The flag of convenience

There has been a searching query as to why Pakistan's private sector is shy to invest in shipping since that industry's demise in 1973 because of its nationalisation. Serious efforts were made to revive it, but failed to attract entrepreneurs to the shipping industry. The option in MSO 2001 for dual registry has not worked. Pakistani's ship-owners are operating on flag of convenience, but are not willing to buy incentives offered under the Pakistani flag.

Having been associated with the industry for over five decades, I am of the opinion that Pakistan may create offshore registry as flag of convenience as some European countries have done. It is food for thought, needs brainstorming and deliberation at the Ministry of Ports and Shipping and the Planning Commission. I feel it may encourage Pakistani nationals to turn to ship-owning under the Pakistani flag.

I am giving the background of flag of convenience which attracts ship-owners around the world.

According to the United Nations Convention on the Law of the Sea 1982 (UNCLOS), every ship should sail under a state's flag and every state (even States which have no marine borders, like Mongolia) has the right to have vessels flying its flag. The ships are subject to the jurisdiction and control of their flag state and have to comply with the state's laws and regulations covering the standards of vessels construction and equipment, the manning of the ships including the labour convention MLC 06 onboard, the safe navigation and the protection of the environment. Since the flag will define the requirements of the vessels construction and operation, the decision of which flag to register the vessel is of utmost importance.

In open sea, we are looking at every opportunity which helps ship-owners to cut their operational costs, so I decided to analyse one more traditional way and look on it from the charterers' perspective as well. In the past, the choice of the flag was easy since the owners registered and crewed their ships in the country where they conducted their business. However, this changed around the middle of the previous century when American owners found that there was a very high cost involved in running the ships under the American flag (mainly due to high crew wages) and it made it impossible for them to be competitive in the international shipping market. Therefore, they searched for a country/flag that would allow a foreign owning company to operate its vessels under the flag without the need for the ship-owner to have operating or financial substance in this country and would also allow the employment of crew of any nationality and without minimum wage scale, while at the same time the taxation would be minimal. Finally, they found this state of affairs in Panama and Liberia which had already established open registries. During the following decades, traditional owners from Europe and Asia adopted the same approach in an effort to lower their operating costs and become still more competitive. Therefore, a status quo was appeared with similar states/flags being known as "flags of convenience" or "free flags."

From the statistics, we see that only six flags control 77 percent of the vessels registered under flags of convenience. But why ship-owners prefer flags of convenience? There are specific advantages for using flags of convenience instead of the traditional/closed flag registries, the most important of which are the following:

Higher flexibility: Ship-owners can register their vessels in any of these states without any requirements for citizenship or presence of the (actual) shareholders or the (actual) company. Also, they are free to change the vessel's registry at any time without any restriction whatsoever, and without a pre-registry survey (except on specific occasions such as a vessel operating for more than 20 years).

-- Lower operating costs: Ship-owners who use flags of convenience can save costs mainly on the crew's wages and maintenance costs. Flags of convenience do not have any requirements as to why the nationalities of the crewmembers and are not subject to minimum wage scales. Since the crew's expense is one of the most important aspects of the vessel's OPEX (operational expenses), by not having any restrictions, ship-owner can search for the cheapest crew available anywhere in the world. Furthermore, the flags of convenience are used to have looser manning rules and more relaxed safety standards than the closed registries, which subsequently results in lower expenses on maintenance and repairs. A survey in 2010, for comparison between the US-based ship-owners those who had their vessels registered under the US flag and the US-based ship-owners who had their vessels registered under a flag of convenience showed that the average crew cost for the US-flagged vessels was about $13,600/day while the relevant average cost for those under flags of convenience was only $2,590/day. On the other hand, the average maintenance and repair cost for the US-flagged vessels was estimated at about $3,000/day while the cost for foreign-flagged vessels was at about $2,400/day. The more expensive crew wages and maintenance/repair costs for the US-flagged vessels made a huge difference on the total OPEX, which for the US-flagged vessels was about $20,000/day while for foreign-flagged vessels the daily OPEX was estimated about $7,400.

Anonymity: In order for a ship-owner to register a vessel under a flag of convenience, the only thing he needs is a P. O. Box or a virtual company/office and the actual shareholders in these jurisdictions may not be reported/disclosed at all. This might be important in order to avoid liabilities which might arise from the operation of the vessels.

Flags of convenience are generally considered registries of lower quality than the closed registries and this is because of their relaxed requirements as well as the room they give to the ship-owners to employ seamen of any nationality. In the past, the gap in quality was surely higher since the control for the implementation of the International regulations was mainly based on the flag states and the ship-owners could take advantage of their relaxed approach. Though the scene has changed in the past decades when the Port State Control regime was developed and the Port States have taken then authority to inspect foreign ships, check whether they follow the international regulations and share the results of the inspections with all the interested parties (ie, other port states, flag states, classification societies and charterers). The MoUs (ie regional memoranda of port states) also publish annual reports with an evaluation of all the flags, depending on inspection results and categorisation of all flags into white, grey and black lists.

From what we can see, there are some flags of convenience which are included in both the white list of the Paris MOU and the high-quality list of USCG. It does not necessarily mean that the flags of convenience are of higher quality than the closed ones but it definitely shows that high-quality vessels and traditional owners prefer specific flags of convenience not in order to benefit from a sub-standard maintenance programme but mainly in order to get rid of the crew synthesis requirements which is still a fact in reputable closed flags.

From the 1960s we note that less than 40 percent of the flags of convenience are included in the white list of the Paris MoU and less than 20 percent of them in the USCG Qualship21. If we also compare with the total flags included in each list we will see that about 32 percent of the Paris MoU white flags are flags of convenience and about 26 percent of all the flags described as Qualship21 are flags of convenience as well. On the other hand from the target list of the USCG, almost 65 percent are flags of convenience.

How flags of convenience affect Charterers and what is their position?

In general, when charters see a vessel, they divide flags into 4 main categories: 

-- Traditional flags of high quality according to their PSC history

-- Flags of convenience of high quality according to their PSC history

-- Traditional flags of lower quality (grey zone/black zone of the PSC MOUs)

-- Flags of convenience of lower quality (grey zone/ black zone of the PSC MOUs)

Charterers would prefer to totally avoid flags categorised in (3) and (4) above, while a point of choice between (1) and (2) might exist in case of period time-charter or in case of a voyage-charter with loading and/or discharge taking place in the ports of developed countries, which are more sensitive in international regulations and the vessels' condition. In this case, all other factors remaining the same, they would prefer to go with the (1) and in some cases, they might also pay a premium for such vessel. A problem that Charterers might face with flags of convenience is the higher cost of the cargo insurance which might be imposed on certain occasions and which would make a difference on the freight per ton. Another main problem might be a potential delay at ports due to the higher rate of PSC inspections and thus the higher risk for a long lasting detention (even if it on ship-owners' shoulders). Despite the fact that, according to the Paris MOU's evaluation, there are flags of convenience with better evaluation.

Inspections which have taken place on vessels with such type of flags seem to be much more than the inspections in similar quality closed flags. This is because the port state authorities believe that the flags of convenience are still riskier than other reputable traditional flags such as the Norwegian and Greek ones. The number of vessels registered in both closed flags and flags of convenience along with the number of inspections reported by the Paris MOU Port State authorities during the same period (2013-2015).

The Greek and Cyprus flags have about the same number of the registered vessels in their fleet, while their PSC evaluation is nearly the same (according to Paris MOU). However during a period of three years there were 2,008 inspections for Cyprus-flagged vessels and only 902 for vessels with the Greek flag. The same story applies to the Singapore flag and its comparison with two other flags of convenience (Marshall Islands and Malta). While two other flags of countries in the European region (Norway and Gibraltar) with similar PSC history seem to experience the same approach with higher inspections (proportionally compared with their registered vessels) for the country which is considered FOC.

Therefore, the Flags of Convenience seem not to be a bad thing and especially after the development of the Port State Control regime, there is an independent control on enforcement of the International regulations and the minimum vessel's standards. Therefore, we see that few of the flags of convenience rated among the best quality flags in the world. On the other hand, the risk for these flags is still considered higher than the reputable closed flags and there are a lot of charterers who would still give a credit to vessels registered under such flags, especially in more specialised vessels or trades. Though, as the minimum international regulations and standards become stricter, the quality of these FOCs will also be necessarily improved in order to comply with the minimum requirement and I expect that the quality gap which still exists will further decrease in the next couple of years.

While most ship-owners are trying to increase their profits by decreasing their OPEX, the open sea marketplace helps them explore and develop more business options, find best-paying cargoes quicker than their competitors and increase their revenues. It is food for thought for our national line, which continues to make profit under close registry due to better management. However profitability will further improve by opting for open sea flags, be it a Pakistani offshore flag.

'Go-slow policy' challenge

The Federation of Pakistan Chambers of Commerce and Industry is concerned at the "go-slow policy" adopted by the Karachi Dock Labour Board as reported in Business Recorder. This policy was adopted by the Labour Board's workers at the Karachi Port from Dec26 to 30. Going slow is an industrial action through which employees do perform their duties but with the intent to reduce efficiency or productivity. It is usually applied as a pressure tactic for the acceptance of their demands. FPCCI senior vice president Khalid Tawab urged all sides to amicably resolve their issues and stressed that the Labour Board should refrain from extreme measures and agitation as the country can ill-afford such disruption. The go-slow has resulted in serious congestion at the port with vessels having to wait for several days for want of berthing space, and cargoes piling up inside the port awaiting clearance, causing serious losses to trade and to the economy. The backlog resulting from this disruption is still being felt at the Karachi Port. Let us explore the origins of the Karachi Dock Labour Board and to the issues related to the troubles.

The Board finds its origins in the pre-mechanized era of ship handling when the loading and discharge of cargoes from freight vessels was done by way of physically handling of the cargoes. Traditionally, ships' cargo was hoisted in large cargo nets that were hoisted under a crane's hook and first lifted and then lowered into place either in the vessel's hatch or on the quay deck. The dock labour would physically carry these pallets, bales, barrels, cases and sacks onto or off the net and stack them in an orderly fashion. This was back breaking work that required dock workers to shift cargoes quickly in order to minimise the time that the vessel remained at port while it waited for the loading and discharge operation to conclude. At times this required the vessel to remain in port for several weeks. Regardless of how swiftly the dock workers managed the discharge and loadings, the logic behind physically shifting cargos remained an inefficient and inhumane concept.

With the advent of intermodal freight handling through containerised cargoes in the 1950s, the need for physically handling these cargoes subsided and cargos loaded into standardised containers dramatically reduced transport costs, supported the post-war boom in international trade and was a major element in globalisation. Containerisation did away with the manual sorting of most cargo shipments within the port area and moved this activity to the off-dock warehousing. As the economics of intermodal cargo handling became apparent to businesses the world over, it displaced many thousands of dock workers who formerly handled break bulk cargo. Containerisation also witnessed a swift reduction in congestion at ports, significantly shortening shipping times and was key for the reduction of cargo losses from damage and pilferage.

In response to the Dock Strike of 1945, the British Parliament introduced the "Dock Workers' (Regulation of Employment) Scheme" in 1947. The scheme was administered by the National Dock Labour Board and was financed by a levy on the employers. The board was responsible for keeping a register of employers and workers, paying wages and attendance money, controlling the hiring of labour and was responsible for discipline. The British National Dock Labour Scheme was abolished in 1989 by the Conservative government under Margaret Thatcher whose Employment Secretary, Norman Fowler, told MPs that the scheme had become "a total anachronism" and that it stood in the way of a modern and efficient ports industry.

With respect to dock labour, the Port of Karachi has remained stuck in the 1960s with the unnecessary burden of the Karachi Dock Labour Board. The government of Pakistan promulgated the Dock Workers (Regulation of Employment) Act, 1974, to regulate the activities of dock workers and to improve their standards of living. At present, there are about 2,800 workers registered with the Labour Board. The scheme introduced under this Act requires that a payment of cess be made to the Board for cargo handling at the Karachi Port. This cess is charged at the rate of Rs 48 per metric ton for general cargo and at Rs 800 per TEU for containerised cargo. In addition to this cess, gangs of dock workers are required to be hired in shifts for the length of the vessel's stay at the port. The cumulative cost for containerised cargo comes to about Rs 1,300 per TEU. This cost is eventually transferred to the owner of the cargo who will naturally pass on the cost to the person next in the supply chain, thus increasing the overall cost of transportation for the economy.

The two container terminals currently fully operational at the port, KICT and PICT, handle a cumulative volume of about 1.9 million TEUs per annum. At Rs 1,300 per TEU the Labour Board charge comes to approximately Rs 2.47 billion per year. This number translates to about Rs 882,000 per worker per year, given a total of about 2,800 workers registered with Labour Board at present. It must be kept in mind that these numbers only relate to the two container terminals occupying seven berths at Karachi Port and not to the other shipping activities at the other 23 berths of the port. To sum up, approximately Rs 882,000 is paid per worker per annum for doing no work at all, resulting in a straight line loss of approximately Rs 2.47 billion to the economy. With another container terminal coming into full operations by February at the KPT's flagship project, the Pakistan Deep Water Container Port, this loss to the economy is set to increase exponentially. It is the need of the hour to direct government policy towards avoidance of this loss to the economy of Pakistan. The mostly bulk cargo loading and discharge at the other non-containerised berths is also undertaken through mechanical rather than physical means, thus rendering the entire Labour Board scheme irrational and out of date.

No charges related to dock workers are prevalent at the Port Bin Qasim situated at a distance of about 48 kms from the Karachi Port as it does not fall within the jurisdiction notified by the government for the imposition of a Labour Board charge. Even liquid cargo including crude oil, molasses and petro products, handled at the Karachi Port are exempt from the Labour Board levies, given the logic that these are not physically handled and instead pumped through pipelines.

Similarly, in the case of containerised cargo, no physical handling is required with the container terminal operator managing all loading and discharge to and from the vessel by deploying cranes. The aim of the game for container terminal operators is to keep costs down and to ensure a swift turnaround times for vessels. Dock workers physically handling cargos cannot and does not factor into this equation. If this is the case, where the KDLB is paid for each container handled at the Karachi Port thus increasing overall costs.

It is time that the government of Pakistan took a cue from the British Conservative government of 1989. It should rethink the Labour Board scheme has already proved to be an anachronism and which stands in the way of turning the Karachi Port into a modern and efficient port. A compulsory payment for no work done cannot be justified on the grounds that it is backed by legislated. The legislation may have been relevant when it was formalised. However, times and methods have changed since then and so should the legislation. These unskilled workers need to be eased into skilled trades so that they can also contribute towards the uplift of the economy of Pakistan.

The Federal Minister of Ports and Shipping personally intervened to normalise the port operation, as reported in the print media.

It is food for thought for Ministry of Ports and Shipping to take a policy decision which may be a win-win situation for all stakeholders. In 2006, some initiative was taken, but it was left half way, without resolving the issue. At KCCI, trade complains of high handling cost, thus, issue may be amicably resolved, so that extra burden on trade is minimized.

KETI BANDAR - PART OF CPEC

Prime Minister Nawaz Sharif, as per top news item in Business Recorder of 20th December, 2016, has directed the inclusion of KCR and Keti Bandar, part of CPEC KCR had been and still a most viable project as per study of JICA, to cater the needs of Karachi Suburbs. It was well utilized before its closure, so, it may be gift to Karachiites, a city of 25 million people, with no mass transit, congested roads with rickety buses. Railway must remove the encroachment first. As far as Keti Bandar is concerned, in past I, recall Mr. Gilani the Prime Minister-elect of Pakistan People Party (PPP) in his opening speech promised to give nation a new port Keti Bandar along with 100 days priority agenda, however, the government failed miserably to deliver on any agenda item.

It is a welcome sign for all Pakistanis in particular for seafaring community and maritime professionals that Prime Minister Nawaz Sharif has promised to give a kick start subject to approval of joint co-operation committee, but Chinese will insist for feasibility study.

Port Qasim was also conceived in the 70's and it is likely to turn into Industrial Hub Portby 2025. Whilst Port Qasim is helping the nation but it is seriously affected by silting due to be in the proximity of Indus Delta and South West Monsoon. The annual maintenance dredging cost runs into 1 billion rupees to maintain 12.0 meter draft. The plans are on way to deepen the port to 14 meter costing about 140 million US dollar. Present annual dredging BOQ is 5 million cubic meter and when dredged further, it is estimated that annual maintenance dredging will be around 10 million cubic meter thus costing in excess of 2-3 billions rupees to maintain the desired depth. When Port Qasim was conceived i.e. returning to old medieval site of Indus River Port Dewal, which was conquered by Mohammad in Qasim (a history of Indis by J.C. Powell, A Voyage on Indus by Alexander Burnes 1831).

The initial planners and hydrographers at the time of conceiving the Port faltered and could not rightly estimate the annual maintenance dredging quantum and cost which was far low comparing as of today's 5/USD per cubic meter Furthermore channel is 40 km with sharp bends restricting night navigation, when compared to Karachi, Pakistan Deep water container Port and Gwadar of 3.5 krn, where vessel can berth/sail 24/7/365. Time is money for ships and ship owners of today and economy of scale is the key to profitability, thus deep drafts are required. Non availability of night navigation for deep draft and long channels are considered as disadvantage in Port planning. I, sincerely hope that proper feasibility study of Keti Bandar may be carried out.

 

It is presumed that planners of Keti Bandar may study the geological history of Indus delta, coastal hydraulic survey, currents, littoral drift, hydraulic model studies, coastal geomorphology, Alexander Burnes surveys of river Indus and earthquake epic center and geologic structure of Indus Basin whilst carrying out hydrographic survey, wave patterns, forming of breakers in monsoon and the coast being low and not except at close quarters for safety of navigation.

 

Whilst referring to Indus Delta Map Keti Bandar is approachable via Hajamaro Creek, which runs beyond Ghora Bari. Since no hydrographic and other studies are available which were carried out in last decade, it could be any body's guess that how much dredging will be required to meet today's generation vessels of 14/16 meter draft and thereafter quantum of annual maintenance dredging to maintain the channel.

It is presumed that a proper feasibility by competent hydrographers and port consultants be carried out evaluating dredging and maintenance cost bearing in mind high cost at Port Qasim. The other aspect to be borne in mind is excellent hinter land connectivity before port is built. We must learn from the experience of Gwadar port, which is still handicapped due to nonexistent hinterland connectivity. It is imperative that hard core professionals having experience of port development may be engaged and this assignment of national importance may not be left at the mercy of generalist having no track of maritime faculty.

We must also learn from the experience of dredging cost at Port Qasim that of our neighbors i.e. India, Bangladesh and Thailand etc. The Hoogly River has silted Kolkatta Port thus forcing development of new port of Haldia at the mouth of Hoogly, Mumbai offshore port, Colombo south port, Chittagong offshore port at Juldia, so has been the case in Bangkok, where new port has been developed at the mouth of the river to cater deep draft vessels of 4th and fifth generation.

The next generation vessels are post Panamax needing 16/18 meter depth and futuristic vision is Suezmax, Malaca Max of 21 meter, thus in all probability  a site which is prone to heavy siltation being in Indus Delta costing billions in dredging and thereafter incurring annual maintenance dredging cost of billions, may only be considered after hydrographic surveys and financial feasibility to cater deep draft vessels of future.

We, must have more ports to develop the region and to cater our futuristic needs. Port development is a science and all issues have to be addressed professionally to cater the futuristic development in the maritime industry. India has 12 major ports and 185 small ports and they are investing 15 billion US dollar in port sector and 12 billion dollar in developing quadruple triangle i.e. logistics connecting all major cities to cater over 1 billion tons of Impo/Expo by 2020. India is improving its inland water ways and launched Sagar Mela Project.

It is a welcome announcement, however, a proper latest feasibility be carried out bearing in mind that it may take 10 years to port be operational from the drawing board, thus ships calling after a decade and their specification be bench marked to make a success story for our future generation.

Since a policy statement has been made thus same must be duly supported with credible latest studies, thus it is expected that the democratic government will make all plans public and will consider the views of local expertise available in selection of site.

Needless to mention as per historical fact the River Indus had many ports in the past i,e. Patala. Debal, Lahori Bandar, Shah Bandar, Gharo, Keti Bandar, Vikar, Daragi and Bambhore, these ports were destroyed due to the ravages of Indus river or by the change of its course, thus we must learn from the history and a very scientific and cautious approach is recommended in selecting the site of new port.

Meantime, we must concentrate to make new commercial Port Pakistan deep water container f ort and Gwadar fully operational and optimum utilization of Karachi and Port Qasim. It is equally important to do traffic fore casting and our needs for 25/50 years.

Pakistan growth is hanged on CPEC thus, we may embark on project with caution. God Bless Pakistan.

Captain Anwar Shah Interview Published in Pakistan & Gulf Economist, December 2016.

PAGE: WOULD YOU EXPLAIN THE PORT OPERATIONS AT KARACHI PORT AND HOW YOU ARE DESCRIBING IT AS THE MOST EXPENSIVE PORT IN THE REGION?

CAPT. ANWAR SHAH: Ports play an integral role in the economy of any nation. Pakistan is blessed with a coastline that stretches 1,046 Kms with the Karachi Port being the largest port in the country. Karachi Port Trust (KPT) claims to have handled a record 50.05 million tons of cargo during fiscal 2015-16 up 15.25% from 43.42 million tons in 2014-15.

With KPT handling over 70% by value and over 60% by weight of all sea-borne trade in Pakistan, shipping lines and trade bodies continue to question the efficiency and cost of this handling. At purchasing power parity, the period during 2015 and 2016 has globally witnessed some of the lowest shipment charges in history. However, cargo handling at Karachi arguably remains one of the most expensive in the South Asia region.

PAGE: DO YOU THINK THAT OUTSOURCING OF PORT AND SHIPPING SERVICES WOULD BENEFIT TO THE ECONOMY?

CAPT. ANWAR SHAH: The early 1980s witnessed a new trend in the global ports sector with major ports migrating towards the landlord port concept to improve cargo handling and rationalization of pass on costs. Over the period, major ports have either outsourced cargo handling to terminals specializing in such handling or have outright sold port infrastructure to private entrepreneurs specializing in the handling of large volumes of specific class of goods owned both by themselves and by others.

Ports authorities in Pakistan unfortunately have yet to awaken to the logic and benefit behind these concept resulting in by far some of the highest levels of inefficiency, pilferage, damage, loss of opportunity and costs in the region.

PAGE: WHAT IS YOUR VISION FOR IMPROVING PORT AND SHIPPING INDUSTRY IN PAKISTAN AND TO COPE WITH THE ISSUE OF CONGESTION AT PORTS?

CAPT. ANWAR SHAH: The Karachi Port Trust (KPT) in 2007 embarked on a venture to building the Pakistan Deep Water Container Port (PDWCP). The project was envisioned to have berths specifically designed to handle the largest container vessels afloat in the world and to have yard operations using the latest equipment, processes and technology available anywhere in the world. All of this would have been a very first in the region.

In 2007, Hong Kong based Hutchison Port Holdings (HPH) and KPT signed an agreement to construct the first phase of PDWCP at Keamari in Karachi. The terminal was to originally commence operations in 2010 after a three years construction period. Under the agreement KPT was responsible for providing the infrastructure whereas HPH as the, terminal operator would building the yard and equip the terminal with the latest technology.

This terminal was planned to relieve insistent congestion witnessed at KPT. Both container ships and their containerized cargos were suffering delays due to congestion. Vessels had to wait at the outer anchorage while berths at which they could come alongside become available. The large number of small ships calling at the port in Karachi strained its vintage infrastructure. Large ships that offer economies of scale could not call at the port due to the inherent limitations of crumbling berths, shallow rning circles, small cargo handling cranes, redundant processes and incapable port staff.

Containers once off-loaded from vessels had to sit at the port for days awaiting customs backlogs and limitations of yard space and long gate procedures. The customs clearing process, by and lage, left a lot to be desired and scrupulous officers regularly bringing a bad name to the organization. The land side handling was plagued with cargo losses due to damage and pilferage.

These and other inefficiencies result in the high cost of shipments, both imports and exports. This in turn generally increases the cost of doing business in the country thus enticing businesses, both big and small to dodge the taxation system and to compromise on quality of products and to ignore environmental considerations. Individual business and their respective trade organizations have regularly questioned why port in Pakistan continue to remain expensive while the global trend has been for reductions in cost incurred at ports.

PAGE: YOUR COMMENTS ON THE PLANNED PDWCP PORT IN THE DEEP SEA?

CAPT. ANWAR SHAH: The PDWCP, was planned to fill the gap at the port of Karachi resulting from use of old infrastructure and process. The project would have resolved the limitations issues by providing containerized vessels shortest streaming times to berths capable of handling the largest containerized vessels. The berths were planned to be equipped with the largest and most technologically advanced cranes. The yard was to have the latest systems and processes and most efficient customs procedures akin to those at global modern terminals.

Feeder vessels previously calling at the old berths at the Karachi port cold continue to do so if they wishes. Shipping lines willing to upgrade their vessel size to large panamax and port-panamax sized vessels could enjoy economies of scale offered by these large ships.

To put things into perspective, the total container handling capacity in Pakistan before the first phase of the PDWCP was about 2.5 million TEUs per annum while terminals handled in excess of 2.8 million TEUs in 2015. The handling over designed capacity have heavily constrained terminals doing more long term harm than good. Current terminals are also constrained to handle vessels over 8,000 TEUs whereas the average is in the region of vessels sized about 3,500 TEUs. The first phase of the PDWCP was designed to handle the Triple-E class of container ships, the largest afloat anywhere in the world today.

While embarking on building the first phase of the PDWCP, KPT has been wounded by numerous obstacles, most of which are said to be self-inflicted. In the view of many, KPT has been wounded by numerous obstacles, most of which are said to be self-inflicted.  In the view of many , KPT HAS BITTEN OFF WAYS MORE THAN IT CAN CHEW, PDWCP project being the largest. Persistent delays in providing the KPT’s 100 years plus history. Delays in providing infrastructure to the operator has left the terminal project in a sorry state and unable to commence operations even after almost 10 years from the signing of the agreement in 2007.

PAGE: WHY THE NEWLY CONCEIVED PORT IS GETTING DELAYED?

CAPT. ANWAR SHAH: With more than a year having passed since the terminal operator imported major equipment in 2015 the start of operations is nowhere in sight. KPT has yet to commence dredging of the navigation channel and customs have yet to notify the terminal as a landing place for loading and unloading of containers from shops at the terminal.

Sources within the shipping sector have confirmed that the operator has completed its obligations in advance of KPT’s long delayed works and awaits the notification form Customs and KPT’s dredging.

KPT has invested over $800 million into the project with HPH investing over $600 million, despite the huge investment into this project and even after a lapse of over nine years since the singing of the agreement, the local economy remains deprived of the benefit that should have started to accrue from the project that currently said to providing employment to over 350 employees and when fully operational this number is expected to increase to over 1,500 direct employees.

PAGE: WHAT IS THE CURRENT STATUS OF THE NEW PORT?

CAPT. ANWAR SHAH: The sources within the shipping sector confirm that since august this year the operator is ready to start operations of the first phase of the project and has had to cancel commencement of operations at least three times due to delays from KPT and customs.  It remains to be seen if the Ministry of Ports and Shipping is able to take stock of the situation and whether it can play a role in getting the project on track and operational.

This project was seen to be positioned to facilitate China-Pakistan economic corridor (CPEC) by way of efficiently handing the imports required by projects within CPEC. PDWCP itself not being a part of CPEC would be instrumental in the success of Gwadar during the initial years when PDWCP could act as a hub port of Gwadar and handle the feeder trade to Gwadar port.

Delays to the PDWCP project need to be investigated as these will have a follow-on effect for the Pakistani economy as a whole. The benefits from such a major project of national importance should have started to accrue to the economy way back in 2011.

It would be extremely difficult to estimate the quantum of losses inflicted to the economy by these delays however, a conservative estimate of the loss suffered by KPT alone as a result of delays to the project exceeds $150 million due to the loss of rent, royalty and port dues. Somewhere in the corridors of power, these questions need to be taken up and addressed towards attempt to set right a project of strategic national importance. Foreign and national ship owners and lines are riled over KPT increase in port tariff. It is virtually doubled after lifting cap on ships. My humble recommendation that KPT may revert to its existing tarrif, as hike has made it very expensive in the region being benchmarked to Colombo and India.

Life time achievement award was conferred by admiral Muhammad Zakaullah Chief of Naval Staff to Captain Anwar Shah on his meritorious services to Pakistan.

On the occasion of honouring Veteran Mariners / Annual Dinner 2016 of Master Mariners Society of Pakistan

Chief of Naval Staff being Chief Patron MMSP, was chief guest at Master Mariners Society of Pakistan ANNUAL DINNER 2016 and Life time achievement award to Veteran Mariners  at Maritime Museum Convention Hall Karachi on 26th April, 2016.

The President Capt. Haleem Siddiqui in his inaugural address, welcoming the Chief Guest, valued invitees and honorable members of the society, deliberated the role of eminent mariners prior inception and thereafter 1947 to-date. He lauded the role of Master Mariners, who not only contributed in the establishment of Merchant Marine in the newly conceived State of Pakistan, but were called upon by emerging countries viz Singapore, Saudi Arabia, Malaysia and Sri Lanka to build their fleet and Ports. This honour was bestowed and today the largest Shipping Line.

NOL was established by a Pakistani Master Mariner. The President touched in detail, independently the services rendered by the Master Mariners from 1947 todate highlighting all. He made it abundantly clear that merit was the only choice in those days, so professionals of repute earned recognition locally and abroad both. The President requested the Chief Guest to facilitate recognition Merchant Mariners on merits, so that Master Mariners may be able to give their professional acumen as a value added product in the growth. The president also appreciated the services of Capt. Anwar Shah  Ex-DG. Ports & Shipping / Chairman Gwader Port and lauded that he is the first Pakistani to become the governor of World Maritime University Sweden, a singular achievement. Capt. Shah’s role as share holder director of PNSC was also dilated upon. The President raised the burning issue of Maritime administration, which has become dysfunctional due to non presence of technical staff  and not complying to IMO requirement, being a serious default , thus urged the authorities to ensure filling slots in Maritime administration, port state control expeditiously.

Chief of Naval Staff conferred Life time achievement award to Capt. Anwar Shah for his meritorious services  to Maritime fraternity. It was an honour that Capt. Haleem A. Siddiqui was conferred Life time achievement award  of Lloyd’s List, a singular achievement.

The plight of PMA Cadets was also highlighted and impressed upon Government to take corrective measures.

Chief of Naval Staff  responded to the call of President to work together for betterment of Maritime Industry and Fraternity. CNS was also pleased to see harmony amongst Mariners.