Published in Dawn, March 27th, 2015

In 1971 the government nationalized the shipping industry, and merged all
shipping lines under the Pakistan National Shipping Corporation (PNSC).
Later, PNSC went to the public sector also with 90.2% government
ownership and 4.9% private sector ownership. PNSC has a fleet of 22
vessels and its subsidiary, the National Tanker Company, owns one tanker.
The Government has issued 35 licenses to private sector companies, but
so far only two companies have started up - the Tri-Star Shipping Company
with one tanker, and the Millwalla Shipping Company with only one small
vessel. Although there are only two companies under the Pakistan national
flag in the private sector, a number of companies are operating under flags
of their own convenience.
Foreign shipping lines dominate the Pakistan shipping industry. Due to
small size and inadequate capacity, the national fleet is presently shipping
approximately 10 percent of the regular cargo and 25 percent of the liquid
build cargo.
The shipping sector in Pakistan is in its infancy at the present moment.
With no sufficient amount of capital invested into the shipping sector, the
entire fleet of the nation is left to only 24 ships, 17 of which are held by
Pakistan National Shipping Corporation.
The rest are owned by Tri-Star Shipping Corporation and a few other
shipping lines.
The country has two major seaports viz. Karachi and Bin Qasim. Besides,
Gwadar Fish Harbour cum Mini Port has been substantially completed.
Feasibility Study to develop Keti Bunder as a Fish Harbour cum Mini Port is
currently under process.All the ports and the shipping lines are not
sufficient to meet the growing demands of Pakistan and other countries and
regions that these countries cater to. Regions include Kashmir, Western
China, Afghanistan and Central Asian Republics like Kazakhstan,
Uzbeksitan, Tajikistan and Turkmenistan.

All Rights Reserved 2003-2009 CCOL

LACK OF SHIPPING INDUSTRY IN PAKISTAN: FOREIGN SHIPPING
FIRMS HANDLE 95% OF TRADE
By Irfan Aligi
Despite having a full-fledged Ministry for Ports and Shipping, with a
minister and a secretary, the government has not yet declared shipping
business as an industry, a leading shipping agent told Daily Times on
Friday.
Pakistans current trade volume was about $50 billion per annum with
imports worth $30billion and exports around $18 billion.
Only five percent of the trade volume was being handled by domestic
shipping businessmen while the remaining 95 percent was being handled
by foreign enterprises, he said. The annual approximate freight charges
are of about $12.5 billion.
Foreign shipping companies have 95 percent of the market share while the
Pakistan National Shipping Corporation (PNSC) gets just five percent, he
said, adding that this is because PNSC has got only 12 to 15 cargo ships,
which all are outdated and have reached their scrapping time.
PNSC chiefs, he said, were nominated from Islamabad and mainly hailed
from the armed forces were incompetent as they lacked the technical
knowledge involved in the shipping business.
He said during 1970s, there were some 70 to 80-cargo ships with PNSC
and private businessmen but after being nationalised, the private sector is
reluctant to remain involved in the shipping business.
Detailing the deteriorating conditions of the shipping sector, he said the
shipping sector is not considered for bank credit like other businesses in
Pakistan. A cargo ship normally costs up to $30 or $40 million. Oil business
forms a large part of the chartering business but the government had given
the PNSC with the first right of refusal.
The PNSC could not take up the entire load of the business therefore
foreign chartering services take up oil shipments. The government should

allow level-playing field to all hands in shipping business but unfortunately

the case is quite opposite to the needs of domestic businessmen.

The Karachi Shipyard and Engineering Works (KSEW) has not

manufactured more than eight ships since 1960, when it was set-up. Like
other institutions related to the shipping business, KSEW too was headed
by people not competent to supervise its functioning.
He said government should privatise the PNSC but the process
privatisation must be neat and clean and it should not be given to hands
folklores. It is the need of the hour that the government should invest
least one billion dollars and give the shipping business the status
industry.

of
of
at
of

Coming to the Karachi Port Trust (KPT), he pointed out that the KPT
Chairman, Vice Admiral (Retd), Ahmed Hayat has been incumbent for the
last seven years although the official tenure for a single chairman was
limited to three years.
A few of KPT berths had collapsed in early of August this year due to lack
of proper care. Unfortunately, the KPT is engaged in developmental works
outside the port area, making roads and under passes to please others.
The KPT needs to be modernised, as it is the backbone of economy, he
felt.
It is worth mentioning here that the shipping business was limited to only a
few players and the Parsi community was mainly engaged in the business
with just two or three ships in 1947. The PNSC was established in 1960s.
The number of ships in both PNSC and private sector were around 90. In
1972, the government nationalised all private ships. At present, some 60
businessmen are in shipping business directly while it becomes about 100
when those who are indirectly linked to shipping business, are counted.
The business employs about 5,000 people directly while 10,000 people
serve as its indirect manpower. Major foreign ship chartering companies in
Pakistan include MAERSK-SEALAND (Europe), HANJIN SHIPPING
(Japan), MALAYSIAN SHIPPING (Malaysia), WOCL (Singapore) and
AMERICAN PRESIDENT LINE (USA).

Source: http://defence.pk/threads/pakistan-lacks-shippingindustry.8178/#ixzz4LOPEfyHF

THE SHIPPING INDUSTRY

Its time to pull up our socks
By Syed M. Aslam August 30 - Sep 05, 1999
Will Pakistan enter the next millennium without a shipping fleet of its own?
The indications are; the heavy dependence on foreign shipping companies
would get worse in the years to come due to two primary factors the
present national maritime fleet is in a badly dilapidated state and will not be
able to meet the stricter International Security Codes of the International
Maritime Organization. The stricter ISO security codes would mean a
crushing blow to the aged Pakistani fleet.
Pakistani shipping has witnessed a series of setback since early 1990s
when the private sector was allowed to bring investment into the shipping
sector and one shipping company, Tri-Star went bankrupt two years ago.
Pakistan is heavily dependent on foreign shipping companies which is
costing it a huge amount of foreign exchange annually. The total merchant
marine fleet strength of the country comprises of 15 vessels with the stateowned Pakistan National Shipping Corporation (PNSC) and a single tanker,
m.t. Johar, with its subsidiary, the National Tanker Company.
The PNSC is lifting less than five per cent of the national seaborne cargo
on the vessels which have long run their economic lives. The total dead
weight tonnage (dwt) of the 15 PNSC vessels, including three used
container ships which it acquired in 1996, add up to 261,836. Including the
tanker, m.t. Johar, the total tonnage available with national shipping
increases to 330,000 dwt.
PNSC fleet comprises of 12 break-bulk vessels whose average age is 18
years, including m.v. Islamabad which was built locally by Karachi Shipyard
and Engineering Works Limited (KSEW). Incidentally, it was also the last of
the three ships built for PNSC by the KSEW in 1983. m.v. Islamabad is also
the biggest vessel (17,200 dwt) built by the KSEW.
Six of PNSC fleet's break-bulk carriers were built in 1980, four in 1981, two
in 1983 and one twenty years ago in 1979. Of the three used container
vessels acquired by the Corporation in 1996, two were built in 1983 while

the year of manufacture of the third was 1985. PNSC has not inducted any
new tonnage since the early 1980s when it acquired 14 ships to take its
fleet strength to sixty.
In less than two decades PNSCs fleet strength declined to one-fourth and
today its aging fleet is in a dilapidated state many of which are on the scarp
list.
PNSC has remained in red most of the years since it was established in
1979 when Pakistan Shipping Corporation and the National Shipping
Corporation were merged.
The Corporation earned an operating profit only five times during twelve
years between 1984 and 1995. It reverted back into black for the first time
since 1992 when it posted an operating profit of Rs 59 million in 1996.
However, its accumulated losses soared to a record Rs 526 million during
the same year.
Since then PNSC has managed to improve its financial performance to
earn an operating profit of Rs 282 million in 1997 and Rs 203 million in the
year ended June 30, 1998. However, as of June 30 last year, PNSCs
accumulated loss stood as high as Rs 353 million.
The Chairman of PNSC, Vice Admiral Obaid Ullah Khan, blamed low freight
rates internationally and economic recession as the primary cause of
decline in the operating profit in 1997-98. In addition, he also cited the
slow-down in large-scale manufacturing sector, incessant currency
depreciation and a cut throat competition for the declining profitability.
He also blamed the withdrawal of the Right of First Refusal which gives
preference to the PNSC to lift the national cargo provided it matches the
rates offered by the lowest bidder, for hurting the profitability. PNSC carried
much smaller quantities of such captive national cargo as wheat and iron in
1997-98 which dropped from 2.4 million tonnes to 0.297 million tonnes and
from 1.343 million tonnes to 0.597 million tonnes respectively over the
previous year.
In the half-year ended December 31, 1998 PNSC managed to improve its
operating profit by over six-fold from Rs 15 million to Rs 92 million over the
corresponding period previous year. This was despite a 19 per cent decline
in operating revenues which fell from Rs 2.5 billion to Rs 2 billion during the

same period. According to the unaudited report, the reduction in operating

revenues did not hurt the profitability as operating expenses also declined
by 22 per cent.
The PNSC earned an after-tax profit of Rs 18 million and its accumulated
loss decreased to Rs 335 million as compared to Rs 504 million during the
corresponding period the previous year.
TRI-STAR GOES BANKRUPT
Talking to PAGE, the chief executive of Tri-Star, Masood Baghpatee, said
that incentives alone will not help induct more vessels into the national
maritime fleet. Blaming the malaise in the shipping sector he said that the
government doesnt want to support the shipping sector as it does not even
consider it an industry.
He was alluding to the first-ever attempt by the present government to
accord shipping the status of an industry and a number of incentives to
attract the private sector investment in the shipping sector. Incentives
include duty-free import of vessels and the removal of age and size bar on
such imports. Ironically, it was the abolition of the import duty which made
PNSC to bring its container vessels which since their induction in 1996
were chartered out by the Corporation on the Far Eastern route.
Baghpatee said that such incentives alone will not help induct additional
tonnage into the maritime fleet as no consideration has been paid by the
government to offer cargo protection to the operators. In a country where
foreign shippers are paid better freight charges than the local shipping
companies who would like to invest in the shipping sector, he asked.
The Local shippers are discouraged to lift any substantial quantity of such
captive cargo as wheat, iron, cotton, rice and fertilizer which alone adds up
to 10 million tonnes. The foreign shippers are not only encouraged to lift the
bulk of the cargo but they are paid a much better a price than their local
counterparts. For instance, US flagships get as much as $ 85 per tonne to
lift a commodity as compared to just $ 20 per tonne by a local shipper for
obvious reasons, he added.
Stressing the need of building a sizable maritime fleet, he said that no
foreign shippers would ever like to risk catering to the needs of Pakistani
trade if, God forbid, an eventuality takes place. In such a scenario even the

PNSC would not be able to ensure supply of even such basic commodity
as oil as it has just one old and dilapidated tanker.
Baghpatee said that he was ready to invest in the shipping sector once
again if the sector was accorded the cargo preference and protection not
only to the PNSC but all the local private sector shipping companies as
freight rates worldwide were low and there was a cut throat competition.
Without cargo protection who would like to invest, he added.
He also said that the government should establish a separate ministry for
shipping like India where the prime minister himself heads the special
committee on shipping. The creation of such a ministry is necessary to
better coordinate the shipping requirements of various ministries. For
instance, ministry of production is responsible for imports of iron ore and
coal; ministry of food, agriculture and livestock makes recommendations
about quantity of wheat imports; while ministry of petroleum looks after the
oil imports. The centralization will help coordinate shipments of various
commodities better to ensure timely shipment at the most economic rate for
the overall benefit of the people and the local shipping, he added.
He attributed the flourishing of the Indian shipping on the much vital
governmental support which is absent in Pakistan. It is a fact that stateowned India Shipping Corporation alone has an envious dead weight
tonnage of 13 million tonnes as compared to just 0.33 million dwt of PNSC
and National Tanker Company. Combined DWT under the private sector
shipping in India adds up to another 10 million dwt.
Even Bangladesh which separated from Pakistan in 1971 has a
merchant marine fleet of 225,000 DWT in its state-owned Bangladesh
Shipping Corporation which serves the trade needs of a country
whose population is three-fourth of that of Pakistan.
Baghpatee expressed concerns at the situation that no attempt has been
made by the government to introduce the new shipping policy, a legal cover
through the endorsement of the Parliament. The fact that the said policy
and the incentives remain good only on paper without enjoying any legal
sanctity speaks volumes about the low priority that the government gives to
shipping, he added.
Baghpatee, whose three vessels, out of the total seven, registered in
Pakistan have been auctioned at the foreign ports where they stayed for

long duration to avoid arrest arising from non-payment of loans from local
Allied Bank Limited, claimed that his company was forced to go out of
business by the vested interests who did not like to see a Karachi-based
company flourishing. "Had Tri-Star been a Punjab-based company it would
have not been meted out the treatment which it was accorded," he added.
Baghpatee expressed absolute pessimism when asked about what the
future holds for the local shipping. "Under present circumstances which
include lack of support on the part of the government, the inability of the
local shipping lines of not to get the cargo orders even if they are the lowest
bidders, the aged fleet which has long past its economic lives, the immense
competition for freight in the international market and the low freight rates
worldwide, and the implementation of stricter IMO security codes from next
year, I see no future for the national shipping. No, I dont even see
Pakistani flagship vessels in the years to come," he added.
He said low freight rates worldwide pose many challenges for the national
shipping as the chartering rates have dropped by one-fourth during the last
few years from $ 21,000 per day to between $ 5000-6000 per day today.
Over 50 per cent of shipping companies today are posting losses due to
slump in the international market but what makes the scenario different is
that unlike Pakistan, shipping sectors the world over enjoys the support of
their governments to lessen the blow, he added.
POST-SANCTIONS IMPACT
The developed countries imposed economic sanctions to punish Pakistan
for using its option to conduct a nuclear test on May 28 and 30 last year.
Like all other sectors it also had a detrimental impact on the seaborne
foreign trade.
Not only the volume of both imports and exports decreased in 1998-99 but
it also forced the foreign shipping companies, which carry the bulk of the
national seaborne cargo, to increase the freight charges by 15.5 per cent
being the remittance adjustment factor. The substantial increase in the
freight charges rendered the Pakistani exports incompetitive in the
international market.
The introduction of dual exchange rate, which asked importers and
shipping companies to buy half of the foreign exchange at official rate and
half from the open market, provided the shipping companies with the

opportunity at the higher open market rate which was over 10 per cent
more than the official rate. This also inflated the prices of exports from the
country to render them incompetitive in the international market.
The restriction to remit the funds to the principals, created problems for the
foreign shipping companies the ultimate price of which were borne by the
importers and exporters who have to absorb the increased shipping costs.
Just how the increased rates hurt the exporters is obvious from the
following examples: Shipping a 20-foot container to the US was increased
by $ 230 per container while that for a 40-foot container went up by $ 460
due to the increased freight charges. Similarly, cost of shipping one tonne
of rice to Sri Lanka went up by Rs 60 per tonne as the shipping companies
charged the exporters Rs 53 for each dollar instead of the composite rate
of Rs 50 which depicts 6 per cent difference.
SHIPPING POLICY- LACK OF IMPLEMENTATION
SHIPBUILDING, SHIP REPAIR
Today, over 20 per cent or 7.7 million tonnes of the total cargo; both imports
and exports, liquid and dry, is containerized in the country. The annual flow
of the containerized cargo has already reached 550,000 TEUs, which with
an average load of 14 tonnes per container adds up to 7.7 million tonnes.
While this offers big business for the PNSC, it is lifting a small portion of the
total cargo due to limited number of container vessels in its fleet. Unless it
inducts more vessels the bulk of containerized cargo business would keep
on going to foreign shipping companies.
CONCLUSION
Years of neglect, absence of long-term policies and the non-implementation
of the ones which were ever devised, have taken a heavy toll on the local
shipping.
No fresh tonnage has been inducted in the PNSC during the last two
decades with the result that today its fleet comprises of vessels which are
an average 18 years old costing it more and more money in repairs and
maintenance to keep them running.

In addition, the imposition of stricter maritime security codes poses a major

challenge for the sole shipping company of Pakistan, the PNSC. With a
fleet of aging vessels most of which are in dilapidated state chances are
that there will be no flagship carriers in the years to come unless measures
are taken to encourage investment in the private sector.
Over fourteen months have passed and yet there seems to be no urgency
on the part of policy makers to give a legislative cover to the Policy. In
addition, provisions should be made to ensure that the local shipping be
accorded the preference and protection which is imperative to attract
investment. As discussed above, incentives alone would not be enough.
Its time to exploit the real potential to make shipping the backbone of the
economy not only to save enormous foreign exchange but also to ensure
smooth flow of seaborne trade which only a dedicated national merchant
marine could do in times of peace or war.
CHECKERED HISTORY

MARITIME SECTOR
Introduction
Significance of the Maritime Sector
The significance of the maritime sector, for a start, can best be emphasized
through an established sequence of linkages:
a. First and foremost, in terms of opportunity, some 90% of world trade by
volume is carried out via the sea. Most countries use their rivers in an
effective manner for inland transportation of people and goods.
b. Secondly, a large number of ships are needed for the purpose of
handling various types of cargo; such ships include container vessels,
crude carriers, chemical carriers, LNG carriers, break-bulk cargo carriers,
general cargo carriers and the list goes on.
d. Fourthly, these ships have to be constructed in commercial yards, which
is another profitable enterprise. These ships also need periodical
maintenance & repairs and hence the need for ship-repair yards. Ship
repair requirements can take the form of emergency docking, machinery
defects, hull repairs, tank cleaning, machinery overhauls, alterations and
repainting. Ship conversion is also a lucrative activity.
e. Now these ships have to be berthed in ports to load and off-load their
cargo; and hence the need for ports. The importance of a port stems from
the fact that it is not only a place for simply handling cargoes, it is much
more than that. The more diverse the range of integrated services it offers,
the more competitive it becomes and the more productivity it generates.
The availability of logistics centers, free trade zones and multi-modal
transportation facilities within the port area enhances its importance. A
number of associated activities, in addition to the value-added services just
mentioned, like ship movement control, logistics management, cargo
handling and transportation, pilotage, tugs, port control, as well as the need
for dredging and navigational aids, automatically get generated.
Comparative Standing
Where we stand today in terms of our maritime prowess can best be
illustrated through a comparative process:
b. Pakistan National Shipping Corporation presently operates some 9 ships
with a total deadweight tonnage of 642,207 which is considerably less than
most private ship-owners in Greece. By contrast, Japan, which controls the
largest number of merchant ships, possesses a fleet of over 132 million

tons (as of 31 December 2010). Most of the general cargo trade moreover
is carried out in container ships, of which PNSC doesnt operate any.
d. The sole shipyard in the country, Karachi Shipyard & Engg Works Ltd, is
doing reasonably well by Pakistani standards, having come out of the red
some five to six years ago. Its profits are however mainly dependent on
ship-building orders from the Pakistan Navy and its competitive edge is not
being put to the test. A case in point is an international tender floated by
KPT some time back for construction of a tug, which was bagged by a
Bangladeshi yard. KSEW has likewise not been able to partake of the huge
requirement of periodical maintenance and repairs of the large number of
ships transiting to and from the Gulf. By contrast, shipyards in South Korea
got orders of $18.5 billion in the first six months of last year. A word of
caution though: while Chinese yards, during the same period also bagged
record orders of around $10.5 billion, it was just 4% of the total yards that
actually secured the orders. Many Chinese yards are accordingly trying to
offset this by expanding their oil rig businesses.
e. The largest port in the country, that of Karachi, is presently handling
around 1.4 million TEUs of containerized cargo and 26 million tons of other
general and bulk cargo per annum. By contrast, the Port of Singapore
handled 32.5 million TEUs of containerized cargo and 227 million tons of
other cargo in 2012. The Port of Singapore, moreover, earns over five
billion dollars in revenue, simply because it provides an array of valueadded services.
Maritime Opportunities
We have seen how big the pie is. The major problem which keeps us from
taking advantage of the immense potential of the maritime sector is a
general lack of awareness and consequently a lack of vision and
capacity. It thus needs to be kept in mind that a vital pre-requisite for
availing the benefits of the vast maritime sector is capacity-building through
maritime education and marine scientific research.
Existing Issues
If we are indeed serious about tapping our enormous maritime potential, a
brief glance at our pressing issues will be in order:
a. The Ministry of Ports & Shipping is currently the only ministry at the
federal level solely dedicated to maritime matters.

c. The current environment of having to run around various power centers

for resolving basic issues is a source of discouragement for private
stakeholders.
d. Most of the civil servants charged with preparing maritime policies and
plans and ensuring their effective implementation are not well-versed in its
operational and technical intricacies.
f. Coordination, both horizontal and vertical, between the federation and the
provinces, between public and private stakeholders, is another weak area
which needs to be surmounted if the faith of the private sector is to be
restored.
Suggestions
And finally, a few suggestions, which if adopted can at the very least point
us in the right direction towards effectively tapping our maritime potential:
a. In order to satisfy the need of the private sector, including customers, for
a one-window solution and for better field level coordination, it is imperative
to set up a National Maritime Authority. The preferable solution would be for
this authority to replace the existing Directorate General of Ports and
Shipping, a largely ineffectual field extension of the Ministry of Ports &
Shipping.
b. For better coordination of maritime aspects which, as mentioned earlier,
are interlinked, it may be preferable to enhance the scope of the existing
Ministry of Ports and Shipping to make it the Ministry of Maritime Affairs.
This proposed Ministry, apart from continuing to handle the portfolios of
ports, shipping, navigational safety and fisheries, can be made responsible
for coordinating or overseeing all other maritime aspects.
c. The proposed National Maritime Authority should preferably be made
responsible to this Ministry but can also be autonomous.
d. The changeover needs to be gradual so as not to upset the apple cart.
e. The keyword is capacity building, without which the entire exercise is
meaningless. The functions of the proposed National Maritime Authority
and Ministry of Maritime Affairs can be gradually enhanced in direct
proportion to the trained manpower being inducted.
f. A conducive environment should be generated in which any investor,
local or foreign, can invest with ease and thrive.
h. Pollution at sea needs to be curbed at all costs; there are no two ways
about it. This responsibility at the moment falls on the shoulders of the
provincial Environmental Protection Agency which seemingly is not too

distressed about what happens in the sea. Once the proposed Ministry of
Maritime Affairs and the National Maritime Authority emerge from the
shadows as major stakeholders of the maritime scene, they may be in a
position to exert the much-needed pressure on the provincial
Environmental Protection Agency.
j. Marine Scientific Research should be undertaken in earnest, so that the
country is ready to exploit the abundant mineral and gas hydrates
resources of the seabed whenever it becomes technologically and
economically feasible to do so.
Conclusion
So, to recap what we have covered, the size and significance of the
maritime sector has been explained through a sequence of linkages, the
gap between what is and what could be has been illustrated through a
comparative study, our inherent systemic flaws outlined and some
suggestions for improvement offered. If we can but imagine the size of the
maritime pie, the large slice we can have of it, and learn to recognize and
remedy our inherent flaws, we can perhaps start taking the first tottering
steps towards realizing our maritime potential. Just imagine too the quality
of life we would have in our coastal belt if the development of our pristine
coast is planned and managed in accordance with a sound Integrated
Coastal Zone Management plan; if tens of thousands of our citizens earn
their livelihood respectably through the safe and environmentally sound
recycling of ships, through sustainable fisheries, through ship-building and
repairs, though harnessing the power of the oceans and exploiting its nonliving resources, through sailing the worlds oceans as seafarers and
employed in various trades associated with a robust coastal tourism
industry. That day can come soon, as soon as the multi-billion dollar
importance of the maritime sector dawns upon us.
Note: This is the text of a talk delivered at the International Maritime
Symposium on Maritime Potential of Pakistan and Security of the Maritime
Domain held on 14-15 May 2014 at the Pakistan Navy War College,
Lahore. It was also subsequently published as a two- part article in the
June and July/August editions of the Navy News.

PNSC's Financial Results

The increased accumulated losses poses many challenges to the shipping
sector
By
Nov ,12 - 18, 2001

SYED

M.

ASLAM

Despite earning operating profit, compared to an operating loss the

previous year, the accumulated loss of state-owned Pakistan National
Shipping Corporation soared to Rs 1.4 billion resulting in a negative equity
of Rs 94 million in the year ended June 30, 2001. In addition, the fleet
strength of the fledging national flag carrier decreased from 15 to 14
vessels cutting its cargo carrying capacity from 261,836 metric tons dead
weight to 243,749 metric tons dead weight with the disposal of m.v. Ayubia,
a 1981-built break-bulk carrier.
The rest of the remaining 14 vessels, including the three container vessels
acquired by the corporation in 1996 and 11 break-bulk carriers, have also
long passed their economic lives one built in 1979, 6 in 1980, 3 each in
1981 and 1983, and one in 1985. Many of these vessels are expected to be
disposed of in the near future cutting the fleet strength and carrying
capacity of the PNSC to a dangerously low level and to further reduce an
already negligible share in the liftings of the national sea-borne cargoes.
During last five years PNSC's financial performance has been highly
erratic: its operating profits slid from Rs 282 million in 1997 to Rs 158
million in 1999 and went into black Rs 299 million in 2000. This year
PNSC managed to earn an operating profit of Rs 445 million which still did
not save it from suffering a pre-tax loss of Rs 267 million and post-tax loss
of Rs 312 million. Though the PNSC managed to earn an operating profit
and also managed to cut its pre- and post-tax losses over the previous year
the same did not help it cut its accumulated losses.
Implications
The increased accumulated losses along with reduction in fleet strength
and cargo carrying capacity in addition to a fleet almost all of whose
vessels have long passed their economic lives poses many challenges to

the shipping sector as PNSC is the sole national flag carrier of the country.
The situation also poses serious implications in the post September 11
scenario for the timely and affordable liftings of the national cargoes,
particularly exports, in the post September 11 situation resulting in
imposition of War Risk insurance and perceived uncertainties on the part of
foreign shipping lines.
For years, PAGE has been highlighting the deteriorating conditions at the
PNSC calling for restructuring of the entity on sound professional and
financial lines. Year after year it called for the concerted and solid attempts
to streamline the affairs in the long financially-troubled Corporation. We
have pointed to the challenges in the competition-oriented world of today
stressing on restructuring an entity which is extremely top-heavy and where
the incentives to the staff and workers far surpass performance.
It is an open secret that years of mismanagement, lack of vision and
absence of direction has brought the only shipping line of the country to a
verge of collapse. The deterioration has not taken place overnight and
much of it could have been avoided with prudent planning and informed
decisions no matter how hard they could have been.
Today, Pakistan's external trade, particularly export orders have come to a
trickle in part due to uncertainty about their timely delivery. The situation is
further worsened as PNSC is able to lift only a fraction of the national seaborne cargoes while the country is almost entirely dependent on foreign
shipping lines to lift the cargoes on their own terms. Certainly, the absence
of a viable national shipping fleet has made it easy for the foreign shipping
lines to dictate their own terms as their loyalties do not belong to the
country.
Conflict
Comments

SHIPPING
By SYED M. ASLAM
July 23 - 29, 2001

Can new shipping policy revive the industry?

The Pakistan Merchant Marine Policy 2001, announced by Federal
Communications Minister Lt. Gen. (Retd.) Javed Ashraf Kazi on the 10th of
this month, is seen by many as an attempt to exorcise the demons of public
sector monopoly and the inefficiency which it implies.
The new policy has deregulated the shipping sector and aims to attract
investment; both local and foreign, public and private, by offering a range of
incentives. Unlike the Shipping policy announced by the former Nawaz
Sharif government in June 1998, the new policy goes beyond offering dutyfree import of ships. It offers many new incentives to local and foreign
investors including Income Tax exemption till 2020.
For as long as one remembers, private sector was not allowed to play any
part in the shipping sector which enjoyed absolute public sector monopoly.
Till early 1990s private sector was not allowed to play any role in the
national shipping sector leaving it in the hands of state-owned Pakistan
National Shipping Corporation. The number of vessels and Dead Weight
Tonnage (DWD) of the PNSC fleet has been on continuous decline over the
years.
Today PNSC fleet comprises just 15 vessels 12 break bulk and 3
container vessels less than one-fourth its fleet strength two-decades-and
half ago. The break bulk vessels have long past their economic lives the
average age being over 18 years. Tender to sell at least one of these break
bulk carriers has already been floated in the near past repeatedly by the
PNSC and many more are expected to be floated in the near future. The 3
used container vessels were acquired by the PNSC in 1996 and were
chartered by it on the Asia Pacific routes. They were only brought to
Pakistan some two years ago.
PNSC is lifting less than five per cent of the national sea borne trade thus
leaving the country to rely heavily on foreign shipping companies for which
the foreign exchange-starved economy has to cough out a staggering $ 1.5
billion each year. Besides the already aged fleet the PNSC has incurred

heavy losses for the half year ended December 31, 2000 to push its
accumulated losses to wipe out paid-up capital & reserves as well as
current assets. With such serious cash flow restraints one can hardly
expect the PNSC to perform any better in the coming years enhancing an
already heavy dependence on foreign shippers even further.
Announcing a policy is a much easy task than implementing it in letter and
spirit. Remember the shipping policy announced by the previous
government in June 1998 and how it failed to induct a single tonnage to the
national merchant marine fleet. Perhaps the reluctance of the private sector
to invest in shipping sector can be attributed to opening and closure of
operations of Tristar Shipping.
To soothe the fears this time around, the Communications Minister added
that the government will constitute a Standing committee under secretary
communications which will take continuous input from all stakeholders to
ensure effective implementation and to make the necessary adjustments.
The committee shall comprise members from the relevant
ministries/agencies and stakeholders from the private sector to meet at
least once every year from the date of promulgation of this policy.
Putting the Pakistan's annual sea borne trade at 39 million tons, just 5 per
cent or 2 million tons of which is carried by the national carrier PNSC, the
minister said that the country's annual freight bill surpasses an staggering $
1.5 billion which is causing a colossal drain of foreign exchange resources.
He said that the new shipping policy aims to attract all sorts of investors
foreign, non-resident Pakistanis and local- to reduce an already heavy
dependence on foreign carriers and to help save substantive foreign
exchange. The policy, he said, aims to facilitate and attract private sector
investment in shipping, create an environment conducive for unimpeded
growth of the maritime sector and to deregulate and provide free
environment for investment in the maritime sector. In addition it aims to
maximise sea borne trade through the merchant marine fleet flying
Pakistani flag, to make the country's merchant marine sector internationally
competitive and to ensure efficient operation of the country's ports and
harbours through availability of harbour crafts tugs, pilot boats, dredgers,
survey vessels and specialised craft.

In addition, it aims to enhance utilisation of trained manpower in the

maritime sector by augmenting the country's training facilities by increasing
productivity which are internationally marketable. It may be mentioned that
thousands of trained and experienced individuals have been forced to find
jobs outside the country as the local merchant marine sector can offer only
limited opportunities mainly in PNSC.
So far so good. The policy does read good on the paper. So what's the
catch? The policy aims at achieving the under mentioned tangible growth in
the private and public sector a good 19 years from today- by 2020.
By 2020, the policy hopes to expand and upgrade Pakistan flag merchant
marine fleet to increase the present share of cargo from 5 per cent to 40
per cent and to increase the deadweight carrying capacity of Pakistan flag
ocean-going vessels to over one million tons compared to declining
261,836 DWD today.
The policy aims to revive and augment national ship-building/capacity to
meet 20 per cent ship construction requirements of the country merchant
marine and entire requirements of support and ancillary crafts. At present,
the sole ship-building and repair facility, Karachi Shipyard and Engineering
Works (KSEW), is standing idle for want of its core activities forcing it to
barely survive on limited maintenance jobs from the Pakistan Navy and
diversifying its activities beyond its core activity. For last many years, a
large number of staff and workers are sacked by the KSEW and at times
the remaining are not paid salaries for months. PNSC is not known to use
KSEW to dry dock and maintenance work of its vessels instead interested
more in passing the work to foreign shipyards on this pretext or that. The
same has been the case with Karachi Port Trust, the manager of the
premiere port of the country, which prefer to place orders with the foreign
shipyards for floating vessels such as dredgers, etc.
The policy also aims to rejuvenate and expand ship repair potential to
undertake the entire range of repairs and maintenance tasks of 50 per cent
of Pakistani Flag ocean-going vessels and all ancillary and support crafts.
Would this bring any relief to the work-starved KSEW, which has built
hundreds of ocean-going vessels and ancillary and support crafts not only
for PNSC and KPT but also for foreign countries. M.V Islamabad was built
by Karachi Shipyard and Engineering Works Limited (KSEW) was also the

last of the three ships built for the PNSC by the KSEW in 1983. The ship
was also the biggest vessel [17,200 dwt] built by the KSEW.
Financial incentives
The new shipping policy offer many financial incentives for the would-be
investors. It offers tax exemptions, concessional tax measures backed by
assurances. It also aims at simplifying the rules by deregulating the sector.
To begin with, ships and floating crafts tugs, dredgers, survey vessels,
and specialised crafts purchased or bareboat chartered by a Pakistani
entity flying Pakistani flag will be exempted from all import duties and
surcharges for good 19 years till 2020. This exemption, however, will not
apply to vessels imported for demolition purposes and will be subjected to
the condition that the ships/crafts acquired will be used for the purpose for
which they were procured, that is shipping. In case, the ships/crafts are
demolished within 5 years of their acquisition, they would be subjected to
full import duties and other charges applicable to ships purchased for
demolition purpose.
The policy accords shop-building and ship-repair the status of an industry
under the investment policy which is entitled to all incentives contained
therein.
Ships and all floating crafts purchased or bareboat chartered by a Pakistani
entity and flying Pakistani flag will be exempted from payment of income
tax till 2020. Instead, they will be liable to pay tonnage tax at the rate of one
US dollar per gross ton per fiscal year in lieu of income tax irrespective of
the earnings or whether the operator made a profit or incurred a loss.
The registration fee will be maximum $ 1,000 per vessels upto 100 gross
tons $ 50, 101-500 gross tons $ 100, 501-600 gross tons $ 200, 601-5000
gross tons $ 500, 5001 and above gross tons $ 1,000. There will be a
slightly different criteria of taxation for ships, vessels and all floating crafts
which are though not registered in Pakistan is hired by Pakistani individual
or group under any type of charter other than bare-boat charter. The fee for
such vessels and crafts shall be fixed at $ 0.15 (15 cents) per gross ton per
chartered voyage provided that it will not exceed $ 1.00 per gross ton in
any fiscal year.

To attract foreign investment, all port and harbour authorities in Pakistan

will allow all ships and floating crafts 10 per cent reduced berthing rates
when the same are berthed for purposes of repair and maintenance.
Pakistan flag vessels shall be entitled to receive freight revenues in any
convertible currency subject to State Bank regulations.
The long standing demand of Pakistani seafarers working on foreign flag
vessels, and there are thousands of them serving abroad in all capacities,
is accepted this time around. The salary of Pakistani seafarers working on
foreign flag vessels will now be exempted from payment of Income Tax up
to the amount repatriated through banking channel.
To further induce the private sector, both local and foreign, to invest in
national merchant marine the government has said that it will help it to
secure a reasonable share of cargo of the country with which it concludes a
bilateral shipping agreement for ships flying the national flag. The same
principle of securing foreign cargo shall be followed when the government
of Pakistan concludes international multilateral shipping arrangements.
To assure the potential investors that this time around the government
intends to implement the policy in letter and spirit the Communications
Minister said that the government will take all necessary legal measures to
ensure protection of local and foreign investment made in the maritime
sector. In addition, all foreign direct investments in shore based shipping
activities will be allowed as per BoI policy.
Owners, charterers and operators of ships and/or floating crafts may be
allowed to open and operate foreign currency accounts and will be
permitted to operate these accounts for both receipts and payments of
foreign exchange. They may retain their surplus earnings in these accounts
and shall surrender the same within three months of closing the financial
year. Foreign partners in Pakistan-based Joint Venture companies may
receive their shares of profits after tax.
In addition, Pakistani owners of ships/flaoting crafts either owners or
bareboat who register their vessels in the country shall be authorised to
remit foreign exchange at the official exchange rate to the sellers/owners of
the ships/floating crafts. Furthermore, the Government of Pakistan shall
authorise free and uninterrupted repatriation of foreign exchange invested

in the merchant marine sector of Pakistan. It shall also allow free and
interrupted repatriation of profits made by foreign Joint Venture partners of
Pakistani entities or foreign ship-floating craft owners running Pakistanbased companies and operating Pakistan flag vessels/floating crafts.
Ships and all floating crafts are considered bonafide collatereal against
which financing can be obtained from Banks and DFIs subject to policy of
the financial institution. The GoP will also make best endeavour to obtain
financing from aid donor countries on attractive terms for the specific
purpose of construction/acquisition of new ships and other floating crafts.
Such efforts shall include obtaining donor country financing for construction
of ships and other floating crafts in Pakistani ship/craft building facilities.
The new shipping policy reads good on the paper but would it help induct
private sector-led investment to help fresh tonnage to lessen heavy
dependent on foreign shipping companies which is costing country heavily
in drain of foreign exchange not to mention the security in case of an
eventuality. We have to wait and see as the private sector having witnessed
the failure of private shipping company may act like the proverbial "once
bitten twice shy."
Certainly the PNSC fleet is an old and dilapidated condition six of the
twelve break bulk carriers were built in 1980, four in 1981, one each in
1983 and 1979. Of the three used container vessels acquired in 1996, two
were builtin 1983 and the third in 1985. In less than two decades PNSC's
fleet strength declined to one-fourth today with all its ships in dilapidated
condition requiring constant maintenance and repairs costing huge
amounts of money, increased idling time, short trips for the financially
troubled corporation.
Despite enjoying absolute monopoly, PNSC has remained a financially
troubled organisation during the big part of its existence since it was
established in 1979 when Pakistan Shipping Corporation and the National
Shipping Corporation were merged.
PNSC earned an operating profit only five times during twelve years
between 1984 and 1995. It reverted back into black for the first time since
1992 when it posted an operating profit of Rs 59 million in 1996. However,
its accumulated losses soared to a record Rs 526 million during the same
year.

Since then PNSC has managed to improve its financial performance to

earn an operating profit of it to Rs 282 million in 1997 and Rs 203 million in
the year ended June 30, 1998. However, as of June 30 last year PNSC's
accumulated loss stood at a high 353 million. The rest is history.
Today PNSC fleet is in a badly dilapidated state and will not be able to
meet the stricter International Security Codes of the International Maritime
Organisation. The stricter ISO security codes would mean a crushing blow
to the aged Pakistani fleet.
The question is: Can incentives alone will help induct tonnage into the
national maritime fleet. As is, shipping was accorded the status of an
industry for the first time in June 1998 Policy. Incentives include duty-free
import of vessels and the removal of age and size bar on the import of
vessels. Ironically, it was the abolition of the import duty which made PNSC
to bring its container vessels which since their induction in 1996 were
chartered out by the Corporation on the Far Eastern route. However, the
policy failed to induct any fresh tonnage or registration under the Pakistani
flag.
What, however, makes the new policy different from its predecessor is the
fact that it also offers assurances by the government to help secure
cargoes from any bilateral arrangements as well as loans from the
international donor agencies.
Observers also highlight the necessity for the creation of a separate
ministry to better coordinate the shipping requirements of various
ministries. As is, the ministry of production is responsible for imports of iron
ore and coal; ministry of food, agriculture and livestock make
recommendations about quantity of wheat imports or exports; while ministry
of petroleum looks over the oil imports. The centralisation is necessary to
help coordinate shipments of various commodities to better ensure timely
shipment at the most economic rate for the overall benefit of the people
and the local shipping sector. A government supported and encouraged
shipping policy can help build a strong maritime presence, if examples of
India and Bangladesh are any indications.
Indian maritime fleet comprise 13 million DWD and even Bangladesh which
separated from Pakistan in 1971 has a merchant marine fleet of 225,000

DWT in its state-owned Bangladesh Shipping Corporation to cater a

populace which is three-fourth of that of Pakistan.
Shipbuilding, shiprepair
The years of neglect have taken a heavy toll on the shipping in Pakistan
which is increasingly getting more and more dependent on foreign shipping
companies to cater to its seaborne trade. Karachi Shipyard and
Engineering Works Limited (KSEW) is the oldest heavy engineering works
and is fully equipped with shipbuilding, ship repairing and heavy/general
engineering works.
Establsihed in 1957, the fully government-owned organisation, has built
over 400 vessels of various types and sizes not only for the country but
also for many other nations in the region. It is fully equipped to build
passenger and cargo ships, oil tankers, bulk carriers of upto 26,000 dwt.
It has built three vessels for PNSC, m.v. Lalazar, m.v. Shalamar and m.v.
Islamabad the biggest 17,200 dwt vessel. It built its last ship in 1992, a
17,300 dwt vessel named Youyi for China. It has also built a number of
vessels for port operations such as tugs, dregders, hopper barges, ferries,
fishing trawlers, launches and special purpose craft.
It has built ships not only for PNSC but also for such foregn organisations
as National Shipping Cororation of Dubai, China Ocean Shipping
Corporation and China National Machinery Corporation.
Apart for building port maintenance vessels for the Karachi Port Trust it has
also built two dumb barges for Hansa Lines of then West Germany which
were used in the Gulf region. Other export orders included two tugs for the
UAE, two propelled tugs for Saudi Arabia, four fishing trawlers and 19
vessels for the Iranian Navy, two mini bulk carriers for China and six port
operation vessels for a Belgian company.
In addition, KSEW has repaired over 4000 vessels, half of which were
foreign flagships. Many navies and shipping lines have a regular customers
of KSEW. However, except for a number of orders from the Pakistan Navy
which also uses its repair services often the KSEW which in better times
bustled with activities today stands much or less idle as not only it has not
received a ship-building order in last seven years but as the state-owned
PNSC prefers to have its ship repair and dry-docked at the foreign ports but

also the Karachi Port and Port Qasim prefer to give tenders for port
maintenance vessels to foreign companies.
The KSEW thus is not only deprived of its core ship-building activity but
also to receive orders for smaller port crafts by the Karachi Port Trust and
Port Qasim, the two national port maintenance authorities.
This has forced the KSEW to divert its attention from its core activities to
general engineering activities in the recent past. Over the years, the KSEW
has emerged as one of the few heavy machinery manufacturers of the
country. It has undertaken a wide variety of engineering and structural
works for oil refineries, storage installations and oil based industries as well
as engineering workshops, and cement and sugar factories.
Since KSEW works under the ministry of defence, it enjoys the support of
the Dockyard of the Pakistan Navy in the designing, development and
construction of submarines and warships. This support from the Pakistan
Navy in the form of joint venture between the two organisations extend to
designing, development of technical know-how, commissioning/trials and
indigenisation in the construction of small warship and support craft.
KSEW has been a partner in the construction of such vessels for the Navy
as mine counter measure vessel, fast petrol boat, missile craft, floating
docks and tugs. Its close liaison with the Navy has given it the capability to
design and construct various types of submarines, warships and naval
support vessels to friendly countries in collaboration with the navy.
However, a big portion of KSEW facilities lay idle at present due to lack of
shipbuilding and repairing work.
Conclusion
The greatest challenge posed to the local national shipping sector which
primarily comprises the sole state-owned flag carrier PNSC is the
imposition of stricter maritime security codes next year. With a fleet of aging
vessels, most of which are in dilapidated condition, chances are there will
be no flagship carriers in the year to come unless of course the new policy
succeeds to attract comparatively newer vessels by the private sector.
Providing the legal cover to the new shipping policy and its effective
implementation at the earliest possible is necessary to give it the needed
sanctity. As is, the last policy was never provided the legal cover.

The lack of work at the KSEW is actually an extension of overall

deterioration in the ports and shipping sector. Of the two operational ports,
Port Qasim still primarily remains a day-time port after almost two decades
of operation. The aged fleet poses an immense financial challenge for the
PNSC which is heavily in red not only to meet its day to day expenses but
more so its inability to induct any fresh tonnage in its fleet.
KSEW is performing no better. While it needs Rs 700 million annually just
to breakeven it is falling short of 25 per cent of this bare minimum revenue
just to keep it afloat. The absence of any ship-building orders over the
years and the lack of support by the PNSC which did not provide a single
ship repair and maintenance work during the last decade till last has taken
a heavy toll on the KSEW.
Will new shipping policy help induct more tonnage in the national maritime
fleet, floating crafts by the KPT and PQA and work for KSEW? We have to
wait and see how effectively the policy is implemented to attract the local
and foreign investment in a sector which remained regulated for much too
long.

SHIPPING
The shipping industry of Pakistan is fast heading towards a total collapse
unless the government takes immediate measures to revive it on war
footing.
By Syed M. Aslam
Sep 29 - Oct 05, 1997
The deterioration in the shipping sector is obvious from the fact that though
the volume of seaborne cargo has increased over three-fold from 9.5
million tonnes to 31 million tonnes from 1971-71 to 1996-97, the fleet
strength of the national merchant marine has declined to less than a third,
from 57 vessels to 17 vessels during the same period. This in turn has
resulted in a sharp reduction in the cargo carrying capacity of the state
owned national carrier, Pakistan National Shipping Corporation (PNSC)
from 635,937 deadweight tonnes (dwt) to 290,356 dwt during the same
period.
The national marine fleet comprises a total of 17 break bulk carriers, 12
with PNSC and 5 with private sector Tristar Shipping plus a oil tanker with
Pakistan Tanker Association, a subsidiary of PNSC. Though PNSC
acquired three container vessels last year they are not included as they are
not lifting any national cargoes being chartered out by the Corporation.
The national shippers are lifting only about 7 per cent of the national
seaborne trade while the rest is being lifted by foreign shippers to cost over
$ 1.5 million to the exchequer annually. The situation would worsen as the
average age of PNSC vessels is 15-20 years and soon many of them
would be up for scrap like many others in last few years.
On the other hand, the private sector Tristar Shipping which has a fleet of
used Korean vessels, is on the verge of collapse due to liquidity problems.
The president of Tristar Shipping, Masood Baghpatee had asked the
finance minister, minicter for communications and the governor of the
central bank to intervene for the immediate release of Rs 100 million loan
by the Allied Bank of Pakistan (ABL) to continue its operations.

Baghpatee had said that the loan is needed to help meet such necessary
expenses as purchase of diesel, to pay wages of crew, insurance and
maintenance of vessels.
He had alleged that ABL was holding Tristars securities worth Rs 653
million out of which Rs 300 has been availed. While Tristar is entitled to
avail 70 per or Rs 457 million of the security the ABL failed to release the
loan.
He warned that failure to get the loan would result in suspension of
operations of Tristar subsequently resulting in unemployment of hundreds
of Pakistani seamen and loss to thousands of shareholders of the
company.
Despite numerous attempts by PAGE to contact Mr Baghpatee and a
number of assurances by his office that he would be replying to a PAGE
questionnaire, no response was received from Tristar Shipping.
Masood Baghpatee, however, choose to fax replies to a PAGE
questionnaire about other shipping related issues in the capacity of
president of National Shipowners Association which forms part of this
article elsewhere.
Coming back to the Tristar-ABL conflict, an analyst said that it is hard to
take sides as the banking arrangement between Tristar and ABL is a matter
of mutual understanding between the two.
The release of loan sought by Tristar depends on what kinds of securities
arrangement it has with ABL and as as the same is known only to the two
parties it would not be right to say anything, he added.
However, he added, the non-release of loans could reflect upon the lack of
faith towards Tristar on the part of ABL and though politicisation could be a
reason he ruled it out.
He added if the Tristar was not satisfied banking with ABL what stops it
from taking its business to any other financial institution.
Tristars operating profit declined sharply by 72 per cent to Rs 27 million for
six months ended December 31, 1996 compared to the same period the
previous year. Its pre- and after tax profits also decreased by 79 per cent to
Rs 14 million and 77 per cent to Rs 12.5 million respectively. While Tristar

blamed the drastic reduction in profitability to a 7 per cent decrease in fleet

operations , rupee devaluation, increases in prices of diesel, fuel and
lubricants the claims seems to make little sense as PNSCs operating
revenues register an increase of 4 per cent during the same period.
The years of neglect and the resultant deterioration is not only costing the
country a huge amount to foreign shippers but the dependence on foreign
shippers is also fearsome if hostility ever breaks out for foreign carriers
they would be least interested to serve the nation for fear of losses.
It is for the first time that the sitting government has proposed to accord
shipping the status of an industry.
The salient features of the Shipping Policy include incentives such as a
five-year tax holiday, soft term loans from either donor countries or the
international market and help raise finances and allocation of funds through
commercial banks and DFIs.
Other incentives include a 30 per cent subsidy on construction of ships to
local shipowners for placing shipbuilding orders with the national shipyard
provided the vessels would not be sold to foreign buyers before 10 years of
service under the Pakistani flag though there is no restriction on sale to
other national flag owners.
In addition, local ship owners would be allowed to open and operate foreign
bank accounts in Pakistani or foreign banks and insure with a local
insurance companies in local currency or foreign exchange.
Setting up of a maritime commercial bank is also proposed.
While generally the incentives provided in the shipping Policy, which
remains yet to be officially announced, have been welcomed by the
shipping circles many said that since shipping is a highly capital intensive
business, the tax holiday period should be extended. Most of them said that
import of ships should be totally exempted from duty. Import tariff adding up
to 26 per cent at present is too high to encourage the investment in
shipping industry, PAGE was told.
While the strength of merchant marine is on the decline the volume of
seaborne cargo is increasing by 5 per cent per annum.

Ninety-five per cent of the external trade, both import and export, is carried
by sea. Being an import oriented country 82 per cent of this comprise
imports, the rest export.
According to projection the seaborne cargo would increase to 35 million
tonnes by the year 2000: Liquid bulk 14.2 million tonnes, dry bulk 10.75
million tonnes, break bulk 4.45 million tonnes, and containerised 5.6 million
tonnes.
It is clear that failure to add tonnage would result in increased dependence
on foreign shippers which would keep on costing Pakistan increased
foreign exchange to cater to its seaborne trade.
PAGE talked to a number of players in the shipping industry, including
PNSC and representatives of foreign shipping companies to understand
how they perceive various issues pertaining to the industry.
The general manager planning PNSC, Syed Mahmood Ali said that many
factors are restricting the growth of shipping in Pakistan.
Shipping, he said, has no place on the list of priorities of the government, a
fact which is evident from the absence of a clear cut shipping policy.
He said that an import oriented economy like Pakistan which has no
significant exports allows the ships to carry only a small export cargo out of
the country. He also cited closure of Indian ports to merchant marine fleet
of Pakistan and Pakistani ports to Indian merchant marine fleet as one of
the causes that restricts the growth of shipping.
Costly financing for ship purchase which is a higly capital intensive
business and an unprecedented 26 per cent levies on the import of ships
restricts the growth of the industry, he added.
He said that most of the above hurdles can be removed by good decision
making by the government while the opening of Indian ports depend on the
resolution of political and regional disputes with India.
He hoped that a good shipping policy will go a long way in helping the
industry to pick up, however, the problem of one sided [import oriented]
business would remain.

Putting the average annual growth rate of the national seaborne trade at 2
per cent he added that at present the total seaborne trade is about 37
million tonnes 32 million tonnes imports and 5 million tonnes export of
which only about 6 per cent is lifted by the PNSC.
Terming addition of new tonnage a tricky question, he said that private
entrepreneurs have so far not shown much interest due mainly to financing
arrangement. The government may consider establishing a shipping
finance bank to provide loans to the private ship owners, he said. However,
unless the private sector shows enterpreneurship, shipping has a bleak
future in Pakistan, he warned.
The president of the National Shipowners Association (NSA), Masood
Baghpatee cited inordinate delay in the announcement of shipping policy,
frequent change in government policies and lack of financial support by the
government and financial institutions as some of the major factors
restricting the growth of shipping industry.
He also cited heavy duties and levies on the import of ship and the highrisk involved, for instance heavy losses due to any mishap, detention or an
unfavourable fluctuation in the freight market as factors detrimental to the
growth.
He stressed that the decisions taken by the economic coordination
committee (ECC) on February 24, 1993 should immediately be made
effective for net five years. The tax exemeption be extended at least till the
year 2000, he added.
In addition he said that the Merchant Marine Shipping Bill which is pending
for the approval of the parliament for the last 4 years be immediately
approved as the shipping business at present is being regulated under
Shipping Act of 1923 which makes it impossible to do the business.
A formal approval may be granted for the establishment of private bank in
the shipping sector. The application from the private sector is pending with
the State Bank of Pakistan for three years and the same should be
approved so that capital be mobilised, he added.
Baghpatee said that a comprehensive shipping policy should be
announced by the government without further delay and it must basically

be aimed at the progress of the industry and not for merely protecting
interest of brokers, operators, carters and agents.
Putting the payment to foreign shipowners at $ 1.7 billion annually for
wheat , fertiliser, iron ore, coke, crude oil and other liquid imports he added
that it is expected to increase by an annual rate of 10 per cent.
He warned that the prices of vessels are increasing and any further delay in
the announcement of an incentive package to the shipping sector will not
only result in additional capital expenditure by the Pakistani investors but
will also force the prospective foreign and overseas Pakistani investors to
divert their capital to more lucrative vistas to enjoy better benefits.
It is matter of great concern that our spending on freight to foreign shipping
companies is the biggest expense after foreign debt service and defence
and yet the authorities have failed to allocate due importance to the
shipping industry, he concluded.
Rashid Barkat of Pacific Chartering and Trading, the representative of
Noble Group of Hong Kong, said that shipping has never been given the
status of an industry and thus enterpreneurs are shy to invest without any
support from the government and the banking sector.
He said, it is pitiable that the private sector is made to run from pillar to post
to obtain permission from numerous government departments to place a
vessel, purchased entirely from his own money, under Pakistani flag.
The duty structure on the import of ship, he added, is based on a system
which is centuries old. While the vessel remains outside the territorial
waters of the country most of the time and while the freight is earned in
dollars, the owners are forced to pay huge taxes for bringing in the vessel.
He also alleged that unionism and politics in the shipping office are also
restricting the growth of the shipping sector, making it not only difficult but
also unmanageable.
He stressed that the government should allow flagging under Pakistani flag
duty-free though some duty may be imposed if the owner decides to sell
the vessel for flagging under a third country or for scrap. No income tax
should be charged for five years and ship owners should be allowed to
employ their own crew instead of through the Shipping Office, the

involvement of which should be totally abolished for the purpose of hiring

the crew. The proposed shipping policy would have no positive impact
unless these measures are taken, he added.
He expected an average annual increase of 7-8 per cent in the national
seaborne trade adding that national flag carrier vessels are handling 5-6
per cent of the export and 15-17 per cent of the import cargoes.
The addition of new tonnage, he stressed requires revolutionary measures
from the government and induction of technocrats and professionals in the
Ports and Shipping sector which at present remains badly neglected and is
run by bureaucrats and defence personnel.
Talking about the relative merits of the Port of Karachi and Port Qasim for
container handling he said that Pakistan is already 20 years behind in the
construction of container terminal primary due to an infighting between the
two ports. The two ports should work together to construct the most
modern terminals instead of competing with each other as none of them
could handle the entire container traffic by itself. In addition, they must work
to improve the infrastructure, modernise their crafts and equipment to enter
the second half century of the country with better planning.
He stressed that Pakistan should encourage a local-flag shipping sector
which would help reduce the unemployment level.
He disclosed that Pacific Chartering and Trading intends to enter the
shipowning business provided the government provides meaningful
incentives to the shipping sector.
An executive of shipping company who ask PAGE not to mention his name
said that we have the market and the required manpower but what is
lacking is investors willingness to invest the capital.
Shipping like any other business cannot work in isolation and without
improving such basic factors as microeconomics, political stability and the
law and order situation the revival of the shipping sector would be a hard to
achieve, he added.
He stressed that the measures to facilitate financing area must to
encourage investment in the shipping sector. Relaxation of prudential rules

and allowing the foreign investors even up to 100 per cent equity in some
cases may be some of the steps in that direction he added.
An source said that in this era of container business the national flag
carriers has no container vessel and it is imperative to induct container
vessels to meet the container traffic of the country.
The government should not encourage the local shipownership but also the
joint venture with foreign companies to give a boost to the shipping
industry, he added.
While the volume of seaborne trade is increasing, the two national ports,
Port of Karachi and Port Qasim are severely underequipped to handle the
ocean freight.
While lack of space restricts the expansion of Karachi Port, Port Qasim is
yet to be opened for night navigation in spite of repeated assurances by the
authorities.
The Port of Karachi which handles 80 per cent of Pakistans maritime trade
has no shore gantries and there is a shortage of other cargo handling
equipment and machinery.
Though it has over two dozen container yards at East and West Wharves it
is yet to have a dedicated container terminal, Karachi International
Container Terminal (KICT) which is expected to open for business in the
first quarter of next year.
At present the container yards are held by a number of ship agents and the
decentralisation in addition to absence of shore gantries and other
equipment has resulted in haphazard stacking, congestion and irregular
flow of goods.
KICT is built at beh nos. 22, 23,24 and 24 A at the West Wharf to handle
300,000 20-ft containers in the first phase and 400,000 in the second. The
KICT is a joint venture between American President Line (APL) and KPT.
Meanwhile, the Port of Karachi is going to lose one-third or 160,000 of its
container business of 550,000 to Qasim International Container Terminal
(QICT), owned and operated by a foreign consortium.

With the shifting of business by a mega container liner like Maersk, which is
one of the consortium partners of QICT, and seven other lines, the bulk of
whose business comprise container would deprive KPT of a considerable
operating income to fall short of projected Rs 5.05 billion during the current
fiscal.
One other factor that the shipping circles feel is restricting the growth of
shipping is that Pakistani Ports are the most expensive in the region,
though tariffs at Port Qasim are still 5 per cent cheaper than the Port of
Karachi.
Sources said that much depends on the implementation of the Shipping
Policy in letter and spirit. It should also be revised to include many
suggestions mentioned above to help encourage the investment to help
add new tonnage to help ease the heavy reliance on foreign shipping
companies to save foreign exchange.

PNSC, ABM AMRO SIGN $135MN FINANCING DEAL

Planned induction of two double-hull and one bulk carrier
SYED M. ASLAM
May 28 - Jun 03, 2007
The expected signing of $ 135 million financing deal between Pakistan
National Shipping Corporation (PNSC) and ABN AMRO Bank would help
the state-owned, and the only, shipping company of the country induct two
double-hull Aframax class oil tankers and one Panamax class bulk carrier
by the end of this year. The acquisition of three additional vessels will cost
around $ 150 million, the remaining $ 15 million of which will be provided by
the PNSC.
For the first time since 1970s, the PNSC is looking at inducting new vessels
into its ageing fleet that comprises 10 multipurpose cargo vessels, 4
Aframax tankers and one bulk carrier. About two-third of the fleet is over 26
years old while the remaining one-third is between 18-23 years old. The
PNSC fleet, thus, has become highly uneconomical due to increased costs
of repairs and maintenance thereby rendering them highly uneconomical.
In the last three years PNSC purchased four used oil tankers; MT
Shalamar, MT Swat, MT Johar and MT Lalazar, the first three at $ 21.9
million each and the fourth for $ 13.5 million, respectively, as well as a bulk
carrier MV Kaghan for $ 15 million. PNSC had also added three used
container vessels in its fleet in 1996 for which it secured a $ 50 million loan
from the National Bank of Pakistan (Bahrain). PNSC chartered these
vessels outside Pakistan and they were only started lifting the national
cargoes years as PNSC did not bring them to the country for what it called
high import duty. Thus more most of their lives these used container
vessels did not play any role in meeting the shipping needs of the country.
PNSC's decision to procure oil tankers at this point in time is driven by the
necessity to replace its aging fleet of four oil tankers which have long past
their economic life and are quite old by world standard. As is, one of its oil
tankers would be out of business this year as Condition Assessment
Scheme of global shipping watchdog International Maritime Organisation
this year, while the remaining three of its oil tankers would have to be put
off the business under the same provision in 2010. It may be mentioned

here that IMO slapped a ban on the use of single hull containers exactly ten
years ago in 1997 but developing countries like Pakistan were given
extended period up to this year to replace single hull containers with double
hull by 2007. However, interestingly the approaching ban did not
discourage the PNSC to induct four used container vessels in its fleet
during the last three years thereby necessitating the induction of doublehull containers by the PNSC at this point in time. According to the IMO
rules single hull containers are not allowed to enter the ports in the
developed countries since 1997 and would no longer be enter the countries
where they were still allowed to operate starting this year.
As mentioned earlier, the four oil tankers in the PNSC fleet are over 20
years old and are thus becoming increasing costly to repair and maintain
thereby rendering them extremely uneconomical. That also highlights the
need for replacing almost one-third, or ten of the total 15 vessels, of the
PNSC fleet within the next few years.
PNSC claims to be lifting around 20 per cent of the national sea-borne
cargoes of 55 million tonnes. Though this shows a substantial improvement
in PNSCs performance compared to around negligible lifting of just
around 6 per cent of national cargo lifting in last five years the figures still
dont represent a true figure because the bulk of this increase has been
made possible by increase in crude oil cargoes while only small increase
has come from dry and containerized cargoes. This has been so primarily
because almost the entire fleet of dry, bulk and container cargo vessels of
the PNSC is in extremely dilapidated state having long past its economic
life. These dilapidated vessels are not able to undertake long voyages, are
uneconomic to run and require frequent and costly repair and maintenance.
The PNSC depends heavily on the captive crude oil shipments as it enjoys
a 10-year contract of affreightment to exclusively transport, on its own
as well as on chartered vessels, crude oil for the three oil refineries of the
country that include National Refinery Limited, Pakistan Refinery Limited
and Pak-Arab Refinery Limited.
The exclusive 10-year crude oil shipment contract for the three national
refineries explains why the Shipping Policy announced by the government
about six years ago failed to attract new shipping companies. PAGE
highlighted the plight of an investor ready to make substantial invest in the

shipping sector who had to shelf his plan because he said that the ten
year exclusive contract to the PNSC for the shipment of crude oil to the
three national refineries just leave no business available for him.
The expected induction of two Aframax oil tankers this year clearly shows
that PNSCs fleet replacement and acquisition plan primarily revolves
around crude oil segment of the shipping vessel with little priority given to
dry and container segment of the business. PNSC aims to improve its
performance by solely focusing on the crude oil cargo thereby heading
towards a loop-sided growth by leaving the dry, bulk and containerized
cargoes open to the foreign shipping companies.
It is time for the PNSC to also focus on improving the health of its dry, bulk
and container fleet that forms a major portion of its fleet. It should induct
bulk and container vessels to help lessen the countrys dependence on
foreign shipping companies that keep on lifting a large portion of dry, bulk
and container cargoes that is costing the country billion of dollars annuallyan expense which is second only to defence expenditure. In the long run,
PNSC would be better off without the loop-sided growth driven mainly by
crude oil business which contribute the bulk of revenue to the PNSC but
does not help lessen countrys dependence on foreign shipping
companies for the lifting of non-liquid cargoes.
PNSC used to have 71 large ocean going vessels in 1971. The failure to
induct fresh tonnage and lack of vessel acquisition and replacement plans
over the years has cut the size of its fleet by almost one-fifth to 15 vessels
presently. It has not inducted any new vessels in the last three decades
and has only acquired used containers and oil tankers to sit on a fleet that
is long past its economic life. It has managed to increase its share in crude
oil business but its share in the overall dry, bulk and container cargoes still
remain low. It seems to be solely focusing on the crude oil segment of the
business with little or no attention paid to dry cargo business. Its time for
the PNSC to start paying attention to the vast dry cargo segment of the
business the bulk of which is being lifted by foreign shipping companies at
a big cost to national economy.

PORTS & SHIPPING

The government needs to take a fresh look at the shipping sector with a
view to encouraging local as well as foreign companies to launch and
expand their activities.
SHAMIM AHMED RIZVI, Bureau Chief, Islamabad
May 28 - Jun 03, 2007
The newly established separate Ministry of Ports and Shipping (previously
a part of the Ministry of Communications) has taken many initiatives for the
improvement and modernization of Pakistani ports and updating the
operational plans to run them on commercial lines.
A spokesman of the ministry, in an exclusive interview told Page that the
ministry has hired the services of port specialists of international repute to
make the country's ports compatible to the ports of the world in order to
meet the challenges of globalization. With professional management in
place, the ports have established its Information Technology (IT) port
community and net working. Tariff and other charges have been lowered to
reduce the cost of doing business. To make our ports more receptive and
investment-friendly the cargo dwell-time at ports has been reduced to 3 to 5
days. Port handling charges at Karachi Port has been reduced by 15
percent and at Port Qasim by almost 25 percent. Consequently, the cargo
traffic at these ports has been considerably increased.
Continuing, the spokesman said that the present government has given
various concessions/incentives to promote shipping under Pakistan flag
and also to improve Pakistan Seamen Employment and increase
Pakistan's share in cargo transportation from and to Pakistan such as:
* Pakistan-India Shipping Protocol to include lifting third country cargo has
been signed by Pakistan and India on 14-12-2006.
* No restrictions on institutions/banks to mortgage ships as collateral for
obtaining loan.
* Insurance cover for Pakistani ships allowed to offshore insurance
companies.
* Exemption from income tax to such Pakistani seafarers who work on
Pakistan flag vessels for 183 days or more during a year has been allowed

by amending Clause (4) of Part-I of Second Schedule to the Income Tax

Ordinance-2001.
* The exemption to capital gain arising from sale of ships/vessels has been
allowed by inserting a new clause (114A) in Part-I of Second Schedule to
the Income Tax Ordinance-2001.
* With the inauguration of Gwadar Port (in Balochistan), Pakistan has now
three ports Karachi port, Port Qasim and Gwadar port.
The spokesman admitted that Pakistani ports at present are comparatively
inefficient and lack state-of-the-art facilities. With a view to improve their
working a benchmarking exercise has been completed with the assistance
of World Bank which is reviewed after every three months by National
Trade Corridor Improvement Programme Secretariat.
Directorate General of Ports & Shipping Wing and its subordinate officers in
Mercantile Marine Department, Government Shipping Office and Pakistan
Marine Academy have already been made responsive to current needs by
introducing computerization and automation therein. All services which are
required from the Mercantile Marine Department including status of various
statutory certificates and its requirements have been manifested on its
website which is accessible to the stakeholders. Similarly, the government
shipping office has also been computerized and the relevant records
pertaining to seafarers is now available on its website. However, the old
record which is needed to be maintained is being updated and placed on
website. The Seamen Service Book (SSB) is being made machine
readable as per ILO's recommendations.
With a view to enhance capacity building and in line with National Trade
Corridor Improvement Programme, the ports have taken various measures
through a number of projects.
Some important projects are:
KARACHI PORT TRUST
Deep draught container handling berths at Keamari Groyne costing US $
510 million.
Pakistan international Container terminal (PICT)

Second dedicated Terminal at East Wharf.

Karachi International Container Terminal (KICT)
Expansion plan including deepening of quay wall for 14-meter draught
vessels. Establishment of Cargo Village to house port related projects.
PORT QASIM AUTHORITY
* Second container Terminal cost US $ 211 million.
* Establishment of Liquid Cargo Terminal cost US $ 11.4 million.
* Establishment of LPG Terminal cost US $ 25 million.
* Establishment of Second Oil Jetty Cost US $ 20 million.
* Establishment of Grains & Fertilizer Terminal cost US $ 50 million.
* Establishment of Coal, Cement & Clinker Terminal cost US $ 50
million.
* Establishment of second Iron Ore & Coal Berth (IOCB) cost US $ 50
million.
* Establishment LNG Terminal cost US $ 450 million.
* Deepening of channel to all weather 14-meter draught.
Pakistan National Shipping Corporation through its fleet development
programmes had inducted Panamaz Carrier during 2005-06. During current
financial year (2006-07), they are in the process of induction of one double
hull Aframaz crude oil tanker, one Panamaz bulk carrier and one double
hull Aframaz crude oil tanker. The approximate investment to this activity is
Rs.8 billion. The profitability position of PNSC during 2005-06 was Rs.2
billion.
Karachi Port Trust has earmarked Rs. 8 billion for its development
programme to finance a number of mega projects. The profitability during
2005-06 remained about RS. 5 billion.
Port Qasim Authority has also allocated Rs. 8 billion to its development
programme. The profitability position of PQA during 2005-6 was Rs. 3
billion.
The Ministry of Ports & Shipping is of firm view that with focused port
management approach, sustainability and continuity in its policies and
having system for an efficient monitoring, system to see implementation of

National Trade Corridor Improvement Programme, the ports in Pakistan

would be at par with the best ports of the world in near future.
The financial year 2005-06 was of great significance for the Karachi port.
For the first time the cargo handling crossed the thrilling figure of 32.27
million tons through 1995 vessels as compared to last year i.e. 28.61
million tons; a growth of 13%. This massive rise was mainly due to increase
of 21.60 million tons of dry cargo handling as compared to 16.32 million
tons in corresponding year; registering 32.35% increase. In this year,
1,144,150 containers (TEUs) were handled as compared to last year's
911,936 containers (TEUs) resulting in a growth of more than 25% by
crossing a magical figure of one million TEUs. Container handling has been
privatized to a great extent and almost 69% of the containers are being
handled at the private terminals i.e. KICT and PICT. Container ships clear
the port within 24 hours and there is no waiting period for ships. Cargo
handling of all types of cargo handled at the KPT berths is being privatized
through cargo handling companies (CHCs). Bids for award of contracts to
cargo handling companies have been received.
Since inception, Port Qasim, the second deep-sea port of Pakistan has
been contributing significantly in the development of national economy.
Cost effective and time efficient port services have greatly helped in
attracting foreign direct investment at the port. The port is geographically
located on the trade route of Arabian Gulf and has excellent multi modal
connections.
Port Qasim is one of the largest contributors to national economy of
Pakistan. It has an impressive growth in all facets of port operation. PQA is
currently pursuing a large number of projects for capacity enhancement
and industrialization, attracting Foreign Direct Investment (FDI) and
simultaneously undertaking major infrastructure development to enhance
efficiency.
The port currently caters more than 40% of sea trade requirements of the
country. Port Qaism has singular attraction and advantage for investment
both in port facilities and port-based industrial development. These
advantages include:

* Full range of port facilities to handle all types of general, gagged, bulk,
break bulk, liquid cargo and containerized cargo with backup
infrastructure.
* First rate multi modal connections with inland transport network
* Close proximity to hinterland saving logistics expenses
* Immense possibility for expansion and upgrading of port facilities in terms
of number of berths to meet dynamic requirement of international shipping.
* Availability of basic utilities like water, power, gas, telecommunications,
rail/road connectivity, banking etc, as part of infrastructure for industrial
development.
* Vast areas of land with direct access to waterfronts for setting up import
based and export oriented industrial cum commercial undertakings.
PRIVATE SECTOR'S PARTICIPATION IN PORT DEVELOPMENT.
Port Qasim has actively sought participation and involvement of private
sector in areas both for port facilities as well as investment in industrial
zones of the port. Port Qasim pioneered the inauguration of terminal
operation by private sector in the country. The entire range of cargo
handling activities i.e. from opening of the hatch of vessel to delivery to the
consignee for imports and vice versa is carried out by cargo handling
companies (CHCs) and terminal operators under one window operation
system.
The performance of Pakistan National Shipping Corporation (PNSC) has
also improved significantly. It is now running in profit with its 16 vessels.
PNSC is continuing with its efforts to add more vessels to its fleet. It is
expected that two Aframax crude oil tankers and one Panamax bulk carrier
vessel will be added during the year 2006-07 and this should enable the
corporation to achieve its growth targets in the coming year. However, with
unprecedented increase in the world oil prices and the resultant steep rises
in bunder prices, the operating expenses and business profitability is likely
to come under strain during 2006-07.
TARGETS ACHIEVED

PNSC continues to be in a consolidation phase. Due to rise in international

prices of shops, the corporation was able to acquire only one Panamax
bulk carrier vessel in January 2006. The additional 5th & 6th Aframax
tankers & second Panamax bulk carrier will now be acquired during this
year.
PNSC's share in Pakistan's sea trade is as under:NATIONAL TRADE

2005-06

(in mln tons)

Total Exports (Dry)

10.631

Total Imports (Dry)

25.957

Total Exports (Liquid)

1.521

Total Imports (Liquid)

17.782

Total Imports & Exports

55.891

Share of PNSC in total trade

9.409

(16.83%)

Gwadar port is the third port of Pakistan Karachi and Port Qasim being
the other two. Gwadar borders on Arabian Sea and lies in the Balochistan
province. It is about 433 km from Karachi and 120 km from the Iranian
border. Gwadar port is located at the mouth of the Persian Gulf and outside
the Straits of Hormuz. It is near the key shipping routes used by the
mainline vessels in the region with connections to Africa, Asia and Europe
and enjoys high commercial and strategic significance. Various
professional studies manifest that Gwadar port's location is the most
advantageous one as an alternative port, which could handle mother ships
and large oil tankers in due course.
China has extended technical know how and financial assistance to
Pakistan. It has once again helped Pakistan in the shape of development of
the Gwadar port, and provided 80 percent of the port's $ 248 million initial
development costs. It would make Balochistan the hub of economic activity.

The Central Board of Revenue (CBR) has issued an SRO amending the
Second Schedule of the Income Tax Ordinance-2001, to grant exemption
from six percent withholding tax to importers of ships and floating crafts,
including dredging and survey vessels and other specialized craft that may
be registered in Pakistan. Notably, custom duty and sales tax exemptions
have already been available on the import of different categories of vessels
but not from withholding tax, which created an anomaly. That has now been
removed on the request of an international company that is interested in
importing as many as 20 maritime vessels.
At one time the shipping sector buzzed with robust economic activity. It had
as many as 60 ocean going ships. But things ran aground consequent to
the Bhutto government's nationalization policy in the early 1970s. Even
when the denationalization process began under successor government,
and a number of ineffective incentives were introduced to rejuvenate the
private industry, maritime industry received little help. A few brave souls
who tried to venture into the field to make a new start found the
environment too unfavourable, with the result that at present there is hardly
any activity in the private sector with regard to shipping. The government
needs to take a fresh look at the sector with a view to encouraging local as
well as foreign companies to launch and expand their activities. That has
become all the more important in view of the huge business prospects that
the deep-sea port at Gwadar holds. We must begin preparing sooner rather
than later to benefit from the big opportunities that are to become available
and, of course, also to utilize the existing ones. Once the port is up and
running it will become a major hub of commercial activity, transporting
goods and, possibly, oil and liquefied gas to and from this region and
Central Asian Republics as well as other parts of the world.
It is, therefore, imperative to chalk out a maritime policy with a long-term
perspective. First of all, the government must focus on removing
bureaucratic hurdles that lend a helping hand to corrupt officials and also
promote red tapism. The existing rules and regulations need to be revisited
so that unnecessary and cumbersome producers are dispensed with.
Secondly, the government must inject a heavy dose of incentives into the
sector.

PORT & SHIPPING ACTIVITY GEARING UP, SAYS MINISTER

"Ports and shipping sector is moving towards the success story of
Pakistan's economy and new developments are in the offing."
AMANULLAH BASHAR
May 28 - Jun 03, 2007
Federal Minister for Ports & Shipping Babar Ghauri, while spelling out the
performance of ports and shipping sector during last five years, has said
that this sector has been steered out of the lethargic performance to an
emerging contributor to the country's economy.
Accompanied by Tauqir Hussain Naqvi, Chairman PNSC and Vice Admiral
M. Asad Qureshi, Chairman Port Qasim besides other senior officials, the
minister described the exciting developments at Gwadar port and Port
Qasim as an achievement, "which is fascinating global players to make
massive investments in the ports and shipping sector". The present
government has put this industry on the path glory in the real sense, which
was never thought during last 24 years, he remarked while addressing a
crowded press conference at the Karachi Press Club.
He said that the development of Gwadar port is of course a feat achieved
by the present government and it is about to start generating revenues
through its operations. The benefits of this port will bring prosperity to the
province of Balochistan as well as the entire country, the minister said in a
firm tone.
Outlining the achievements by his ministry, Ghauri said that during last 24
years, the past governments could develop only three terminals, while the
present government on the back of its focus on economic growth has
developed nine new terminals, which is a record and a significant
contribution to the national economy.
President Pervez Musharraf inaugurated the second phase of LPG terminal
at Port Qasim. This LPG terminal, which is a joint venture between
Malaysia, Pakistan, Kuwait and NLC, has been developed at a cost of $50
million. This would help in raising the turnover of LPG to the tune of 20
million tons a year in the country.

Another major achievement in the energy sector of the country is the

floating LNG terminal at Port Qasim being set up at a cost of $162 million,
he added. Babar said this floating terminal would be the second in the
world as the first is already in operation in UK.
Replying to a question, he said that owing to favourable government
policies the private sector is mustering its confidence, which is reflected in
the registration of three bulk vessels under Pakistan flag by the private
sector. Similarly, the Pakistan National Shipping Corporation (PNSC),
which had almost reached to the level of bankruptcy when the present
government assumed power, has remarkably bounced back and now it is
running in profit, besides retiring its heavy liabilities. He said that PNSC
was also about to enhance its fleet by inducting two tankers and a bulk
cargo carrier into its fleet.
He said that ports and shipping sector is moving towards the success story
of Pakistan economy and new developments are in the offing.
To a question about development of port at Sonmiani beach and the
resolution passed against it by Balochistan Assembly, Babar Ghauri said
that actually the federal government develops ports on the request of the
provincial government concerned. It was the government of Balochistan,
which had suggested for developing port at Sonmiani beach, adding: "we
would go by the wishes and desire of the provincial government". He also
referred to the proposal of KT Bunder which, he pointed, was suggested by
the Sindh government. He expressed the confidence that this port project
would materialize as we are seriously proceeding as per development
plans.
Regretting the trend of calling strikes on every issue whether it is related to
Karachi or is proving counter productive to the economic achievements, he
said: "We have to avoid such attitude in the larger interest of the country".
He said the wheel of industry and economic activities should keep moving
because it is in the interest of every Pakistani.
PNSC'S PERFORMANCE DURING 2002-2006
Outlining the achievement of Pakistan National Shipping Corporation
(PNSC) during the tenure of the present government, the minister said that
during 2002-03 PNSC came out from troubled waters to smooth sailing.

The following achievements speak in volumes about how a sinking

organization was turned into a growing concern:
ACHIEVEMENTS 2002-03:
a) Acquisition of three oil tankers by PNSC through its own resources and
there was no government funding or guarantee involved.
b) Dividend paid after 10 years at the rate of 7.5% (last dividend was paid
in 1992).
c) Repayment of NBP's Bahrain Loan (US$ 4.285 million) as installment
and US$ 5 million pre-payment. Loan was obtained in April 1995 to
purchase three used container vessels.
d). Pay raise for employees
- Ashore/Afloat w.e.f. 1st July 2002
- Afloat crew w.e.f. 18 April 2003
ACHIEVEMENTS 2003-04:
a) Acquisition of 4th oil tanker.
b) Dividend paid - 10% + 5% bonus shares.
c) Repayment of NBP Bahrain loan (US$ 4.285 million) as installment and
US$5 million pre-payment. Loan was obtained in 1995 to purchase three
used container vessels.
d) Regular six monthly interest payment of NBP loan.
e) Bonus to employees (last paid in 1976).
f) Salary increase of employees
3. ACHIEVEMENTS 2004-05:
a) Acquisition of bulk carrier
b) Dividend paid - 20% + 10% bonus shares
c) Repayment of NBP Bahrain loan US$ 4.285 million as installment and
US$5.0 million pre-payment. Loan was obtained in 1995 to purchase three
used container vessels.

d) Regular six monthly interest payment of NBP loan.

e) Two bonuses to employees.
f) Salary increase of employees.
4. ACHIEVEMENTS 2005-06:
a) Dividend paid 10%
b) Repayment of NBP Bahrain loan US$ 4.285 million as installment and
US$5.0 million pre-payment. Loan was obtained in 1995 to purchase three
used container vessels.
c) Regular six monthly interest payment of NBP loan.
d) Bonus to employees.
e) Salary increase for employees.
5. FUTURE DEVELOPMENT PLAN:
PNSC is in the process of acquiring two double hull Aframax tankers and
one Panamax bulk carrier vessel. In this regard a loan agreement is being
signed with ABM AMRO bank for -US$ 135 million facility without any
government guarantee. The said agreement will be signed on 29th May
2007.
6. PNSC'S CORPORATE STRATEGIES
The Corporation having achieved a solid financial standing is now seeking
to sustain its growth on both short and long term basis.

SHIPPING INDUSTRY CONFRONTING MANIFOLD PROBLEMS

"There will be no flagship carriers in the years to come unless measures
are taken to encourage investment in the private sector."
KANWAL SALEEM
May 28 - Jun 03, 2007
Years of neglect, absence of long-term policies, poor infrastructure,
imposition of war risk surcharge and the non-implementation of policies
which were ever devised, have taken a heavy toll on the local shipping
industry. No fresh tonnage has been inducted in the PNSC during the last
two decades with the result that today its fleet comprises vessels which on
an average are over 20 years old, costing it more and more money in
repairs and maintenance to keep them running, said Mr. Tahir Malik,
Chairman/ CEO of Trafco Logistics (Pvt.) Limited while talking to PAGE.
In addition, the imposition of stricter maritime security codes poses a major
challenge to the sole shipping company of Pakistan - the PNSC. Having a
fleet of aging vessels, with most of them in dilapidated condition, it is
apprehended that there will be no flagship carriers in the years to come
unless measures are taken to encourage investment in the private sector,
he added.
Tahir Malik who is also Vice-Chairman of Federation of Pakistan Chambers
of Commerce & Industry's (FPCCI's) Standing Committee on Aviation,
stated that war is over in Afghanistan since long but war risk surcharge is
still being charged from exporters. He was of the view that this surcharge is
a great injustice with the exporters because it is an undue burden on
exporters. Highlighting the problems being faced by exporters with regard
to ports and shipping, he stated that poor infrastructure at dry ports, loadshedding and lack of proper facilities are some of the major problems
confronting the exporters. Although CBR has taken various initiatives for
prompt customs clearance, load-shedding is causing delay in the shipment
of consignments. Apart from this, there is a shortage of manpower at ports,
which needs to be addressed.
The stakeholders have called for exploiting the real potential to make
shipping the backbone of the economy not only to save enormous foreign

exchange but also to ensure smooth flow of seaborne trade, which only a
dedicated national merchant marine could do in times of peace or war.
According to Tahir Malik, the office of Ports and Shipping Wing was
established in 1961 to bring the decision making closer to the shipping
industry, which is mainly based in Karachi. The main functions involved are:
1. Shipping industry is to be provided with guidance and policy decisions
based on international conventions and national rules & regulations. This
wing formulates such policies under the said rules for the industry.
2. Tackling of shipping-related issues on the spot and to give timely
decisions for overall benefit of the sector.
3. Registration of ships and crafts under Pakistan flag and conducting
survey/inspection and issuing required trading certificates.
4. To act as safety administration and ensuring seaworthiness of ships and
crafts in accordance with national and international laws/conventions.
5. Pollution control from ships in harbour and territorial waters.
6. Seafaring is a specialized profession and requires proper training
followed by examination and certification to be in line with acceptable
international standards. The wing is entrusted to undertake this business to
ensure compatibility with existing system of other maritime nations.
7. Seaman Service Book (SSB), formerly known as Continuous Discharge
Certificate (CDC), is a pre-requisite document for ship-board employment.
Its issuance is one of the functions undertaken by this wing through its subordinate office.
8. The autonomous bodies and the field offices which deal with the shipping
industry are placed under the administrative control of this wing.
9. The wing is also entrusted with the responsibility to prepare
developmental plans to affect improvement in maritime sector in
consonance with the international requirement and technological changes
in the field.
10. International conventions pertaining to ports and shipping are initially
examined by this wing and then recommended for ratification by the
Government of Pakistan after reviewing the existing system in the country.

11. As a follow up to ratification of conventions, the wing is responsible for

formulation of maritime laws/regulations for implementation by shipping
industry.
12. The wing is also required to update and advise the government on
technical matters related to maritime field. Coordination and liaison with
other ministries, agencies, national and international organizations on
maritime affairs is also one of the functions undertaken by this wing.
Giving background, Tahir stated that in 1947 Pakistan inherited a fleet of
four privately owned cargo ships. In 1963, the National Shipping Ordinance
was promulgated and National Shipping Corporation (NSC) was
established which procured its first used ship, m.v. Rupsa in 1965. The
national fleet comprised some 53 vessels, which were owned by 10 private
shipping companies. The national fleet strength grew to a record 71
vessels just prior to the separation of East Pakistan and its emergence as
Bangladesh in 1971. The fleet strength declined to 57 vessels after the
separation.
In 1974, nine private shipping companies, which had 26 ships, were
nationalized. The national fleet strength increased to 51 vessels, including
26 with the nine nationalized companies plus 25 ships with the state-owned
NSC. In 1977, 14 ships were inducted in the PSC during the fifth five-year
plan. Two years later, NSC and PSC were merged to form the Pakistan
National Shipping Corporation (PNSC) which remains the sole state-owned
shipping corporation. The total fleet strength increased to 60 ships with the
induction of 14 vessels in late 1970s and early 1980s.
Today, PNSC's entire fleet comprises over 15 ships - 12 break-bulk vessels
and three used container vessels purchased in 1996. Pakistan Tanker
Company, a subsidiary of PNSC, also has a single tanker for crude oil
imports. PNSC enjoyed a complete monopoly till early 1990s when the
shipping sector was deregulated by the then Nawaz Sharif government.
Even the opening of the shipping sector to the private sector has failed to
achieve the desired results of helping induct more tonnage as Tristar
Shipping, which started operations in 1992, went out business. Tristar
owned cargo ships the combined capacity of which added up to 310,000
DWT.

The chief executive and one of the directors of Tristar, Masood Tariq
Baghpatee and Mansoor Khalid Baghpatee were arrested on the charges
of defrauding the Allied Bank of Pakistan of $ 10.85 million as they did not
pay back loans totaling Rs 440 million for the purchase of five vessels in
1994-95.
PNSC's aging fleet is carrying just about 5 per cent of the national
seaborne cargo while the rest is shared by the foreign shippers which cost
the country over $ 3 billion annually. While the freight rates have remained
constant over the last few years, not withholding the present low globally,
the successive devaluation of Pakistani currency nevertheless has put a
tremendous strain on the national economy to cater to its seaborne trade
needs, which makes it a second top expenditure after Defence, he added.
Karachi, which is a banking and financial capital of the country, has also
distinction in the country's economy due to having the Port of Karachi and
Port Qasim which are the two main seaports of the country. Sea fright
charges from Pakistan are higher as compared to the neighboring
countries. This affects export, as high freight cost affects prices. The
exporters demand that the government should consider bringing down
freight charges by negotiating with the shipping lines or subsidizing the
charges.
According to sources in CBR, Prime Minister Shaukat Aziz had formed a
task force on National Trade Corridor (NTC) Development.
A Trade Facilitation Committee under National Trade Corridor Improvement
Project (NTCIP) was formed with the broad mandate of rationalizing port
charges and dwell time. Major trade facilitation measures -- reduction in
clearance time/ dwell time, developing freight forwarding, shipping,
warehousing & dry ports development, cold chain improvement,
modernizing trade & transport logistics practices, developing a trade
facilitation strategy, implementing care (customs administrative reforms),
faster and accelerating customs reforms, simplification of ports procedures,
reduction in dwell time with concerted efforts of all stake holders,
development of freight forwarding (FF), insurance, banking in support of
trade logistics revamping / modernizing other trade organizations (such as
FPCCI), publicizing efforts of trade facilitation in the forums of WTO, SAFTA
and ECO -- were the main objectives of TFC, the sources said. According

to them, a multi agency modern transit terminal has been constructed at

Jamrud (near Peshawar) for effective, speedy and smooth clearance of
transit cargo.
PHDEB hired consultants for three pre-feasibility studies for the
improvement of cool food chain facilities. Feasibility studies have been
completed and sent to the Ministry of Commerce. PC-1s are being drafted
accordingly. The wet charges at the ports reduced significantly by 15% to
make our ports competitive resulting in the reduction of the cost of doing
business, the sources pointed out. Maximum facilitation for customs
clearance and transportation of Afghan Transit Cargo have been ensured
while the plans for infrastructure development, refurbishment of customs
offices for PACCS roll out have been finalized. The free time at ports
reduced from 7 days to 5 days, resulting in reduction of choking of ports
and effective inventory management by the trade, the sources added.
Development of Pakistan Automated Commercial Community system by
CBR as a virtual trade platform and clearance system connects all
stakeholders in a paperless environment, the sources concluded.

LEVEL-PLAYING FIELD NEEDED TO ENCOURAGE INVESTMENT IN

SHIPPING
Interview: Capt. Haleem A. Siddiqui, Chairman Marine Group of
Companies
AMANULLAH BASHAR
May 28 - Jun 03, 2007
Capt. Haleem A. Siddiqui, Master Mariner (UK), Chairman Marine Group of
Companies, while discussing the overall situation of port and shipping
sector in Pakistan, has strongly recommended for providing level-playing
field to both the public and private sectors in order to accelerate the pace of
investment in the country's shipping industry.
Talking to Pakistan and Gulf Economist (PAGE) Capt. Haleem said that
Pakistani investors don't get their ships registered under Pakistan flag due
to various reasons such as discrimination between public and private
sectors. The private sector ships were declared as second-class carrier as
the first choice of lifting cargo is offered to public sector despite the fact that
PNSC does not have enough fleet strength. It is using third party carriers,
though the current management is doing well yet the level playing field is
the key to attract private sector investment in this important sector.
Actually, the investors have to think in terms of economic viability; you
cannot go everywhere under Pakistani flag. Even you cannot lift the
Pakistani cargo under Pakistani flag as the first priority is given to the public
sector; why investors will come into business in such circumstances, he
remarked.
INDIA
Pakistan has recently entered into an agreement with India. The pact,
allowing the ships of the two countries to lift cargo from third country port, is
a good development especially for Pakistan's shipping industry because
Pakistan can have a considerable market share. Though India has a good
strength of fleet yet the trade volume of that country is so huge that its fleet
cannot cater to the need and provide a space for Pakistan to get its share,
he said.
FINANCIAL SECTOR

As far as financial support from the banking sector is concerned for

shipping industry, first we have to prove that shipping is a commercially
viable business only then the financial sector would come forward in this
sector. At present about 90 percent of cargo is being carried by foreign flag
carriers, which means that a huge foreign exchange is being drained out on
freight charges. This sector is so far untapped and has great potential for
investment. However, the question again arises for providing level playing
field to all stakeholders irrespective of their status - whether public or
private or even foreign investors should be treated at par, he said
In fact, benefits should not be focused only to public sector; due to this
discrimination between public and private sectors many Pakistanis have
got registered their ships outside Pakistan.
In fact, shipping business is meant to serve the world trade, it is not a local
business by nature. When you come in shipping trade you become the part
of global trade. Once a vessel goes to ocean, it takes months to return
home as it goes from coast to coast which is the demand of the trade.
PORTS
While discussing the performance of ports in Pakistan as compared to
regional ports, Capt. Haleem said that every port has its own demand,
which is related to trade volume of the respective country. When we look at
the trade volume of India, it is much more than Pakistan, hence there is no
comparison between the two countries as far as the trade volume is
concerned. If we look at other ports in the region like Dubai or Salalah they
are actually serving the regional trade.
GWADAR
The outlook of Gwadar is more attractive as compared to Karachi, provided
it is developed in the real sense. Gwadar has the potential to deliver much
more than Karachi. For this we first have to develop the port and the
required infrastructure. "You are required to develop port facilities and
infrastructure to satisfy the ship owners and calling ships.
Gwadar is currently in its initial stage; we have no water, electricity, roads,
housing, schools, colleges and airport, road and rail links. Unless these
facilities come up, the required skilled manpower will not be available for
that port. So it will take time to have all these facilities, which help

accelerate port operations. However, Gwadar port has the potential to

become a busy transshipment port when all the required infrastructure
facilities are made available.
OUTLOOK
Capt. Haleem Siddiqui said that in 1992-93 he had proposed to develop
Gwadar port but the idea was neglected due to political reasons, now the
government has initiated serious efforts yet the collective efforts are still
needed to bring things like airport, roads, residential areas, schools,
colleges, etc through making coordinated efforts.
Capt. Haleem recalled that a cold storage was developed in Gwadar for
small fish industry but processing and export facilities were not in place.
Resultantly, that marvelous facility could not be availed despite a lapse of
15 years because there was no road or rail link with Karachi to bring fish
catch to Karachi.
Hopefully, when this port becomes fully operational then we could use that
storage facility in the real business terms. That cold storage was build 15
years back and was inaugurated by Benazir Bhutto, after that Nawaz Sharif
also inaugurated the same cold storage, however, it could be utilized due to
lack of infrastructure, thus losing an economic advantage.
Gwadar port has been built but it is not yet connected with the rest of the
country. It would not go commercially operational and beneficial unless all
required infrastructure support is provided.
He suggested that before going for building up more ports such as
Sunmiani or KT Bunder, we have to improve the existing ports as well as
enhance our export surplus. For example KPT and Port Qasim still have
surplus space to be utilized. Our two ports still have room for development
to meet the demand of the country, he observed.

REVITALIZING SHIPPING SECTOR

PNSC IS ADDING NEW SHIPS BUT WITHOUT ACTIVE PARTICIPATION
OF THE PRIVATE SECTOR, THE COUNTRY WILL REMAIN DEPENDENT
ON FOREIGN LINES.
SHABBIR H. KAZMI
(feedback@pgeconomist.com)
Mar 7 - 13, 2011
There is no denying the fact that despite addition of new ships by the
national carrier the country remains heavily dependent on foreign lines. The
government has chalked out an elaborate plan to revamp Pakistan's port
and shipping but availability of funds remains the key constraint. It is
understood that unless private sector is involved in a big way the country
will remain dependent of the national carrier.
The recent initiative taken by the national carrier Pakistan National
Shipping Corporation (PNSC) must be appreciated. PNSC is expanding its
fleet at a time when many lines are shrinking.
The size of a fleet is determined by its tonnage and not by the number of
vessels it has. In the past, PNSC had 14 vessels but these averaged about
250,000 dwt (deadweight tonnage). According to the latest annual report as
on June 30, 2011 PNSC had 10 vessels with aggregate tonnage of 633,273
dwt.
During 2009-10, PNSC and its vessel-owning subsidiary companies
together performed a total of 538 voyages (inclusive of foreign chartered
vessels and slot chartered vessels) and lifted 7.921 million freight tons of
cargo as compared to 637 voyages and 8.684 million freight tons cargo
during the previous year. A comparison of handling of cargo presents a
disappointing picture because the quantum of cargo is on constant decline.
PNSC had carried 9.451 million tons in 2007-08, which declined to 8.684
million tons in 2008-09 and further reduced to 7.921 million tons in 200910. Handling of liquid cargo remains the key business. PNSC handled
7.227 million tons liquid cargo in 2009-10 as against 7.665 million tons in
2008-09.

PSNC is in the process of replacing its old vantage vessels with under ten
years old secondhand Japanese vessels in Phase-I and then shall embark
upon ordering new build/buying resale vessels in Phase-II for its
development/expansion program. The five-year plan envisages induction of
two to three modern bulk carriers preferably by March 2011. Induction of a
Product Tanker and an LNG carrier was also part of the fleet development
plan, which would serve the energy sector of the country. Inductions of bulk
carriers, product tanker, and an LNG carrier would provide PNSC with
diversified business opportunities and enhance shipping tonnage to the
targeted one million tons. This would place Pakistan and PNSC in a
prestigious position within shipping circles of the world at large and a lead
contributor in the development of national economy, the statement said.
The finance ministry has also appreciated recommendations forwarded by
the federal ministry of ports and shipping for considering PNSC as the
official shipping company for all public sector organizations. While talking
about future role of PNSC in rapidly expanding international trade, it is
heartening to note that the corporations in the first phase of expanding its
fleet plan to invest over U$270 million to include eight new ships. PNSC is
making rapid progress despite international recession. However, it remains
to be seen that keeping its efficiency, expertise, and experience in mind
how the foreign investors respond to its interest in forming joint ventures
and seeking direct investment in the corporation.
United Arab Shipping Company has expressed interest in joint ventures in
transporting goods to Gulf States. Kuwait Petroleum, which supplies oil to
Pakistan State Oil (PSO), has also expressed interest in joint ventures. At
present, PNSC carries oil to India, Bangladesh, Sri Lanka, and African
countries.
A long-term agreement is expected with Bangladesh while Shell has
already secured PNSC services for Singapore. It is necessary to mention
about one of the latest inductions in PNSC fleet. MV Malakand was taken
over physically at outer anchorage of the Port of Dalian China on
December 27, 2010. It has 76,830 metric tons deadweight with a gross
tonnage of 40,040 having length 225 meters and breadth 32.20 meters.
This Panamax bulk carrier was built in 2004 by Sasebo Heavy Industries of
Japan.

Acquisition of the ships is part of PNSC's fleet revamping/expansion plan,

whereas a sum of approximately Rs70 million was paid through commercial
loan which PNSC contracted with a consortium of commercial banks
without government guarantee. The planned acquisition of ships in the fiveyear (2010 2015) is based on modern and competitive tonnage with a
view to serve Pakistan's seaborne trade as well as providing competitive
shipping services for the world trade.
The five-year plan caters for induction of 2-3 modern handy size/supramax
bulk carriers, preferably during 2011. Induction of a Product Tanker and an
LNG carrier is also part of the fleet development plan, which will serve the
energy sector of the country.
Keeping in view the fact that PNSC is still not fully ready to handle
Pakistan's international trade, active involvement of the private sector is a
must. However, without offering incentives convincing the private sector to
play any role is hoping against hopes. Pakistan should benefit from
Bangladesh experience. Since independence, it has completely turned
around its shipping.
Since more than 95 per cent of the total trade of Pakistan is seaborne, the
Ministry of Ports and Shipping must focus on modernization and
corporatization of ports and shipping with a view to introducing landlord
concept in ports, rationalizing ports tariffs in order to be competitive in the
region, introducing modern technology and data base in line with the
present day trends, reviving ship-owning in the private sector by removing
the impediments, and enhancing tonnage and profitability of PNSC.

NEED FOR VAST IMPROVEMENT IN SHIPPING SECTOR

Aug 1 - 7, 2016
By: MOHAMMED ARIFEEN
There is hardly any significant interest to the shipping sector by the
Pakistans governments in the past and present as the shipping industry
depends on foreign shipping lines for 95 percent of its $60 billion in external
trade. There is a transit trade hub in Dubai that allows free flow of currency;
therefore nobody take risk sinking in a place that lacks basic support
services.
Until 1974, Pakistan had a good number of merchant fleet with prospering
privately-owned shipping companies. Almost all cadets who passed out at
the Pakistan Marine Academy were absorbed either by the national-flag
carrier or had good demand in many private shipping companies.
The Pakistan Marine Academy had a specialized high standard and
catered not only to Pakistani nationals but also to trained cadets from many
countries such as Malaysia and Sri Lanka.
Pakistan was truly considered a prominent maritime nation capable enough
of safeguarding its maritime boundaries and enforcing various International
Maritime Organization (IMO) conventions/treaties.
It went on to produce a large number of trained seafarers who went on to
serve on board not only to national flag carriers but also foreign flag
vessels.
Nepotism and favoritism spread throughout the shipping company. The
quota system killed the selection on the basis of merit by the Pakistan
Marine Academy. The national fleet rapidly slowed down from around more
than 70 vessels in 1971 to may be nine vessels at present.
Foreign nationals are no more interested in the Pakistan Marine Academy,
and Pakistani nationals passing out run from pillar to post and remain at the
mercy of foreign shipping companies which would, only employ them if it is
commercially viable.
The incident of 9/11 in 2001 was something that had already started to fail
for Pakistans shipping industry and seafarers. Being categorized as

belonging to a restricted nationality, a Pakistani seafarer faces large

problems seeking employment as now most of the countries have placed
visa restrictions on Pakistani nationals, which a foreign shipping company
with commercial interests is not willing to take up.

The bureaucratic obstacles , such as coming to Karachi, from wherever the

seafarer resides, for signing on the Articles of Agreement at the shipping
masters office does not make them an lucrative choice in the international
job market.

PRESENT STATUS
The present government is working with the support of other ministries to
improve the port infrastructure, streamline supply chain management and
develop the existing national fleet.
Pakistans maritime sector is important especially in the context of the
China-Pakistan Economic Corridor (CPEC) projects being completed by
2018 and our ports, especially the Gwadar port, which will play a pivotal
role in bolstering regional trade.
The Ministry of Ports and Shipping has decided that all possible support will
be extended to the interested parties who come forward for the
development of this sector for a prosperous Pakistan. It has abolished the
customs duty, general sales tax and withholding tax on the import of ships
and all the floating crafts including tugs, dredgers, survey vessels and other
specialized crafts purchased or bareboat-chartered by Pakistani entities as
well as vessels flying the Pakistan flag.
The merchant shipping of Pakistan, specifically the Pakistan National
Shipping Corporation (PNSC) have played a pivotal role in uplifting trade
and economic activity and supporting the oil supply chain of Pakistan.
In 2015, China and Pakistan signed an agreement of 6 Maritime Patrol
Vessels (MPV) for the Pakistan Maritime Security Agency. According to the
agreement, construction of ships will be undertaken at Karachi Shipyards &
Engineering Works (KS&EW) or builders shipyard, as commercially viable.

Pakistan shipbuilding industry needs more shipyards. Its importance

becomes more when under-construction ship lift and transfer system at
KS&EW was stalled due to filing of case in High Court and Supreme Court
by the unsuccessful bidder.
After receipt of Supreme Court verdict in KS&EW favor, the project
progress has recommenced and the contract for civil works has been
awarded on January 10, 2014.

KS&EW LACKS COMPETITION

Karachi Shipyard and Engineering Works Limited (KS&EW) is the only
high-tech shipyard in Pakistan. KS&EW primarily sustained through
government subsidies and orders from the Pakistan Navy.
Government should take shipbuilding sector seriously. Its not just about
signing some contracts and building few vessels under transfer of
technology.
Governments claims to have achieved self-sufficiency in warship
construction appear meaningless when we see this fact that KS&EW can
certainly not construct warships through purely indigenous means. Such
constructions rely greatly on foreign suppliers for almost all the equipment,
weapons, sensors, machinery, electronics and even shipbuilding designs
and material.
Government of Pakistans lack of interest in this sector makes the situation
worse. In 2014, government decided to set up two new shipyards at
Gwadar and Port Qasim, with investments from Japanese and Korean
firms on build, operate and transfer (BOT) basis.
Government should answer why KS&EW lost four ships and reasons of
high cost. Cost of production in Pakistan is low but governments
mismanagement and poor governance is making it high.
This year, steel cutting of first MPV was held at Gouangzhou Wenchong
Shipyard on 29th January. Due to high cost production, KS&EW lost the
construction of 4 ships. Just because of Transfer of Technology agreement
this year KS&EW able to construct only 2 ships out of 6.

According to the planning commission, unit price of each 600T MPV is

US$22.5 million at KS&EW, which is $4.5 million more than builders
shipyard. KS&EW has to be competitive, either in terms of production costs
or in terms of technological sophistication.

PROPOSALS
The following suggestion might remove the suffering of our seafarers and
raise the bar of the shipping industry. We should encourage private ship
owning by giving tax incentives and run the national flag carrier on
professional lines so as to make it commercially viable, which would result
in the growth of national fleet.
Further we make merit the sole basis of selection in the Pakistan Marine
Academy and appoint competent nautical/engineer surveyors and
examiners of master/mates and engineers. This would not only raise the
standard of our seafarers, but also ensure effective compliance with
various IMO conventions/treaties.
Moreover, we should do away with the shipping masters office in Karachi
as a valid seamans book and a seafarers identity document should
suffice. This has effectively been enforced by India to the great benefit for
seafarers of distant countries.
There is need to work jointly with full devotion and dedication in
strengthening our maritime sector by enforcing policies that support our
trade.
Shipbuilding is an attractive industry. Shipyards create quality jobs and
support economic growth. Shipyard activities include ship construction,
repair, conversion, and alteration. They also include the production of
prefabricated ship and barge sections, and other specialized services.
The reforms of the present government in exempting duties and taxes on
the procurement of ships, has finally set the stage for the development of
the maritime sector in Pakistan.

THE CONTAINERIZED
PAKISTAN STAND?

SHIPPING

INDUSTRY

WHERE

DOES

Aug 1 - 7, 2016
FEEDBACK
The global trends in the shipping industry have drastically changed with
containerized cargo shipments taking over the bulk cargos. From cost
effectiveness of shipment to increased convenience coupled with the high
level of security, the growth in containerized cargo at the Karachi Port has
been substantial from 1,590,000 TEUs in the fiscal year 2013-14 to
1,720,000 TEUS in 2014-15. This is an 8.4 percent growth compared to
bulk cargo that experienced 5 percent growth from 41,350,000 tons during
2013-14 to 43,420,000 tons in 2014-15.
This consistent growth in containerized cargo is evident across the globe,
depicting the need for increasing containerization in Pakistan. Not only this,
new and more advanced mother vessels have been in place, which can
greatly be associated with economies of scale, given the conditions for the
vessels to be entertained on the ports of Pakistan.
Currently, the 3 container port capacities of the country are accommodative
of Post Panamax and Post Panamax Plus vessels (capacity of 4,000 to
8,000TEUs of containerized cargo). Larger vessels cannotbe handled at
the current terminals due to limitations of available infrastructure and depth.
This is the very reason for increased time and costs of transportation for
the traders since the cargo from the larger vessels is unloaded, and
reloaded to Post Panamax vessels at nearby ports before arriving in
Pakistan(also known as transshipment). It is obvious that containerization
is the future of sea trade which leaves the need for Pakistan to adapt to the
growing needs of containerized ships to be able to benefit from
advancement and cost effectiveness. Larger container ships berthing at
Pakistani ports could result in lower costs to the end users resultingin
economic and handling efficiencies to trade in Pakistan.
The idea is not so far-fetched with the developmental plans of container
ports underway. The first Deep Sea Container Terminal, also known as
South Asia Pakistan Terminals(SAPT) is a public private partnership
between Hong Kong based Hutchison Port Holdings and Karachi Port
Trust. The new terminal will definitely prove to be a game changer for
containerized cargo trade, with the ability to accommodate the largest
vessels afloat today, the New Panamax Plus and Post New Panamax

(Triple E) vessels with a capacity of 15,000 to 19,000TEUs of containerized

cargo. This will be made possible due to a depth of 16.5 meters alongside,
together with the ideal location for berthing mother vessels.
Sources in KPT have said that the currently operating container terminals
in Pakistan, namely KICT, PICT and QICT, have inherent limitations due to
which they are not suited to handle container vessels of sized exceeding
10,000 TEUs. The cost of removing the said limitations would be
significantly higher than the expected benefits. Therefore, it was deemed
necessary by the Government of Pakistan to invest in an all new terminal at
SAPT that is a Greenfield project designed to handle the largest container
vessels afloat today. This is KPTs premier project and is expected to be
inaugurated before the end of 2016.
Karachi Port has invested over US$350 million for creating land area for
the terminal while SAPTshall be investing US$600 million in the technology
and development of the container terminal. The terminal is equipped with
the latest technology from Hybrid RTGCs and Remote Controlled Cranes
(RCCs) to examination facility equipped with automated gates with identity
cards, CCTV systems, proper illuminationand fully automated operations
unlike never before in Pakistan. The Operations Control Centre is equipped
with the latest nGen TOS System, EDI exchange with shipping lines, EDI
exchange with Customs (Weboc) and Electronic Delivery Order allowing
shipping lines to pass consignment release info directly.
The port will not only be fruitful in terms of operations, but also convenient
for traders with a web based payment system that will not only ensure
security but also ensure that traders physical presence is not necessary for
payments to be made. This can also facilitate importers and exporters of
the Central Asian landlocked countries to use the Deep Water Container
Terminal which will prove immensely beneficial for the economy.
The SAPT terminal is said to have been designed to be environmentally
friendly with a low carbon footprint matching some of the advanced
terminals globally due to the increased awareness of this issue amongst
shipping lines. From generating their own electricity through solar power
and captive power plant to sustainable production technology such as
hybrid cranes will ensure effective fossil fuel consumption with minimal
opportunity cost. Furthermore, a reverse osmosis filtration system will
ensure in house supply of portable water. All of the above will be
complemented by a Regenerative Power Absorption System increasing
electrical power utilization.

The terminal was previously expected to be ready for operations and

inauguration by June 2016. However, the inauguration could not take place
due to a number of pending issues. Thisinclude availability of access road
and rail links from the container terminal to the upcountry for the cargo to
be transported to and from the terminal. Sources within KPT have
confirmed that dredging of access channel could also not be completed
within time and KPT is in the process of awarding a new dredging contract
to a foreign firm.These sources have also indicated that the Karachi Dock
Labor Board is demanding a share in the revenues of the SAPT terminal
and that this matter is complex and could go to court resulting in further
delays.
The impediments mentioned above have put a question mark on the million
dollar investment project. Such delays and impediments have become
characteristics of several major projects in Pakistan and it concerns still
remain to see remains to be seen if KPT and the Ministry of Ports and
Shipping will be able to remove the concerns of the foreign investors to
ensure the success of this project.

MARITIME INDUSTRY SENDING SOS

June 27 - July 3, 2016
By: CAPT. ANWAR SHAH
It not only hurts me but gives immense pain to see that Maritime Shipping
Policy 2001, incentives were being rescinded by the government, the duty
exemptions and other incentives were valid up-to 2020, but in last budget,
same were rescinded without any advance notice, discouraging any
investment in Maritime Industry, however believe that new Minister is
reverting to old initiatives, as announced.
I am writing this with heavy heart being author of Shipping Policy 2001 and
Merchant Shipping Ordinance 2001, having drafted the document gratis to
repay my debt to my country. The proposals were made in last PML (N)
Government in 1996 and were implemented in 2001 by an ordinance and
policy was improved in 2006, whilst I was Chairman as Director General of
Ports and Shipping. Our national flag carrier though in profit is not allowed
to function independently as 79 ordinance authorizes board to take
independent decisions in functioning of the organization. My interaction
with authorities of neighboring big brother at seminars that Shipping
Corporation of India though in loss is allowed to be independent and Board
makes all decisions without any interference from the government being
majority stakeholders.
I, am making plea to our Finance Minister to ensure reverting to the
Shipping Policy 2001 and cut/paste incentives being offered by India.
Our national line plays a crucial role to the countrys economy lifting more
than 26 percent of trade, meeting demands of non edible oil industry, most
efficiently. Due to global economic show down and merchandise trade of all
economics showing declining trend, thus BDI of Bulk Carriers touching the
rock bottom, developing the core sector is call of the day, otherwise its
inadequacy may create bottlenecks in the economic growth of a country. In
Container Trade even Maersk, CMA CGM were feeling the impact, whilst
Chinese are merging to dominate the industry by mergers and acquisitions.
Indian Finance Ministry has announced the union budget, promising GDP
growth of 7/8 percent. Indians are pleased to note several prop up the
countrys maritime sector in the union budget announced, most significant
being permission for local ship owners to register their ships in tax friendly
overseas jurisdiction, without opening subsidiaries there, in a bid to
increase the national tonnage.

WRS, ware house receipt is new concept introduced for Indian commodity
derivative market, to obtain short term finance. Any receipts issued by
central/state warehouse is considered as co-lateral by banks. WRS is an
excellent system to support the market and small traders to get finance.
Indian government has taken initiatives to protect the local
investors/contractors by introducing the short term policy, dredging policy,
marine tonnage, tax scheme for local investors. Even Cabotage Laws are
relaxed to promote growth of coastal shipments.
My humble submission to the government is to ensure the initiatives of
policy 2001 and implemented and extending it to 2030, whilst assuring
preference to Pak Flag in all FOB imports, be it PSO, TCP, Steel Mills, Coal
Plants etc. If, need be, I, am willing to present my view point gratis to
concerned Ministry, enable our Maritime Sector may prosper. I, strongly
recommend registration of ships in tax heavens as permitted by India to
Induce private ship owners to increase our tonnage too.
Since I was abroad, local sources have told me that no new inventive to
Maritime Industry has been offered in the present budget, except reverting
to policy 2001, as announced to be implemented.

REVITALIZING SHIPPING SECTOR

PNSC IS ADDING NEW SHIPS BUT WITHOUT ACTIVE PARTICIPATION
OF THE PRIVATE SECTOR, THE COUNTRY WILL REMAIN DEPENDENT
ON FOREIGN LINES.
SHABBIR
(feedback@pgeconomist.com)
Mar 7 - 13, 2011

H.

KAZMI

There is no denying the fact that despite addition of new ships by the
national carrier the country remains heavily dependent on foreign lines. The
government has chalked out an elaborate plan to revamp Pakistan's port
and shipping but availability of funds remains the key constraint. It is
understood that unless private sector is involved in a big way the country
will remain dependent of the national carrier.
The recent initiative taken by the national carrier Pakistan National
Shipping Corporation (PNSC) must be appreciated. PNSC is expanding its
fleet at a time when many lines are shrinking.
The size of a fleet is determined by its tonnage and not by the number of
vessels it has. In the past, PNSC had 14 vessels but these averaged about
250,000 dwt (deadweight tonnage). According to the latest annual report as
on June 30, 2011 PNSC had 10 vessels with aggregate tonnage of 633,273
dwt.
During 2009-10, PNSC and its vessel-owning subsidiary companies
together performed a total of 538 voyages (inclusive of foreign chartered
vessels and slot chartered vessels) and lifted 7.921 million freight tons of
cargo as compared to 637 voyages and 8.684 million freight tons cargo
during the previous year. A comparison of handling of cargo presents a
disappointing picture because the quantum of cargo is on constant decline.
PNSC had carried 9.451 million tons in 2007-08, which declined to 8.684
million tons in 2008-09 and further reduced to 7.921 million tons in 200910. Handling of liquid cargo remains the key business. PNSC handled
7.227 million tons liquid cargo in 2009-10 as against 7.665 million tons in
2008-09.

PSNC is in the process of replacing its old vantage vessels with under ten
years old secondhand Japanese vessels in Phase-I and then shall embark
upon ordering new build/buying resale vessels in Phase-II for its
development/expansion program. The five-year plan envisages induction of
two to three modern bulk carriers preferably by March 2011. Induction of a
Product Tanker and an LNG carrier was also part of the fleet development
plan, which would serve the energy sector of the country. Inductions of bulk
carriers, product tanker, and an LNG carrier would provide PNSC with
diversified business opportunities and enhance shipping tonnage to the
targeted one million tons. This would place Pakistan and PNSC in a
prestigious position within shipping circles of the world at large and a lead
contributor in the development of national economy, the statement said.
The finance ministry has also appreciated recommendations forwarded by
the federal ministry of ports and shipping for considering PNSC as the
official shipping company for all public sector organizations. While talking
about future role of PNSC in rapidly expanding international trade, it is
heartening to note that the corporations in the first phase of expanding its
fleet plan to invest over U$270 million to include eight new ships. PNSC is
making rapid progress despite international recession. However, it remains
to be seen that keeping its efficiency, expertise, and experience in mind
how the foreign investors respond to its interest in forming joint ventures
and seeking direct investment in the corporation.
United Arab Shipping Company has expressed interest in joint ventures in
transporting goods to Gulf States. Kuwait Petroleum, which supplies oil to
Pakistan State Oil (PSO), has also expressed interest in joint ventures. At
present, PNSC carries oil to India, Bangladesh, Sri Lanka, and African
countries.
A long-term agreement is expected with Bangladesh while Shell has
already secured PNSC services for Singapore. It is necessary to mention
about one of the latest inductions in PNSC fleet. MV Malakand was taken
over physically at outer anchorage of the Port of Dalian China on
December 27, 2010. It has 76,830 metric tons deadweight with a gross
tonnage of 40,040 having length 225 meters and breadth 32.20 meters.
This Panamax bulk carrier was built in 2004 by Sasebo Heavy Industries of
Japan.

Acquisition of the ships is part of PNSC's fleet revamping/expansion plan,

whereas a sum of approximately Rs70 million was paid through commercial
loan which PNSC contracted with a consortium of commercial banks
without government guarantee. The planned acquisition of ships in the fiveyear (2010 2015) is based on modern and competitive tonnage with a
view to serve Pakistan's seaborne trade as well as providing competitive
shipping services for the world trade.
The five-year plan caters for induction of 2-3 modern handy size/supramax
bulk carriers, preferably during 2011. Induction of a Product Tanker and an
LNG carrier is also part of the fleet development plan, which will serve the
energy sector of the country.
Keeping in view the fact that PNSC is still not fully ready to handle
Pakistan's international trade, active involvement of the private sector is a
must. However, without offering incentives convincing the private sector to
play any role is hoping against hopes. Pakistan should benefit from
Bangladesh experience. Since independence, it has completely turned
around its shipping.
Since more than 95 per cent of the total trade of Pakistan is seaborne, the
Ministry of Ports and Shipping must focus on modernization and
corporatization of ports and shipping with a view to introducing landlord
concept in ports, rationalizing ports tariffs in order to be competitive in the
region, introducing modern technology and data base in line with the
present day trends, reviving ship-owning in the private sector by removing
the impediments, and enhancing tonnage and profitability of PNSC.

Seminar on future of shipping sector

Federal Minister for Ports and Shipping Senator Mir Hasil Khan Bizenjo has
praised the reforms of the present government in exempting duties and
taxes on the procurement of ships, which has finally set the stage for the
development of the maritime sector in Pakistan.
Addressing a seminar organised by the Pakistan National Shipping
Corporation (PNSC) on Prospects of Shipping Sector in Pakistan, he said
that his ministry is presently working with the support of other ministries to
improve the port infrastructure, streamline supply chain management and
develop the existing national fleet.
Senator Mir Hasil Khan Bizenjo also highlighted the volatility, which prevails
in international shipping and also shared the reasons that resulted in the
recent downturn which has posed significant risks to the shipping market.
Pakistans maritime sector is important especially in the context of the
CPEC projects being completed by 2018 and our ports, especially the
Gwadar port will play a pivotal role in bolstering regional trade, he added.
He said: I believe that we are back on track and the only thing that matters
now is that we work jointly with full devotion and dedication in strengthening
our maritime sector by enforcing policies that support our trade.
The minister further expressed his full faith and confidence in the
management of the PNSC for utilising full benefits from these taxation
reforms and thanked the chairman and management for holding the
seminar.
I completely understand the importance of each stakeholder and their role
and also recognise the valuable efforts that they are making. I believe that
all issues of the maritime industry need immediate attention and resolution
for which we all have to work together.
The Ministry of Ports and Shipping assures that all possible support will be
extended to the interested parties who come forward for the development
of this sector for a prosperous Pakistan, Bizenjo said.
The seminar was attended by prominent representations from Pakistans
shipping industry and stakeholders from both the public and private
sectors.

Addressing the seminar, PNSC Chairman Arif Elahi highlighted the global
perspective on the role of merchant shipping.
He also briefed about the merchant shipping of Pakistan, specifically the
role of the PNSC in uplifting trade and economic activity and supporting the
oil supply chain of Pakistan.
He praised the efforts of the Ministry of Ports and Shipping in abolishing the
customs duty, general sales tax and withholding tax on the import of ships
and all the floating crafts including tugs, dredgers, survey vessels and other
specialised crafts purchased or bareboat-chartered by Pakistani entities as
well as vessels flying the Pakistan flag.
KARACHI: In order to recognise the recent tax reforms for shipping sector
by the present government, Pakistan National Shipping Corporation
(PNSC) recently held a seminar on "Prospects of Shipping Sector in
Pakistan" in Karachi.
The purpose of the seminar was to highlight the recent exemptions by the
present government on Customs duty, general sales tax and withholding
tax on imports of ships and other floating crafts. The house was full with
prominent representations from Pakistan's shipping industry and
stakeholders both from public and private sectors.
The seminar was honoured by Ports and Shipping Minister Senator Mir
Hasil Khan Bizenjo and COMPAK Commander Vice Admiral Arifullah
Hussaini.
The seminar was aimed to promote shipping sector of Pakistan,
promulgate policies and incentives to ensure growth and prosperity of
Pakistan's maritime sector and encourage and attract local and foreign
investors.
Addressing the audience, PNSC Chairman Arif Elahi highlighted the global
perspective on the role of merchant shipping. He briefed about the
merchant shipping of Pakistan, specifically the role of PNSC in uplifting
trade, economic activities and supporting oil supply chain of Pakistan. He
appreciated the efforts of MoP&S in abolishment of Customs duty, general
sales tax and withholding tax on imports of ships and all floating crafts
including tugs, dredgers, survey vessels and other specialised crafts
purchased or bareboat chartered by Pakistani entity and vessels flying
Pakistan flag.

The PNSC chairman, while emphasising the importance of maritime

industry, also highlighted PNSC's performance that has been outstanding in
the last decade. He said that the current PNSC's fleet comprises modern
vessels with deadweight carrying capacity of 681,806 metric tonnes highest ever since its inception, adding that the corporation's profitability
continues to increase with a net profit of over Rs 2 billion with foreign
exchange savings of over $1.5 billion. PNSC has also paid dividends and
taxes to the government, which amounts to billion of rupees and
contributing its part in economic growth of Pakistan, he said.
"The current national seaborne trade of Pakistan stands at 73.0 million
tonnes and looking at the potential of this sector, we expect this figure
would reach to 95 million tonnes by year 2020," the chairman added.
Elahi encouraged the participants to invest in maritime sector of Pakistan in
areas i.e. oil tankers, bulk carriers, container vessels, LNG carriers, oil
storage and ancillary shipping services to strengthen national fleet and
improve shipping services in Pakistan.
"I invite all the stakeholders to fully utilise these benefits of exemptions of
duties and taxes and welcome to enter into joint venture with PNSC in
acquiring vessels for your own usage. This shall not only save the country's
huge valuable foreign exchange but will also improve our cost and reduce
dependency on foreign carriers, which will ultimately benefit investors and
shareholders by means of higher profitability," the PNSC chairman said.
Ports and Shipping Secretary Khalid Pervez also expressed his gratitude to
the ports and shipping minister for his untiring efforts in pursuing the
government to abolish the Custom duty, GST and WHT on import of ships
and all floating crafts. "This remarkable decision will help private sector
invest in the maritime sector and will also provide golden opportunity for
them to join PNSC through public private partnership," he added.
The federal secretary appreciated the efforts made by the PNSC chairman
and his team in the commercial and financial performances during the last
financial year introducing reforms in the organisation and thanked them for
organising such an informative seminar.
In the end, Ports and Shipping Minister Senator Mir Hasil Khan Bizenjo
thanked all the participants and appreciated the reforms of the present
government by exempting duties and taxes on procurement of ships, which
has finally set the stage of development in maritime sector of Pakistan.

"I am pleased to inform you that our ministry is presently working in support
with other ministries to improve port infrastructure, streamline supply chain
management and developing of existing national fleet," the minister added.
Bizenjo also highlighted the volatility that prevails in international shipping
and also shared reasons that resulted in recent downturns, which posed
significant risk to shipping market.
ISLAMABAD:
Defence experts have stressed the need for fully exploiting maritime area
of Pakistan to tap its potential.
They were speaking at a seminar on Pakistan: maritime challenges and
opportunities, organised by the Institute of Policy Studies (IPS), here on
Thursday, said a press release issued by the institute.
Speakers included former deputy chief of naval staff Vice Admiral (retd)
Iftikhar Rao and National Defence University (NDU) Department of
International Relations Head Dr Muhammad Khan and a large number of
maritime and defence experts, armed forces officials and others.
Admiral Rao emphasised that Pakistan needed to update and develop its
maritime policy of 2002 and take into account the recent trends and
developments.

Pakistans maritime areas consisted of 295,000 square kilometres and

there is a need to tap its real potential, the retired admiral said.

Underlining the significance of trade, mineral and strategic maritime

potential he reminded that Pakistans 95 per cent trade takes place
through sea.
Pakistan is located at a point which lies just besides the route of worlds
72 per cent oil supplies.
Gwadar port needs to be equipped with necessary technology and
infrastructure so that it may not only become a starting point for an
economic corridor towards China but also provide an ideal location for the
empty oil tankers entering the Gulf before reloading for necessary repair
and maintenance, he suggested.
He called for integration between maritime and inland transport systems,
development of corridors and enhanced logistic solutions to take full
benefit of countrys maritime potential.
Rao
vehemently
advocated
that
Pakistan
should
emerge as a shipbuilding country as this industry has proven to be a
catalyst of industrialization in a number of countries which have deep sea
shore and abundant labour force.
A policy board with the prime minister as its chairman has already been
notified since 2007 while a real development is yet to be seen, he said.
He also stressed the need for meaningful diplomatic efforts to counter the
hegemonic designs of India to dominate the Indian Ocean, which it
strategically considers Indias ocean.
He said that the strategic islands of Nicobar and Andaman had 80 per
cent Muslim population at the time of partition but the yardstick of Muslim
majority areas to become part of Pakistan was not applied to them. Today,

India has a three-star naval command based on these two islands through
which it controls Chinas maritime movement by its neck.
Dr Muhammad Khan talked about the challenges to the countrys maritime
interests and the Indo-US plan to establish Indian control over the Indian
Ocean at the cost of Pakistans economic and strategic interests.

The question is: Would the government bail out the long financially errant
Corporation once again like many times in the past by pumping in hard
cash earned to save the one and only domestic shipping company?
By
Syed
May 21 - Jun 03, 2001

M.

Aslam

With the accumulated loss surpassing the paid-up capital and reserves by
Rs 105 million and current liabilities exceeding current assets by Rs 1.5
billion for the half-year ended December 31, 2000, the state-owned
Pakistan National Shipping Corporation is looking at a bleak future.
The question is: Would the government bail out the long financially errant
Corporation once again like many times in the past by pumping in hard
cash earned to save the one and only domestic shipping company?
Despite lifting more cargo and bettering the revenue during half-year under
discussion the PNSC and its subsidiary company, Pakistan Co-operative
Ship Stores (Pvt) Limited, suffered an operating loss of Rs 36.6 million. The
failure to improve profitability despite increase in cargo liftings and revenue
was blamed primarily to the substantial increase in bunker price during the
period which rose to $ 172 per ton over the comparative period the
previous year. The depressed freight market resulting in decreased freight
rate was also blamed as another major set back for the loss.
The notes to the unaudited accounts for the half-year also say that the
Government of Pakistan has restored the 'First Right of Refusal' for the
PNSC allowing it to win bulk imports by the government agencies and
public sector organisations by matching the lowest bid. The restoration of
the 'First Right of Refusal' is seen by the observers as an indication of the
government's plans to help the fledgling PNSC.
The PNSC management has already requested for support from the
Federal Government, which holds 90 per cent of the shares. A bailout this
time around would not be the first for the PNSC The Federal
Government provided a subsidy of Rs 259 million to the PNSC in 1984-85
and the Corporation managed to remain in black for the next two years
thereafter generating losses.

In March 1990 the Federal Government once again financially restructured

the troubled Corporation by writing off its accumulated losses which totalled
hundreds of millions and raising its paid up capital from Rs 500 million to
Rs 1,143 million. By 1995-96, PNSC's accumulated losses totalled Rs 850
million wiping out almost 75 per cent of the enhanced paid up capital.
pnsc attributed the massive operating loss last year on the unprecedented
increase in the international prices of oil which increased the expenditure
on the purchase of bunkers to Rs 606 million, almost double than Rs 319
million over the previous year. However, a look at PNSC's performance
over the years clearly shows that the Corporation has managed to earn an
operating profit only half the time since 1984s.
During last decade, PNSC's fleet strength has decreased by almost half
from 28 vessels to 15 vessels. The dead weight tonnage has also declined
from 494,956 to 261,836 during the same period. PNSC's fleet today
comprise a total of 15 vessels including 12 break-bulk and 3 container
vessels. All the break-bulk vessels have long passed their economic lives
the average age being 18 year. Many of them are on the scrap list and
the Corporation has repeatedly called for tender for one vessel during last
few months for scrap/other purposes.
The conditions of the rest of the break-bulk vessels are only marginally
better requiring frequent repairs and dry-docking costing an ever increasing
sums in maintenance and running costs. The relevant question is: Would
the restoration of the 'First Right of Refusal' would help PNSC's dilapidated
fleet perform or would the facility be used to pass on the business to the
chartered operators as usual. As is, during the half-year under discussion
PNSC chartering revenues totalled more than its freight revenues.
The PNSC still owes an outstanding balance of $ 30 million from the
Bahrain Branch of National Bank of Pakistan for the three-used container
vessels it acquired in 1996. PNSC is negotiating for the rescheduling of the
remaining part of the loan.
The restoration of the 'First Right of Refusal' should also be seen in the
broader context allowing PNSC to enjoy monopoly on such captive import
cargoes as coal, steel, fertiliser, phosphate, etc. It also means giving power
to the PNSC to not to match a bid to avoid shipment of an import cargo no
matter how important.

The importance of having a reliable national maritime fleet can hardly be

over-emphasised, particularly in the context of Pakistan which faces real
threat from its hostile neighbour. However, turning PNSC in to a lean and
efficient commercial organisation should be made a top priority. Can a
shipping company having a fleet of 15 vessels, the majority of them in
dilapidated state, afford to have 610 executives; including the chairman, 4
directors and 605 other executives.

SEMINAR
Federal Minister for Ports & Shipping Mir Hasil Khan Bizenjo told that we
want to establish and developed shipping sector and thats why we are
giving duties and taxes exemption on import of shipping products. Pakistan
National Shipping Corporation (PNSC) will make a key role to make
Gwadar biggest business hub of Pakistan in near future.
Advertisement
Federal Minister for Ports & Shipping was addressing a seminar in Karachi
on Prospects of shipping sector in Pakistan. This seminar was held by
Pakistan National Shipping Corporation. At this moment Federal Secretary
For Ministry of Ports & Shiping Khalid Pervez, Chairman of PNSC Arif Alvi,
Chairman Port Qasim Authority Agha Jan Akhtar, Commander COMPAK
Vice Admiral Syed Arifullah Hussaini and other prominent representatives
of PNSC were present.
The purpose of this seminar was to introduce tax exemption which is
provided by present government on withholding tax and custom duty on
import of ship and aircrafts. On the other hand it will promote the shipping
sector of Pakistan, promulgate policies and attract foreign investors.
Senator Hasil Khan Bizenjo told that new investment will come in shipping
sector. It will create great positive impact on the economy of Pakistan and
sea ports. Further he told that ChinaPakistan Economic Corridor (CPEC)
as well as shipping sector will be developed gradually.
Federal Secretary For Ministry of Ports & Shiping Khalid Pervez told that
current seaborne trade of Pakistan 73 billion tones and we expect that it will
reach 95 billion tones by 2020. Further he told that stakeholders should
avail full benefits from these exemptions of duties and taxes. We are
offering to stakeholders for investment and joint ventures because we are
acquiring new ships for own usage. It will not only save the countrys
valuable foreign exchange and reduce dependency on foreign carriers.
Federal Minister appreciates efforts which is made by the PNSC team in
commercial and financial sector. They are introducing the tax reforms in
organization and thanked them for organizing such as informative seminar

CHALLENGES , OPPURTUNITIES MARITIME POTENTIAL

ISLAMABAD:
Defence experts have stressed the need for fully exploiting maritime area
of Pakistan to tap its potential.
They were speaking at a seminar on Pakistan: maritime challenges and
opportunities, organised by the Institute of Policy Studies (IPS), here on
Thursday, said a press release issued by the institute.
Speakers included former deputy chief of naval staff Vice Admiral (retd)
Iftikhar Rao and National Defence University (NDU) Department of
International Relations Head Dr Muhammad Khan and a large number of
maritime and defence experts, armed forces officials and others.
Admiral Rao emphasised that Pakistan needed to update and develop its
maritime policy of 2002 and take into account the recent trends and
developments.

Pakistans maritime areas consisted of 295,000 square kilometres and

there is a need to tap its real potential, the retired admiral said.
Underlining the significance of trade, mineral and strategic maritime
potential he reminded that Pakistans 95 per cent trade takes place
through sea.

Pakistan is located at a point which lies just besides the route of worlds
72 per cent oil supplies.
Gwadar port needs to be equipped with necessary technology and
infrastructure so that it may not only become a starting point for an
economic corridor towards China but also provide an ideal location for the
empty oil tankers entering the Gulf before reloading for necessary repair
and maintenance, he suggested.
He called for integration between maritime and inland transport systems,
development of corridors and enhanced logistic solutions to take full
benefit of countrys maritime potential.
Rao
vehemently
advocated
that
Pakistan
should
emerge as a shipbuilding country as this industry has proven to be a
catalyst of industrialization in a number of countries which have deep sea
shore and abundant labour force.
A policy board with the prime minister as its chairman has already been
notified since 2007 while a real development is yet to be seen, he said.
He also stressed the need for meaningful diplomatic efforts to counter the
hegemonic designs of India to dominate the Indian Ocean, which it
strategically considers Indias ocean.
He said that the strategic islands of Nicobar and Andaman had 80 per
cent Muslim population at the time of partition but the yardstick of Muslim
majority areas to become part of Pakistan was not applied to them. Today,
India has a three-star naval command based on these two islands through
which it controls Chinas maritime movement by its neck.

Dr Muhammad Khan talked about the challenges to the countrys maritime

interests and the Indo-US plan to establish Indian control over the Indian
Ocean at the cost of Pakistans economic and strategic interests.
Published in The Express Tribune, September 7 th, 2013.

PNSC Organizes Seminar On Prospects Of Shipping Sector

SHARE THIS

TAGS
KARACHI: Federal Minister for Ports & Shipping, Senator Mir Hasil Khan
Bizenjo has appreciated the reforms of the present Government by
exempting duties and taxes on procurement of ships which has finally set
the stage of development in maritime sector of Pakistan.
Addressing a seminar organized by Pakistan National Shipping Corporation
(PNSC) on Prospects of Shipping Sector in Pakistan, he said that his

ministry was presently working in support with other ministries to improve

port infrastructure, streamline supply chain management and developing of
existing national fleet.
Senator Mir Hasil Khan Bizenjo also highlighted the volatility that prevails
international shipping and also shared reasons resulted in recent
downturns which has posed significant risks to shipping market.
Pakistans maritime sector is important especially in the anticipated
emergence of CPEC by 2018 and our ports specifically Gwadar port will
play a pivotal role in bolstering regional trade and its related activities he
added.
He said I believe that we are back on track and the only thing that matters
now is that we should work jointly with full devotion and dedication in
strengthening our maritime sector by enforcing policies that support our
trade and its associations.
The Minister further expressed his full faith and confidence in the
management of PNSC for utilizing full benefits from these taxation reforms
and thanked the Chairman and management for such a eventful gathering.
I completely understand the importance of each stakeholder, their role and
also recognize valuable efforts they are putting. I believe that all issues of
maritime industry need immediate attention and resolution for which all we
have to work together. APP

NEED FOR VAST IMPROVEMENT IN SHIPPING SECTOR

Aug 1 - 7, 2016
By: MOHAMMED ARIFEEN
There is hardly any significant interest to the shipping sector by the
Pakistans governments in the past and present as the shipping industry
depends on foreign shipping lines for 95 percent of its $60 billion in external
trade. There is a transit trade hub in Dubai that allows free flow of currency;
therefore nobody take risk sinking in a place that lacks basic support
services.
Until 1974, Pakistan had a good number of merchant fleet with prospering
privately-owned shipping companies. Almost all cadets who passed out at
the Pakistan Marine Academy were absorbed either by the national-flag
carrier or had good demand in many private shipping companies.
The Pakistan Marine Academy had a specialized high standard and
catered not only to Pakistani nationals but also to trained cadets from many
countries such as Malaysia and Sri Lanka.
Pakistan was truly considered a prominent maritime nation capable enough
of safeguarding its maritime boundaries and enforcing various International
Maritime Organization (IMO) conventions/treaties.
It went on to produce a large number of trained seafarers who went on to
serve on board not only to national flag carriers but also foreign flag
vessels.
Nepotism and favoritism spread throughout the shipping company. The
quota system killed the selection on the basis of merit by the Pakistan
Marine Academy. The national fleet rapidly slowed down from around more
than 70 vessels in 1971 to may be nine vessels at present.
Foreign nationals are no more interested in the Pakistan Marine Academy,
and Pakistani nationals passing out run from pillar to post and remain at the

mercy of foreign shipping companies which would, only employ them if it is

commercially viable.
The incident of 9/11 in 2001 was something that had already started to fail
for Pakistans shipping industry and seafarers. Being categorized as
belonging to a restricted nationality, a Pakistani seafarer faces large
problems seeking employment as now most of the countries have placed
visa restrictions on Pakistani nationals, which a foreign shipping company
with commercial interests is not willing to take up.

The bureaucratic obstacles , such as coming to Karachi, from wherever the

seafarer resides, for signing on the Articles of Agreement at the shipping
masters office does not make them an lucrative choice in the international
job market.

PRESENT STATUS
The present government is working with the support of other ministries to
improve the port infrastructure, streamline supply chain management and
develop the existing national fleet.
Pakistans maritime sector is important especially in the context of the
China-Pakistan Economic Corridor (CPEC) projects being completed by
2018 and our ports, especially the Gwadar port, which will play a pivotal
role in bolstering regional trade.
The Ministry of Ports and Shipping has decided that all possible support will
be extended to the interested parties who come forward for the
development of this sector for a prosperous Pakistan. It has abolished the
customs duty, general sales tax and withholding tax on the import of ships
and all the floating crafts including tugs, dredgers, survey vessels and other
specialized crafts purchased or bareboat-chartered by Pakistani entities as
well as vessels flying the Pakistan flag.
The merchant shipping of Pakistan, specifically the Pakistan National
Shipping Corporation (PNSC) have played a pivotal role in uplifting trade
and economic activity and supporting the oil supply chain of Pakistan.

In 2015, China and Pakistan signed an agreement of 6 Maritime Patrol

Vessels (MPV) for the Pakistan Maritime Security Agency. According to the
agreement, construction of ships will be undertaken at Karachi Shipyards &
Engineering Works (KS&EW) or builders shipyard, as commercially viable.
Pakistan shipbuilding industry needs more shipyards. Its importance
becomes more when under-construction ship lift and transfer system at
KS&EW was stalled due to filing of case in High Court and Supreme Court
by the unsuccessful bidder.
After receipt of Supreme Court verdict in KS&EW favor, the project
progress has recommenced and the contract for civil works has been
awarded on January 10, 2014.

KS&EW LACKS COMPETITION

Karachi Shipyard and Engineering Works Limited (KS&EW) is the only
high-tech shipyard in Pakistan. KS&EW primarily sustained through
government subsidies and orders from the Pakistan Navy.
Government should take shipbuilding sector seriously. Its not just about
signing some contracts and building few vessels under transfer of
technology.
Governments claims to have achieved self-sufficiency in warship
construction appear meaningless when we see this fact that KS&EW can
certainly not construct warships through purely indigenous means. Such
constructions rely greatly on foreign suppliers for almost all the equipment,
weapons, sensors, machinery, electronics and even shipbuilding designs
and material.
Government of Pakistans lack of interest in this sector makes the situation
worse. In 2014, government decided to set up two new shipyards at
Gwadar and Port Qasim, with investments from Japanese and Korean
firms on build, operate and transfer (BOT) basis.
Government should answer why KS&EW lost four ships and reasons of
high cost. Cost of production in Pakistan is low but governments
mismanagement and poor governance is making it high.

This year, steel cutting of first MPV was held at Gouangzhou Wenchong
Shipyard on 29th January. Due to high cost production, KS&EW lost the
construction of 4 ships. Just because of Transfer of Technology agreement
this year KS&EW able to construct only 2 ships out of 6.

According to the planning commission, unit price of each 600T MPV is

US$22.5 million at KS&EW, which is $4.5 million more than builders
shipyard. KS&EW has to be competitive, either in terms of production costs
or in terms of technological sophistication.

PROPOSALS
The following suggestion might remove the suffering of our seafarers and
raise the bar of the shipping industry. We should encourage private ship
owning by giving tax incentives and run the national flag carrier on
professional lines so as to make it commercially viable, which would result
in the growth of national fleet.
Further we make merit the sole basis of selection in the Pakistan Marine
Academy and appoint competent nautical/engineer surveyors and
examiners of master/mates and engineers. This would not only raise the
standard of our seafarers, but also ensure effective compliance with
various IMO conventions/treaties.
Moreover, we should do away with the shipping masters office in Karachi
as a valid seamans book and a seafarers identity document should
suffice. This has effectively been enforced by India to the great benefit for
seafarers of distant countries.
There is need to work jointly with full devotion and dedication in
strengthening our maritime sector by enforcing policies that support our
trade.
Shipbuilding is an attractive industry. Shipyards create quality jobs and
support economic growth. Shipyard activities include ship construction,
repair, conversion, and alteration. They also include the production of
prefabricated ship and barge sections, and other specialized services.

The reforms of the present government in exempting duties and taxes on

the procurement of ships, has finally set the stage for the development of
the maritime sector in Pakistan.

The global trends in the shipping industry have drastically changed with
containerized cargo shipments taking over the bulk cargos. From cost
effectiveness of shipment to increased convenience coupled with the high
level of security, the growth in containerized cargo at the Karachi Port has
been substantial from 1,590,000 TEUs in the fiscal year 2013-14 to
1,720,000 TEUS in 2014-15. This is an 8.4 percent growth compared to
bulk cargo that experienced 5 percent growth from 41,350,000 tons during
2013-14 to 43,420,000 tons in 2014-15.
This consistent growth in containerized cargo is evident across the globe,
depicting the need for increasing containerization in Pakistan. Not only this,
new and more advanced mother vessels have been in place, which can
greatly be associated with economies of scale, given the conditions for the
vessels to be entertained on the ports of Pakistan.
Currently, the 3 container port capacities of the country are accommodative
of Post Panamax and Post Panamax Plus vessels (capacity of 4,000 to
8,000TEUs of containerized cargo). Larger vessels cannot be handled at
the current terminals due to limitations of available infrastructure and depth.
This is the very reason for increased time and costs of transportation for
the traders since the cargo from the larger vessels is unloaded, and
reloaded to Post Panamax vessels at nearby ports before arriving in
Pakistan(also known as transshipment). It is obvious that containerization
is the future of sea trade which leaves the need for Pakistan to adapt to the
growing needs of containerized ships to be able to benefit from
advancement and cost effectiveness. Larger container ships berthing at
Pakistani ports could result in lower costs to the end users resultingin
economic and handling efficiencies to trade in Pakistan.
The idea is not so far-fetched with the developmental plans of container
ports underway. The first Deep Sea Container Terminal, also known as
South Asia Pakistan Terminals(SAPT) is a public private partnership
between Hong Kong based Hutchison Port Holdings and Karachi Port
Trust. The new terminal will definitely prove to be a game changer for
containerized cargo trade, with the ability to accommodate the largest
vessels afloat today, the New Panamax Plus and Post New Panamax

(Triple E) vessels with a capacity of 15,000 to 19,000TEUs of containerized

cargo. This will be made possible due to a depth of 16.5 meters alongside,
together with the ideal location for berthing mother vessels.
Sources in KPT have said that the currently operating container terminals
in Pakistan, namely KICT, PICT and QICT, have inherent limitations due to
which they are not suited to handle container vessels of sized exceeding
10,000 TEUs. The cost of removing the said limitations would be
significantly higher than the expected benefits. Therefore, it was deemed
necessary by the Government of Pakistan to invest in an all new terminal at
SAPT that is a Greenfield project designed to handle the largest container
vessels afloat today. This is KPTs premier project and is expected to be
inaugurated before the end of 2016.
Karachi Port has invested over US$350 million for creating land area for
the terminal while SAPTshall be investing US$600 million in the technology
and development of the container terminal. The terminal is equipped with
the latest technology from Hybrid RTGCs and Remote Controlled Cranes
(RCCs) to examination facility equipped with automated gates with identity
cards, CCTV systems, proper illuminationand fully automated operations
unlike never before in Pakistan. The Operations Control Centre is equipped
with the latest nGen TOS System, EDI exchange with shipping lines, EDI
exchange with Customs (Weboc) and Electronic Delivery Order allowing
shipping lines to pass consignment release info directly.
The port will not only be fruitful in terms of operations, but also convenient
for traders with a web based payment system that will not only ensure
security but also ensure that traders physical presence is not necessary for
payments to be made. This can also facilitate importers and exporters of
the Central Asian landlocked countries to use the Deep Water Container
Terminal which will prove immensely beneficial for the economy.
The SAPT terminal is said to have been designed to be environmentally
friendly with a low carbon footprint matching some of the advanced
terminals globally due to the increased awareness of this issue amongst
shipping lines. From generating their own electricity through solar power
and captive power plant to sustainable production technology such as
hybrid cranes will ensure effective fossil fuel consumption with minimal
opportunity cost. Furthermore, a reverse osmosis filtration system will
ensure in house supply of portable water. All of the above will be
complemented by a Regenerative Power Absorption System increasing
electrical power utilization.

The terminal was previously expected to be ready for operations and

inauguration by June 2016. However, the inauguration could not take place
due to a number of pending issues. This include availability of access road
and rail links from the container terminal to the upcountry for the cargo to
be transported to and from the terminal. Sources within KPT have
confirmed that dredging of access channel could also not be completed
within time and KPT is in the process of awarding a new dredging contract
to a foreign firm. These sources have also indicated that the Karachi Dock
Labor Board is demanding a share in the revenues of the SAPT terminal
and that this matter is complex and could go to court resulting in further
delays.
The impediments mentioned above have put a question mark on the million
dollar investment project. Such delays and impediments have become
characteristics of several major projects in Pakistan and it concerns still
remain to see remains to be seen if KPT and the Ministry of Ports and
Shipping will be able to remove the concerns of the foreign investors to
ensure the success of this project.

Challenges Faced By The Shipping Industry Economics Essay

Published: 23, March 2015
Today, the shipping industry is still facing a hard period due to macro
economic conditions. Most of the shipping entities are struggling to survive
these difficult times. There are clear signs of economic recovery in the
other sector but on contrary maritime industry has not shown any such
indication of recovery form effects of havoc created by the latest economic
tsunami. Seaborne trade is uncertain and that some challenging lie ahead
for shipping and international seaborne trade. These challenges are further
compounded by other developments of some regulations concern in the
problem of maritime safety and the protection of marine environment. What
kinds of current challenges to the maritime industry related to economic
and development of maritime regulations, and how the maritime industry
cope with those challenges will be described base on the reference studies.
Challenges Facing from Economic Point of View
The global maritime industry has presently been reeling under the impact of
the ongoing economic crisis. It is expected to experience a few years of
decline due to the overcapacity of ships, and a substantial reduction of
shipment, resulting in a drop in tariffs. Overall, the shipping industry is
witnessing a new trend of consolidation. Smaller companies, which are
asset heavy, are merging with larger organizations in order to survive these
difficult times. Observations indicate that the prospect of considerable
improvements in trade volumes before the end of 2010 is unlikely. "It can
be safely assumed that the shipping industry will learn its lessons and
emerge stronger from the current economic crisis. However, there is still a
long way to go, at least three years, before the shipping industry bounces
back to its earlier prosperous times and freight rates are rationally
stabilized." (Frost & Sullivan, 2010).
Challenges Facing from Development of Maritime Regulations

Professional
Essay Writers
Get
your
grade or
using our Essay Writing Service!

your

money

back

ESSAY WRITING SERVICE

Most companies in this domain are struggling with the problem of positive
cash flow. The major challenges facing the shipping industry not only stem
from the economic standpoint, but also arise from strict enforcement of
emission regulations and increasing safety and security issues. The
Rotterdam rules are expected to replace the old Hague, Hague-Visby, and
Hamburg rules. These regulations will provide fresh and fair legal rights to
shippers and other cargo-interested parties. Shipping lines and terminal
operators will be exposed to new legal claims system for damages, stolen
goods, and shipment delays. The criminalization of seafarers is a
prominent issue clouding the industry landscape. Seafarers are subjected
to severe penalties and punitive charges for acts that have nothing to do
with criminal negligence. In addition, carbon emission is a matter that will
ultimately determine the future of the shipping industry. Emission control
measures require the fitting of detectors and making expensive changes in
the machinery deployed on board. This exerts additional pressure on the
shipping organizations that are already struggling.
How Maritime Industry Cope with those Challenges
Under the current circumstances, collaboration shows the way forward.
Additionally, companies must look internally to eliminate non-value adding
activities. Removing "non-value-added" waste or "Muda" from their value
chains and focusing on customer satisfaction, which assumes greater
importance during these testing times, has the potential to help companies
to stay out of the red. Port authorities and operators must optimize
utilization of existing capacities rather than building new ones and dealing
with excessive idle capacities. Ramping up infrastructure capabilities to

cater to regional needs will eventually lead to profitable operations. This

applies to shipping companies that should strategically analyze the profit
earned on each route, and reduce the number of services on the route
where trade volumes are severely down. "For survival in the shipping
market, it is essential to maintain the flexibility required to take advantage
of any emerging opportunities and to act on available market intelligence,"
says the analyst (Frost & Sullivan, 2010). "Major financial benefits will be
associated with well-timed market activity - the probability of shipping
companies achieving the latter will be markedly improved through the
undertaking of regular appraisals of markets and market prospects."
-----Frost & Sullivan. (2010). Maritime Industry: Strategic Insight into Current
Issues and Future Outlook, from the World Wide Web:
http://www.researchandmarkets.com/reports/1197139/

Comprehensive
Writing Services
Plagiarism-free
Always
Marked to Standard

on

Time

ORDER NOW

Review of maritime transport

Against the background of a global financial crisis and economic downturn,
growth in seaborne trade continued, although at a slower rate.

While demand fell, the supply of new vessels continue to grow as the result
of vessel orders placed before the financial crisis. It leds to an oversupply
of tonnage and a decline in vessel prices. Prices for scrap metal in 2009
remain very low and many vessel owners have preferred to hold on and lay
off their ships, hoping for better times to come. As a consequence of falling
demand and increased supply, freight rates have fallen from their 2008
highs.
The great number of disturbing incidents of piracy and armed robbery
against ships - particularly off the Somali coast and in the Gulf of Aden have become an increasing concern not only for the maritime industry that
is heavily affected by these incidents, but also for international
organizations, including the International Maritime Organization (IMO) and
the United Nations.
In the field of maritime and supply-chain security, efforts to implement and
refine relevant legal instruments and standards are ongoing. Noteworthy
environment related developments include IMO's continued commitment to
making progress in a number of areas, including in relation to reducing
emissions of greenhouses gases from international shipping and in its work
towards the establishment of a relevant global regime.
--------Assessing the costs of climate change impacts on ports and, more
generally, supply chains, was seen as important. Understanding the
implications for trade and development especially for developing countries
needed to be enhanced and relevant studies should be carried out
Climate change mitigation in maritime transport and the need to adapt to
climate change impacts posed a particular challenge for geographically
disadvantaged landlocked countries with significant population, especially
for their already volatile trade and development prospects. In that context,
further attention should be focused on the impact of potential mitigation
measures and adaptation requirements for the trade and development
prospects of landlocked developing countries, as well as LDCs [least
developed countries]. In that context, financial and technical assistance, as
well as capacity-building, were important.

-----Having come through what many have described as the worst year in its
history, the global maritime industry is looking towards better days. While
the going remains challenging, there are positive signs that portend hope
for the future. Freight rates are heading up on a strengthening global
economy. The supply overhang of ships is less severe than earlier feared
because of order cancellations and deferments, and slow steaming. The
improved sentiment is trickling down to other sectors of the maritime
industry. As we face the challenges in the year ahead, we see some
encouraging signs of the world economy bottoming out and progress on a
slow road to recovery.
---Climate change is happening and its impacts are already being felt, in
particular in the more vulnerable countries. Unchecked, climatic changes
can reach tipping points resulting in disastrous and irreversible
consequences for humanity. The wide-ranging impacts of climate change
and their potential implications for development underscore the need for
integrating climate considerations into development and transport planning
and strategies. Thus, urgent, concerted and considered action is required
at all levels to ensure effective control of GHG emissions and establish the
requisite adaptive capacity, especially in developing countries. Like other
economic sectors, maritime transport, which is vital to globalized trade, has
a role to play in addressing this challenge. At the same time, access to
cost-efficient and sustainable international transport services must be
safeguarded and enhanced -especially for LDCs, LLDCs and SIDS. Against
this background, and to contribute to the debate, deliberations at the
meeting may help identify relevant policy actions that serve the purpose of
climate change mitigation and adaptation in maritime transport without
undermining transport efficiency and trade facilitation gains. One objective
of the meeting is to gain a clearer vision of the format, scope and content of
a potential new regime on GHG emissions from international shipping and
help ascertain the economic and policy implications of various mitigation
measures, including on trade competitiveness of developing countries. To
this end, and with a view to providing substantive policy guidance in the

context of UNFCCC conference in December 2009, discussions are

expected to help, inter alia:

This Essay is
a Student's Work
This essay has been submitted by a student. This is not an example of the
work written by our professional essay writers.
EXAMPLES OF OUR WORK

(a) Assess impacts on/implications for transportation systems, in particular

ports and ships;
(b) Improve the understanding of required adaptation measures;
(c) Explore the potential for synergies between transport and trade
facilitation measures and climatepolicy, including in relation to technology;
(d) Outline best practices in terms of mechanisms used to integrate climate
change considerations into transportation policy, land use planning, as well
as infrastructure investment decisions, and development strategies; and
(e) Identify current climate change-driven cooperation mechanisms
between maritime industry stakeholders and explore their potential
expansion in developing countries.
Maritime transport is a service rarely in demand for its own characteristics.
As the demand for products increase, so the demand for transport facilities
increases. Factors determining demand for maritime transport are:
condition; price; competition; affordability; speed; quality; standards;
comfort; reliability and most importantly safety and security.

Marine transport encompasses all forms of transport by sea, intermodal

links and inland ports but has certain fundamental differences from other
modes of transport. Firstly it caters to a large degree for the freight market.
Secondly, as it operates in an international environment, it is influenced by
considerable competition and standards.
Trends, developments and challenges to the Maritime Transport
The international nature of maritime transport renders its vulnerable to the
ever-changing world scene and this is a major challenge to the industry as
tabulated below.
2.1 Globalization
The freer movement of people, goods and information characterizes
today's globalised world. It is a more interrelated world, whereby the
actions in one part of the world have implications elsewhere. In tandem
with the expansion of trade is the elevation of the importance of shipping as
the major catalyst of global trade. The case in point is, mega shipping
conglomerates and alliances, as well as global terminal operators exercise
increasing power on global trade, the maritime transport sector and
shipping matters at large. At the same time, there is concern that the forces
of liberalization and competition sweeping through the maritime sector
might compromise shipping standards.
Challenges:
be proactive in identifying trends and developments affecting maritime
transport
be comprehensive and inclusive in our approach to maritime matters
be effective and efficient in responding to maritime trends, developments
and incidents, within the framework of the IMO
involve relevant government departments and stakeholders in the
formulation and adoption of policy

2.2 Heightened maritime safety concerns

Enhancing maritime safety through ensuring that each link in the chain of
responsibility fully meets its obligations is a priority for the maritime
community as a whole. An effective maritime administration is critical in
ensuring an effective and efficient maintenance of maritime safety
standards through proper co-ordination.
Challenges:
The challenge is to enhance technical, operational and safety management
standards. A further challenge is to identify and evaluate factors influencing
a safety culture and to turn them into practical and effective mechanisms
for further developing a quality and safety culture throughout the maritime
community. An existence of an effective and efficient SAMSA is critical in
the enforcement of maritime safety standards.
2.3 Heightened maritime security concerns
The unfortunate events of 11 September 2001 in the United States of
America changed the manner and approach in which matters of maritime
security were handled. The collective approach by the IMO in developing
and adopting maritime security policies and measures has meant that
shipping will no longer be the same again. There are equally growing
concerns that the new measures should not unduly affect the efficiency of
shipping and port operations, more so in an interconnected world highly
dependent on sea-borne trade. The entire maritime community is hard at
work to ensure full compliance with the provisions of the ISPS Code and
changes to SOLAS.
Challenges:
The challenge is to promote the effective implementation of the new
security measures, to instill a security consciousness in ship and port
facility operations and at the same time, ensure the right balance is struck
with trade facilitation, and that sea borne trade will continue to be smooth
and efficient.

2.4 Heightened environmental consciousness

There is growing public intolerance to environmental pollution from shipping
incidents as experienced from several accidents. There is also heightened
concern over the impact of global shipping activities on the environment,
giving impetus to efforts, such as ensuring the preservation of aquatic
systems and not allowing the introduction of harmful substances from ships
in the marine environment.
Challenges:
The challenge in line with the global emphasis on sustainable development,
is to be proactive in identifying and addressing maritime and shipping
activities that could have an adverse impact on the environment; and
To develop effective responses to maritime incidents to mitigate the impact
on the environment, should they occur.
2.5 Safety of people at sea
In line with the IMO's fundamental principle to protect the lives of all those
at sea, the advent of large passenger ships with capacities of several
thousand persons, and the continuing loss of seafarers' lives at sea have
heightened concerns over the safety of human life at sea and the success
of search and rescue operations in case of distress. Such concerns include
the safe operation of ships and whether current response capabilities to
deal with emergencies are adequate.
Challenge:
The challenge is to ensure all that systems and infrastructure related to
ensuring the safety of life at sea are adequate, including the welfare of
persons working at sea and in ports. We need an effective and efficient
MRCC5
2.6 Shifting emphasis onto people
Human performance in all sections of the maritime industry is a major
cause of maritime incidents. Advances in technology affecting the human

element offer new opportunities that we can harness to enhance the human
element in safer shipping.
Challenge:
Is to increase emphasis on the human element in safer and more secure
shipping, port operations and continuously improve measures to enhance
human performance in the maritime industry.
2.7Technology as a major driving force for change in the maritime
transport sector
Technological developments particularly in communications and information
provide better opportunities for knowledge management to increase
transparency and accessibility to information. Care should however be
taken with regard to possible negative consequences that technology could
bring.
Challenges:
To ensure that when adopting technological developments, they enhance
maritime safety, security efficiency and protection of the environment;
Ensure the proper application of technology in information management
and provide enhanced access to that information by the shipping industry
and others.