KARACHI, Aug 2: While stressing the need for further reforms in the ports and shipping sector, the World Bank has asked the government to privatise the handling of geared container ships at the Karachi Port to achieve the objective of transformation from service provider to port authority.

Presently the Karachi Port Trust (KPT) is handling over 40 per cent of geared container ships at its berths which is reported to be about $30 per TEU less expensive than those at the two private container terminals -– Karachi International Container Terminal (KICT) and Pakistan International Container Terminal (PICT).

The World Bank feels that the KPT has avoided the “Second Best” form of privatisation, via utility style concessions with regulated tariffs and productivity levels. However, the productivity at KPT berths is lower at about 17 moves per crane hour compared with about 25 at the specialised terminals.

The compulsory shifting of the feeder vessels to the KICT and PICT berths is being considered by the KPT. The World Bank, however, does not recommend it as low cost alternative has demonstrated its commercial viability by attracting over 40 per cent of the containers handled at the Karachi Port.

This situation, the WB says, is comparable with the low cost “midstream operations” at the Hong Kong, which continue to handle about a quarter of the port’s containers. These low-cost, low-technology options are used particularly by small businesses or traders and may this indirectly benefit lower income groups, the bank observed.

However, the bank has also highlighted the weak points of these low-cost operations which deprive stevedores from having their own quays and also keep KPT involvement in shore handling. Therefore, the bank recommends that the stevedores should be allowed their own separate berths and that the KPT should withdraw from operations.

The bank observed that until late 1990s, the KPT lagged behind world trends in port reform. But, it has now completed the most important task in progressing towards a landlord role, by introducing competing private container terminals. Two thirds of Karachi’s dry cargo, in terms of tonnage (and a much higher percentage in terms of value), is shipped in containers.

While stressing upon the need of initiating further reforms, the WB pointed out that both ports are still overstaffed. The KPT has made bold progress, reducing staff numbers from 14,000 in the late 1990s to 5,000 in 2004, but still needs further streamlining to bring staffing levels in line with KPT’s new role. Port Qasim is also overstaffed (with 1,600 employees).

It has stressed upon the need within the port authorities’ management and operation is for a more commercial approach. The ports have made progress in modernising management procedures, including computerisation of financial transactions and automatic security systems, but need to strengthen contacts with port users.

The WB alleges that Pakistani ports are making excessive profits and receive larger income from investment of their accumulated surpluses rather than operational income. It pointed out that the KPT’s budgeted revenues of $150 million for 2004-05 are more than twice as high as its budgeted costs. A surplus of this level is unusual in the port industry, as is the very high level of income from investment which is around 43 per cent.

Similarly, the bank says that the Port Qasim also makes a large profit with revenues of $29 million compared with costs of $19 million (FY2003). About 64 per cent of the surplus comes from investment, and only 36 per cent from operations.

Consequently, it observed that high port profits are not a “good thing” per se. They reflect port charges that are higher than necessary, these are additional costs which are passed on to importers and exporters. It further states that this is not necessarily a “zero sum” game from the viewpoint of the economy as a whole; lower port charges and increased incentives for trade may have a much more positive impact on the overall economy than high port profits.

Therefore, the WB suggested that under further reform a substantial reduction in port revenues and surpluses would be desirable, particularly if this was achieved via port tariff reductions and passed on to the wider economy.