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Trade
and Shipping
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Trade
facilitation does not occur anywhere near the level that it should. Irreversible shipment
delays and delays in receipts of goods are commonplace.
Fractious, territorial disorganization impairs all aspects of operation. Little or no
coordination exists between the services offered. Obsolete cargo equipment, ineffectual
cargo management, unnecessary custom procedures and excessive lag-times before issuing
cargo clearance are require urgent improvements to enable Pakistan to compete equitably
in the international market place.
Pakistan
has two major sea ports namely Karachi Sea Port and Port Qasim. Beside, two
Harbor-cum-mini ports are being developed at Gawader and Keti Bunder. Pakistan National
Shipping Corporation (PNSC) is the regulatory body.
PNSC and other ports & shipping organizations are over staffed and inefficient.
Excessive and disruptive political interference strangles all aspects of operations.
Nepotism and the lack of management and professionalism produce inferior quality services.
Likewise, the lack of proper planning and absence of basic coordination with other
transport sub-sectors give rise to prolonged delays while ship wait to be berthed.
These problems leads to other numerous operational deficiencies and provide opportunities
for pilferage. Issues like these create unnecessary losses that damage Pakistan's economy.
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Group
Coordinators |
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1. |
Mr. Muhammad Farrukh Qaisr, Managing
Director, Pak-Shaheen (Pvt.) Ltd. |
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2. |
Captain Irfan Naqvi, The Mariners
Institute. |
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April
20, 2001 |
Draft
Transport policy is submitted from review. Click
here to read.
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| Ports |
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Ports
- The berth capacity of these ports is considered adequate for the next twenty years but the approach channels need improvements.
- Landlord concept should be introduced in which the basic ports facility are provided by the public sector while all operational tasks such as stevedoring, piloting, etc by the private sector.
- None of the two existing ports (KPT and PQA) have the required container handling facilities. There is still wide scope of containerization in the two ports.
- High port charges as well as cargo handling charges need to be brought at par with the other ports in the region.
- A Supra Port Authority with both the ports under its policy control, while maintaining day to day operational independence for each Port, need to be created.
- The third deep-sea port at Gwadar, on the Balochistan coast with an estimated cost of Rs. 20 billion, lacks economic and commercial viability.
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| Trade
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Key
Issues Addressed
- Inefficiency in the conduct of trade logistics and facilitation.
- Cumbersome procedures of customs.
- Inefficient operations and procedures for international trade.
- Inappropriately designed and powered road freight traffic.
- Expensive and inefficient operations of the trucking industry.
- Overloading resulting in very high axle loads.
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Recommended
Policies
- Simplify customs' clearance procedures.
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Customs to provide out-of-normal hours clearance to meet trade and transport requirement.
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Deregulate container movements in bond.
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Consolidate international trade documents and align them to the standard international format.
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Implement effective "trade points" at ports, inland trade centers and dry ports.
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Streamline financial and banking provisions related to foreign trade transactions.
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Modernize and liberalize marine and domestic transport insurance provisions and policy conditions.
- Permit import of modern vehicles and powerful heavy duty trucks.
- Enable truckers to have access to regular financial markets for purchase of vehicles.
- Establish modern freight terminals in major cities by private parties in association with municipal councils or regional authorities.
- Improve efficiency of NLC by managing and operating it on a commercial basis.
- Evolve measures to address excessive loading by trucks
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| Shipping
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Shipping
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The Pakistan National Shipping Corporation must be privatized without further delay.
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To encourage shipping industry in the country, there should therefore be no duty/sales tax or any other types of tax on import/export of ships, their spares, other accessories, etc.
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There is no likelihood of coastal shipping having any significant role in the near future.
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Key
Issues Addressed
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Insufficient storage facilities for bulk cargoes at the ports.
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Lack of specialized facilities for handling bulk cargoes.
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Inefficient port infrastructure.
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Weak institutional capacity and poorly motivated management.
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Unproductive labor force working under inefficient and ineffective labor union regulations.
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Poor state of port's safety and environment.
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Low utilization of Pakistan National Shipping Corporation's (PNSC) chartered ships.
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Weak financial position of PNSC.
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Inequitable imposition of duty or taxes on locally registered ships.
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Dearth of trained manpower.
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Under-developed coastal areas.
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Recommended
Policies
- Improve cargo handling, construct an integrated container terminal and develop bulk handling facilities.
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Transform Ports into landlord ports with the private sector taking responsibility for port operations and services.
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Create an enabling environment for private sector participation in port activities.
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Restructure the port organization including labor rationalization and a retrenchment program.
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Reform tax administration and customs.
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Improve inter-modal logistics and customs facilities; streamline documents, procedures and liability provisions for goods.
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Modernize and expand PNSC's fleet.
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Improve PNSC management.
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Review in detail the PNSC's operations, reasons for poor utilization of existing vessels, including institutional and management factors, financial performance and determine whether government involvement in this internationally competitive market is advantageous or not.
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Ports
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Ports
The Ports sector essentially holds a monopoly over international trade, as over 95% is channeled through the two main ports-Karachi and Port Qasim. The growth in port traffic in the last ten years has been around 6% per annum. The berth capacity of these ports is considered adequate for the next twenty years but the approach channels need improvements. None of the two existing ports (KPT and PQA) have the required container handling facilities. There is still wide scope of containerization in the two ports.
On the land side, the main problem is the excessive handling charges and low labour productivity. As a result, the cash flow of the Karachi Port has dropped by 50% between l996 and l999.
For cargo, Karachi port is reported to be 1.5 times more expensive than Bombay, 4.5 times Colombo and 19 times Dubai. As a result, the shippers pay about Rs. 15.000 billion "extra" per year to the two ports-a cost which is passed on to the users.
Both the ports still have direct involvement in day to day operation. Experience has shown that the most desired course is the landlord concept in which the basic ports facility are provided by the public sector while all operational tasks such as stevedoring, piloting, etc are handled by the private sector.
There is serious lack of coordination among the two ports. Currently, both the ports tend of operate in competition with each other. With the creation of additional ports on Mekran Coast, the situation would be further aggravated. The problem can be overcome by creating a Supra Port Authority with both the ports under its policy control, which still maintaining day to day operational independence.
The third deep-sea port at Gwadar, on the Balochistan coast with an estimated cost of Rs. 20 billion, lacks economic and commercial viability.
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| Trade |
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Consistency
in Policy & Incorporation of New Concepts
There was ambiguity and
lack of clarity in the existing policy. there was need need to have
a consistent and clear policy that sent clear signals to the private
sector. The new policy framework should embody concepts such as the
'landlord concept' and the 'door to door concept' in service
delivery. |
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Institutional
Changes
There was lack of co-ordination and inadequate infrastructure which
led to high port and cargo handling cost. there was a need to
abolish the dock labour scheme and establish a National Ports
Authority in order to make ports autonomous. All decisions with
respect to ports would be made by the NPA without reference to other
agencies like the Ministry of Finance, CBR, DG P&S, etc. |
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Simplification
of Procedures
The current port port procedures were complex and cumbersome and
needed to be simplified. There was a need to undertake systematic
documentation and computerisation of port handling operations. |
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Lack
of Investment Undertake
capital investment for bringing the infrastructure up to
international standards and introduce incentives such as duty free
import of port handling equipment. |
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Private
Sector Participation
There was need for greater
autonomy in the sub-sector to encourage private sector
participation, improve port productivity enhance efficiency in port
operations and provide customer orientation.
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Efficiency of Logistic Operation
Efficiency of logistic operations and in particular of the port
interface, is critical for export competitiveness.
A comprehensive trade and transport facilitation agenda, addressing all procedural aspects
of transport operations related to external trade activities, would be highly beneficial
for Pakistan |
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Some of the important issues
are
1.
Shipment Delays.
2. Little or no coordination in services offered
3. Obsolete cargo equipment.
4. Ineffectual cargo management.
5. Unnecessary custom procedures, etc. |
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Road Freight Problems
Private
trucking industry carries approximately 95 percent of the road freight traffic. The
army-based trucking operation, the National Logistics Cell, created for emergency in 1978
by GOP to transport wheat and fertilizer from the port, carries the remaining 5 percent.
About 95% of the road
freight traffic is not appropriately designed and powered.
Obsolete cargo transportation services and logistics add to the problems of congestion on
the roads.
There is excessive overloading resulting and lack of enforcement of truck overloading and
safety regulations.
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| Shipping
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Shipping
The market share of the Pakistan National Shipping Corporation (PNSC) has dwindled over the years to only 5% of the national trade. Its' shipping fleet has diminished from 70 ships in the 70s to only 15 today. It has been consistently posting losses to the tune of half a billion Rupees annually.
Pakistan's private shipping sector, which was nationalized in the 70s, has not yet recovered, primarily due to lack of incentives and undue restriction on registration.
Coastal shipping along the Mekran coastal area is still far from being developed to any reasonable degree.
As a result, shipping which can be a great source of foreign exchange earning is losing this earning to foreign carriers to the tune of about 40 billion rupees per year.
The most crucial issues in shipping is the failure of the government to recognize that unlike any other mode of transport, the shipping sector is unique as its not encumbered by any bilateral agreements to allow it to call at any port. Any ship registered anywhere in the world, can pickup freight from any port and un-load at any port. This makes imposition of any kind of duty or taxes on locally registered ship totally un-necessary as it would only result in driving the ship owners out of the country in search of tax havens. To encourage shipping industry in the country, there should therefore be : (a) no duty/sales tax or any other types of tax on import/export of ships, their spares, other accessories, etc.
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Need
for Enabling Policy Framework
Shipping
was the backbone of Pakistan's industry and there was need to
enhance the capacity of the shipping sector and to introduce a
greater degree of professionalism. There was need to re-orient the
shipping sub-sector for international operations. There was need for
the implementation of the Shipping Policy 1999 and for enacting
legislation for multi-modal transport. |
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Role
of Merchant Marine
The
role of the Merchant Marine had to be acknowledged and a New
Merchant Shipping bill had to be enacted which recognised this role
and made appropriate provision for it. |
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Private
Sector Participation
There
was a need for growth of ships under the Pakistan Flag. In order to
aid this process there was a need to encourage private sector
investment, provide greater security for capital investments, simply
procedures for ship registration and encourage participation in
trade through international conventions. |
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Human
Resource Development
There
was need for increasing employment opportunities for seamen,
improved training and education. There is need to encourage
employment in the sub-sector through income tax free status of
seamen's earnings abroad. |
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Lack of Full Capacity Utilization of Ports
There
is lack of the full capacity utilization of the existing ports. However, there is also
lack of specialized cargo handling equipment at ports and storage facilities for bulk
cargoes. |
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Port Cost
The current
trade facilitation regime is an area of high concern. There is need to reduce port costs
at Karachi through improvements in cargo handling productivity, accelerated cargo and
document clearance, and improved landslide access to the port. |
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Institutional Issues
There is
lack of the appropriate mix of public and private sector partnership in the development
and operation of ports and there is need to strengthen the Karachi Port organization
through changes in institutional, managerial and financial structures. |
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Manpower and Under developed Coastal Areas
There is an
extreme shortage of trained manpower in the shipping sector. This is one of the main cause
of its bad performance.
Coastal areas, are under developed, even the basic necessities of life are missing from
there. |
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Local Monopolies
Competition
conditions between ports, or within ports, need to be monitored by the public authorities
to prevent the development of local monopolies and rent-seeking practices. |
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The Ports and Shipping sector essentially holds a monopoly on trade, as over 95% of the trade is channelled through the two main ports-Karachi and Port Qasim. Despite nearly 6% growth in port traffic in the last 6-7 years, the physical capacity of these ports is considered adequate as no major congestion is encountered. The main physical constraints may be the condition of the approach channels. On the ports side, the main problem is the excessive handling charges incurred by shippers due to inefficiencies and multiple charges. For a comparable cargo, Karachi port is reported to be 1.5 times more expensive than Bombay, 4.5 times Colombo and 19 times Dubai. It is estimated that the shippers pay about 15 bil Rs ($300 million) "extra" per year to the two ports-a cost which is passed on to the consumers and producers in Pakistan. he net effect on the economy of these inefficiencies at Karachi Port alone have been estimated to be around $850 mil3 (42.5 bil Rs) per year.
Pakistan's shipping sector, dominated by the Pakistan National Shipping Corporation (PNSC) is another sad story. The market share of PNSC has dwindled over the years; currently it handles only 5% of the national trade. Its' shipping fleet has diminished and aged! With only fifteen, or so, ships remaining [vs. 70 ships in the 60s and 70s], it has been consistently posting losses to the tune of half a billion Rupees annually. Pakistan is currently paying about $800 million (40 bil Rs) per year to foreign shippers. |
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April
2001 |
The World Bank, in conjunction with MOC, NTRC is organising
a Transport Workshope from 24 to 26 April, 2001. Find
more click here. |
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