PAKISTAN’S trade is passing through a crisis, as both exporters as well as importers are facing hardship in performing their legitimate commercial activities due to the sequence of events followed since September 11.
A state of confusion prevails and a “wait-and-see” sort of atmosphere dominates the country’s economic scene. The export trade became a victim when foreign buyers, especially the US customers suspended Pakistani shipments till further instructions even for the orders already placed. Not only this, the future orders were also withheld. The exporters and manufacturers obviously have limited financial and storing capacities at their disposal. Moreover, most of the Pakistani exporters are on D.A. basis and unless the goods physically reach at the destination, payments are not made by the foreign buyers.
This is already upsetting their liquidity and capacity to invest more. The banks’ interests are also accumulating with the passage of time while expenses like wages, utilities, overheads etc., are adding to the cost. As a result, the Pakistani goods are becoming uncompetitive in the international market.
Importers on the other hand also face hardships. Their grievance is still more disturbing. The shipments against which payments have already been effected in time to the suppliers in foreign countries are not being made, both from the eastern and western countries on the pretext that they (foreign suppliers) are scared of the situation in Pakistan.
According to them, they were not sure as to whether their shipping documents would be accepted and paid for in full. Besides, they have also decided to take additional confirmations and guarantees from other banking channels of their choice to the effect that payments to the foreign suppliers will not be stuck and will be repatriated as soon as the shipping documents are presented to the opening banks.
Trade groups, associations, the chambers of commerce and industry and above all, the apex body of the FPCCI held meetings and discussions to find out solutions to the problems being faced by the Trade.
While these meetings were being conducted another bombshell fell as some of the shipping agents imposed the so-called War Risk Surcharge on cargo movements to and from Pakistan.
This was done on the pretext that Pakistan falls under the war-zone and hence such a charge has to be paid on all consignments.
This added to the problems of exporters and importers, who once again rushed to their representative trade bodies for rescue purposes.
Following a number of discussions, the consensus that emerged was that the war surcharge is totally uncalled for. The angry businessmen, while denouncing the levy, termed it as an attempt to blackmail Pakistani businessman.
In such a situation, the national carrier of the country should have come forward. However, in Pakistan’s case, its national carrier, the PNSC is not in a position to help businessmen for reasons known to everyone.
Sensing the gravity of the situation, the FPCCI sought help from the Export Promotion Bureau which in turn established contact with the London shipping market and somehow arranged a visit of some British shipping agents. The events, after the arrival of these agents, however, are not worth-mentioning. But one cannot resist saying that perhaps we are still treated as a colony of some developed country and we are not supposed to take ‘independent’ decisions, in any matter.
Coming back to the issue and as a result of the deliberations at the various forums, exporters— both in the context of shipping and insurance— strongly feel that the present war is between the USA, the United Kingdom and of course Afghanistan.
As such, the war-risk surcharge cannot be applied to Pakistan cargo, especially when Afghanistan has no seaport of its own nor has a naval force. As such Pakistani waters are free from any hazard and are open for free shipping trade and other activities.
In addition to this and in support of the stand taken by the Pakistani exporters, they reiterated that neither Pakistan has attacked any country of the world nor has been subjected to a military offensive by any such country. It is, therefore, crystal clear that Pakistan should not be, at any cost, treated as a country in the war zone. Accordingly, any surcharge, is totally unjustified. If at all, a “war risk” has to be applied, it should be on the US and the UK, as they are at war and not Pakistan.
After all, a loss estimated to well over $35 billion as a result of act of terrorism on September 11, cannot and should not be recovered from the countries that are not party to the war. The insurance and re-insurance companies should bear the loss from their own resources accumulated over the years.
In Pakistan, some of the shipping agents have started collecting $300 per 40’ container, or $150 per 20’ container, which has caused a great resentment among businessmen. The concerned shipping agents, upon receiving negative feed-back from ship-users, i.e. exporters and importers, decided to reduce the surcharge upto 50 per cent.
However the question arises as to why, at all, any surcharge be paid when it is not applicable to Pakistan and it should be withdrawn forthwith.
Pakistan’s sea trade pays billions in the form of freight to international carriers and may consider shifting their cargoes to carriers who have shown a more responsible attitude.
One should also honestly realize that such a surcharge otherwise seems contradictory to the policy statements of the developed countries. A number of friendly countries like the USA, the UK, France, Germany, Japan and others have announced relief in various fields for Pakistan to help revive its economy.
What Pakistan today expects from its friends is lifting of sanctions and quota restrictions, waiver of certain repayments of sizable loans, etc. Pakistan also expects that freight rates for its cargo, both in- and out-bound should be reduced, what to speak of levy of additional charges.
Pakistan was involved in warfare twice, in 1965 and then in 1971. The war risk surcharge or extra insurance premium was levied but then it was after proper negotiations among Pakistani representative forums, international shipping, insurance and re-insurance institutions.
Moreover, the war risk surcharge had been applied through and in consultation with the Insurance Association of Pakistan as well. Nonetheless, the Pakistan Insurance Corporation (PIC) received a 30 per cent share of the insurance premium collected in accordance with the rules governing compulsory cession at that time.
It looks rather tricky that the surcharge is being collected by the shipping agents and not by respective insurance companies directly. It is therefore feared that the amount on account of extra war premium being charged is more than being actually paid to the insurance companies for adequate risk coverage. Induction of a third party in business obviously increases cost.
It is a matter of great anxiety that in the event of a lapse or abnormal circumstances, some individuals and organizations try to take undue advantage of the situation at the cost of national interests.
The tragedy is that while formulating laws regarding trade, genuine exporters/importers are not taken into confidence. One could very well imagine as to what sort of policy would be framed by those who have hardly anything at stake.
If only a port-user or a ship-owner is represented at the time of preparing a shipping policy, such incidents will continue to hurt the economy. Lack of knowledge also plays a negative role in executing such technical rules.
Keeping in view the technical aspect of the matter, the writer, back in early 1985, proposed from the platform of the Pakistan Shippers’ Council of the FPCCI that shipping should be inducted as a regular academic subject in the syllabus at the college and university level. Unfortunately, the idea was not implemented, although we claim ourselves to be a maritime nation.