October 02, 2007	Tuesday	Ramazan 19, 1428

ISLAMABAD, Oct 1: The government is considering improving the efficiency of ports by introducing various measures, including rationalising port charges.

Pakistani ports function at profits and this raises the cost of doing business for local firms.

Under the plan, the government aims to make the ports as service-providers and not as profit makers.

Informed sources told Dawn on Monday that the efficiency of ports would be improved through a regulator to ensure that monopoly power of the ports is not exploited.

In this behalf, customs processing, paperwork requirement, fumigation and other processing would require additional and continuous vigilance.

Competition from private sector would be introduced and transparency ensured.

The dwell time at Pakistani ports is three to four times higher as compared to more efficient ports. Entry costs are also very high at local ports.

The real criteria for port efficiency should be on the basis of dwell time and cost comparisons with other ports in the region and around the world. On these criteria, Pakistani ports do not do well.

The main issue underlying the longer dwell times is customs clearance and despite recent improvements, it still allows a degree of corruption to occur.

Also, paperwork required for clearance of goods takes a long period. Similarly, too much time is allowed for free storage.

Official planners have proposed that some of the processing that is currently done at port should be done outside the port so that more space is available within the port and a higher turnover is ensured.

Limited rail and transport services force customers to keep goods at the port for a long period. In this regard, long free storage time makes a sense, but the ports impose a cost.

Uncollected or unclaimed cargo lies at the port for too long before it is auctioned. It is said that inefficiencies related to labour relations or training of dock workers also slows down operations.

About roads, the National Motorway and Highway Authority is responsible for planning, constructing and maintaining all highways while local roads come under the authority of local governments.

It has been pointed out that a significant proportion of roads is not in a good state which imposes time and accident costs on passengers as well as cargo carriers and there is a higher depreciation cost on vehicles. The main regulatory problems in the area are clear enough to delineate.

The way the National Motorway and Highway Authority is set up, it has little incentive to construct roads that are of high quality, and maintain roads at a high quality level.

Though the NHA is responsible for managing the initial construction, incentives to ensure quality are not possible and there does not seem to be any mechanism for ensuring accountability and punishment if standards are compromised.

Once the road has been commissioned, the NHA has no incentive to impose regulations against overloading and other activities that can damage the road as incentives are not based on optimal maintenance of roads.

Its incentives are actually structured in a way that it is better for the authority to let the road deteriorate to a sufficient degree and then go for major repairs, and that is why the opportunities for corruption and nepotism are higher in major repairs than in minor ones.

Public censure against poor roads is not an effective means of creating incentives for optimal maintenance.

The official planners believe that optimal maintenance incentives would have to link reward/punishment for the authority and its executives with outcomes of maintenance.

The basic issue with the incentive structure seems to be that the NHA has been given powers to plan for future needs, manage the construction process, act as a regulatory authority for managing the construction, and manage maintenance as well.

So it is in fact acting as both as an executing agency as well as a regulator. As an executing agency, opportunities for corruption in the making of roads can be significant, but how can NHA as a regulator be effective in curbing this corruption.

In this behalf, separation of the regulatory function of the highway authority from the executive one was proposed.

About air transport, a very small fraction of freight and passengers is transported by air in Pakistan. Despite the fact that other carriers have been allowed, PIA still holds a dominant position and enjoys the benefit of favourable treatment from the government.

It was stated that development of air transport would have to be linked with the creation of an independent and fair regulator.

The government was told that maintenance of passenger transport market needs regulation in terms of creating a basic minimum quality package in terms of vehicle worthiness, fare, and driving quality.