Shipping Sector of Pakistan: An Appraisal (Edition 2021)

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Contents

 

AUTHORS’ INFORMATION – SECTION WISE.. vii

ACKNOWLEDGEMENT. viii

ACRONYMS.. ix

IMPORTANT FIGURES.. xii

IMPORTANT TERMINOLOGIES FOR SHIPPING SECTOR.. xiii

EXECUTIVE SUMMARY.. xv

SECTION 1: THE CONTEXTUAL FRAMEWORK.. 2

  1. INTRODUCTION.. 2

1.1.     Background Rationale. 2

1.2.     Objective of the Study. 4

1.3.     Research Questions. 4

1.4.     Methodology of the Report 5

1.5.     Sections of the Report 5

  1. HISTORICAL OVERVIEW OF PAKISTAN’S SHIPPING SECTOR.. 7

2.1.     Current Status of Pakistani Flag Carrier 9

  1. PROBLEM AREAS IN PAKISTAN’S SHIPPING SECTOR.. 11

3.1.     Consolidated Reasons for Poor Response of Private Sector in Shipping Industry. 12

3.2.     Review of Recent Amendments in Merchant Marine Policy. 13

3.3.     Key Findings. 17

3.4.     Conclusion and Recommendations. 18

  1. GLOBAL CONTEXT OF SUCCESSFUL SHIPPING POLICIES.. 19

SECTION 2: GOVERNANCE ASPECTS.. 24

  1. PAKISTAN’S SEABORNE TRADE: ESTIMATION OF FREIGHT BILL 2018. 24

5.1.     Introduction. 24

5.2.     Section Methodology. 25

5.3.     Freight Estimation. 25

5.3.1.      Freight from PNSC’s Import Data Source. 26

5.3.2.      Freight from Other Import Data except PNSC Source. 26

5.3.3.      Freight from Non-containerized Bulk and General Export Data. 27

5.3.4.      Freight from Containers’ Data. 27

5.3.5.      Freight from Containers’ Import Data. 27

5.3.5.1.       Freight from Container’s Export Data. 28

5.3.6.      Consolidated Seaborne Freight Bill 29

5.4.     Finding and Conclusion. 30

5.5.     Recommendations. 30

  1. PROTECTION AND PROMOTION OF NATIONAL FLAG CARRIER – PNSC: POLICY OPTIONS FOR PAKISTAN.. 31

6.1.     Introduction. 31

6.2.     Analytical Review and Discussion. 31

6.2.1.      Existing Strength and Potential Market 31

6.2.2.      Enabling Role through Government Policies. 32

6.2.3.      Institutional Weaknesses. 32

6.2.4.      Revision in Exiting Merchant Marine Policy. 33

  1. EVOLUTION OF FLAG OF CONVENIENCE: SUGGESTIONS TO IMPROVE PAKISTAN’S SHIP REGISTER.. 34

7.1.     Introduction. 34

7.2.     Historical Evolution of FOC.. 35

7.3.     International Obligations and FOC.. 37

7.4.     National Lines vs FOC.. 38

7.5.     Strengths of FOC.. 39

7.6.     The Case of Pakistan. 40

7.7.     Conclusion and Recommendation. 41

  1. RATIONALIZING PUBLIC PRIVATE PARTNERSHIP IN SHIPPING SECTOR.. 42

8.1.     Introduction. 42

8.2.     Research Questions. 43

8.3.     The Context and Conceptual Framework of PPP.. 44

8.3.1.      The Notion of PPP.. 44

8.3.2.      PPP Spectrum.. 46

8.3.3.      PPP Joint Venture. 47

8.3.4.      Worldwide PPP Institutional Structures. 48

8.3.5.      PPP Evaluation Techniques. 49

8.3.6.      PPP Infrastructure Projects. 49

8.3.7.      Guidance on PPP Port Infrastructure Projects. 49

8.3.8.      Practical Application of Green Growth PPP Projects. 50

8.4.     Review and Discussion – JV in Shipping Sector of Pakistan. 51

8.4.1.      Technical Aspects. 51

8.4.2.      Legal Aspect 53

8.4.3.      Other Aspects. 54

8.5.     Findings and Conclusion. 55

8.6.     Recommendations. 55

  1. ISSUES RELATED TO SHIP FINANCING IN PAKISTAN AND THEIR SOLUTION.. 56

9.1.     Introduction. 56

9.2.     Global Dynamics. 57

9.3.     State of Play in Ship Financing in Pakistan. 58

9.3.1.      Banks’ Perspective. 58

9.3.2.      Financing Instrument by State Bank of Pakistan. 60

9.3.3.      Shipping Companies’ Perspective. 61

9.4.     Bridging the Gaps: The Way Forward. 62

  1. THE PLIGHT OF PAKISTAN MERCHANT NAVY WORKERS: MERCHANT SHIPPING ORDINANCE 2001 AND EMPLOYMENT ON MERCHANT SHIPS.. 64

10.1.       Introduction. 64

10.1.1.       Merchant Shipping Ordinance 2001 – Relevant Provisions. 64

10.1.2.    Application of MSO.. 64

10.1.3.    Provisions Related to Employment on Board Merchant Ships. 65

10.2.       Analytical Review and Discussion. 65

10.2.1.    Article 117 of the Ordinance. 65

10.2.2.    Article 119 of the MSO.. 65

10.2.3.    Article 120 of the MSO.. 66

10.2.4.    Article 123 of the MSO.. 66

10.2.5.    Article 125 of the MSO.. 67

10.2.6.    MSO Article 127 – Engagement of Seamen in Pakistan for Foreign Ships. 68

10.3.       Conclusion. 70

10.4.       Recommendations. 71

SECTION 3: STAKEHOLDERS AND ALLIED ACTIVITIES.. 74

  1. STAKEHOLDERS OF SHIPPING SECTOR.. 74

11.1.       Introduction. 74

11.2.       Importance of Stakeholders. 75

11.3.       Pakistan Context of Shipping Sector Stakeholders. 75

11.3.1.    Ministry of Maritime Affairs. 77

11.3.2.    Pakistan National Shipping Corporation. 77

11.3.3.    All Pakistan Shipping Association. 78

11.3.4.    Freight Forwarders. 79

11.3.5.    Shipping Agents. 81

11.3.6.    Stevedores. 83

11.3.7.    Seafarers. 84

11.3.7.1.     General Overview.. 84

11.3.7.2.     Major Problems for Seafarers. 85

11.3.7.3.     Findings and Conclusion. 89

11.3.8.    Classification Societies. 89

11.3.9.    Ports and Harbours. 90

11.3.9.1.     General Overview.. 90

11.3.9.2.     Karachi Port Trust 91

11.3.9.3.     Port Muhammad Bin Qasim.. 92

11.3.9.4.     Gwadar Port 93

11.3.9.5.     Single Point Mooring. 93

11.3.10.      Shipping Insurance – Protection & Indemnity. 94

11.3.10.1.      The Emergence of P&I Clubs. 94

11.3.10.2.      Important Cases Resolved by P& I Clubs. 95

11.3.10.3.      Pakistan Context of P & I Clubs. 95

11.3.11.      Banking Sector – Financing. 95

11.3.12.      FBR and Customs. 96

  1. OUTLOOK OF SHIPBUILDING, REPAIR AND MAINTENANCE IN PAKISTAN.. 98

12.1.       Introduction. 98

12.2.       Global Shipbuilding Industry. 98

12.3.       Shipbuilding Industry in Pakistan. 100

12.4.       KS&EW’s Areas of Business. 101

12.4.1.    Shipbuilding. 101

12.4.2.    Ship Repair 102

12.4.2.1.     Repair Facilities and Assets. 102

12.4.2.2.     Ships Repaired during Last 10 Years. 102

12.4.3.    General Engineering. 103

12.5.       Upgradation of KS&EW… 104

12.6.       Private Sector in Shipbuilding In Pakistan. 104

12.7.       Analysis of Government Policies Regarding Shipbuilding. 105

12.8.       Challenges in Shipbuilding Industry in Pakistan. 106

12.8.1.    Limited Shipbuilding/ Repair Capacity. 106

12.8.2.    Regional Competitors. 106

12.8.3.    Absence of a Strong Ancillary Industry. 106

12.8.4.    Retention of Skilled Workforce. 107

12.8.5.    Lack of Government Support for Shipbuilding. 107

12.8.5.1.     Subsidy. 107

12.8.5.2.     Right of First Refusal 107

12.8.5.3.     Taxation. 107

12.8.5.4.     Tax Free Import of Ships/Crafts. 107

12.8.6.    Lack of Research, Development and Design Capability for Shipbuilding Industry. 108

12.8.7.    Outsourcing / Sub-contracting. 108

12.9.       Opportunities in Shipbuilding Industry. 108

12.9.1.    Ship Repair Business. 109

12.9.2.    Proximity to SLOCs. 109

12.9.3.    Cheap and Skilled Labour 109

12.10.     Future Prospects of Shipbuilding Industry. 109

12.11.     Conclusion and Recommendations. 110

12.11.1.      Short-to-Medium Term Measures. 110

12.11.2.      Long Term Measures. 111

  1. DHOWS IN DOLDRUMS: A SPOTLIGHT ON AN INFORMAL SEGMENT OF PAKISTAN’S MARITIME ECONOMY.. 114

13.1.       Introduction. 114

13.2.       A Brief Overview of Dhows. 115

13.2.1.    Origin of Dhows. 115

13.2.2.    Types of Dhows. 115

13.2.3.    Identification of Dhows by Origin. 116

13.3.       Traditional Boat Building in Pakistan. 116

13.3.1.    Wooden Boats – An Informal Industry. 116

13.3.2.    Construction Process of Boat / Dhows. 117

13.3.3.    Financial and Other Aspects. 118

13.3.3.1.     Construction Expenses. 118

13.3.3.2.     Working Practices for Boat Building Business. 119

13.3.3.3.     Crew Management 119

13.3.4.    Registration of Boats and Flag State. 120

13.4.       Practical Use of Dhows. 120

13.4.1.    Trade through Dhows in Pakistan. 120

13.4.2.    Modern Utilization Trends of Dhows. 121

13.5.       Recommendations. 122

SECTION 4: REVIVAL STRATEGY AND RECOMMENDATIONS.. 125

  1. REVIVAL STARTEGY AND RECOMMENDATIONS.. 125

14.1.       Contours of Revival Strategy. 125

14.2.       Jump Start Pakistan’s Shipping Sector – Key Recommendations for Priority Actions. 126

14.3.       Collective Set of Recommendations. 127

BIBLIOGRAPHY.. 130

Annex-A: Questionnaire 1 for Stakeholders Input on Shipping Sector Revival 135

Annex-B: Questionnaire 2 for Input on PPP-JV.. 136

Annex C: List of Freight Forwarders Based In Karachi (Pakistan) 138

Annex D: Pakistan Ship’s Agents Association. 164

Annex E: List of Stevedores. 167

Annex F: List of Classification Societies. 170

Annex-G: Features of Different Dhows. 171

Annex-H: Variety of Wood used in Boat Construction. 174