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Pakistan’s Ports: deep and efficient

Prior to the pandemic, Pakistan’s ports handled a total trade volume of approximately 110.69 million tons during 2019. In 2020, with COVID-19 slowing the global economy, the volume dropped to 92.85 million tons, thus a difference of about 17.84 million tons or about 16.12% on the volume of 2019. Almost the entirety of the aforementioned volumes were handled by Karachi Port and Port Qasim, both situated at Karachi. Both these ports remained operational throughout the height of the pandemic, albeit with the necessary precautions, while numerous ports around the world either scaled down their operations or closed shop altogether sending the global supply chain into a tailspin the effects of which are still being felt in terms of recent sky high freight costs in the containerized sector.

Criticism has recently been leveled against the performance of Pakistan’s ports by certain quarters sans the required technical and operational knowledge required for a deep understanding of such complex matters. I have been involved in ports and shipping related matters for over the past 50 years, both as a seafarer and in various capacities as a subject matter specialist. Based upon my knowledge and experience, I shall engage to clarify various issues that continue to remain hazy.

It has been said that Pakistan’s ports are inefficient and expensive and in doing so examples of European and East Asian ports are thrown about with the implication that we should aspire to be and compete with those ports. Dreams for a better future are essential but before one aspires to such lofty ambitions we should be familiar with certain ground realities. Only by diagnosing the problem rationally and dispassionately, can we grow as a nation.

Ports play a central role in the materialization of economic growth in any country. Pakistan is indeed blessed and has often been touted as a geostrategic hub, a sliver of prime real estate located in close proximity to major economic power houses. Despite this, the realization of Pakistan’s geographic potential has remained elusive. Pakistan has been relegated as a regional feeder port. In order for Pakistan’s ports, and consequently trade volumes, to grow and to evolve into a transshipment hub, a prime destination for global cargo’s, several expansive measures are required.

Geography plays an important role in the success of any port. Large and busy ports, such as Singapore, Hong Kong, Shanghai, Rotterdam, etc., are often at the crossroads of major shipping routes or where there is a bottleneck such as a strait or a canal, such as Colombo, Alexandria, Panama, etc.

Unfortunately, Pakistan’s two major ports of KPT and PQA are not located in close proximity to any major container shipping route. The main circum-equatorial maritime route that goes through Panama, the Strait of Malacca, Suez and Gibraltar, which has the most traffic, passes from the Red Sea towards Sri Lanka almost entirely bypassing the Arabian Sea. The North South route, from Europe to Middle East moves from the Red Sea into the Arabian Gulf once again bypassing Pakistan’s territorial waters.

Since Pakistan cannot relocate near these routes the most ideal method would be for Pakistan to pull these routes towards it by growing exports substantially and sustainably. We must understand that Pakistan’s economy has remained relatively small because we as a nation tend to gravitate towards imports instead of prioritizing value added manufacture of exports. The reasons for this are well documented and beyond the scope of this article, however, needless to say that lack of significant generation of indigenous cargo’s over the years, has limited the growth potential of our ports. The decline of our indigenously generated and impelled cargoes has restricted Pakistan. Export driven growth with increasing volumes would prompt further investment in Pakistan’s port sector by international shipping concerns which would further increase volumes and efficiency.

Obviously, just like any other country, there are inefficiencies which certainly need to be resolved. Other international, high volume ports have deployed sophisticated modern technology and as a result are highly automated. Since Pakistan has lower volumes and low labour costs, the requisite investment in our ports sector has not been as substantial as that in many European ports. However, if we were to compare Pakistan’s ports with other such similar ports we would find that our volumes are not subpar. For example, Jawaharlal Nehru Port, located in Mumbai and the largest container port in India has volumes of 56.43 million tons (2019-2020). Therefore, a comparison of Pakistan’s ports with leading ports of say Europe or Far East would be illogical. The cardinal rule is that like should be compared with like rather than unlike. Any such comparison should be restricted to similar regional ports such as Mumbai or Cochin, etc. In doing so, it will be concluded that Pakistan’s ports are efficient and the pricing of their services is competitive when compared to similar ports in the region.

In some situations, only one port can logically provide access to hinterland markets. This may result from geographical features, lack of adequate transport infrastructure from all but one port, political issues, or other factors. The port of Djibouti currently has a virtual monopoly on access to the Ethiopian market as a result of the conflict between Ethiopia and Eritrea and the lack of transport infrastructure from neighboring Somalia. Dar es Salaam is the major entry point to Tanzania, as well as the neighboring landlocked countries of Zambia, Burundi, Rwanda, and Malawi. Although Pakistan is ideally situated to access landlocked countries such as Central Asian Republics, Afghanistan and Western China, the potential of Pakistan has not been realized primarily due to the conflict in Afghanistan resulting in low trade volumes.

More recently, containerized trade has seen record high rates, which were caused by the COVID-19 pandemic and subsequent shuttering of large parts of the global economy. Containers were continuously being shipped from export intensive regions (an example would be China) to import intensive regions (an example would be USA). These import intensive regions were not exporting sufficient volume to recirculate containers back into the global pool due to COVID. This caused a massive shortage of containers. Combined with blank sailing imposed by carriers to compensate for faltering demand, it caused container rates to skyrocket. However, it should be mentioned that these high rates are not sustainable since they are caused by artificial means and a misallocation of resources. Pre-pandemic, volumes shipped were higher and the rates were lower but currently volumes shipped are lower and the rates are significantly higher despite the available floating tonnage remaining substantially the same during both periods. This situation is unsustainable and has already started to reverse itself as market forces, due to higher prices, are causing more supply to enter into the market.

The pricing at Pakistani ports is essentially driven by market forces beyond the control of Pakistan’s sea ports. The notion that our ports are inefficient and costly is absolutely unfounded as our ports cannot be compared with large, automated and hub ports. It must also be recognized that even though there is always room for improvement, given the available resources and ground realities, Pakistani ports remain the best performing ports in the region as already witnessed during the ongoing pandemic.

The writer is an advisor to the Karachi Chamber of Commerce.
[email protected], captainanwarshah.blogspot.com

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