PDWCP – Vision for future

[Salman]

PDWCP – Vision for future

The long awaited deep sea container port project, Pakistan Deep Water Container Port (PDWCP) at Keamari in Karachi is well in progress and is reported as per print media to bearing fruit by the first quarter of 2014. Karachi Port Trust (KPT) will have spent close to $1 billion on the project to bring this component of our country’s logistics vision to fruition. KPT has now established the key infrastructure by building the breakwater and dredging a new channel, which will pave the way for modular addition of capacity. According to the feasibility study by UK based consultants, Royal Haskoning, PDWCP’s planned six phases shall be capable of handling up to 10 million TEUs (twenty foot equivalent box units) upon their completion. Phase I of PDWCP was awarded to Hong Kong based Hutchison Port Holdings following competitive bidding.
Hutchison is said to be independently investing up to $500 million to build and equip the terminal. This is probably amongst the biggest foreign direct investment coming into the country at a time when other investors have exited Pakistan and adopted a wait and see policy. When Phase I is fully completed, it shall be capable of handling 3.1 million TEUs. It is planned for the facility to have a draft of 18 metres capable of handling the largest container ships in the world and shall be the biggest source of revenue to KPT.
As a Pakistani, I am proud of the fact that our country will have the most advance container handling facilities in the West region of the Indian sub-continent. Years of hard work by KPT and others have finally put our country on the world maritime map with PDWCP being Pakistan’s latest success stories. To me, this is just the beginning of a major vision of our country. Pakistan is blessed with a strategic location as the gateway of goods and people to Afghanistan, Central Asia and beyond. These future terminals will also have the capability to handle container traffic for China’s western region. However, such a blessing will be wasted if we do not plan our limited resources to gain maximum benefits. By this, I mean that we have to ensure that expenditures are incurred in the most efficient manner. As I discussed in the foregoing paragraph, once the key infrastructure is built for PDWCP, modular additions can be made using the same breakwater and channel resulting in substantially lesser investment when adding new capacity. The success of this port shall also require adequate road and rail connectivity to upcountry destinations and improvements in logistics management techniques.
While we forge ahead with major investment in PDWCP, there are discussions about adding further capacity to enhance existing port capacity at our ports. Furthermore, there are discussions to build a third container terminal at Port Qasim. One has to ask if our nation is spending its limited resources wisely to avoid excess capacity. Our GDP growth is not satisfactory and container volumes are registering a downward trend, in particular loosing 2.0 Lac TEUs of NATO / ISAF cargo, which is presently congesting port awaiting decision to open transit to Afghanistan. There is the real danger of uncontrolled expansion of cargo handling facilities. One has to learn from the mistakes of Vietnam, Korea and Rotterdam, where currently, there is a fatal excess of capacity, which is driving down the local port’s revenues due to bad decision making by its management and in the long term, may result in driving away foreign investments. Pakistan’s port authorities would be well advised to avoid a similar mistake. The example of Gwadar should also provide lessons for all. Much has been debated as to the wastage caused by building Gwadar, which has been left non-operational except handling TCP (Trading Corporation of Pakistan) government cargo in bulk where logistic is heavily subsidised at the cost of poor tax payers. The subsidy is said to be around Rs2,655 per tonne against Rs395 per tonne from Karachi. Thus, an excess liability/subsidy of Rs2,260 per tonne is being paid on cargo discharged at Gwadar. The searching question is how long we can afford logistic subsidy bearing in mind that Gwadar Port was inaugurated in 2007. This wastage is due to policy making failure by the government to plan properly. The project was doomed from the start, as Gwadar has no industries and the required population base to support the generation of container traffic. The absence to date of road and rail links also raises questions about the project’s feasibility. The provision of these links is expected to cost several times more than the cost of the port itself. It is now evident that the predictions made by several senior port experts about Gwadar port’s failure have proved to be true. Even as early as 2001, it was advised to proceed with PDWCP instead of throwing away over a billion dollars on Gwadar port.
Pakistan is a gateway for the flow of goods and people from the sea to Central Asia and beyond. I was representing the Federation of Pakistan Chamber of Commerce and Industry (FPCCI) as a transport expert at a meeting of Economic Cooperation Organisation (ECO) held in Karachi on 19 November 2011, an event sponsored by the FPCCI. Iranian and Turkish delegations promoted their ports extremely well during that meeting. Iranians were well prepared, promoting very well their Chah-Bahar port to ECO participating countries. In particular, they marketed well the use of Shahid Beheshti Port for handling of cargo bound for Central Asian land locked countries. At the same event, Turkey promoted Mersin Port, but Pakistan government lost the opportunity to promote our ports. We need to induce interest by through planned marketing efforts to show maritime facilities in Pakistan to induce ECO countries and to increase our share in regional trade. We must launch our marketing initiative to cater ECO countries to use our Deep Water Port capacity to boost our volumes by making in-roads in ECO countries. Such marketing efforts are needed to ensure the success of PDWCP and bring benefits to the people of Pakistan where job creation is so desperately needed.
Having spent so much energies and a planned injection of $1.6 billion, there are several more matters that we, as a nation, need to do to cement the foundations necessary to build a world class port facility. I have expounded these potential initiatives in my previous writings. Firstly, it is imperative that there be serious efforts to build the connecting roads and other infrastructure to cater for efficient cargo flow enabling the full utilisation of PDWCP. Failing such infrastructure, PDWCP will not realise its full potential. Secondly, we must afford the legal status and recognition a deep sea port deserves by enacting a Deep Sea Port Act. It would also confer recognition to the men and women who had toiled and sacrificed to make the deep sea port a success. Such a legal status should form the sound basis for other legislation to attract further investment in other economic sectors and to empower the appropriate authorities to expedite bold initiatives to bring our ports to world class competitiveness. Thirdly, there is need to amend the Customs Act such as to make Pakistani ports a viable option and place them in a fighting chance to get a piece of the trans-shipment cargo market vis-à-vis other ports the region.

The writer is Ex Additional Secretary and Director General, Ministry of Ports and Shipping. He had also been the Chairman of Gwadar Port. Currently, he is a member Board of Governors, World Maritime University Malmao (Sweden), while he is also a member of IMO Secretary General’s Panel of Experts, London