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Maritime sector

Even after 75 years since its creation, Pakistan has never paid its utmost attention to its maritime sector. The main reason for the continued neglect has been the political instability and lack of the will by its leaders and policymakers. As the world is witnessing a new industrial revolution, it is very vital for Pakistani leaders and the policymakers to double-down their efforts towards developing the maritime sector as one of their topmost priorities.

Under the current conditions, maritime sector is one of the most inefficient operations due to many layers of bureaucracy and non-existence of collaboration between the current three major ports. Under these circumstances, not only the port operations bring a lot of inefficiency, higher costs, and unnecessary delays in moving the cargoes from their points of origin to loading on the vessels. Additionally, creation of the required documents for the international trade move at the speed of snails! Therefore, to make the maritime segment very efficient with competitive advantages, it is in the best interest of Pakistan to privatize not only the ports but all the ancillary operations as well, like the inland transportation, storage, transloading, loading, etc.

Pakistan is blessed with its long coastline that expands 1,050 kilometres (650 miles) along the Arabian Sea. However, Pakistan has not taken any advantage of its long coastline by streamlining current ports’ and terminals’ operations for transforming them as the source for a robust economy. Transformation of just this single sector has the enormous potential for generating sustainable higher foreign exchange (FX) in billions of dollars from current meagre amount of just a few hundred million. In turn, this higher FX generation will help eliminate its unending balance of payments crisis that has been reaching to its insolvency stage very often, at least lately!

Additionally, Pakistani coastal line is very well positioned to offer strategic export hub not only for its own exports but also for the landlocked countries from the Central Asia. Trading through Pakistani ports, countries of the region can benefit tremendously by exporting their commodities and value-added products to the Middle East, Europe, South Asia, and African countries.

Currently, Pakistan operates eight major ports and out of them three are the most important ones and are called Karachi Port, Port Qasim and Gwadar Port. Gwadar port is the latest addition, and it was revamped recently as part of the BRI, Chinese global infrastructure initiative, under its CPEC Project. This maritime port is the only deep seaport in the region, thus has the capability for handling the megaships.

In today’s interconnected and highly dependent world, bilateral and multilateral trades are happening at an unprecedented pace that has never been seen before in the history of trade and commerce! Globalisation has proven that the maritime trade is one of the major sectors for sustainable economic growth, creation of higher paying jobs, and the most importantly, the sustainable major source for the foreign exchange to service the debt obligations for any country. Even the countries who have the lowest cost production and blessed with many natural resources, without having efficient exports infrastructure, it is not possible to compete against the major exporters in the global market. Seaports and terminals are the backbone for the exports and extensions of the supply chain infrastructure. It is very important that in order to have efficient ports and terminal system, the total operations must be streamlined to support each and every aspect of the supply chain operations.

In this area, DP World (DPW) has done an excellent job making it not only a global company that is well managed and growing by bringing efficiency, transparency & value to its clients and the shareholders, equally. In a very short period, DPW, a Dubai-based ports management company, has outgrown from the UAE, its birthplace, and now has its operations not only in the GCC countries but also in Europe, Asia, Africa, and the Americas. DPW provides services that comprise the entire export operations seamlessly, starting by supplying containers to the factory, moving them from the factory to the ports, loading and unloading cargos on and off the ships and delivering them to the final destinations. Additionally, preparing all the cargo related documents, and getting them approved by the steamship lines, local authorities, and the customs officials. All this is done in the background as the vessel is approaching to its destination port terminal. This approach has created the most efficient maritime trade operations having total transparency and making the entire information available in real-time to the clients from the origination ports to the delivery ports. Not only this streamlining has reduced many in between steps but has also eliminated time loss in between the agencies’ responsibilities through the digital footprints instead of the physical exchanges.

DP World was founded in 1999 in Dubai (UAE) and was called Dubai Ports International or DPI. Outside the UAE, its first undertaking was with the Kingdom of Saudi Arabia to manage and operate its Jeddah container terminal and since that beginning, the DPW has continued to grow by leaps and bounds all across the world. Currently, DPW operates more than eighty ports and terminals globally. This stellar success of the DPW is unparallel in the history of maritime business. Early adoption of the technology, combined with highly experienced workforce and focused management has transformed initially a local business into a multinational conglomerate that offers seamless export logistics from start to finish. This is bringing not only an admirable success to the company but also giving cost savings and delays elimination that used to be caused by the piece meal operations using many companies and organizations for every step of the export and the maritime business.

For successful transformation of the maritime sector, Pakistan must privatise its entire operations ASAP. Since Pakistan severely lacks in the maritime trade skills, expertise, and capital, DPW is the best choice for Pakistan to hand over the entire operations to this multinational company who has demonstrated an extreme level of success to every client it has ever taken under its belt in any part of the world. By following this strategy, in a very short time, the maritime sector will become as one of the major sources for the foreign exchange by stimulating the local and national economy, creating higher paying jobs for its educated and skilled unemployed youths. For this blueprint, Pakistan will not need any capital (FX) to put upfront, except just to sign the contracts for the transfer of the management of these assets, like the other governments and port owners have done elsewhere.

This strategy will transform the ports into a sustainable source for generating foreign exchange not only by exporting its own commodities and value-added products but also a strategic gateway for exports by China and the landlocked Central Asian countries and Afghanistan. Following this path, the need for running to the international & multilateral lenders (IMF, WB, ADB, Paris Club, etc.) to get loans for thwarting the balance of payments crises and asking favours from the brotherly Middle Eastern countries and China for short-term deposits to its central bank (SBP) will not be needed and will become things of the past! The maritime sector will become the major source for generating foreign exchange more than enough to meet its imports costs and at the same time creating surpluses which will bring political stability, prosperity, economic growth that are fundamentals for the FDI, entrepreneurs and relocation of the industries from higher cost places like Europe, Asia, and the Americas.

According to the IMF (International Monetary Fund), in 2021 Pakistan’s total maritime trade (import and exports) value was $163 million which is many times smaller than Bangladesh’s and India’s who generate their maritime revenues in billions of dollars. According to the World Bank (WB), today nearly 90% of the global trade of about ten billion MT is carried out through the maritime channels. This volume will continue to grow as the technology and investments will continue to chase the lowest cost centers around the globe that offer not only educated/skilled workforce but also technology support and well-connected networks of the infrastructure. These are all pre-requisite markers for the FDI, factory relocations, e-commerce distribution centers, and transloading operations. From this regard, Pakistan is blessed as it offers educated/skilled workforce, newly built network of roads, railways, and waterways. Additionally, according to the WB 2020 data, Pakistan has scored 40.8 points in the Liner Shipping Connectivity Index (LSCI) which signifies how well a country is connected with the containerized global shipping network and what is the largest ship (TEUs; 20ft equivalent units) it can handle, besides few other factors. Compared to many other countries from the same league, 40.8 points score is remarkable for Pakistan! During the same period, Bangladesh’s score was 13.8 points, Indonesia’s 34.9, Qatar’s 36.9, South Africa’s 41.3, Mexico’s 48.4, Peru’s 39.2, Oman’s 60.7, Turkiye’s 60.8, Saudi Arabia’s 70.0, Sri Lanka’s 72.0, and Vietnam’s 79.8 points! Other notable mentions were the USA with 103.9, UK 91.0, Singapore 113.8, Hong Kong 93.6, but they all were trailing behind China with 162.4 points due to its massive network of the state-of-the-art maritime as well as the land-based infrastructure. Similarly, in the containerized trade bench marking, during the same period, Pakistan handled 3.3M TEUs, while Oman 5.2M, Qatar 1.4M, the UAE 19.3M, KSA 9.4M, Singapore 36.9M, Sri Lanka 6.9, Turkiye 11.7M, the USA 55M, the UK 8.7M, the Netherlands 14.5M, Vietnam 13.7M, India 16.3M, Indonesia 14.0M, Malaysia 26.7M, S. Korea 28.4M, and China 245.1M, again leading the maritime trade.

These are very favourable ratings and Pakistan should use this competitive advantage to promote itself as the most strategic gateway for having access to all the continents with significant cost savings and substantial transit time reductions. Gwadar Port could be the most ideal location and central hub for transloading of the goods from the congested ports of the region, like the UAE, Oman, Qatar, KSA, etc. A tax-free port with state-of-the-art cargo handling, storage, and value addition through the tax-free industrial zones just in the vicinity. In the meanwhile, Pakistan should upgrade the other two major ports (Karachi Port & Port Qasim) as well along the lines of the Gwadar port. By following this path, Pakistan can easily generate billions of dollars enough to pay off IMF and other foreign debts in a brief period of time. It is not just a dream but a factual analysis as Singapore having just one port generates about 8-10% of its GDP ($397B) through the maritime sector. Pakistan having three major ports has much higher potential to transform itself as the strategic gateway and transloading hub for the marine trade not only to its regional countries but also to other continents due to its ideal location and other advantages as described earlier that are not available from any other port of the region, currently.

This is the golden time and unique opportunity for Pakistan to leverage these competitive advantages for transforming the country into a thriving and vibrant economy of the region and a model for other countries to follow for getting out of their own debt traps for good. In conclusion, this blueprint will invigorate the economy (local, provincial, and national levels) at a rate unprecedented in Pakistan’s past 75 years history by reducing poverty, improving quality of life, enlarging its middle-class, supporting industrial activities, and encouraging the landlocked Central Asian countries to use Pakistan’s maritime infrastructure as the most competitive gateway for their exports and imports.

Dr Jamil Khan, "Maritime sector," Business recorder. 2022-11-23.
Keywords: Economics , Monetary fund , Economic growth , State Bank , Global company , Economy , Pakistan , East , Europe , South Asia , Bangladesh , IMF , WB , ADB , SBP , DPW

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