‘We are twice as efficient as other Karachi ports’

An interview with Captain Syed Rashid Jamil, Head of Business Unit, Hutchison Ports Pakistan

Hutchison Ports is the world’s leading port network spread across 27 countries globally, including Pakistan. BR Research sat down with their General Manager and Head of Business Unit, Captain Syed Rashid Jamil to talk about Hutchison Ports’ operations in Pakistan, the regulatory challenges that the company and the industry at large faces, and Hutchison Ports’ outlook on Pakistan given the port is entering its second phase of development in Karachi. Following are edited transcripts.

BR Research: Walk us through the history of Hutchison Ports in Pakistan.

Syed Rashid Jamil: Hutchison Ports Pakistan is a partnership between a local entity, which has 10 percent shareholding and Hutchison Ports, which is a wholly owned subsidiary of CK Hutchison. Hutchison Ports is the port operating arm of CK Hutchison, which is a huge conglomerate. We have two business units in Karachi. One is Hutchison Ports KICT, which has been operating since 1998 and Hutchison Ports Pakistan on the other hand was established in 2007 as a result of a concession agreement signed between Hutchison Ports and Karachi Port Trust (KPT) to set up a container terminal, which at the time was called Pakistan Deep Water Container Port. The idea was to have a separate port owned by KPT and we were brought in to build, operate and transfer the container terminal. It was a public tender and we won it. We now have it on a 25-year lease. The port became operational in 2017.

BRR: What led to the massive delay in this project execution?

SRJ: In 2007, when we signed the contract, we were supposed to get access to the facility to start construction in 2011, and we were supposed to start operation in 2012. There were delays in site handover and in construction of berths, reclamation and dredging by KPT’s contractors.

BRR: What is the difference between Hutchison Ports Pakistan and other ports in Pakistan?

SRJ: Hutchison Ports Pakistan is the only deep water port in the country. Our cranes have the capacity to handle any size of vessel. The port itself has a turning basin of 720 meters, which is long enough to accommodate the largest container vessels. Other ports are restricted in their ability to handle any ship size. We are also the only operational terminal designed and constructed as a container terminal. All other terminals have been modified from conventional berths.

In the shipping industry, economies of scale play a very large part, because freight rates have plummeted due to competition and excess capacity while volumes have not grown by that much. The only way shipping companies can make money, and they are probably making money this year after many years, is if they deploy larger vessels. Deploying larger vessels allow the cost of mile per TEUs (twenty-foot equivalent units) to come down. We have the ability to handle those mega vessels while other ports in the city are restricted in their ability and can only handle the 6,500 TEU class vessels. The channel is restricted at these ports; their cranes do not have the height required to handle the larger vessels. Our cranes are equal to the highest in the world.

BRR: Do you follow any global standards, and what skills are you adding to the job market?

SRJ: We are bound by global standards on safety, which we have to adhere to. We get audited by our parent company. But there are many challenges we face being part of the larger system in terms of safety. We are trying to enforce those global rules, but it is not possible without cooperation from customs, truckers and other stakeholders. Every time we try to affect change with international best practices, we get push-back. Recently we tried to limit the number of persons to just the driver in all external trucks and to stop them from exiting the vehicle whilst in the terminal. This is as per global best practices. This is a huge safety issue; people have died in other terminals. The truckers refused to accept this and blocked our gates. We have been trying to get the customs officials to wear safety vests and helmets, but have not been successful.

Skills development is one of our strong points. Recently, we have trained two female remote crane operators. That has not been done anywhere in the region. They are engineers with very different skillsets from those required to operate heavy cranes from remote locations. They learned very quickly and are now very efficient crane operators. In general, we have upgraded the skills set of our operators. Remote cranes operation has actually been deployed in only a few terminals globally and is only now gaining traction globally.

BRR: Do you have any efficiency metrics that would explain the level of efficiency at your port versus other regional ports?

SRJ: We compare our key performance indicators (KPI) within our group. Within the group, we have 52 container terminals and we are among the better ones. In terms of throughput (throughput reflects the TEUs a port handles annually), we are only a medium sized business unit.

We are at least twice as efficient in terms of the vessel operating rate (VOR), which is the time it takes to handle a vessel, as compared to other ports in Karachi. Our average VOR is about 130-140 moves per hour, while other terminals in Pakistan are normally in the range of 60-70 moves per hour. Vessels earn for the shipping lines when they are moving at sea, while they cost when at the port. A high VOR reduces the port stay of a vessel, resulting in saving for the shipping line.

To illustrate, if a vessel has to discharge and load a total of 2000 containers, she would need a port stay of around 30 to 40 hours in the other terminals in Pakistan, while she would need only 15 hours at our port.

That is why we charge a small premium for our services. Our concession fees, the royalty and land rent we pay our landlord, are also higher by a factor of 2 and in some cases even of 3 as compared to the other terminals.

BRR: How long does it take for the container to be cleared out of storage?

SRJ: It takes 12 days on average to clear an import container. Rather, local trade will clear a box in 12 days. We can clear the box the minute it is landed. We can give it to them for pickup. But the local trade delays it. There’s a lot of inefficiency in that.

Internationally, the dwell time (refers to the time a container spends in a port or terminal) for containers is no more than 3 days. In more efficient countries, where the supply chain is working properly, it is one day.

BRR: Would it help when you get connectivity to the railway?

SRJ: In terms of dwell time, it may not matter. The customer has to file his bill of entry to pick up a box. If that is delayed, it does not matter whether the goods are transported via trucks or railways. However, it will help reduce congestion on the access roads, and that is good.

BRR: How much of your current cargo is moved on railways against trucks?

SRJ: It is nominal. The total market for railway right now is of 80,000 to 100,000 containers a year. The only cargo that moves up north on railway is overweight cargo. There may be more boxes going there, now with the new restrictions on axle load, but the total market is still small.

BRR: What will be the impact on costs and efficiency of cargo movement if this port is connected to the railway?

SRJ: It depends on the customer. I cannot predict how many people will jump on the train. At the moment, it is more expensive to move a container by rail than a truck. There is a difference of about Rs20,000 or so one way. If it is a two-way trip with an import laden box going up and an export laden box coming down through rail, then the whole cycle may start saving money for the customer. Our exports are currently too low, so usually these containers come back empty. If we were an exporting nation, it would naturally be different. Though after the road restriction, there may be a shift. We can perhaps see accelerated movement towards railways.

BRR: What is your long term view on Pakistan’s economy? You have already made investments of over $600 million. Do you believe volumes will grow substantially, or you are banking on diversion of clients from existing ports to yours?

SRJ: The throughput volume of Pakistan is not representative of the potential of this nation of 220 million. As standards of living improve, as people keep moving out of the poverty line, our volumes will grow. We feel Pakistan has a lot of potential and it is not utilising this potential to the full extent, which is reflected in the low trade volumes right now.

For example, Oman has a population of 3-4 million and a throughput volume of 800,000 TEUs. When you translate that population number to Pakistan’s 220 million, and use the same ratio, it would be 16-17 million TEUs. Pakistan’s current volume is around 3.5 million TEUs.

BRR: What is the challenge you are facing with the port authority? You mentioned earlier that there were prolonged delays that were caused by efficiencies on the ground.

SRJ: The port authority, like other regulators in the country, need to increase their institutional capacity and promote a culture of accountability not only for their actions but also for the result of inaction. Survival is based not on performance but on following the rules. Don’t get me wrong, rules are important but not at the cost of efficiency.

The curious thing here is that the Port Authority is the regulator as well as a port operator. It is essentially in competition with us because it is in the business. How can a regulator regulate effectively while being in the same business as well?