'CPEC should give full priority to Keti Bundar,' Najib Balagamwalla, Chairman SeaTrade Group

Muhammad Najib Balagamwalla is the Chairman of SeaTrade Group, one of the largest shipping and trading group in Pakistan. He has won laurels and commendations from various large private and public groups worldwide for his role in port and shipping. He is considered to be one of the founders of Port Qasim, where he led, consulted and headed port operations. Below is the edited transcript of BR Research's recent sit-down with him.
BR Research: The shipping industry remains one the most neglected sectors of our economy, being dependent mostly on foreign flag vessels as far as containerized trade and bulk trade is concerned. Having achieved a peak of 71 Pak flag vessels in the yester decades, now we are left with only about 14 ships, out of which 11 are nearing 30 years, and that too in the public sector only. What are the reasons behind shipping's decay in Pakistan?
Najib Balagamwalla: The problem with Pakistan's shipping industry is that our fleet consists only of PNSC tankers, which charge very high freights, as they have the first right of refusal. If the PNSC were to charge market rates it would end up in big losses.
Many years ago, Pakistan boasted a decent number of private flag owners, but due to issues in doing business in terms of customs, immigration, the foreign remittance rules by the central bank, manning policies etc; private sector players had to sell their vessels, while some in fact went bankrupt.
So difficult is the doing business environment that no private investor has even taken advantage of the recent government incentives for the shipping industry. This is because it is hard to operate a ship with existing central bank and custom rules, as the foreign exchange permission to pay for bunkers, crew, port dues etc, has to be free of interference without the any requirement to seek permission from the central bank all the time.
BRR: There were talks of a public-private partnership in the industry. How did that work out?
NB: Yes. Some people tried public-private partnership with the PNSC but it could not work due to apathy at the PNSC, and nepotism and corruption in the Ministry of Ports and Shipping.
BRR: How critical could be the development of Keti Bunder in the context of CPEC?
NB: The CPEC should give full priority to Keti Bundar; it should be built on urgent basis as it will release all the traffic from Port Qasim and Karachi Port which in turn would de-clog the city's road infrastructure; the move will also save huge fuel costs for trucks.
Governments after governments have lacked the basic business sense to build Keti Bunder, which would support the import of coal, oilseed, wheat in times of emergency, sugar exports, raw sugar imports - all of which could save at least Rs 200 crores or $20 million in transport costs for the country every year.
If truck imports due to additional wear and tear, cost of fuel, due to additional mileage, pollution, cost of tyres etc are all included with the time to arrive at Port Qasim and Karachi Port, the total amount which Pakistan's national exchequer is losing by not building Keti Bundar, is $250 million, which is half of what Keti Bundar jetties would cost to build.
Despite its importance, however, whether this time the government will actually pursue it or not is anybody's guess at the moment. You must recall that late Benazir Bhutto had tried developing Keti Bunder in her days as the prime minister. But the move was deliberately sabotaged by the establishment as it would lead to progress and development of Sindh province. Meanwhile, petroleum and refinery lobbies have also not encouraged Keti Bundar since it would reduce transport costs of the petroleum etc and save lot of trucking costs.
BRR: Do Pakistan's current private sector players have the understanding and capacity to foray in the shipping industry?
NB: There is a Pakistan ship agents association and other private players in the industry as well. But their understanding is limited to being an agency as against a full fledged flag bearing company. Having said that, many Pakistani are ship operators and owners worldwide, some notables in the region as well, but they are limited in number. If the government can remove the barriers to doing business then it could attract private players in the industry.
BRR: What specific measures would you suggest to reduce the cost of doing business?
NB: Well, mark-up on financing by local banks needs to be reduced. Since this industry would be earning forex or at least saving forex in its early years, it should be given the same level of discount on interest rate by the State Bank as is given to the textile industry. Secondly, though 100 percent exemption already exists but it needs to be clarified for duties, sales tax, income tax, excise and all local charges for imported ships.
The government also needs to make regulatory changes to ensure free movement of foreign currency for payment of crew / bunkers / duties / taxes, while reducing charges for registration, ensuring rationalization of union and MMD rules. The KPT should allow 50 percent reduction in port dues for Pak flag vessels even if crew is 25 percent Pakistani, instead of the 75 percent crew currently in vogue. The government also needs to develop a proper shipyard and maintenance facilities.
Above all, there has to be change in mindset and leadership at the top; how can ports which are trade business entities be run by former naval heads or bureaucrats? The shipping and port industry needs a team of sincere Pakistanis who have background in running ships and ports as operators and owners, instead of non-specialists bureaucrats.
BRR: What is the state of maritime policy research institutes in Pakistan?
NB: All such institutes are run by the bureaucracy; they hold seminars where the speakers and panelists invited are based on personal friendships and government bureaucrats, rather than private sector expertise. Those people give run of the mill speeches, which is why private sector owners or worldwide names do not attend these seminars.