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.
Sunday, October 25, 2009
Monday, August 24, 2009
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.
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.
Friday, August 21, 2009
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.
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.
Saturday, August 15, 2009
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.
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.
Saturday, June 13, 2009
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.
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.
Tuesday, June 2, 2009
Malicious political campaign
The western media have launched a tirade of media blitz against development of port by Sri Lanka in collaboration with Chinese. It is nothing new, as I personally faced very intriguing questions by western media on Gwadar Port where I happened to be Chairman in 2006/07. I strongly dispelled the rumours that Gwadar is developed by Chinese as a naval base.
On the contrary, Chinese never showed any interest, neither participated in the open tender. All western media reports were malicious as the port was awarded to Singapore. "I recall Hambantota in 60s a small fishing village, as navigator we had to be careful to avoid small fishing boats, when rounding southern end of Sri Lanka.
The port lies on the main East and West route and is being developed with Chinese assistance of 1 billion USD and will be completed in 15 years in four phases. The first phase will cost 450 million USD. The work on the bunkering terminal started in 2007 and likely to be completed in 39 months. The terminal may handle upto 500,000 M/tons of oil / products per annum. It is also planned to develop oil refinery, container terminal and power plant.
The fear expressed by belligerent western and Indian media is that China being dependent on import of oil from Middle Eastern countries, thus wants to control the sea route. Sri Lanka is situated in the Indian Ocean close to Mallaca Strait and has a strategic location for the protection of oil route. The fears may be misconceived as was the case with Gwadar, but one wonders if China may use the port for bunkering facility of its naval fleet.
What is so big fuss about it, as Trincomalee was the base used by Britain, so is nearby Diego Garcia. France has a base now in Abu Dhabi and Bahrain offers state-of-the-art support to US naval fleet. I simply fail to understand the double standards, when I read Sunday Times, Indian Express or see BBC T.V. where Indian experts are criticising the building of port.
The Indian media is urging the newly elected Prime Minister to address the Chinese chequers, the influence of Chinese stretching from Pakistan to Myanmar, Bangladesh and now a fuelling station on main East-West route, the media wants a concrete strategy to arrest the influence of Chinese in Indian Ocean, even Air Marshall Major Chief of Indian Air Force feels China as a major threat than Pakistan.
Indians never objected on their own or western build up, but are seriously reacting to the development of Hambantota Port, duly supported by West. What a paradox?
While Sri Lankan leadership is indomitable, sovereign, firm and not lackeys as had been the case, dealing firmly with LTTE, they are going ahead with the project and sixty five percent of the work on two break water alms and (East and West) is completed and excavation and dredging by Sino Hydro, a Chinese firm, is in progress for the channel across the KARGAMLEWAYA.
The port is likely to be completed by 2011, and initially will cater to industrial and service sector and later for container traffic. At present more than 100 vessels bypass Sri Lanka South west coast daily with no value addition to the economy of the country. The port may be operative by January 2011, as Sri Lankan Government is proceeding ahead firmly by awarding a Chinese contractor to build the bunkering facility and tank farm for oil storage.
Indian media is worried that on completion of Hambantota Port, it may trigger international competition to control energy supply routes in the Indian Ocean as China's 80 percent and India's 65 percent oil supplies pass through sea lanes of Indian ocean.
It is also interesting to note that US Joint forces command confirms that commercial shipping/container port at Hambantota being built by Chinese is part of China's "strings of pearl" strategy to gain political influence and project power in Indian Ocean whilst Chinese vehemently deny accusations and have clarified that its investment in the port is for commercial purposes only.
Chinese are also willing to enhance Sri Lanka's ship building capacity by building a dockyard at Hambantota. I may not comment on Indian or western media concerns on this port, but with my personal experience of Gwadar it appears to be a malicious political campaign to blackmail Sri Lanka and Chinese.
The Sri Lanka President Mahinda Rajapaksa is firm and remains dedicated and has not taken any dictations, but it is feared that West may try to malign him with war crimes on Tamils. It is intriguing that the same western media wants Pakistan to do more and does not project co-lateral damage to civilians and armed forces both, while fighting war on terrorism.
May be at the end they may perhaps malign our forces for war crimes as the case is in Sri Lanka of LTTE and Tamils. Bringing economic development to the neglected southern corner of the Island was cornerstone of Mahenda's election manifesto. The region was starved of investment and infrastructure will be transformed into economic and industrial heart of the country.
Modern infrastructure is essential for a country's long term economic development, but after 60 years of independence Sri Lanka has only one major Port and airport, inadequate power generation, in fact the nation is still without a single multilane highway. Sri Lanka is building southern expressway to support logistics and hinterland connectivity to the port.
It appears that Lankans have learned from our mistake of building Gwadar Port, without hinterland connectivity, thus the port remained idle, except handling logistically subsidised captive public sector cargo. The cost of subsidy per ton is 2200/Rs and total amount is said to be 10 billion rupees plus, as per the media reports.
Shipping analysts believe that Hambantota port is financially a viable project when bench marked to Gwadar, as the port is ideally located on main East-West route and advantageous to ship owners to use for bunkering facilities comparing to Colombo/Indian ports, as there will be no deviation from the main route.
The Hambantota port project, power project and Southern expressway is the largest development project since the Mahawelli project which was supervised by a Pakistani Shoaib Sultan, believed to be now with AKRSP project. I congratulate people and Government of Sri Lanka being our long-tested friends as Chinese, for expeditious completion of the project. Stay firm, shun all propaganda by west and Indian media by staying on the course and let a new day dawn for the poor of south Island as the fishermen's have faced abject poverty.
I am happy to learn that 40,000 people will get employment. Sri Lankans have expertise as Colombo is handling 70% of transshipment cargo, whilst only 30% captive cargo is handled. Hambantota may chip a slice out of volume from Singapore, which is the main transshipment hub, nearby in Malaka Strait. The Indian dream of converting their port to a regional hub on East Coast may be lost, with the development of the new port on the main route. The development is pinching India economically.
On the contrary, Chinese never showed any interest, neither participated in the open tender. All western media reports were malicious as the port was awarded to Singapore. "I recall Hambantota in 60s a small fishing village, as navigator we had to be careful to avoid small fishing boats, when rounding southern end of Sri Lanka.
The port lies on the main East and West route and is being developed with Chinese assistance of 1 billion USD and will be completed in 15 years in four phases. The first phase will cost 450 million USD. The work on the bunkering terminal started in 2007 and likely to be completed in 39 months. The terminal may handle upto 500,000 M/tons of oil / products per annum. It is also planned to develop oil refinery, container terminal and power plant.
The fear expressed by belligerent western and Indian media is that China being dependent on import of oil from Middle Eastern countries, thus wants to control the sea route. Sri Lanka is situated in the Indian Ocean close to Mallaca Strait and has a strategic location for the protection of oil route. The fears may be misconceived as was the case with Gwadar, but one wonders if China may use the port for bunkering facility of its naval fleet.
What is so big fuss about it, as Trincomalee was the base used by Britain, so is nearby Diego Garcia. France has a base now in Abu Dhabi and Bahrain offers state-of-the-art support to US naval fleet. I simply fail to understand the double standards, when I read Sunday Times, Indian Express or see BBC T.V. where Indian experts are criticising the building of port.
The Indian media is urging the newly elected Prime Minister to address the Chinese chequers, the influence of Chinese stretching from Pakistan to Myanmar, Bangladesh and now a fuelling station on main East-West route, the media wants a concrete strategy to arrest the influence of Chinese in Indian Ocean, even Air Marshall Major Chief of Indian Air Force feels China as a major threat than Pakistan.
Indians never objected on their own or western build up, but are seriously reacting to the development of Hambantota Port, duly supported by West. What a paradox?
While Sri Lankan leadership is indomitable, sovereign, firm and not lackeys as had been the case, dealing firmly with LTTE, they are going ahead with the project and sixty five percent of the work on two break water alms and (East and West) is completed and excavation and dredging by Sino Hydro, a Chinese firm, is in progress for the channel across the KARGAMLEWAYA.
The port is likely to be completed by 2011, and initially will cater to industrial and service sector and later for container traffic. At present more than 100 vessels bypass Sri Lanka South west coast daily with no value addition to the economy of the country. The port may be operative by January 2011, as Sri Lankan Government is proceeding ahead firmly by awarding a Chinese contractor to build the bunkering facility and tank farm for oil storage.
Indian media is worried that on completion of Hambantota Port, it may trigger international competition to control energy supply routes in the Indian Ocean as China's 80 percent and India's 65 percent oil supplies pass through sea lanes of Indian ocean.
It is also interesting to note that US Joint forces command confirms that commercial shipping/container port at Hambantota being built by Chinese is part of China's "strings of pearl" strategy to gain political influence and project power in Indian Ocean whilst Chinese vehemently deny accusations and have clarified that its investment in the port is for commercial purposes only.
Chinese are also willing to enhance Sri Lanka's ship building capacity by building a dockyard at Hambantota. I may not comment on Indian or western media concerns on this port, but with my personal experience of Gwadar it appears to be a malicious political campaign to blackmail Sri Lanka and Chinese.
The Sri Lanka President Mahinda Rajapaksa is firm and remains dedicated and has not taken any dictations, but it is feared that West may try to malign him with war crimes on Tamils. It is intriguing that the same western media wants Pakistan to do more and does not project co-lateral damage to civilians and armed forces both, while fighting war on terrorism.
May be at the end they may perhaps malign our forces for war crimes as the case is in Sri Lanka of LTTE and Tamils. Bringing economic development to the neglected southern corner of the Island was cornerstone of Mahenda's election manifesto. The region was starved of investment and infrastructure will be transformed into economic and industrial heart of the country.
Modern infrastructure is essential for a country's long term economic development, but after 60 years of independence Sri Lanka has only one major Port and airport, inadequate power generation, in fact the nation is still without a single multilane highway. Sri Lanka is building southern expressway to support logistics and hinterland connectivity to the port.
It appears that Lankans have learned from our mistake of building Gwadar Port, without hinterland connectivity, thus the port remained idle, except handling logistically subsidised captive public sector cargo. The cost of subsidy per ton is 2200/Rs and total amount is said to be 10 billion rupees plus, as per the media reports.
Shipping analysts believe that Hambantota port is financially a viable project when bench marked to Gwadar, as the port is ideally located on main East-West route and advantageous to ship owners to use for bunkering facilities comparing to Colombo/Indian ports, as there will be no deviation from the main route.
The Hambantota port project, power project and Southern expressway is the largest development project since the Mahawelli project which was supervised by a Pakistani Shoaib Sultan, believed to be now with AKRSP project. I congratulate people and Government of Sri Lanka being our long-tested friends as Chinese, for expeditious completion of the project. Stay firm, shun all propaganda by west and Indian media by staying on the course and let a new day dawn for the poor of south Island as the fishermen's have faced abject poverty.
I am happy to learn that 40,000 people will get employment. Sri Lankans have expertise as Colombo is handling 70% of transshipment cargo, whilst only 30% captive cargo is handled. Hambantota may chip a slice out of volume from Singapore, which is the main transshipment hub, nearby in Malaka Strait. The Indian dream of converting their port to a regional hub on East Coast may be lost, with the development of the new port on the main route. The development is pinching India economically.
Monday, May 25, 2009
Maritime industry - futuristic vision
I have been associated with shipping for a long time. We experienced a downturn in 1980. However due to global economic meltdown, shipping has been hit severely in the last quarter of 2008, causing bankruptcy to ship owners, slowing down of new port projects and low load factor and losses to all major lines.
This recession in maritime is worst than ever encountered. Some generalists during the boom claimed to have made a turn around in 2000 of sick companies. However, when shipping was at its peak, no commercial expertise was required and some companies and banks got the vessel free within five years and ships were operated by management companies without any chief executive.
Now it is the testing time of shipping skill to keep the head out of the water, as recession may cause more casualties in 2009/10, but it opens the doors of opportunities and one can translate the opportunity by taking over business from competitors. Diversified business conglomerates have history of stemming such economic downturn cycles, as it is part of business.
The latest research by prominent maritime analysts forecast a nominal growth of 1.2% in container trade, while expecting demand to grow in 2011. The excess supply is likely to stay until 2011, coupled with low load factors, vessels lay off, demolition and major lines are trying hard to break even, whilst major ports of the world and terminal operators are assisting by reducing tariff to keep the bleeding ship-owners in business. Four hundred and twenty fine container vessels had been laid up and now ship-owners are short of space to lay up in ports, thus requesting Sri Lanka to allow lay up in Trincomalee Bay which may accommodate 50 vessels. The ship breaking industry at Gadani, has got new lease of life due to old tonnage being demolished.
At present, only Gadani has 80 vessels, four contributed by PNSC and one tanker sold to Bangladesh demolishers by PNSC. Current gearing is low for operators but prolonged losses may erode equity and test debt servicing capability of major players. The investment researchers are painting a bleak picture of South Korean Lines due to depreciation of wong and Taiwanese due to high gearing, but Maersk line and Japanese may overcome the losses due to diversified business, mix.
Forwarders will be equally affected due to price conscious exporters and importers, but large forwarders are equipped to overcome the storm due to diversified networks and wide range of services.
While reading drewry and UBS report, economists expect a more prolonged global recession and container shipping has deteriorated worst in 2008, than expected. The operators will continue to suffer deeper losses till 2010. Forwarding in basically 1-2% margin business if regulated and ethics are not compromised, as in Pakistan, Karachi Chamber is crying for long to regulate the forwarders, but to no avail.
The government officials are blank on the subject and all recommendations of Karachi Chamber of Commerce remains frozen in files due to lack of competence of regulators and unawareness, causing misery to poor exporters and importers. Ethically premium margins are achieved by forwarders, who have strong global network and value added services.
The declining volumes on Asia-Europe and transpacific trades may last till 2011, as US trade has faded and west coast ports are facing 37% cut in volumes as dry bulk freight rates have plummeted and US dollar has strengthened. It is believed that ship-owners are operating at or below cash break even levels and laying up vessels to preserve cash and margins. Due to excessive supply growth, zero margins will be seen till 2010 and these trade accounts for 60-80% of revenue of most Asian container, shipping operators.
The expected trading losses may be 5% to 50% up to 2010. If this condition persists for the next 2/3 years, major operators will face serious funding problems.
The analysts have forecast that charter rates and vessel prices will continue to decline. The analysts have revised global container shipping model and have lowered demand forecasts to reflect a protracted global recession. The analysts have collected world-wide data on new deliveries and cancellations and concluded that supply/demand balance may be achieved by 2011.
According to Lloyds list, there is no possibility of direct link between China and Taiwan and about 742,000 TEU is transshipped through Hong Kong. It is interesting to note from the data that 60% to 80% revenue is generated by most listed operators by large vessels and only 7 large container vessels have been laid up when compared to 425 medium sized container ships. A modest impact may be seen in large container ships as most of them are up to 5 years of age.
The decline in freight rates in 2008 has surpassed industry expectations. The magnitude in 09 and speed of decline has led to a situation, where operators are unable to cover cash costs. Service rationalisation and cancellations, vessels lay ups and off hiring of chartered vessels is common in the industry.
We, in Pakistan, are 100% dependent on foreign lines for our containerised export and import cargo of 1.7 mill TEUS. If major players continue to be in distress, many more lines will stop calling our ports thus our ports may consider assisting lines to operate by cutting down their tariffs thus giving comfort to the lines. Similarly, the terminal operators must be regulated on the pattern of TAMP in neighbouring countries and the ministry may constitute a "tariff authority of port and terminals" to regulate tariff.
The body should be duly represented by Karachi Chamber of Commerce and Industry. Neither ports nor terminals may levy un-announced tariffs. It is also imperative to regulate our freight forwarders, as demanded by Karachi Chamber of Commerce and code of business ethics be introduced by regulators.
The concept of free market economy has failed and markets in greed do not correct themselves thus the need of regulator is established world-wide and we cannot be an exception. The lobbies in Pakistan are quite strong, but should be resisted to boost our exports. Unless we regulate, it is free for all and the trade continues to suffer. It is now high time to implement the assurances for relief to trade to overcome the trade deficit with growth of exports. The ministry may also assist the shipping industry, by offering ship-owners to lay up ships at Gwadar protected bay, as total 1000 ships are laid up and others are in the line. Philippines has translated crisis into opportunity by allowing ship-owners to lay up ships in Subic Bay and Davo protected anchorage and charging only 91/USD per day from owners. Why can't we do the same to generate revenue by translating the crisis into opportunity.
This recession in maritime is worst than ever encountered. Some generalists during the boom claimed to have made a turn around in 2000 of sick companies. However, when shipping was at its peak, no commercial expertise was required and some companies and banks got the vessel free within five years and ships were operated by management companies without any chief executive.
Now it is the testing time of shipping skill to keep the head out of the water, as recession may cause more casualties in 2009/10, but it opens the doors of opportunities and one can translate the opportunity by taking over business from competitors. Diversified business conglomerates have history of stemming such economic downturn cycles, as it is part of business.
The latest research by prominent maritime analysts forecast a nominal growth of 1.2% in container trade, while expecting demand to grow in 2011. The excess supply is likely to stay until 2011, coupled with low load factors, vessels lay off, demolition and major lines are trying hard to break even, whilst major ports of the world and terminal operators are assisting by reducing tariff to keep the bleeding ship-owners in business. Four hundred and twenty fine container vessels had been laid up and now ship-owners are short of space to lay up in ports, thus requesting Sri Lanka to allow lay up in Trincomalee Bay which may accommodate 50 vessels. The ship breaking industry at Gadani, has got new lease of life due to old tonnage being demolished.
At present, only Gadani has 80 vessels, four contributed by PNSC and one tanker sold to Bangladesh demolishers by PNSC. Current gearing is low for operators but prolonged losses may erode equity and test debt servicing capability of major players. The investment researchers are painting a bleak picture of South Korean Lines due to depreciation of wong and Taiwanese due to high gearing, but Maersk line and Japanese may overcome the losses due to diversified business, mix.
Forwarders will be equally affected due to price conscious exporters and importers, but large forwarders are equipped to overcome the storm due to diversified networks and wide range of services.
While reading drewry and UBS report, economists expect a more prolonged global recession and container shipping has deteriorated worst in 2008, than expected. The operators will continue to suffer deeper losses till 2010. Forwarding in basically 1-2% margin business if regulated and ethics are not compromised, as in Pakistan, Karachi Chamber is crying for long to regulate the forwarders, but to no avail.
The government officials are blank on the subject and all recommendations of Karachi Chamber of Commerce remains frozen in files due to lack of competence of regulators and unawareness, causing misery to poor exporters and importers. Ethically premium margins are achieved by forwarders, who have strong global network and value added services.
The declining volumes on Asia-Europe and transpacific trades may last till 2011, as US trade has faded and west coast ports are facing 37% cut in volumes as dry bulk freight rates have plummeted and US dollar has strengthened. It is believed that ship-owners are operating at or below cash break even levels and laying up vessels to preserve cash and margins. Due to excessive supply growth, zero margins will be seen till 2010 and these trade accounts for 60-80% of revenue of most Asian container, shipping operators.
The expected trading losses may be 5% to 50% up to 2010. If this condition persists for the next 2/3 years, major operators will face serious funding problems.
The analysts have forecast that charter rates and vessel prices will continue to decline. The analysts have revised global container shipping model and have lowered demand forecasts to reflect a protracted global recession. The analysts have collected world-wide data on new deliveries and cancellations and concluded that supply/demand balance may be achieved by 2011.
According to Lloyds list, there is no possibility of direct link between China and Taiwan and about 742,000 TEU is transshipped through Hong Kong. It is interesting to note from the data that 60% to 80% revenue is generated by most listed operators by large vessels and only 7 large container vessels have been laid up when compared to 425 medium sized container ships. A modest impact may be seen in large container ships as most of them are up to 5 years of age.
The decline in freight rates in 2008 has surpassed industry expectations. The magnitude in 09 and speed of decline has led to a situation, where operators are unable to cover cash costs. Service rationalisation and cancellations, vessels lay ups and off hiring of chartered vessels is common in the industry.
We, in Pakistan, are 100% dependent on foreign lines for our containerised export and import cargo of 1.7 mill TEUS. If major players continue to be in distress, many more lines will stop calling our ports thus our ports may consider assisting lines to operate by cutting down their tariffs thus giving comfort to the lines. Similarly, the terminal operators must be regulated on the pattern of TAMP in neighbouring countries and the ministry may constitute a "tariff authority of port and terminals" to regulate tariff.
The body should be duly represented by Karachi Chamber of Commerce and Industry. Neither ports nor terminals may levy un-announced tariffs. It is also imperative to regulate our freight forwarders, as demanded by Karachi Chamber of Commerce and code of business ethics be introduced by regulators.
The concept of free market economy has failed and markets in greed do not correct themselves thus the need of regulator is established world-wide and we cannot be an exception. The lobbies in Pakistan are quite strong, but should be resisted to boost our exports. Unless we regulate, it is free for all and the trade continues to suffer. It is now high time to implement the assurances for relief to trade to overcome the trade deficit with growth of exports. The ministry may also assist the shipping industry, by offering ship-owners to lay up ships at Gwadar protected bay, as total 1000 ships are laid up and others are in the line. Philippines has translated crisis into opportunity by allowing ship-owners to lay up ships in Subic Bay and Davo protected anchorage and charging only 91/USD per day from owners. Why can't we do the same to generate revenue by translating the crisis into opportunity.
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