Karachi, the next containerised cargo hub by 2012

In April this year, I wrote about the need for a Deep Water Port Act to guide Pakistan in the development of our maritime industry, it was generally welcomed but I also welcomed my critics with open heart and mind. The global economic situation in April 2009 was uncertain. It was the same for Pakistan. Trade and container volumes were lower compared to previous year. 

Many were uncertain about the future and uncertain about change. In my article in April, I was of the opinion that it was time to build and for KPT to build the deep sea port so that Pakistan will be ready when the recession is over. Since then, there are signs of a recovery. 

Pakistan's ports have fared relatively well in the last six months and the good times are coming, as recession is receding and recovery is evident, with growth in China/India, so is the case with South Asia. It has been said that change makes enemies of all who prospered under the old regime and many others who are not prepared to change. This holds true in terms of new economic development. 

The Pakistan Deep Water Container Port (PDWCP) has been carefully planned for years and finally came to fruition in 2007, where the Karachi Port Trust (KPT) awarded the project to build and operate Phase I for a term of 25 years. I can say that this is one aspect where change is coming to Pakistan. 

PDWCP is under construction by the KPT and is expected to be operational by 2012. KPT is currently carrying out the dredging and reclamation works and will construct the marine protection works and the quay wall. The concessionaire will construct the quay deck with the required civil works and provide the equipment. The total investment by the KPT and the concessionaire will be approximately US $1 billion, not 650 million as reported in the print media. The pace of capital dredging of 16% be accelerated to 30% to meet the dates. 

This project will bring about a dramatic change in the logistics and port industry in the region and in Pakistan never seen before. The terminals will be equipped with the latest state-of-the-art facilities, first available in the West Indian and Arabian Sea region. The PDWCP, which will have drafts of up to 18 meters, will serve as a hub for the region, rivalling that of Dubai and JNPT in Mumbai. 

It will be able to handle the world's largest container ships, some of which are still under construction. PDWCP will also enhance the ability of our ports to handle cargo in the regions. PDWCP will elevate Pakistan as a credible player to compete in the transshipment market, which to-date is constrained by infrastructure capabilities. All this will transform Pakistan to a maritime hub for the region. 

The hub and spoke distribution paradigm has been largely accepted in the freight, transport and communications industries as the standard economic geography for numerous reasons, such as simplification of operations, lowering costs and reducing the number of routes, to name only a few advantages. 

This concept has been successfully applied by the marine freight industry, which in any case holds the lion's share in the global logistics sector. Selected ports around the world act as hubs and nearby smaller ports rely on these hubs for their feeder cargo. Doing so creates a win-win situation for all parties involved and results in lower service costs to the end user. 

For a sea port to be able to act as a cargo hub it must possess several physical and geographic advantages. To name just a few, such a port must have the depth required for large vessels to safely navigate unobstructed. It must be on or in close proximity to major shipping routes for shipping lines to be able to keep running costs and travel times low. But most importantly, it must have an identifiable market to whose needs it can cater and thus make economic sense of its existence. 

Karachi is ideally situated near the shipping routes between the Far East and Europe. It is also in close proximity to the Middle East. Being a naturally enclosed harbour helps lower possible risk of damage to flotilla and facilities at Karachi, in turn reducing insurance costs. These factors together with others that I will mention herein below, lend economic sense for Karachi to become a regional cargo hub. 

Looking at another perspective, the ports of Pakistan have always served as a gateway to the flow of goods to the Central Asian Republics (CARs), such as Afghanistan, Tajikistan, Uzbekistan, and beyond. Completion of the PDWCP will increase trade between the CARs with the rest of the world. The CARs have a population of approximately 80 million living in a landlocked territory and development of the national trade corridor with the help of World Bank to reduce the delivery time. 

The economies of scale that can be reaped as a result of having larger vessels call at a port in Pakistan will no doubt eventually reflect positively on the entire industrial sector within the country. Lower freight cost and faster deliveries have been the pending needs of not only our textile industry but our entire manufacturing sector. 

Faster turnaround times shall also mean that the industrial concerns will need to improve their logistics planning and employ modern and technologically advanced methods of supply chain management to remain competitive globally. This means that the project will only bring about major benefits to the people of Pakistan. When fully operational, Phase I of the PDWCP is expected to create jobs for 1,500 people within the terminal, not to mention the jobs created in the support industries. 

Beyond the confines of the terminal, there will be demand for truck drivers, truck attendants, stevedores and other supporting job roles. It will provide income to many Pakistani families. Investing in the best infrastructure will also lead to the transfer of skills and technology to Pakistanis, who will be involved in the marketing and operations of the container terminals. 

This will, in turn, also perpetually increase the government's revenues through taxes and other levies. It is imperative that educated Pakistanis be induced into the logistics sector and be imparted training. When fully operational, the PDWCP will add handling capacity of over 3 million teus (twenty-foot equivalent boxes) to the existing facilities in Pakistan. This can only mean more competition and resulting efficiency to the entire trade. 

Such competition will eventually have a trickledown effect, in increasing the welfare of the people of Pakistan. We must not be afraid of competition by putting up obstacles to investment through our words and actions and provide excuses for investors to put their money elsewhere. 

Containerisation has been the dominant method of cargo transportation for the last three decades and shall continue to be so for the foreseeable future. When it was first introduced in the USA in 1955, this new concept met some stiff resistance. The same seems true for this project in Pakistan today, however, as good economic sense prevailed then in the USA so it will now in Pakistan. 

A decision to spend US $1 billion on this mega project has been arrived at after considerable planning and study. At a time when many of the other mega projects, such as large dams and real estate development, have been shelved indefinitely due to financial constraints, etc, it is of critical importance for the nation to push this port infrastructure project to completion. 

There are many who fear change. Some fear change for change itself. Some fear change will destroy their existing personal and economic interest. Investment decisions like this, not only brings hope but also tangible benefits to the nation and our people. We should be ready and prepared, prepared to participate and contribute. It must be the pride of all patriotic Pakistanis that we possess the most advanced logistics infrastructure in the region. 

It also demonstrates to the world that foreign investors have confidence in the long term development of Pakistan. We must support our nation in its economic development and we must work hard to maintain the confidence of investors, whose support we need. As the late President John F Kennedy said, "Think not what your country can do for you, think what you can do for your country." 

All Pakistanis must contribute positively in ways, big or small, to ensuring the success of the project. The successful completion shall also help in drawing foreign investment to the country at a time when every bit of investment helps. Therefore, any suggestions to the contrary will reflect badly on investor confidence and affect negatively on Pakistan's ability to further attract foreign investment for other projects of national importance. 

Delay in the completion of this project will also afford reason to other neighbouring countries to speed up their own similar projects resulting in loss of revenue and market which could otherwise have been captured by Pakistan. Pakistan is poised to become the first in the South Asia region to welcome the largest container ships. I look forward to that day. 

More important, I look forward to witness the welfare benefits that it will bring to our 'am admi', the common man on the streets, who needs roti, kapra and makan. Let us strive and ensure that we do not miss the window today, as had been the case in the past when we missed it in 70's, resulting in development hubs in the Gulf. 

I am confident that the ministry of ports and shipping and Karachi port must have made a study on logistics and transportation for the new port, as logistics and transportation are key factors for improved quality of life and environment. As the Karachi Port expands, airport traffic grows, rail traffic intensifies, congestion is likely to reach alarming levels. I quote the example of Port of Houston, Haris County and the State of Texas, identified well before.

Congestion and transportation issues are key threats to economic growth, together with safety and security. We have to plan better entry/exit routes for the new port and must fund such projects with the help of the Karachi Port and Sindh Government. The blue print of the Port of Houston may be taken as a guide as they had planned before Houston grew into an international logistic hub. Karachi may be transformed into a regional hub with the development of a deepwater Port. 

Ship owing and ship management: a regional perspective

Our generation was witness to the peak of ship owing in the 60's, with eleven ship-owners, ie ten in private sector and one in public sector providing employment to educated and skilled seafarers. There was a time, prior to nationalisation, that ship-owner's had a total of 79 ships under Pakistan's flag. 

The 1973 nationalisation and breaking of our eastern wing were the last nails in the coffin of ship-owners. It pains to see today that we are 100% dependent on foreign flag vessels for containerised and bulk cargo, with the exception of 8/10 mill tons crude oil being lifted by public sector Pak flag ships. Since two more tankers are set to be scrapped by 2010, due to CAS of the IMO convention, our share in crude lifting will also be lifted by chartered foreign-flag tankers. 

There is only one ship-owing company in the public sector, with nine vessels and by 2010, we will be left with 7 vessels, 6 being over 30 years old, ready for demolition too. We, in our life time, will never see ship owing, under the Pak flag reverting to the respectable statues of 60/70's, it pains that we will be virtually left with minimal or no market share in the country's overseas trade. 

Commerce and trade will be almost 100% dependent on foreign-flag ships and their dictates, thus harming our Expo/Impo both, making it un-competitive in the world market. We are in deep trouble and heading for dooms day, whilst the Ministry concerned is in deep slumber, having no expertise of maritime nor any future plans. I really wonder, why the Commerce Ministry and the Chambers of Commerce do not take up this important issue with the Government and Planning Commission to provide ship owing a loan assistance scheme for fleet expansion, as practised in India. 

No serious efforts were made on our part except adhoc measures to induce ship owing under Pak flag, to facilitate boosting exports, to bridge the trade deficit of 12 billion USD. India has 9m gross tonnage fleet, but nearly 44% is expected to be phased-out by 2011/2012 and they have plans in the Ministry to expand to 11m gross tonnage by 2011/2012. In case we lack the capacity to plan, we may cut and paste Indian plans with logical amendments to suit our conditions. 

Indian owners were enjoying only 14% market share in overseas trade in 2007/2008, but the same has now plunged to mere 9.5% due to recession and economic growth of 6% from 9% in the preceding year. Indian policy makers have highlighted that the Indian domestic fleet is relatively small, compared to the size of economy. 

Pakistan's coal imports of about 6 million tons and growing cement exports worth 7.7 million tons in 2007/2008 and our surplus capacity to produce cement may encourage the factory owners of cement to venture into ship-owing under Pak flag, with the Government/ Planning Commission committing to the loan assistance scheme. It is surely a viable proposal for cement exporters being 6th largest exporter in the world behind Germany with 8.3 mill tons, Turkey with 10.6 mill tons and China being first with 26 mill tons. Cement factories are also major importers of coal to keep their furnace of cement plants warm, giving surplus produce to export. 

The ship owning by cement factories promises a two-way trade. Furthermore with amendment in shipping protocol with India, our new private-proposed owners can benefit with Indian cargo as their fleet is lifting only 9.5% of overseas trade. Cement factory owners should form a consortium and buy some good second-hand tonnage, which is cheap now and give a kick-start to ship owning in the private sector under the Pak flag. 

A feasibility study is imperative before they embark on such adventures and the Government must commit whole-hearted support by giving loan assistance to the new prospective private or public sector, both, so that we may have a moderate fleet to cater to our needs in case of any blockade or emergency and also to combat dictation by foreign flag ships, boost our exports, by offering competitive freight rates and cutting down the drain of 3.5 billion US Dollars freight cost being siphoned. 

Since the Planning Commission is seriously working on a 5 years plan, it is worth consideration. Prospective ship-owners must comprehend that shipping requires a new set of skills for new comers as it is both an asset and a knowledge based business, requiring specialised commercial / technical skills to address IMO conventions, being internationally compliant Our planning commission must read the blueprint of the Indian plan of loan assistance and study their 12 billion dollar national maritime development programme (NMDP), announced in 2005 and the benefits achieved. 

The Indian Government has plans to award a contract this year, worth some 4.25 billion USD on 14 projects to be completed within four years. In case we are shy to copy India, please look on the blueprints of Bangladesh, which has emerged as a shipbuilding nation, whilst years back they were only demolishing scrap vessels. 

Their fleet in the private sector has grown so shipbuilding has progressed, whereas our good old Karachi shipyard stands nowhere and attending the captive business of the Pak Navy only. Pakistanis are blessed with potential, but we need consistency in our policy and placement of people on merit to draw our policy vision 2020. 

The skill of policymakers need not be creative, but at least they may cut and paste the latest policy from region, as they closely addressed our needs. "Resources are limited, but creativity is unlimited". We, have a pool of creative Pakistanis that need to be harnessed strictly on merits. 

World Maritime Day

Every year IMO celebrates World Maritime day. The exact date is left to individual Government/organisations, but is usually celebrated during the last week in September. The day is used to focus attention on the importance of Shipping Safety, Maritime Security and the Marine environment and to emphasise a particular aspect of IMO 's work. 25th September marks the 61st celebration of World Maritime day, when the International Maritime Organisation leads the world in honouring shipping. 

The Secretary General in his World Maritime day message to International Maritime Community, stated that IMO 's work has demonstrated, beyond doubt, that international standards - developed, agreed, implemented universally are the only effective way to regulate such a diverse and truly international industry as shipping. IMO was established by a UN conference held in Geneva in 1948, IMO is now in 61 years in the service of Shipping. 

Due to the extensive network of global regulations that IMO has developed and adopted over the years shipping is nowadays a safe and secure mode of transport, clean, environmentally friendly, and very energy-efficient. The IMO bravery award has gone to a Brazilian seafarer this year. Master Mariners Society of Pakistan celebrated the world maritime day by holding a Seminar on "Piracy at High Seas", inaugurated by Chief of Naval Staff on 28th September at PC Hotel Karachi, which was largely attended by Maritime fraternity. 

The one-day seminar was well attended in both sessions and foreign/Pakistani speakers made their presentation to combat piracy, by making risk-assessment, preparation, implementation of ship security plan (SSP), conduct during transiting the high risk area, actions encountering pirates and post incident actions and reporting . All issues were deliberated in detail to create awareness amongst seafarers to prevent them becoming hostage in the hands of pirates, whilst transiting Gulf of Aden and Somalian coast. 

The message of Secretary General of IMO was also circulated to the audience. The international maritime bureau states that there were 140 approaches and at least 39 vessels actually detained by pirates in 2008 (source UKMTO). The participants were educated to make frequent reference to maritime security centre - horn of Africa web site www.mschoa.org for updating and incident reporting/assistance from combined tasks force (CJFF-HOA) in which Pak Navy is also participating. 

The speakers were of general view that the cause of sea piracy is based on land and without removing these factors such as deprivation, socio-economic inequality and hunger the world should not think of getting rid of this menace or be able to reduce piracy by mere use of force. It was intriguing as some speakers disclosed that most of the deals and negotiations for payment of ransom money were taken place in London, where leading lawyers were engaged to get vessels and hostages released from the pirates. 

Factors of rampant piracy at some of the major sea routes and narrow straits were easy access to high-tech communication equipment like mobile wireless phones and automatic weapons such as AK- 47 and RPGS. Despite the fact that piracy is the 3rd oldest profession in the world and according to history even famous Roman Emperor Julius Caesar was captured and thereafter released by pirates. Pirates were actively involved in 500 B.C. 

Despite all above in today's civilised world it has assumed unprecedented activity with Gulf of Aden heavily infected with Somali Pirates and navies have partially failed to eliminate this menace despite presence of combined Naval Task Force. A foreign speaker was of the view that anyone who thought piracy, especially in Somalia context, as some deprived tribal group of disenfranchised people seeking social equality, or other lofty ideals is living in fool's paradise. 

There was divergence of views expressed by all speakers as some thought it is business for Somali pirates pure and simple, but the problem for seafarers is that unlike a normal business transaction, they are prepared to kill hostages to get what they want. 

It was also disclosed that about 600 Pakistani and Indian seafarers became hostage and even now about 2/300 seafarers are held as hostages in Somalia and perhaps not even the best intelligence agency in the world exactly know their whereabouts, some speakers felt that they do but they don't tell us due to their own vested interest. 

Key Pakistani speakers supported the measures taken by IMO and UN but insisted that world may address the core issue of poverty alleviation, stability in Somalia. It was also expressed that whilst supporting IMO/U N measures, a caveat to their resolution is imperative to bar the foreign shipping trawlers sweeping the Somalian economic zone, thus depriving the poor fishermen of their catch for earning livelihood, otherwise more fishermen will be hooked to the business of piracy. 

Final recommendations were drafted and presented in the concluding session for the government, but is anybody listening or will bother to take up issues of the trauma suffered by the families of Pakistani or other hostage seafarers to the IMO/UN. The event has been well-publicised by the media and maritime webs world-wide. 

Maritime fraternity is indebted to the good media coverage by the electronic and print media, however the champions of human rights in Pakistan, totally neglect to raise the issue of Pakistani seafarers lost as hostages and the trauma of their families. This issue deserves coverage as seafarers remit about 70 million USD by working on foreign vessels. I am quite sure that the media will now highlight the problem of hostages, so that powers are persuaded to assist the families of hostages. 

Good governance

We have seen many write ups on the issue of good governance. Whilst I fully subscribe to the eight laid-down cardinal principles, of IGRD, viz., accountable, transparency, equitable and inclusive, responsiveness, effectiveness and efficiency, the rule of law, participatory and consensus-oriented, which are accepted universally in the civilised world, in accordance with the criteria laid-down by the institute of regional good governance, based in Djarkata Indonesia. 

I personally feel that good academics with professionalism is equally essential clubbed to execute a project under the PSDP-allocated funds, (basically tax payers) or the donors' money. The conditionalities of audit, by donors, must be accepted for the prudent distribution of funds to cater to the development of our poor infrastructure, poverty elevation, health and education. 

Indians have realised that and in spite of good academics the government has started refinement courses, in collaboration with Speakfast of UK, so that fresh graduates can be groomed and turned into productive human resources. There is a dire need to improve our human resource potential, as our median age is said to be 21 and we have a young pool available to utilise locally and fill the human resource slots abroad too. 

I fully subscribe to Colin Powell, who said that when you tolerate mediocrity in others, it increases your mediocrity. An important attribute in successful people is their impatience with negative-thinking and negative-acting people. Unfortunately, my experience, serving the government, was of its obsolete management and that the majority of human resource needed capacity building, redesigning of employment induction and market compatible remuneration. 

I learned, with experience, if you are going to achieve excellence in big things, you develop the habit in little matters. Excellence is not an exception, but a prevailing attitude. I subscribe to the wise words on media for Pakistan's civil service, by my intellectual friend Danishmand Ex. Director IBA and presently with Islamic University. His views were not critical, but productive recommendations for induction on the merits of the Pakistan's civil service. 

The present-day recession has taught us the necessity of an excellent regulatory regime in the public and private sector, but those in control of such institutions must be first-class professionals to keep a vigil on the fly-by, night operators and swindlers. Alan Greenspan, ex. Fed Chief, has publicly admitted that laxity in the regulatory regime has lead to the recession and failures. 

Accountability is a key requirement of good governance, be it government or private institutions and civil society organisations, must be made accountable to the public and to their institutional stake holders. In general, an organisation or an institution, is accountable to those who will be affected by its decision or actions. 

Accountability can only be enforced with transparency and rule of law. Transparency means that decisions and their enforcement are done as per rules and regulations. It also calls for freedom of information freely available and directly accessible to those who may be affected by decisions and enforcement. Enough information be provided, which is in easily understandable forms and media. 

A society's well-being depends largely on ensuring that its members feel that they have a stake in it and may not feel excluded from the mainstream. It requires all groups, particularly the most, vulnerable, have opportunities to their well-being, thus be equitable and inclusive both. Good governance needs that institution and process to try serve all stakeholders within a reasonable time frame, thus be responsive. 

It also calls on effectiveness and efficiency, which means that process and institutions produce results that meet the needs of society, whilst making the best use of resources at their disposal. The concept of efficiency in the context of good governance also covers the sustainable use of natural resources and the protection of environment. To follow the rule of law requires a fair legal framework that enforces impartiality, full protection of human rights, particularly those of minorities. Impartial enforcement of laws requires an independent judiciary and an impartial, incorruptible police force. 

Needless to mention that participation could be either direct, or through legitimate intermediate institutions or representatives. Representative democracy, traditionally, does not necessarily mean that the concerns of the most vulnerable in society are taken into consideration in decision-making. 

Ours is a living example. Participation needs to be informed and organised, which means freedom of association and expression on the one hand and an organised civil society on the other hand. We cannot rule out that good governance requires the mediation of the different interests in society, to reach a broad consensus on what is in the best interests of the whole community and how this can be achieved. 

You may plan a policy, guidelines, but if you do not have the right tools to execute, the ultimate result is bad and poor governance. The media is pinpointing to no avail, thus representative democracy is dysfunctional and not different from the past. It is humbly suggested that government and its institutions must induct people on strict merit and contracts should be performance-based to achieve the results. 

It is high time that the government takes note of poor governance and gives due credit to the print and electronic media is unbiased reporting, which are investigative and free of any vested interest. The performance of local government at the grass root level, in particular in Karachi, has yielded positive results, thus the process may be improved with more checks and balances. We may amend the shortcomings, but may not scrap the local government to please any vested interest. Let us develop a consensus, ensuring the participation of all vulnerable stakeholders for the sake of good governance at the grass root level, as our representatives in parliament have yet to perform. 

Regional perspective on public-private partnership

For years now, Western countries, through their institutional framework, have criticised South Asian countries for keeping governments in the driving seats of economies; their idea was that businesses are for the private sector. Today, both systems have failed and everyone is looking hither and thither for a solution. 

New economic realities have dawned, thus, the next obvious step is to try a combination - the viable common ground between these two - ie Public-Private-Partnership (PPP). It has been tried before, but never before has the need for it been more pressing as the base for our South Asian economies. There is an urgent need to find an effective formula to make this a reality. 

Pakistan has experimented successfully with the PPP, on the advice of the World Bank and other international agencies, to drive economic growth and bring about development and improved welfare for its people. The evidence is seen in the many infrastructure projects in ports, road, and power projects, South Asian countries have been dabbling in the mechanics of both the government and private run enterprises, so what better place and time to boldly embrace this economic blueprint. 

The main idea should be that they find the fundamental elements that make both the private sector and the government work and make PPP out of it; the bad parts of it must be jettisoned. What is the win-win answer for both? As the world becomes more competitive, there is a need for governments to improve the welfare of its people, using its limited resources, to build infrastructure. Resources are limited while demand is ever increasing. 

To bridge the gap, the trend would be to utilise resources and skills of the private sector to achieve public objectives. Public Private Partnerships (PPP), a contractual arrangement between governments and the private sector, involves the sharing of risk between public and private sectors. Infrastructure projects are characterised by high initial investments, and revenue flows occurring many years after the initial investment. 

Traditionally, it is believed that investment in infrastructure for public services, such as transport, telecommunications, due to the need for large sums of money, must be carried by the public sector. However, experience has shown that when implemented correctly, PPP is capable of providing services to the public at lower cost and spurs economic growth. It results in faster implementation of public works, better risk allocation and improves service quality. 

Implemented correctly, this means a proper balance of private investors' and public interest. Grand and visionary development plans could be wreaked by overzealous officials, in the name of protection of national and public interest, by imposing unrealistic and exacting commercial terms, due to callow faculty experience and lack of comprehension of port facility management science. 

In the area of container terminals, increase in global trade, increasing levels of containerisation, combined with an increase in container ship size, has resulted in more demanding investment in state-of-the-art cranes, systems, and civil works. The scale of investment in container terminals has increased exponentially, to a point where it is not meaningful to expect such infrastructure to be financed by solely public sources. 

Similar to other infrastructure projects, there is need for a delicate balance of the interest of the public and private sector. Most PPP projects for container terminals are granted on a model of Build-Operate-Transfer, which involves the investor transferring all its assets, as no cost, to the port authority. For a government and port authority or trust as the case may be, PPP is used to achieve the objectives of economic growth and job creation, ultimately transferring skills and technology. 

The use of a Build-Operate-Transfer (BOT) ensures that the operation of the facility reverts to the nation. For the investor, his objective is to build a business and make a profit. The period of any BOT is important and involves a delicate balance. The investors' asset will be transferred to the port authority at no costs, allowing the port authority to gain control. Overzealous port officials, keen to gain control of such assets, could set a short concession period destroying any hopes of attracting investors. 

Thus, professionalism and understanding of port management science has become imperative. Private sector companies exist to make a profit and are accountable to their shareholders. Private investors are unlikely to participate in PPP where they are asked to take a leap of faith. The quantum of investment is heavy and the time to recover the initial investment, usually referred to as the payback period, for container terminals is long. 

Weigmans, esq. (BW Weigmans, Investment in Container Terminals, 2002) estimates that it takes an average of 10-15 years to recover such investments. There are three main terms of critical importance to investors in container terminals. First, whether the period of the investment is adequate to allow them to recover their investment and make a reasonable return on their investment. 

Secondly, whether there is any protection against the indiscriminate issue of licences for new facilities by government and port officials, who may have their own personal interests. Thirdly, whether it has any control over the setting of tariffs in the event of changes in its cost of operation. It is interesting to compare the recent PPP projects in South Asia. Starting from the west, Pakistan has successfully used PPP to develop its container terminals. 

The efficient terminals at Karachi and Port Qasim were awarded on a Build-Operate Transfer (BOT) basis, except one on a build-operate-own basis, which may be transformed to a BOT basis as per new agreement. The port of Karachi, administered by the Karachi Port Trust (KPT), handled over 1.3 million teus (twenty-foot equivalent boxes) in 2008, with two privatised terminals. KPT had, in 2007, granted concession for the deepwater container terminal, for 25 years, for a terminal, which will handle 3.1 million teus. 

The project cost to be incurred by the private investors totalled US $500 million. The other major port in Pakistan, Port Qasim handled approximately 800,000 teus in 2008. Together, these two ports handled Pakistan's 2.2 million teus. An examination of concession agreements, which are public available documents, shows that they contain a mechanism, which allows the investors to recover his investment and make a reasonable return. 

At, or close to, the expiry of such a period or upon the agreed percentage of capacity being reached, the port authority has the right to grant new concessions, such a mechanism catering to the interests of the public. India has its share of success in attracting investment to privatise its ports. The Mumbai Port Trust granted a concession for the Offshore Container Terminal (OCT) in 2006, to build a container terminal with a capacity of 1.4 million teus. 

With a project cost of approximately US $350 million (INR1200 crore), the investor is granted a concession period of 30 years. The investor is given the assurance that a new terminal will be built only when his terminal reaches a capacity of 800,000 teus. In 2006, Chennai Port Trust was able to attract investors to build the second terminal to add 1.1 million teus to the port. 

The investor is required to spend US $150 million (INR492 crores) and operate the terminal for 29 years. In consideration of incurring such infrastructure costs, the investor has the assurance from the Chennai Port Trust that it will not grant licences for new facilities within 5 years, or when the investors' facility reaches 400,000 teus. 

Moving eastwards, there is the Colombo Port Expansion Project (CPEP), first tendered in 2007 and recently re-tendered in 2009. The concession has provided for an operation period of 35 years, a good period of time for the investor to recover their investment. There is a provision of guarantee by the port authority that no new concessions would be granted for 5 years, allowing the investor time to recover his investment. Bidders are requested to bid for the royalty per teu (twenty-foot equivalent boxes) and the minimum volume guaranteed. 

For a terminal designed to handle 2.4 million teus and an area of 58 hectares, bidders are required to pay rental of US $5 per annum from the first year of operation, escalating at 3% per annum. Most important, the operator has the flexibility in setting the tariffs. Overall, it is a reasonable proposition to potential investors. 

In 2007, the tender attracted a good number of internationally reputable bidders, although it is unfortunate that this has fizzled out in 2009, due to the untimely arrival of the global economic crisis.The most recent example is the tender issued in July 2009 for the New Mooring Container Terminal in Chittagong, Bangladesh. It is premature and would not be right to speculate on the level of investors' interest. 

It is noteworthy that the concession period is 15 years. The major commercial terms require the investor to install equipment estimated at over US $100 million, and pay annual fixed fees totalling US $110 million over 15 years, making the total investment of close to US250 million. 

It is also reported, by those who attended the pre-Application (pre-Request For Qualification (RFQ) meeting in October 2008, and enquired about the matter that there is no assurance that new facilities would not be built in the immediate future, thereby opening the possibility of uncontrolled supply and jeopardising their investors' money. 

Indeed, plans are already afoot to convert publicly-owned general cargo berths to container terminals. The response from the officials provides little assurance, as investors were requested to trust that their government will be reasonable in taking care of their interest. The tender specified that tariffs are to be regulated and subject to approval of the port authority. 

Additionally, the tender contains a unique term, requiring the investor to relinquish all financial control, as monies received by the terminal operator are required to be deposited in an escrow account and any disbursements controlled by the port authority. In this PPP project, the proposition appears to invite investors to take a leap of faith into the dark. 

There are common traits of the successful PPP projects as described above. The concession period of 25 to 30 years allows the investor adequate time to recover his high capital costs and make a reasonable return. There is a mechanism, which balances the interest of the investors and public interests, where the government or port authority undertake not to indiscriminately issue new concessions, exploding supply, and destroying any opportunity for the investor to recover his capital. 

A PPP is a business relationship, albeit a very structured one. It is necessary to have a structure to ensure that the interest of the parties (port authority and investor) and public interests are protected respectively. Written contractual terms, rather than verbal guarantees of reasonable behaviour from ministers or port officials are needed to assure investors. 

PPP projects with imbalance weighing against investor's interest will not attract the participation of the private sector for any funds needed to build the infrastructure for the country. South Asia needs to work out a viable formula for its economies, it has to be done soon before the crippled West rises again, this time they should be in a better position to be partners in global commerce, rather than be at the back end of it. 

The cash strapped countries of South Asia need considerable foreign direct investment in the next five years, of which it is estimated that 65% will be needed for new investments, whilst the balance will be needed to maintain existing assets to extend their useful lives. 

We certainly need regulations but regulatory regimes must have the enforcement power who takes care of national interest while having the flexibility to be fair to private investors to earn a reasonable return (IRR). The PPP systems can only flourish when each country devises its own to suit local conditions. No single blueprint can be imposed. 

Both public and private sectors must be allowed to exercise creativity within a broader framework. There are five phase of PPP implementation, namely policy development, capacity building, development of enabling environment, identification of partners and evaluation/selection of credible partners. 

Fallen in love with Nepal

When planning holidays, it is our mind set to either visit Malaysia, Dubai, Thailand or UK, USA, however having seen the west and orient both, I took the risk of venturing my holiday break at Nepal. It was all suspense in-spite of my internet surfing, but I was amazingly pleased when I actually landed and went out of Khatmandu. 

Most of our Pakistanis are unaware that Nepal offers cheapest holiday than west/orient and has lot to offer. The natural beauty and Himalyan views, the culture and tradition, historical monument, art and architecture, Hindu Temple and Budhist Stupas and monasteries, its people and rites, myth, mysteries, which are daily part of the life of Nepalese. 

Nepal has geographical extremes from cold highest mountains to the deepest Gorge of the world, hot plains mild hills. Nepal is blessed with eight highest mountains above 8000 meter out of 14, whilst five are in Pakistan and one in China. These eight mountains cover 800 miles of Himalayan range. Natural beauty and cultural identities are its lively and legendary phenomena that makes destination holiday in Nepal spell bound and magically touched. I can sum it up as, "see and touch it once and feel it forever", and those who have hobby of visiting new places will feel that Nepal is one of the places that is to visit at least once before you die. 

You may find more what you imagine as one treads on its thrilling trails, snowy slopes, mysterious dens and wonderful beauties of wildlife and flora such as yarchgumba (Himalyan energytic herb known as half animal half plant). I did find fresh scents in air and more challenging paths on the lanes of trekking trails. Khatmandu is the first arrival point surrounded by mountains an old but basic and congested city with five star hotels. 

The Darbar Square is the major attraction of the city listed as world heritage site. Nearby places are Patan and Bhaktapur, which according to a Indus Valley Pakistani artist whom I came across described as the hub of artist and sculptures in Asia, whilst Pushupatimath and Swambunath are Hindu / Budhist religious sites. 

I must profusely admit that I did not see any crime like mobile snatching etc and the society appeared to be most modern, tolerant and welcoming to tourists as tourists income is more than 40% of its revenue. I was amazed to see no beggars although poverty is visible, but Nepalese are clean, polite, humble and gracious in general, based on my observation in city and countryside both. I recommend visiting Nepal without any fear of harassment, theft or roadside crimes. 

Whilst Khatmandu is congested and polluted, but once you are out of the valley, the closest point 2175 meter above sea level is Nagarkot which is popular vintage point to take in expansive mountain range view only 32 km from Khatmandu. The sun rising from behind the Himalayas clothing the snow clapped peaks with a succession of hues is another visual to feast on. Club Himalyan resort is most comfortable hotel for overnight stay. Dulikhel only 30 km from Khatmandu is an ancient town and drive is scenic, full of winding streams and paddy fields. 

The most attractive tourist attraction is Pokhra about 200 m West of Khatmandu about 880 m above sea level. The Fish Tail Lodge resort on the island of Phawe Lake is breath taking and exotic, with five star facility and has played host to most of the dignitaries of the world. 

If you are early rising bird you can view Fishtail Mountain towering 6997 m high and the sunrise is so fascinating that it can't be described, one has to see and believe it. The lake with Jungle around offers boating facility and city is quite, but David Fall and Mahendra Cave is worth visiting, so is the visit to the Milky River, unique to see. 

Having enjoyed Pokhra, we ventured for Chitwan Jungle safari, the 50 km road is not metalled, but the Machan Paradise Hotel is excellent, offering safari in jungle on jeep and elephant. The jungle is full of animals and canoeing in Rapti River is another attraction, including visit to nearby villages. The standard of hotels and meals are good and safe too. The jungle safari is an adventure, which one should enjoy, thereafter we ventured for 8000 feet Daman, which is a treacherous winding road but scenic. 

I, must admit that my trip was a good experience, however the worst was awaiting us as we were made to stay 10 hours on Airport as PIA flight to Karachi was delayed due to mismanagement at Karachi and it is poignant memory. Nepal was the cheapest holiday spot, which offers excellent experience of rafting, trekking, canoeing, mountains and above all scenic as all mountains have forest and green look unlike ours denuded. The season is from September to May, but out of season the Nepal was full of tourists of all nationalities. The service provided by our tour operator Yeti was commendable and there was no deviation on our itinerary and they lived to their commitment without any hassle. 

There is general liking for Pakistanis amongst masses except I noted discrimination that Indians are given more than 60% discount in all hotels as per government policy, which is not comprehendible. The trade is dominated 80% by Indian merchandise and economy of 28 million people is in virtual control of Indians. I could not find any Pakistani product thus, we must explore the market to introduce Pakistani products and tourists as well. The literary rate is 60% in Nepal, and there is no discrimination based on religion. I did find Nepalese equally dissatisfied with democracy and governance as is the case with us. 

Focus on environmental credentials

I, recall 1972, visiting beautiful valley of Swat along with my wife, which takes me to nostalgia, recalling all mountains with forest and green pasture with Swat river. I, feel sorry with present state of affairs of the valley and it gives me immense shock to see the mountains denuded, thus raising the temperatures in Mingora. 

I recall that Swat had excellent motels with British managers, serving 4/5 course meals. Pakistan has been left with 3 percent forest areas, raising temperatures and causing melting of glaciers. The old axiom one man one tree is not implemented, thus entire Pakistan even Karachi is engulfed with heat waves and high temperatures. Karachiites wonder where the sea breeze has gone. 

It is very recently that human being have learnt that the planet that sustains us and give us life is a fragile entity and our actions of deforestation, emissions etc have massive repercussions on the well being of mother nature. We cannot freely squander the earth and its resources, without considering the impact on future generations. Climate change, ozone layer depletion, green house gas emissions are the terms unheard of a generation ago, but now are the key words as world is awakening. 

More than a decade ago, many countries agreed, through the United Nations frame work convention on climate change (UNFCC), to consider ways and means to reduce global warming and how to cope with inevitable rise in temperatures and prior to that Montreal Protocol on substances that deplete the ozone layer came in 1989, and I recall that amendments were made to SOLAS Convention forbidding use of Halons and perfluoro carbons as fire extinguishing media. It is interesting that Kyoto Protocol was signed in 1997 to ensure legal binding measures to protect the environment in addition to UNFCC, but unfortunately the biggest emitter USA, Singapore, Australia and partially China did not sign, thus no serious efforts were made to preserve the environment. 

On the other hand, authoritative organisations such as world metrological organisation and the US national and atmospheric administration are warning that the level of gases in the atmosphere associated with climate change are reaching record high. I am sure millions must have seen the BBC documentary "Global Dimming" which reveals that we may have grossly under-estimated the speed at which our climate is changing. I would also recommend that BBC's documentary "INVADERS OF THE SEA" very vividly explains the problem in graphic details. For the glare of international publicity, fuelled by today's global communication infrastructure, ensures that environmental issues are played on world wide stage. The broader concerns of society mean that pressure to be "GREEN AND CLEAN" is mounting. 

In the world of global business today, it is not unusual to find major commercial concerns freely embracing the notion that good environmental and social stewardship actually makes good business sense, thus Corporate Social Responsibility (CSR) is the new concept. Companies are learning the value of their own environmental considerations as their markets and their customers become increasingly sensitised to environmental issues, however there is an inherent quandary in the fact that, on one hand everybody, it seems wants more for less - while on the other society's concerns about safety and the protection of environment grow. Of course all industries and commercial concerns needs to do whatever it can to solve this apparent conundrum, but in the long-term, society will need to address its own priorities and understand that nothing comes for nothing. 

A, first comprehensive study reveals the human impact of global warming, climate change is causing 300,000 deaths per year and affecting 300 million people. The study predicts that by 2030 about 500,000 people may die due to severe heat waves, floods, storms and forest fires. The U N Secretary General think tank estimates economic losses more than 125 Billion USD/.year and by 2030 it may cost 600 billion USD/year. The worst to be affected are developing countries and there is serious risk to sub Saharan Africa, Middle East and South Asia. U N Secretary General has launched the report on 29th May at London and said that world is at cross roads, he squarely blamed the weak politicians world wide for impasse in negotiations. He said that now we cannot ignore the human affect of climate change. He called upon negotiators to come to some agreement to avoid mass starvation and migration on mass scale. 

Whilst 1997 Kyoto protocol on climate change could not bring any relief due to tough attitude and refusal of USA, Australia and some other countries, but the protocol also failed to address the huge amount of green house gas emissions due to destruction of world rain forest. Deforestation as per study amounts for one fifth of the worlds green house gases. It is estimated that 30 million acres of rain forest disappear every year, destroying biodiversity and pouring billions of tons of carbon dioxide in the air. 

As per media report the global warming bill in USA seeks to change the destructive dynamics in two ways. It will, set up a carbon trading system and may raise 60 billion USD / year through sale of pollution allow-ness. It is interesting to note from the world bank report that one acre of rain forest stores 200 tons of carbon. 

A big effort is required to resist the loggers, miners, ranchers and politicians who helped in cutting the rain forest in Amazon, NWFP Pakistan (Swat, Kaghan etc). We in Pakistan are already feeling the heat, thus we must put an immediate halt on logging to save ourselves and posterity both. The UN must enforce a legislation on all its members to save the rain forests and control loggers. The fall meeting in Copenhagen must address this serious issue by signing a treaty with no waivers and ensure that BRIC countries must be netted being big polluters. 

The Shipping industry was also blamed as polluter, however on examination of its credentials it has been observed that shipping is the least environmentally damaging type of transport, when benched marked to land industry and transport, it is a minor contributor, overall, to marine pollution from human activities. According to GESAMP (UN agency) and UNEP's study reveals that land based discharges, such as sewage and in case of Karachi 400 million gallons of untreated sewage is pumped into Karachi Harbour alongwith industrial effluent from Korangi industrial area to Gizri creek. The land based pollutants along with emissions account for 77 percent of marine pollution generated by human activity. 

The maritime transport in contrast is responsible for 12 percent of the total, which has now been reduced to only 10 percent, by stringent measure taken by IMO ie convention Marpol 73/78 and Annex VI for emissions. The world seaborne trade rose from around 15000 billion ton miles to 27000 billion tone mile upto 2004 from 1988. The carriage of oil and petroleum product rose to 70 percent in the above period. 

The average number of oil spills have shrunk from 25 in 1970's to 3.5 in 2000, thanks to Marpol convention. It is also interesting to note that maritime industry is small contributor to atmospheric pollution and Pakistan with only 9 ships has virtually no place in the records, neither accounted in studies. The marine engine efficiency and quality of fuel used, improved hull design and large vessels has caused reduction in emission. 

I quote a United Kingdom transport study that shows that energy consumption by road transport by truck lies in the range 0.7 to 1.2 mega Joules/tons/km, whereas a 3000 DWT ship at 14 knots is about 0.3 MJ/Tones/km and a container ship is 0.12 MJ/tones/km . The green peace has forced IMO to adopt ship recycling convention, thus taking care of pollution during demolition of ships. 

This does not mean that maritime industry be relaxed, but it calls for curtailing their share of pollution and emission both to save this beautiful planet which has been neglected for long and it is our undeniable responsibility to protect the posterity. Shipping has to ensure that its activities are sustainable and we must understand that caring for our environment be our top priority even though it may carry an economic price tag with it. 

We need a broad based effort in which every one has a responsibility and every one has a role to play, which is a maxim "THINK GLOBALLY" act locally. We all must educate people, increase awareness about the true state, and detoriating state of planet and be responsible citizens to protect and preserve the environment, but we may promote and promulgate its virtues and beautiful impact on all forms of life. 

Now that there is a wide spread recognition that green house effects represent a real, present, clear and serious threat to environment and our planet earth, thus only action can save mother nature. The ball is in court of politicians of developed and under developed countries to respond soonest as I quote Sir Nicholos Stern former world bank economist who said, "economic cost of action against global warming is far lower than the cost of inaction". The world masses have great hope on the fall summit as it is already too late. 

Whilst in Karachi's perspective our city father, be commended for plantation and President's effort to develop Boat Basin Park and Malir River park and plantation of trees is equally commendable, but Karachiites would like to see implementation of these environment friendly efforts. 

The other aspect which is equally important to ensure maintaining the trees by watering them with sewage treated water, as its pains to see that Cano-corpus planted in open space near old Casino Clifton are dying down due to no maintenance. The City Nazim and Cantonment Board must salvage the remaining trees. 

As, a humble maritime person , I can safely say that shipping has a green record, however it pains to see in Pakistan, that having ratified many conventions on oil response etc, our ports are not adequately equipped to address OPRCI requirement, nor they have trained staff. Pakistanis have enormous indivual potential but collectively, we have failed to project our motherland. 

One has to hang his head in shame, when Pakistanis nominated for ILO, IMO, etc are simply tourist section officers, personal Secretaries who are obliged as member of Pak delegation, even the head of delegation could not comprehend the International documentation of UN bodies. 

What a pity and misuse of tax payers money. I, remember that a Pak delegation member was said to be asked to leave the ILO meeting due to misbehaviour and not being sober. On the contrary Iran, India, even Saudi Arabia delegation comprises of Public/Private Sector, Experts who are known internationally and can contribute as they are not layman like our delegation to marine environment, UNEP etc. 

We look forward for a change in Governance environment of Pakistan by inducing professionals in all faculties, so that our country's contribution be taken seriously by International forums and we could protect our interest world wide. We have to ensure recognition of our credentials by world's agency. The cost of action on correcting our governance is nominal than the cost of action which is effecting our PSDP and all environmental/social welfare projects suffer due to slashing of PSDP.