Need for deep water port act

It was Saturday, the 18th of April, when the Prime Minister inaugurated the dredging and reclamation works. The evening was sultry and humidity was high, but it was well organised spectacular and elaborate show followed by fire work. One can rightly say it was extravaganza. While all went well, but rubrics by an insolent compere offended the community of journalists. 

Truly it was undesirable/uncalled for and comperes may not be permitted to speak extempore. The Minister and the GM P&D of KPT took pains in arranging such a mega event after a long pause, who should be commended, as it was an impressive display in all respect, except the poignant episode, which resulted in no or poor coverage. 

It is also true that some critics and interest do not subscribe to such project and I respect their views. However, I being an independent writer would try to deliberate on merits and demerits and the history of deep water ports in the world without prejudice. 

A deep water port is any port that may accommodate fully laden post panamax vessels. The concept of deep water port first emerged in 1970 to facilitate Lousiana Offshore oil Port (LOOP) in accordance with Section 863(C) (2) of IRS in USA. Five oil majors clubbed to create deep water port in USA to accommodate super tankers. As a result the deep water port act of 1974, 33 USC-501 et SE2 ( "the Act" ) was enacted by congress in USA, in order to promote efficiency in transportation and protect the environment by establishing procedures for the location, construction and operation of deep water ports off the coast of United States. 

A deep water port is defined under 33 US CS. 1502(10) as any man made structures other than vessels and similar appurtenances to the extent they are located seaward of the high water mark. The constitution, laws and treaties of USA shall apply as if such port were an area of exclusive Federal Jurisdiction located within a State. However, interestingly, the ACT 33 US SCS 1518 (d) excludes application of Custom Laws. 

Gross income tax exemption is also available to foreign entrepreneurs and only net 4% tax is payable. The Netherlands and many other countries too have separate deep water port acts. However in Pakistan there is no such act, even KPT Act is 1886 (Bombay Act VI of 1886) duly amended from time to time without disturbing the main body of old Act, thus it is imperative that a deep water port act be enacted for smooth operation of the proposed new port. 

The growth of container traffic due to unprecedented shipping boom, which lasted about ten years, South East Asia and Gulf region witnessed a growth of 18.4% comparing to 14% in the world. This could be a driving force in conceiving a deep water port. More so, Pakistani ports only handled captive cargo of 1.7 mill TEUS, including 100,000 transit boxes, whilst Colombo, Dubai, Salalah, Singapore, Hong Kong, Rotterdam, Schenzen and even Bander Abbas thrived on transshipment business. Port of Colombo only handles 30% captive cargo whilst 70% cargo is transshipment boxes and port is making good revenue with transshipment business, whilst our 3 terminals thrived on captive cargo and said to be generating excellent IRR of 30% plus on their investment. 

When the deep water port was conceived in 2006, shipping was at its peak but plummeted in the end of 2008 laying about 477 container vessels and bankruptcy to many ship-owners, as the shipping bubble burst due to global meltdown. The volumes have been affected world-wide and in India, Singapore, Hong Kong and Schenzon volumes have dropped upto 19%, but port of Singapore is assisting the bleeding shipping lines by lowering its tariff by 35%. The above is true in today's perspective but there will be turnaround in economy world wide by 2014/15. 

The strong argument in favour of building deep water port is that, it will not be ready before 2014, thus recession may be over and on completion of phase I of KDWEP it will have 1500m quay length to accommodate 5th and 6th generation container ships of over 350 LOA, 55.0 meter beam. Carrying about 10/1100 TEUS thus giving advantage on economy of scale, lower freight rates and initiating first time transshipment from KDWCP. 

But an act is necessary to root out evils of KDLB, trade unions and of course, tariff compatible to transshipment ports. Unfortunately the 3 terminals at both ports are handling feeder vessels due to restrictions of draft, but KDWCP will cater to 16 m draft initially, thus saving our impo/expo double handling cost due to feederings. Trade will get edge on freight rates. 

Due to economic glut it is the right time to build the asset as KPT with 40 billion rupees plus in coffers is only saving interest, but by building asset it will have multiplier effect and when recession is over, we will be ready to take the challenge. It is also true that most of the contractors world wide are idling and will be most willing to undertake any job even at break even to avert insolvency due to liquid cash flow crunch and tightening by banks. 

I was amazed to learn that CWE has taken capital dredging on less than 8 USD per cu. meter when bench marked to 20 USD per meter in 2007/08. They are said to be dredging 33 million cubic meter at a cost said to be 220 mill USD, a peanut. However, the firm has no expertise in designing of navigable channel and ports, but they may sublet the assignment, due to their limited port skill, as they specialise in Dam / Reservoirs, Hydro power project etc. KPT and its consultants will have to keep an stringent eye on the scope of work awarded and to ensure they effectuate world class standards. The designing of channel, basins etc are highly specialised skill jobs, unlike laying rail tracks or roads with generalist experience. 

Once dredging and reclamation is completed by CWE, the marine protection work may commence and project shall include construction of 3 break waters and sand dyke. The marine protection works may comprise three rocks or concrete ( CORE-LOC units, armoured break waters to provide shelter to the basin particularly in SW monsoons from May 15 to September 15th, when sea is extremely rough. 

The latest breakwater technology must be used to prevent sedimentation and seepage of sand into basin. Dubai palms break water is a living example. It may cost 0.5 bill USD in today's market. KPT has already awarded two terminals based on landlord concept on BOT basis, which after construction of KDWCP, may cater to small feeder vessels and may give back up support. 

After completion of dredging and break water the concessionaire M/s. HPH who are the leading terminal operators of the world will do civil construction of 1500 m quay wall and equip port with state of art gantries, RTGS etc to give fast turnover at KDWCP to calling ships. 

It is expected that HPH will invest 457 mill UISD and it is said that they have already paid 50 mill USD to KPT and have shown commitment earlier too by completing KICT extension project at west wharves. 

I do not wish to comment on KPT's projections of earning as it is too early to predict, as we have to wait and see the revival of shipping industry and economic glut, which has caused downward spiral, but as an optimist I see that recession will be over by the time KDWCP is ready in 2013/14 to handle ships. It is also true that DP world has backed out from QICT extension at Port Qasim and so from London gateway port, so is PSA from Hazira deep water port in India. 

The future of Bombay gateway port is also in doldrums as Dravados the Spanish firm who got concession with Gammon India, has been sold out to China merchants, thus Indian Govt will never give NOC to a Chinese firm, as had been the case in earlier tender, when Turbo Larsen was denied due to Hong Kong connection. 

The Colombo South Port is also in doldrums as no terminal operator came forward to bid. If KDWCP is ready prior to Colombo and Bombay, HPH may turn this into regional Hub for transshipment, but will have to compete with Dubai, Salalah, JNPT and Colombo. HPH will be testing its management/marketing and port operator skills to attract lines but KPT has to match its wet dues and avoid undue interference giving a free hand to HPH to market and operate the terminal. However the role of regulator in today's world is imperative. KPT is committed to make connectivity to cargo village and Northern Bye-pass which may cost 56 billion rupees as reported in media, but it will be a lifeline of project, otherwise the project will be hampered by operational delays due to congested connectivity to groyne. 

The forecast in 2007 was world container volumes will touch 557 mill TEUS by 2010. Let's keep our fingers crossed and pray for early recovery of world from recession. HPH, being common carrier terminal operator may face tough time with Maersk and NOL, who have strong interest in Salalah and being shipowners as well as dedicated terminal operators may patronise their own terminals of Salalah for transshipment as it is handling 3.4 mill TEU and new concession with NOL: may double the capacity. 

In today's world no one can make a firm forecast, but as the saying goes, I quote George Soros " Fear when greed is on and be greedy when fear is on. The 14 m plus deep water ports in the region are Singapore, Sohar, Salalah, Schenzen, Shanghai, Kakinada and Hazira (India) The proposed 16 m plus deep water port in India is Chennai, Vizhingam Kakinada, in Bangladesh is Sonadia near Cox's Bazar and Nobel Laureate Yunus has appealed to government to expedite the project. In Burma is Kyekphyu and Colombo South Port in Sri Lanka, whilst Qatar is going ahead with Khalifa deep water port. 

I have penned down merits and demerits but feel apparently that KDWCP may be a success subject to economic revival. It may not hurt existing terminals as the case in Vietnam, Bangkok etc, where after building of deep water ports existing terminals are busy in feeder operation. 

Maritime experts may form their own opinion but one thing is clear that port management skill is a faculty and can't be left to callow generalists, with no commercial maritime background. Ships are required to maintain their schedules and terminals have windows for every line, unlike bus or rail road. You may arrive a day later. The fixed operating cost of a container ship per day is 40/50,000 USD. The project has been initiated and now we look forward for the goal to be achieved. 

TAIL PIECE: I have collected data of Khalifa Port, Sohar, Chennai etc and will be analysing data, bench marking KDWCP evaluation matrix, dredging, navigation report and simulated conditions in my next detailed write up subsequently. However, I would like to make humble recommendation for consideration of Ministry of Ports and Shipping. 

As per World Bank/IMF and financial analysts, presently world economy suffers from toxic assets of 4.1 trillion USD and revival of economy is expected by 2013/14. However nothing is firm, thus we are blessed with sufficient time to look into recommendations. Let this project be considered as stimulus package to our economy. 

ENACT A DEEP WATER PORT ACT: Form a cluster group of maritime industry, taking onboard existing terminal operators to address the impediments in the new Act. Spain and other countries do so to get the best inputs. Since shipyards are idling, it is time to negotiate building min two 85 tons Bollard Pull Tugs of Z-propellers because of 360 degrees steer able propellers. 

A very intricate calculation is needed to establish the exact Bollard pull required to hold a ship,. Opposing a measured surface to beam wind blowing x meters/second. Acquire two Pilot Boats to face sea conditions upto Beaufort scale 8-9, safe working platform, large GM constructional strength to control collisions. Everyday and of coarse a speed of 20/25 knots. 

Renegotiate all contracts as Saudi Arabia and others are doing. Induct 100 young engineers/MBAs strictly on merits to groom them in port development, designing, dredging etc. Make use of indigenous dredgers under Pak flag, be it private or public and avoiding minor jobs to foreigners. Pakistani companies should have priority. 

Reclaimed area must be subjected to latest compactness Technology with Canadians and Dutch. Allowing nature to compactness is considered obsolete as was done at Gwadar. Generate maximum, employment of Pakistanis by making mandatory on contractors to impart training to our youth. Debate with critics with logic and technical data and convince.