IT is a sad story of abuse of power, corruption, misplaced priorities, betrayal and gross negligence. Shipping is in a shambles in a country blessed with 1,000km of warm water coastline. The natural advantage and economic logic remain dormant. Today, Pakistan depends on foreign shipping lines for 95pc of its $60bn external trade.

According to World Trade Organisation data, Pakistan imported $45bn and exported $25bn last year, accounting for a mere 0.37pc of global trade, showing enormous scope for expansion. The trade per capita was projected at $425 and the trade-to-GDP ratio at 33.8pc.

Leading shipping and logistic experts talk bitterly about how a potential sector was ‘systematically crushed’ over the past 40 years. Despite the natural advantage of geography and demography and economic benefit of rising demand of import and export, they did not see much future for shipping.

They identified patronage-based private business models, inconsistency in public policies, absence of required skills, and the high-risk capital-intensive nature of the shipping business as major constraints in the expansion of the merchant navy, which is technologically advanced, governed by international maritime regulations, and highly competitive.

Some top members of the country’s economic team had no clue about the state of affairs in this sector. Two regular members of the Economic Coordination Committee of the Cabinet privately confirmed to Dawn that in the last year and a half, the shipping sector was never discussed in any policy-level meeting they attended.

Shipping is a high risk, high return business that needs a free environment to prosper. The time factor is critical and competition does not allow the liberty of dealing with red tape — Najeeb Balagamwala of the Sea Trade Group

This explains why the Pakistan National Shipping Corporation (PNSC), a profitable public organisation, feels sidelined. In an informal meeting with this writer, the management complained about the government’s apathy towards its affairs.

The PNSC handles about 5pc of the country’s trade, particularly oil imports, in terms of value, and 26.43pc in terms of tonnage. Contrary to the general impression, the listed company is handling more tonnage on nine ships, younger and bigger than 48 old small ships it operated a decade back.

On the strength of its expertise and infrastructure, the corporation saves $602m in foreign exchange by providing logistic services for import of bulk cargo and oil, according to a 2015 presentation by the company on corporate governance. This is in addition to tax and operating profits. The turnaround in its performance was reflected in the capital market, as PNSC’s share price hiked from Rs2 in 2002 to Rs176 now, and earnings-per-share shot up to Rs165. It is among the public sector entities listed for privatisation by the Nawaz government.

Muhammad Siddique Memon, PNSC chairman and CEO, took pride in the company’s performance, but admitted that selling the company’s business expansion plan to the government was difficult. “When I approached a minister to rationalise the 28pc tax rate on sea trade, he stood up and excused himself,” he shared a recent experience.

Investigations by this scribe revealed that there are about 50 ships owned by Pakistanis registered in countries such as Liberia, Somalia, UAE, Congo etc. There are 11 bigger players in the sector working quietly. Fifteen shipping brokerage houses were mentioned, and in all 50 to 60 shipping freight forwarding companies are active in Pakistan, though a major chunk of the business is controlled by seven big companies.

Kamran Micheal, minister for ports and shipping, did not respond to the call. Khalid Pervaiz, federal secretary of ports and shipping, who assumed his charge recently, claimed to be worried over the situation.

“This is a sorry situation. I have directed PNSC to develop a brief that we intend to discuss with other relevant departments to facilitate the development of shipping,” he told this writer, dismissing the impression that ports interest the ministry more than shipping.

“Yes, development projects in progress at ports are dealt on priority, but we are doing the doable. PNSC has a strategic importance and has acquired business acumen. We intend to pursue its case for easing conditions for business advancement. And for private shippers, we will engage them and recommend changes in the policy framework to encourage fly Pakistan flag on their ships,” he added.

Another high ranking official of the federal port and shipping ministry gave a rundown on the history of shipping, but avoided giving a direct reply to why shipping has failed in Pakistan.

“Why would any serious businessman operating ships like to fly the green flag? If anything, it will bring the credibility of my company in question. For me, it is out of the question in the foreseeable future. I have no time or energy to haggle with people in ministries,” an angry shipowner reacted.

Faisal Maqbool Shaikh of Harbour Services, engaged in logistic business,, was critical of the social mindset. “It is unfair to limit the criticism to the government. In Pakistan, the private sector is equally irresponsible. As a policy, we deal exclusively with international trading companies and not with consignee parties here,” he said, counting hurdles for honest professionals.

Najeeb Balagamwala of the Sea Trade Group, a Berkley graduate and recipient of many business trophies, who was awarded a shipping licence during the last tenure of the Nawaz government, opted not to use it. He was critical of the Navy for its commercial ambitions and crowding out private shipping companies.

“Shipping is a high risk, high return business that needs a free environment to prosper. The time factor is critical and competition does not allow liberty of dealing with red tape.”

He thought that the policymakers did not want private shipping to grow in the country. He gave the example of the currency regime that restricts the free movement of foreign exchange. “When there is a transit trade hub in Dubai that allows free flow of currency, who would risk sinking in a place that lacks basic support services,” the religious businessman told this scribe.

Published in Dawn, Economic & Business, February 16th, 2015

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