November 29, 2006	Wednesday	Ziqa'ad 7, 1427

KARACHI, Nov 28: The ministry of ports and shipping has advised the business community to resolve their disputes with shipping companies amicably.

Pakistani companies are alerted to the clout that shipping lines enjoy in wake of large scale consolidation which has given them near monopolistic control over the world market.

Under these circumstances the shipping lines have an upper hand and there was no wisdom in following a confrontational path.

Several attempts were made in the past to resolve the issues confronting stakeholders (importer and exporters) with the shipping lines but generally it transpired that contentions of both the sides are rooted in their respective business compulsions.

However, in a recent meeting between Director General, Ports and Shipping, Capt Anwar Shah, and business leaders, it transpired that stakeholders have no choice other than handling the issue intelligently and diplomatically as the shipping lines have attained a very powerful posture after undergoing large scale consolidations.

The DG ports and shipping informed the business leaders (stakeholders) that as a consequent of the global development of trade and resultant growth of container traffic, the ports and shipping industry world-wide was feeling the impact of consolidation of shipping lines.

He pointed out that there had been a merger from 20 shipping lines to eight major alliances in 2000 and further consolidation to the existing five major shipping alliances had virtually shifted the balance of power and initiative from port terminal operators in favour of the major shipping lines that now enjoyed monopoly in the industry and dictated their own terms.

The participants were informed that in the entire region comprising vibrant economies like India, Malaysia, the UAE, etc., the dictates of major shipping lines ultimately prevail and go unchallenged altogether.

Similarly, in Pakistan when the shipping lines are getting the haulage business of around 1.7 million TEUs it would be a fare off cry in the wilderness to even think of getting some better treatment.

Consequently, it has been suggested that as a response to this shift in balance, other stakeholders, particularly the terminal operators and stevedores, have to come up with consolidated efforts so as to bring forth some sorts of equation in the industry.

One way to do this could be to explore various partnerships between them such as join ventures, common user terminal, etc., Capt Anwar Shah suggested to business leaders.

Besides, it may also be noted that the container shipping lines would not merely rely on the present trend of building too much capacity, by acquiring large ships through consolidation as it would make the industry to experience a glut of container slots, making the shipping lines to be entirely dependant upon the Nvoccs (non-vessel operating container carriers) and third party logistics providers (3PLs), who being the concessionary buyers of the unutilised space, have already started exploiting the conditions to the disadvantage of the shipping lines.

Consequently, Mr Shah suggested that in the foreseeable future, the shipping lines would continue retaining market leadership with them, which would impact the market on various points and put pressure on other stakeholders of the industry, including respective state controls having no regulatory functions with them.

Therefore, he said response to a business phenomenon, driven by market dynamics, could only be through business tactics by the aggrieved parties and not through any state regulations which in this context had no effect at all throughout the world.