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Unprecedented development at Pakistan’s ports

Interview - April 2, 2014
It is an exciting time for the ports and shipping industry of Pakistan, with the establishment of new industrial zones and coal-fired power plants to power those zones; the upgrade of Port Qasim and the massive upgrade of Gwadar Port; funded by China, the port will soon become the starting point of the Pak-China economic corridor and the ideal gateway to the Far East. The majority of these port developments have been funded by the private sector on a build-operate-transfer (BOT) basis. Kamran Michael, Pakistan’s Minister of Ports and Shipping, speaks to Upper Reach about BOT opportunities and these new developments
KAMRAN MICHAEL, PAKISTAN’S MINISTER OF PORTS AND SHIPPING
KAMRAN MICHAEL | PAKISTAN’S MINISTER OF PORTS AND SHIPPING
The continuity of democracy in Pakistan has recently raised the hopes of investors around the world that Pakistan can finally make a lot of progress in the challenges it has ahead. According to President Nawaz Sharif in his state of address to the nation, Pakistan is ready to improve the lives of its citizens. From the Ministry of Ports and Shipping what is your personal vision on what is new in Pakistan? Can we say this is a new beginning for Pakistan?

Yes it is a new beginning for Pakistan after the recent elections. It was one of our slogans of PML-N that we don’t want aid we want trade. Now we have to fulfill this requirement and whatever we have announced we are committed towards that vision. We will provide them with each and every comfort of life because it is the responsibility of the government to provide the maximum fundamental rights to each and every citizen of Pakistan. 
 
To answer the question of how we are going to accomplish those fundamental rights that is to reduce poverty and other sorts of crisis, we will do this with a vision and Nawaz Sharif is a visionary leader and he has a vision of fulfilling all the requirements in the business sector and he will promote business in Pakistan. That is why we welcome all foreign investment and investors here in Pakistan especially the Ports and Shipping Ministry.

This ministry has a lot of potential and is a source of generating maximum revenue. It can prove itself on being the basic backbone to strengthen the national economy of Pakistan. We have started new developments and have taken up new initiatives for the uplifting and development of ports and shipping.  
 
Do you see any further developments now that the GSP plus status has been approved? Do you foresee more trade and commerce entering through the ports? 

We have lands for the purpose of installation of industry. It has been declared as the industrial zone. Due to some energy crises many of our industries had shifted to Bangladesh, South Africa and Sri Lanka but now we are going to fulfill this requirement.

We have announced that we will install 660 megawatt coal plant at Port Qasim providing energy directly to our industry department. After we provide them with the energy and fulfill their requirements then I don’t think anyone will consider moving to other countries. When they restore their plants and establish themselves in Pakistan new jobs will be created and exports in the future and we will generate foreign exchange.

This is the main focus of our attentions. Foreign exchange is the base of what will strengthen Pakistan. 
 
One of your other initiatives of upgrading the port also came with the coal handling facilities.

Actually we are going to install ten coal plants at Gadani and six coal plants in Punjab and one in Jamshoro; Sindh as well. This comes under the responsibility of the Ministry of Ports and Shipping of handling the coal. We are handling the coal plantation for the private sector these days.

They utilize this coal for the purpose of cement and other materials in the factories. We are currently handling 3.5 million metric tonnes every year at the Karachi Port Trust (KPT) but we have a capacity of 8 million metric tonnes. We can increase the capacity because we will have new berths which are to be located only for the purpose of co handling. The draft for the berths is for 13.5m. Here we’re handling 55000 to 60000 metric coal vessels but we have a capacity in the KPT because we have a developed T water port terminal over there and a 16 meter draft there so we can receive the big vessels with a capacity of 75,000 to 100,000 metric tons.
 
At this time we are handling the coal only at KPT but we are going to establish a new coal terminal at Port Qasim as well. It will be completed and functional by the end of 2016. We are looking at the future that is in the next 50 years we need one more terminal so it’s been decided that within a couple of months we will advertise for the next coal terminal on build-operate-transfer (BOT) basis. So there’s a public private partnership.
 
What would you say has been the collaboration of FDI in terms of the upgrade of Port Qasim? 

All of these projects are on BOT basis so the private sector arranges all the finances. We prefer and welcome the fully sponsored programs.

The BOT basis projects are fully sponsored by the private sector and they will build their terminals and arrange everything on their own regarding finances and then they will sign the agreement with us on 25 or 30 years basis, earning as much as they can out of this and in return we get their loyalties. After the timeframe ends they will leave the plants and will transfer in our ownership. 
 
It is a very attractive program for them.

Yes, we don’t want to touch our reserves so if anyone wants to develop and establish their terminals it’s all welcomed provided it’s fully financed by them and build their terminals, berths. Our vision is to start the coal plants because we have an energy crisis. We don’t have sufficient sources left; we’ve build our berths and jetties so if anybody in the private sector wants to come and start work together therefore we welcome even the international companies to come and join us.

We will provide the facilities that are available in Pakistan. There’s scope for business here and they can come with their ships and vessels.
 
How has your collaboration been with UK companies? Have you already secured any partnerships or do you expect to get any with the United Kingdom? 

We welcome UK companies, it is on BOT basis and we have good relations with the UK so if they want to come and work they are more than welcome. In the past we’ve had many programs together, compliance with UK companies. We have companies that are UK-based and they are working with us. So the UK is always welcome in our country. If they come and start work with us so we will definitely accommodate and facilitate them because we want to strengthen the relationship of both countries in terms of good trade relations and friendship and tourism to flourish as well. 

Coming towards Gwadar Port, starting with the fact that the UK is China’s biggest partner in the European Union but the shipments from London to China take now 33 days. What will change with the Pak-China economic corridor and the Gwadar Port? What are the benefits of this port and what would you like to tell UK investors abroad?

China has good relations with the UK and they are already doing business together. Currently the concession holder is China, we had signed the power concession agreement with the Port of Singapore in 2007 and now they have transferred their rights to the Chinese company so now China is the concession holder. China is developing the Gwader Port with the Pak-China economic corridor. This corridor is between two countries and this is the priority item, the Gwader Port.

The development of this is of deep concern; Pakistan is looking forward to the day when it will finally be functional. The Prime Minister of Pakistan has signed the MOU’s with the Chinese for the installations of coal plants and signed agreements for the development of Gwader Port as well. Within two years they will spend almost 1.08 billion dollars in Gwader both the countries together. It has been announced by the Prime Minister.
 
First of all we will develop the port, then the airport, there, among one of the seven projects which have been approved by the Prime Minister, and then we have designed hospitals over there and built new vocational training institutes, berths and developed industrial zones. It will be like a whole new economic hub. 
 
What do you expect in regards of the facilities that you have and implementation of the universities in the education sector? You were telling us this will be the first marine university in Pakistan?

Not only in Pakistan but also in the region. We have a marine academy at Karachi and almost every year 400 to 500 marine cadets complete their studies and after their two-year diploma they go on to big vessels because they don’t have the sources to go to abroad for further education. We have space of 182 acres of land at Karachi and there we want to build a new marine university.

Last month I was a Chief Guest of a program which was arranged by the marine academy at the passing out parade of the marine cadets I announced that I will build a new marine university at Karachi and it will be the first of its kind in this region where everyone from our neighbor countries can send their marine cadets and we will train them and provide marine education and they can serve as proper cadets. We will also build a huge library there as well.

Next month I am going to Belgium and they have offered scholarships for the marine cadets and the people who are serving on the ships to provide them with technical education. So they need that technical education and specialization because they have to handle the ships and we don’t have the sufficient sources here but prior to meeting with you I was engaged in another with the ambassador of Belgium and they are committed towards this vision. I know for sure that it will be more than 100 scholarships they will offer and it is a 100-percent fully sponsored scholarship.

I am committed to this and hopefully this effort will pay off. 
 
I understand that you are also trying to duplicate the number of ships that Pakistan Shipping Corporation has.

There was a time when the PSC had around 78 bulks and other ships but now we are suffering with the number of ships, we have 6 bulk ships and 3 oil tankers. In these 7 months we have worked on this issue and we will resolve this issue and fulfill the requirements of the PSC and the requirement is that we have a need to have a double figure of the ships that we have now. We have advertised now about the requirement of our ships and we will buy 2 new ships. Hopefully we will be able to fill our requirements and the number of ships will increase to 12 bulk ships and 6 oil tankers. 
 
In December of 2013 PSC have earned the whole year business of 1.9 billion dollars and increased the share in stock market from 63 to 81 rupee. It has improved after a lot of effort.

I have shared few things on how to improve the business how to convince the other countries and business communities to give our ships priority and signed the MOU with our Chamber of Commerce Karachi that they will give the preference to us for the imports/exports of their items to PMSE, that they will give us the business and the Government of Sri Lanka is going to sign the MOU with us and our technical team under my command will go to Sri Lanka with me next month and sign the proper agreement with them which states that in this whole region when they send their item by sea they will give us all the business to PMSE ships and they will prefer us.

Hopefully when we will receive the business it will help generate more revenue and strengthening of PMSE.
 
You have a lot of international vision on how to manage the ports not only a way for the business to come but also to create a lot of activity within the public sector which I think is remarkable. Now Pakistan of course, is fighting a perception war, from the Ministry of Ports and Shipping you are holding the keys of the country because this is from where most of the trade comes through. What would your Excellency say to the investors in the UK on why Pakistan is safe to invest and what are the advantages of Pakistan?

Actually whenever foreign investment comes to your country it generates the development of the country. We want foreign investment here in Pakistan if we want to stable and strengthen our national economy and see that national economic growth so we have to manage these things and facilitate the foreign investors so that they invest in projects here.

You can see the whole country in our port and shipping ministry we have different options which we are planning to provide them, one option is that they can come and sign the MOU with us and start their business on BOT basis, daily basis, joint ventures. There is a potential to develop the undeveloped sea sides, there are options to develop the tourism for the islands we have many islands in Karachi and Gwadar then we have many commercial locations as well, prime locations.

They can build malls and residential areas there too not to mention the industrial and textile zones. The ban which was imposed by the European Union in 2007 on seafood imports has been lifted due to our efforts. Now we are sending our tuna fish and tiger prawns from our deep sea waters. So all the investors including the UK ones can invest and start business in Pakistan. We have a good fisheries business and we welcome them. They can install their infrastructure and fish design process system. There are many options available to foreign investors. 
 
There is a regular need for dredging of ports and if that is not done then we will not be able to call the ship on the port. There are some measures to take for the up keeping of the ports; these are certain requirements which need to be followed. We always prefer the international companies to come here and start their dredging. Now we are going to start the LNG terminal and we need to develop a channel because we have 13.5 meter draft and we need a 16 meter draft so we need dredging over there and it’s a capital dredging.

At the moment we don’t have a capital dredger in our capacity. We will advertise for this and many of the international companies will soon participate. We have a vision that we will start the speedboats’ for the purpose of perishable item as we are sending these items on a daily basis by air and its very costly so we are sending our meat, fish, vegetables and fruit on a daily basis from Pakistan to Gulf states and especially UAE. Right now we have 40 to 50 knot speed boats and it will take 24 to 28 hours from Karachi to UAE.

The costs will reduce and they will spend 30 to 40 percent and they will save 60 percent. We had meeting with the stakeholders and vegetables representatives and food associate representatives, members of chamber of commerce, representatives of private shipping clients so they are all on board. The work has finished now and we are going to implement our project. So this is a good sign. We don’t have that many ships in Pakistan so many of the investor countries and business communities who are willing to provide them the ships they can. 

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Katsumi Ishizaka

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