International Bank for Reconstruction and Development (IBRD) will provide US $125 million for Karachi Port Improvement Project at the end of current fiscal year to replace the lost port capacity and reduce shipping costs to the Pakistan economy through the reconstruction of the failed berths.
According to project report on "Karachi Port Improvement Project", prepared by Simon Ellis, Senior Transport Economist of World Bank, measurement of the Project Development Objective (PDO) will be through reduced ships' waiting times, the reduction of ship time at berth and lower overall shipping costs. The immediate beneficiaries will be importers and exporters of bulk and general cargoes-especially coal, fertilizers, wheat, cement, clinker and rice-which include government agencies and private companies.
WB report mentioned that the Berths 10 - 17 at Karachi Port are currently unfit for service and need reconstruction. The estimated cost of all civil works related activities is $220 million including civil works, contingencies and supervision of works. KPT is currently in discussions with IFC to provide an IFC-IBRD sub-national loan of $60 million towards the construction of berths 10 - 14. These berths are already under construction and are scheduled to be completed by September 2010. KPT has also approached the Bank to finance $115 million towards the reconstruction of berths 15 - 17 and related studies which is the basis for this PCN.
WB report revealed that Pakistan's national transport system is functioning but costly, with inefficiencies that are estimated to cost the economy at least 4 to 6 percent of GDP each year. The main weaknesses of the Pakistan transport system relative to "international norms" are summarised as follows. Port operating costs are high, resulting in high charges to users; there are long dwell times for inbound containers, resulting in congested terminals and the need to construct additional facilities earlier than necessary; access channels are relatively shallow, which will increasingly limit shipping connections; and there is a shortage of modern bulk handling facilities which not only raises the cost of importing essential commodities but also creates congestion on the quayside for the other traffic.
Furthermore, trade logistics services lack breadth and vertical integration; the railways carry little long distance freight; the main road infrastructure requires major investment to provide the accessibility, capacity and quality required for rapid and reliable road services; and the trucking sector operates old and technologically outdated trucks, offering low freight rates but long transit times and unreliable service quality unless shippers are prepared to introduce additional and costly measures.
The trucking sector has low private costs but high external costs in terms of vehicle overloading, leading to road damage and high accident rates, and also congestion.
WB report mentioned that the National Trade Corridor Improvement Programme (NTCIP) to reduce these costs and improve Pakistan's competitiveness, the NTCIP was initiated by the Government of Pakistan (GoP) in 2005. The key aims of the NTCIP are to encourage modern streamlined trade and transport logistics practices; to improve port efficiency; to reduce costs for port users and enhance port management accountability; to create a commercial and accountable environment in Pakistan Railways and increase private sector participation in the operation of rail services; to modernise the trucking industry; to reduce the cost of externalities for the country; to sustain delivery of an efficient, safe and reliable National Highways and Motorways System; and promote and ensure safe, secure, economical and efficient civil aviation operations and boost air trade.
In the wake of the current global recession and political problems within Pakistan the country needs these transport and trade logistics efficiencies as much for stabilisation as for growth.
WB report said that the ports of Karachi Port Trust (KPT) are a key component of the NTCIP, as they are used for almost 95 percent of Pakistan's international trade. There are three ports in Pakistan. The Karachi Port Trust (KPT) handles the majority of Pakistan's sea-borne trade traffic (37.7 million tonnes in 2008/9), and almost all of the remainder (25.2 million tonnes) is handled by the Port Qasim Authority (PQA).
The new port at Gwadar, completed in 2005, had not attracted any significant traffic until the GoP, late last year, diverted imports of bulk cargoes - wheat and fertilisers - to the port, which handled 1.3m tonnes during January-June 2009. Growth of dry cargo at Pakistan's ports has been high, averaging 11 percent p.a. in the five years up to 2008/9; and it has been even higher for the bulk cargoes - coal, fertilisers, wheat, cement, rice and clinker.
KPT's traffic in these cargoes increased at 18 percent p.a. in the five years up to 2008/9. The Karachi Port comprises two wharves, East and West. There are around 30 berths in these two wharves. Of these, 171/2 berths are on the East Wharf- berth numbers 1 through 17A. Berths 5 through 17 were constructed during 1955-1960 under a World Bank financed First Development Project. Berths 5-9 were reconstructed in the late 1990's and four of those berths were subsequently concessioned to a private container terminal operator, Pakistan International Container Terminal (PICT). By early 2000 the remaining Berths Nos. 10-17A had also become suspect and in July 2007 berths 10 and 14 actually collapsed into the water forcing KPT to stop all operations on all suspect Berths Nos. 10-17. KPT have now started reconstruction of berths 10 to 14 and the reconstruction of berths 15 to 17a forms the basis for this project.
These berths are shallow draft (10.4m) and ill-equipped to handle unitized or heavy cargo, but were nevertheless used mainly for dry bulks and general cargo and were approaching full capacity in 2007. The collapse resulted in queues of ships waiting for berths in 2008, and the situation will worsen, as the rapid growth of bulk cargoes is expected to continue at Karachi Port, despite the diversion of some wheat and fertiliser to Gwadar Port. Particularly rapid growth is expected in the use of coal for power stations, and although the government favours use of local coal, its cost-competitiveness and quality remains questionable, so that much of the coal is likely to be imported.
Pakistan's coal imports have been rising at about 20 percent p.a. over the five years to 2008/9, to 3.39 million tonnes. Also, cement and wheat imports soared in 2008/9. Initial projections by the mission indicate that by 2010/11 the PQA and KPT traffic will reach nearly 27.5 million tonnes of general and dry bulk cargoes against a projected available capacity of 25.5 million tonnes. At present, eight of the twenty general purpose berths which provide this capacity at Karachi Port are non-operational, and many of the other berths are shallow draft and incapable of handling larger ships normally used for the high volume bulks. Consequently, berths 10-17A need to be reconstructed immediately, WB report mentioned.
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