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.