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.