Importance of ports and shipping industry for the blue economy of Pakistan

Successful voyages and geographical connectivity have always been a dream for the mankind. The connectivity in maritime domain is certainly more important than connectivity in the terrestrial realm due to certain benefits of the seaborne trade. Yet the pace of progress has been multiplied several times since the containerization trade took over normatively at global level in the 1960s and 70s, which has not only increased interdependence in politico-economic domain among countries but has also highlighted the fault lines within the states’ systems. In the year 2017, World Bank issued a report in which it was advised to South Asian economies to increase seaborne trade by saying “(I)mproving the competitiveness of South Asia’s container ports located in Bangladesh, India, Pakistan and Sri Lanka is critical to maintaining the trade growth in the region and fostering its fast economic growth.”

The containerized trade or liner shipping may be multimodal or even slow in terms of speed; but the combined benefit of the trade involving containers or freights is undeniable due to cost effectiveness and large quantities of cargo over longer distances. Almost 90% of the global cargo is dependent upon transportation through sea, whereas according to a study, maximum containerized throughput handled in 2016 had been at Asian ports, which was 64%, and since then it has been increasing gradually. The continuously increasing containerized shipping is certainly an outcome of globalization of production and consumption, and increasing demand and supply. Hence trade, shipping industry, and ports cannot be separated from each other.

Pakistan has over 1000 km of coastline with 03 significant ports in which Port Qasim and Karachi Port are functional whereas Gwadar Port is not fully functional as yet. Despite the fact that Pakistan has been blessed with natural deep sea ports required which can be improved with regular dredging, these ports are not working to their full potential. According to Karachi Port Trust, there are 33 cargo handling berths in which 30 are used for dry cargo and 3 are used for liquid cargo, and can host vessels upto 75000 Deadweight Tonnage (DWT); whereas approximately 1600 ships per annum do visit Karachi Port and only 45% berth occupancy takes place in one year. Port Qasim has 17 berths under 14 terminals and can host around 55000 DWT vessels; whereas Port Qasim serves 40% requirement of seaborne trade and gradually it is becoming energy hub. Since Belt-Road Initiative (BRI) is progressing rapidly and Pakistan has been connected with this extensive economic connectivity initiative through Maritime Silk Road (MSR) and China-Pakistan Economic Corridor (CPEC), the time is coming closer to make Gwadar Port functional to its full capacity to reap the potential. China already has been leading from front in the seaborne trade. The year 2019 was consecutively 10th year of highest annual container throughput for Shanghai Port of China which has proven itself the busiest container port in the whole world. With Gwadar Port and CPEC becoming functional as the gateway port for supply chain to China and its allies, the container throughput would be added to Gwadar Port as well.

As the year 2020 has been declared the “Year of Blue Economy”, the role of port and shipping industry cannot be ignored for sustainable economic activity. The sailing ships do not engage many workers, but economic activity on the port after berthing and supply chain brings intense employment opportunity and revenue generation. Here the questions come to the mind quite naturally why despite almost all favorable geographical conditions, the blue economy of Pakistan has not been augmented through potential sectors of port development and management, and shipping industry which could have brought higher yields than rest of the countries. There can be used International Logistics Performance Index (LPI) as an instrument to seek a plausible answer. According to the World Bank, the “LPI is an interactive benchmarking tool created to help countries identify the challenges and opportunities they face in their performance on trade logistics and what they can do to improve their performance” with help of six indicators, i.e. customs, infrastructure, international shipments, logistics competence, tracking & tracing, and timeliness.

The international LPI ranking is done biennially and as per 2018 ranking, Pakistan comes at number 122, while China comes at 26, India at 44, Sri Lanka at 94, and Bangladesh at 100 across 160 countries. The international LPI is based upon domestic LPI which is focused on logistics environment analysis with special emphasis at logistics constraints within countries by using four major determinants, infrastructure, services, border procedures and time, and supply chain reliability to measure performance of particular state. At domestic LPI performance-2018, if Pakistan is compared with India in port or airport supply chain, there is 04 days lead time of exports for 66 km, and for India, the lead time is 03 days for 246 km; while the import of Pakistan takes 08 days lead time for 306 km, and for India, it takes 03 days for 203 km. In shipments meeting quality criteria for export and import, number of agencies and documents is important for which Pakistan gains 83% while India acquires 77%. Pakistan takes 02 days each for clearance without physical inspection and with physical inspection and India takes 03 and 01 day respectively. There are 17% multiple inspections being performed in Pakistan in comparison with India’s 19% inspections. Another area which is quite important regarding modern day transportation is electronic and online submission facility of clearance and other documents which is 4% for Pakistan and 3% for India. 67% ships were able to choose the location of final clearance in Pakistan while the percentage in India was 100%; whereas in Pakistan, 60% goods released which were pending due to customs clearance, and in India, this number was 50%.

The domestic LPI performance of the year 2018 indicates at major issue areas in Pakistan’s port and shipping industry where there are shortcomings quite visible. However the problem is graver and systemic. There are certain hurdles at different levels starting from number of ports, underused available berthing and terminal resources, inadequate commercial infrastructure from port to hinterland connectivity terminals, poor port management, systematic deficiencies and bureaucratic hurdles, flawed governance and accountability policy, and loopholes created by the corrupt staff. Yet the main problem stays with the deficient policy making, ineffective strategies’ building to acquire policy objectives, and ignoring the need to address unnecessary delays and even monetary corruption in the Customs and revenue system. A coherent, multi-pronged approach to get benefit of the geographical location, global economic trends, and strategic visionary analysis is crucial for sustainable port and shipping industry within the blue economic perspective.