, whereas the port offering three multi-purpose berths and a channel of 11.5 meters draft which will accommodate vessels of 50,000 tonnes dead-weight, will be made operational very shortly.
The channel has further been deepened to 14.5 million, through additional dredging. Besides, Phase-II of the project shall commence on completion of Phase-I and its related infrastructure and will be offered for private sector participation on BOO/BOT basis.
ISSUANCE OF MACHINE READABLE SEAFARERS IDENTIFICATION DOCUMENT (SID) AND CLASSIFIED SEAMEN SERVICE BOOK (SSB) In order to address the security concerns and to safeguard the employment opportunity for Pakistani seafarers, the Government has been able to put in place a system issuing the Machine Readable Seafarers Identification Document (SID) through NADRA and the Seamen Service Book (SSB) printed from the Printing Corporation of Pakistan press. In doing so, the Government has been able to restore the respect for the documents world-wide.
SETTING UP OF ENGINEERING UNIVERSITY WITH FACULTY ON MARINE SCIENCES Conscious of the fact that it is almost impossible to survive in the modern times without having compatible knowledge and training in the related fields and realising that aggressive research in all fields of modern sciences is essential prerequisite for progress, the government initially desired to upgrade the Pakistan Marine Academy (PMA) to Marine University.
However, with the involvement of Higher Education Commission (HEC), it subsequently emerged that a full-fledged Engineering University having a comprehensive faculty on Marine Sciences would be more appropriate. The Engineering University has been inaugurated by the Prime Minister and now its functional aspects are being looked into and taken care of by the HEC in assistance with the PMA and the Ministry of Ports and Shipping.
The work for improvement in the existing facilities, up-gradation of simulators and laboratories, construction of new infrastructure etc would start from January, 2007. Selection of faculty and commencement of classes would follow.
COMPLIANCE OF THE ISPS CODE Post 9/11, the world has been very conscious of the security concerns which they even extended up to the world maritime sector. Consequently, and ISPS Code was designed under IMO, whereby all the maritime nation are required to be compliant to that for the safety of the crew, cargo, vessels and the ports of destinations.
Incompliant States would naturally lose the business. Feeling this pressure, the government initiated efforts and ultimately was successful in making all its ports and shipping facilities compliant to the ISPS Code before the cut off date of 30th June, 2004. This achievement was not only appreciated locally, but the Secretary General, IMO, at the very official forum, also applauded Pakistan's early compliance of the Code.
Though sky is the ultimate limit, yet the government has significantly contributed to re-invigorate this sector in terms of its operation and profiteering, whereas a lot is on the cards to be implemented to make the sector more competitive in the region.
RATIFICATION OF CIVIL LIABILITY CONVENTION (CLC) 92 Upon inception of the present Government, the ghost of M.T. Tasman Spirit and its resulted disaster, which had adversely affected the country's beaches and ecological system, was lingering in the air.
The Government by virtue of it interest and initiative became able to have Civil Liability Convention (CLC) 92 ratified, for effecting compensation of oil spills, which was pending since last many years.
The Government has also embarked upon initiating efforts to become member of FUND-92 Convention to cover additional oil spills compensation up to 311 million US dollars. Since this Convention requires contribution from the importers of oil, the Government is negotiating with Refineries and other importing houses through Ministry of Petroleum to become member of this Convention.
RE-EMERGENCE OF PRIVATE SHIP-OWNING INDUSTRY UNDER PAKISTAN FLAG The Government has been acting as facilitator for the stakeholders and the trade by providing them the prudent guidelines so as to restore their confidence in the ship-owning business which had earlier shaken by 1970s nationalisation policy.
Besides, realising that the ship-owning under Pakistani flag, particularly in post WTO Regime, has not taken off despite efforts by allowing incentives to private sector entrepreneurs in the past, the Government with the positive encouragement from Prime Minister formed Ship Advisory Committee to come up with concrete proposals for consideration so that the private ship-owning under Pakistani flag could be put into place.
Accordingly, the proposal so formulated have been submitted for the Prime Minister's consideration and approval. Meanwhile, some of the demands of the prospective ship-owners were met and conveyed to the stake-holders by the Minister for Ports and Shipping in press conference of 29th June, 2006.
Resultant to such confidence boosting steps, the Government has been able to register one private sector vessel namely, MEGA-I, under the Pak flag. More are in the pipeline.
However, most of the prospective ship-owners are awaiting the ratification of the amendments in the Pakistan India Shipping Protocol, which would ultimately provide the better shipping prospects in the region. With this, the government has eventually become successful in marking re-emergence of private ship-owning under Pak flag.
REDUCTION IN PORT TARIFF In consideration that our ports are expensive in the region, a lot has been done, since the inception of the present Government, for reduction of port tariff. Both Port Qasim and Karachi Port were made to understand that at such expensive tariffs, their ports could not be able to compete regionally.
Resultantly, they had to reduce tariff by 25% on all Pakistani flag vessels and on those foreign flag vessels which carry 80% Pakistani compliment on-board so as to encourage employment of Pakistani seafarers on foreign flag vessels.
It is anticipated that most of the foreign flag vessels will respond positively to this decision, for getting the offered tariff concessions, thereby increasing the employment opportunities for the Pakistani seafarers which in the post 9/11 scenario are on the decline.
PORT DEVELOPMENT PROJECTS The government has undertaken various projects of important nature relating to the Ports' sector and the allied industry.
(A) KARACHI PORT At KPT, two container terminals in private sector ie PICT and KICT, equipped with modern gantry cranes have been established to enhance container handling. Even for the existing container terminal at West Wharf, expansion project has been approved and additional space provided.
This, resultantly, has enhanced the capacity of Karachi Port, which is now handling 32 million tons of cargo along with 1.1 million TEUs of containers. There are a number of projects undertaken by KPT so as to meet futuristic vision of container handling.
In this respect, a deep water port catering upto 18 meters draft is in advance stage of being built to meet the needs of 2010. Other projects being implemented by KPT include development of cargo village, development of food street, establishment of water jet fountain and port tower complex to improve the skyline as well as provide facilities to inhabitants of Karachi.
Considering the international trend where port authorities indulge in development of the city infrastructure, KPT was directed by the government to participate in Karachi package and assist in improvement of road network which not only would benefit Karachi Port but would also ease out traffic jams and provide convenience to Karachiites.
KPT has thus engaged itself in construction of fly-over at Karachi, widening of M.T. Khan Road, Mai Kolachi Road and M.A. Jinnah Road and construction of underpasses at various locations and a three tier flyover at Hino Chowk.
(B) PORT QASIM Similar developments are also the hall-mark of Port Qasim which is emerging as the largest industrial hub port of South East Asia - on the pattern of Jubail (S.A.) Jable-e-Ali. Over the period of time, Port Qasim has expanded its base and cargo handling capacity, which presently is around 23.6 million tons along with 0.6 million TEUs container handling capacity.
Moreover, a number of projects have been initiated by the Government, by inducing private entrepreneurs. These projects include, second container terminal, liquid cargo terminal, LPG terminal, second oil jetty, grain and fertiliser terminal, coal, cement and clinker terminal, etc.
Besides, the Government has successfully concluded an agreement with EMAAR, for development of 12000 acres of industrial zones, which will have positive impact on the country's economy.
The Government has also allocated 100 acres of land in Port Qasim at a distance of 18 KM from Karachi Airport, so as to establish a media city therein, the work on which is in progress. Upon establishment the project would be first of its kind undertaken for the benefit of journalists and associated members of the community.
(C) GWADAR PORT The construction work on first phase of the deep water port project at Gwadar has been completed, whereas the port offering three multi-purpose berths and a channel of 11.5 meters draft which will accommodate vessels of 50,000 tonnes dead-weight, will be made operational very shortly.
The channel has further been deepened to 14.5 million, through additional dredging. Besides, Phase-II of the project shall commence on completion of Phase-I and its related infrastructure and will be offered for private sector participation on BOO/BOT basis.
ISSUANCE OF MACHINE READABLE SEAFARERS IDENTIFICATION DOCUMENT (SID) AND CLASSIFIED SEAMEN SERVICE BOOK (SSB) In order to address the security concerns and to safeguard the employment opportunity for Pakistani seafarers, the Government has been able to put in place a system issuing the Machine Readable Seafarers Identification Document (SID) through NADRA and the Seamen Service Book (SSB) printed from the Printing Corporation of Pakistan press. In doing so, the Government has been able to restore the respect for the documents world-wide.
SETTING UP OF ENGINEERING UNIVERSITY WITH FACULTY ON MARINE SCIENCES Conscious of the fact that it is almost impossible to survive in the modern times without having compatible knowledge and training in the related fields and realising that aggressive research in all fields of modern sciences is essential prerequisite for progress, the government initially desired to upgrade the Pakistan Marine Academy (PMA) to Marine University.
However, with the involvement of Higher Education Commission (HEC), it subsequently emerged that a full-fledged Engineering University having a comprehensive faculty on Marine Sciences would be more appropriate. The Engineering University has been inaugurated by the Prime Minister and now its functional aspects are being looked into and taken care of by the HEC in assistance with the PMA and the Ministry of Ports and Shipping.
The work for improvement in the existing facilities, up-gradation of simulators and laboratories, construction of new infrastructure etc would start from January, 2007. Selection of faculty and commencement of classes would follow.
COMPLIANCE OF THE ISPS CODE Post 9/11, the world has been very conscious of the security concerns which they even extended up to the world maritime sector. Consequently, and ISPS Code was designed under IMO, whereby all the maritime nation are required to be compliant to that for the safety of the crew, cargo, vessels and the ports of destinations.
Incompliant States would naturally lose the business. Feeling this pressure, the government initiated efforts and ultimately was successful in making all its ports and shipping facilities compliant to the ISPS Code before the cut off date of 30th June, 2004. This achievement was not only appreciated locally, but the Secretary General, IMO, at the very official forum, also applauded Pakistan's early compliance of the Code.
Thursday, August 16, 2007
Second and parallel registry option to increase fleet
It is indeed necessary for Maritime Administration of Pakistan to study the administrative systems of other countries who are successfully conducting their maritime affairs and learn from them the modern trends of regulating shipping and analysing the merits and de-merits of Flag of Convenience.
Unfortunately the private sector of Pakistan has shied away since nationalisation of 1970s. Although as a result of continued efforts, the Ministry of Ports and Shipping has been successful in registering one container vessel under Pakistan flag in private sector, all the same more efforts are required to attract many other local and foreign investors to register their vessels under Pakistan flag.
However, it must be appreciated that it is not only the concessions, which would attract the ship-owners but at the same time the essential perquisite vis-a-vis political stability, continuation of policy, tax concessions, economic free zones, no regulatory control on manning of vessels and relief for shipping operation need to be appropriately addressed so as to create conductive environment for vibrant shipping owning industry in the country.
The incentives offered by two important countries ie Panama and Liberia, have resulted in their successfully inducing investors world-wide. Panama has 13,000 vessels registered under its flag followed by Liberia, Cyprus, Bahamas, Malta and Marshall Island.
However, in order to deliberate further on this issue, the term "flagging out" must be understood properly as it has commanded considerable attention since the process was first used in 1950s. In simple terms flagging out is the process through which the ship-owners seek to reduce the cost of operating a ship by switching from a high cost, national flag to a lower cost open or second registry.
SHIPPING REGISTRY BY FLAGS
(a) TRADITIONAL:
Pakistan is a typical case of traditional registry which is strictly regulated national flag registry where vessels are crewed solely or largely by national seafarers. Vessels operating costs are higher as ship-owners must ensure full compliance with all maritime conventions and pay higher wages to seafarers. Traditional registers are associated with cargo protection vessels are subject to military requisition of government at times of hostilities.
The size of traditional registry has diminished over the past 30 years, as more and more ship-owners have flagged ships out to open, dependant and second registry. However, efforts have been made to improve the competitiveness of traditional registry through granting of limited concessions of payments of employment subsidies, example, USA, UK, Japan, Greece and Norway.
(b) DEPENDANT:
This registry is mainly associated with the former British Colony, where British ship-owners were allowed to change the flag to a dependant territory offering greater freedom in terms of crew nationality and taxes but such registries are subject to the proviso of British Merchant Shipping Act.
(c) OPEN:
Flag of Convenience (FoC) registers which grant freedom to ship-owners in terms of crew nationality and terms/conditions of employment, taxes, exemption, regulatory control and company disclosure requirement. The standard of surveillance by the different FoC, flag state administration vary substantially from those which regularly inspect ships bearing their flag to ensure compliance with the major maritime statutory requirements to those which pay little attention to such matters. Example, Liberia, Panama, Cyprus, Bahamas.
(d) SECOND OR PARALLEL:
This registry was set up in 1980 by governments granting certain national flag ship-owners access to less stringent crew employment registry via a second or parallel registry. These registries were set up to arrest the flight of national ship-owners to the open registry and to encourage ship-owners who had already made these move to flag in. For example, NIS (Norwegian International Ship-Registry), DIS (Danish), GIS (German), Kergulen (France) Madeira (Portugal), Netherlands Antilles (The Netherlands).
While ship-owners flag out ships for a number of reasons, the principal reason is to reduce crew cost. I quote here a report published by Bergantino Marlow in Year 2000, the Shipping Research Group which made a review of 26 quantitative research projects conducted for the last 36 years and they have concluded as under:
"We share the belief that crew cost can be considered as the main financial reason behind the ship-owners decision to flag out. The cost of manning a ship can be considered the easiest variable to influence when compared to other cost which appear to be mostly fixed internationally specially in the short term. Moreover, flagging out satisfies the ship-owners attempt to lower operating outlay and to bypass rigid labour market regulations and harassment by sea-farers unions."
I would like to quote here the example of various countries and I quote the Industrial Bank of Japan Quarterly Report based on figures produced by Japan Ship-owners Association in year 2000 reflecting the fact that a vessel manned with 22 Japanese crew cost USD 2.75 million per annum or USD 7534 per day. This is nearly 80% higher than comparable vessels manned with a mixed crew of South Asian nationality, their cost run down to only USD 1452 per day (USD 530,000 per annum). Similarly, German International Federation, Finnish Ship-owners Association, Swedish Ship-owners (B&N) and British Ship-owners and particularly Shell save millions of pounds by employing multi-national crews from South Asia and saving sizeable money to the National Insurance Contribution.
Will ship-owners continue to flagging out? The final question relating to the flagging out process is the hardest one to answer. The reason for this is that shipping is a dynamic industry influenced by many social and economic and political factors which can create an uncertain environment for decision making. All that can be done, therefore, at any particular point any time, is to study the case for and against continued flagging out and indicate which argument is holding the upper hand.
The case against flagging out in Germany and the use of certain open flag (FOCs) have been studied and now ship-owners on flag of convenience are feeling the pinch of the stringent regulatory control by Port State Control, revised STCW requirements and ship-owners to comply IMO, ISM Codes and other Conventions. The trend of flagging out had been checked due to strict requirement of Port State Control and IMO world-wide and according to statistics some 1000 vessels around 50 million tons were registered under NIS ie second or parallel registry. Nevertheless the pressure on ship-owners to use FoC persists.
In spite of stringent requirement, the outlook in year 2000 was that open registry would continue to hold its appeal compared with national and second registry as evidenced by leading chemical tankers owners. Please refer to Drewry's Report of year 2000 which predict 16.5% rise in operating cost in year 2000 including crew cost, if the supply sources are not expanded and training practices do not increase.
CONCLUSION:
I am of the considered opinion that instead of Pakistan opting the open registry FoC, we must seriously consider now opting for second and parallel registry on the pattern of Norway, Germany, France, Portugal and Netherlands offering the same facility as offered by these countries on second or parallel registry so that crew cost which constitutes 33% to 50% of operating cost can be considerably reduced and ship-owners are free from labour market regulations and harassment by the trade unions.
In case we choose to go for the second registry or parallel registry than a Pakistani delegation may visit Norway, Germany, France, Portugal, Netherlands instead of Panama and Liberia which are open registry ie Flag of Convenience. It is not at all difficult to have a second or parallel registry in Pakistan by giving the second registry same concessions as European countries are using off-shore island for second registry we can also use the Astola Island for second or parallel registry, provided that due legislative cover and provisions are made in MSO-2001.
The government may opt for second or parallel registry which in my opinion is a better option than to go for open registry ie Flag of Convenience as with the present day regulations, the Port State Control, IMO and other regulations are putting a lot of pressure on Flag of Convenience, including restrictions placed by hull and machinery underwriters, P&I Club etc.
Unfortunately the private sector of Pakistan has shied away since nationalisation of 1970s. Although as a result of continued efforts, the Ministry of Ports and Shipping has been successful in registering one container vessel under Pakistan flag in private sector, all the same more efforts are required to attract many other local and foreign investors to register their vessels under Pakistan flag.
However, it must be appreciated that it is not only the concessions, which would attract the ship-owners but at the same time the essential perquisite vis-a-vis political stability, continuation of policy, tax concessions, economic free zones, no regulatory control on manning of vessels and relief for shipping operation need to be appropriately addressed so as to create conductive environment for vibrant shipping owning industry in the country.
The incentives offered by two important countries ie Panama and Liberia, have resulted in their successfully inducing investors world-wide. Panama has 13,000 vessels registered under its flag followed by Liberia, Cyprus, Bahamas, Malta and Marshall Island.
However, in order to deliberate further on this issue, the term "flagging out" must be understood properly as it has commanded considerable attention since the process was first used in 1950s. In simple terms flagging out is the process through which the ship-owners seek to reduce the cost of operating a ship by switching from a high cost, national flag to a lower cost open or second registry.
SHIPPING REGISTRY BY FLAGS
(a) TRADITIONAL:
Pakistan is a typical case of traditional registry which is strictly regulated national flag registry where vessels are crewed solely or largely by national seafarers. Vessels operating costs are higher as ship-owners must ensure full compliance with all maritime conventions and pay higher wages to seafarers. Traditional registers are associated with cargo protection vessels are subject to military requisition of government at times of hostilities.
The size of traditional registry has diminished over the past 30 years, as more and more ship-owners have flagged ships out to open, dependant and second registry. However, efforts have been made to improve the competitiveness of traditional registry through granting of limited concessions of payments of employment subsidies, example, USA, UK, Japan, Greece and Norway.
(b) DEPENDANT:
This registry is mainly associated with the former British Colony, where British ship-owners were allowed to change the flag to a dependant territory offering greater freedom in terms of crew nationality and taxes but such registries are subject to the proviso of British Merchant Shipping Act.
(c) OPEN:
Flag of Convenience (FoC) registers which grant freedom to ship-owners in terms of crew nationality and terms/conditions of employment, taxes, exemption, regulatory control and company disclosure requirement. The standard of surveillance by the different FoC, flag state administration vary substantially from those which regularly inspect ships bearing their flag to ensure compliance with the major maritime statutory requirements to those which pay little attention to such matters. Example, Liberia, Panama, Cyprus, Bahamas.
(d) SECOND OR PARALLEL:
This registry was set up in 1980 by governments granting certain national flag ship-owners access to less stringent crew employment registry via a second or parallel registry. These registries were set up to arrest the flight of national ship-owners to the open registry and to encourage ship-owners who had already made these move to flag in. For example, NIS (Norwegian International Ship-Registry), DIS (Danish), GIS (German), Kergulen (France) Madeira (Portugal), Netherlands Antilles (The Netherlands).
While ship-owners flag out ships for a number of reasons, the principal reason is to reduce crew cost. I quote here a report published by Bergantino Marlow in Year 2000, the Shipping Research Group which made a review of 26 quantitative research projects conducted for the last 36 years and they have concluded as under:
"We share the belief that crew cost can be considered as the main financial reason behind the ship-owners decision to flag out. The cost of manning a ship can be considered the easiest variable to influence when compared to other cost which appear to be mostly fixed internationally specially in the short term. Moreover, flagging out satisfies the ship-owners attempt to lower operating outlay and to bypass rigid labour market regulations and harassment by sea-farers unions."
I would like to quote here the example of various countries and I quote the Industrial Bank of Japan Quarterly Report based on figures produced by Japan Ship-owners Association in year 2000 reflecting the fact that a vessel manned with 22 Japanese crew cost USD 2.75 million per annum or USD 7534 per day. This is nearly 80% higher than comparable vessels manned with a mixed crew of South Asian nationality, their cost run down to only USD 1452 per day (USD 530,000 per annum). Similarly, German International Federation, Finnish Ship-owners Association, Swedish Ship-owners (B&N) and British Ship-owners and particularly Shell save millions of pounds by employing multi-national crews from South Asia and saving sizeable money to the National Insurance Contribution.
Will ship-owners continue to flagging out? The final question relating to the flagging out process is the hardest one to answer. The reason for this is that shipping is a dynamic industry influenced by many social and economic and political factors which can create an uncertain environment for decision making. All that can be done, therefore, at any particular point any time, is to study the case for and against continued flagging out and indicate which argument is holding the upper hand.
The case against flagging out in Germany and the use of certain open flag (FOCs) have been studied and now ship-owners on flag of convenience are feeling the pinch of the stringent regulatory control by Port State Control, revised STCW requirements and ship-owners to comply IMO, ISM Codes and other Conventions. The trend of flagging out had been checked due to strict requirement of Port State Control and IMO world-wide and according to statistics some 1000 vessels around 50 million tons were registered under NIS ie second or parallel registry. Nevertheless the pressure on ship-owners to use FoC persists.
In spite of stringent requirement, the outlook in year 2000 was that open registry would continue to hold its appeal compared with national and second registry as evidenced by leading chemical tankers owners. Please refer to Drewry's Report of year 2000 which predict 16.5% rise in operating cost in year 2000 including crew cost, if the supply sources are not expanded and training practices do not increase.
CONCLUSION:
I am of the considered opinion that instead of Pakistan opting the open registry FoC, we must seriously consider now opting for second and parallel registry on the pattern of Norway, Germany, France, Portugal and Netherlands offering the same facility as offered by these countries on second or parallel registry so that crew cost which constitutes 33% to 50% of operating cost can be considerably reduced and ship-owners are free from labour market regulations and harassment by the trade unions.
In case we choose to go for the second registry or parallel registry than a Pakistani delegation may visit Norway, Germany, France, Portugal, Netherlands instead of Panama and Liberia which are open registry ie Flag of Convenience. It is not at all difficult to have a second or parallel registry in Pakistan by giving the second registry same concessions as European countries are using off-shore island for second registry we can also use the Astola Island for second or parallel registry, provided that due legislative cover and provisions are made in MSO-2001.
The government may opt for second or parallel registry which in my opinion is a better option than to go for open registry ie Flag of Convenience as with the present day regulations, the Port State Control, IMO and other regulations are putting a lot of pressure on Flag of Convenience, including restrictions placed by hull and machinery underwriters, P&I Club etc.
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