With the opening dates of terminals in the Colombo South Harbour Project in Sri Lanka and Deep Water Container Port in Pakistan now set as 2013 and 2014 respectively, port development in the South Asian region is about to enter another era.
When completed, the new deep sea ports in Karachi and Colombo will have the most advanced facilities in the region, capable of handling the largest ships in the world. This is the result of the vision of these countries leaders’ and their foresight in leveraging the expertise of world class partners for the development of their infrastructure. Trade within the region with the rest of the world can be facilitated and create economic benefits to the region. This will stimulate economic growth and improve the welfare and quality of life of citizens in the region.
Against the background of a still slowing down world economy, it becomes even more important for countries in this region to invest in their infrastructure, to bring about the key elements necessary to stay ahead. Strategic initiatives to upgrade the competitiveness of countries have become an urgent necessity.
There is a need to increase efficiency in the entire logistics chain. In this respect, ports play a crucial role as they are the gateway for the timely flow of materials to the manufacturing process and their rapid movement out to the consumers.
As stated above, Sri Lanka and Pakistan have moved forward and positioned their ports to operate to world class standards. Sri Lanka’s association with the Chinese seems to have paid off or so it seems. In comparison to our immediate neighbour India, we are chugging full steam ahead.
Recently Hyundai Glovis Co. Ltd., the car carrier with a worldwide transport turnover network, sailed into the new Hambantotaharbour in the south of Sri Lanka with 1,000 units of Hyundai automobiles. It is significant to note that Sri Lanka is now in a position to provide transhipment links to Europe and Africa, where these vehicles, manufactured across the Palk Strait at the Hyundai Chennai (India) plant were unloaded at the Hambantota Port for onward transhipment to Europe and Africa. These promising calls of Hyundai Glovis will no doubt quick-start the operational capabilities of this yet untested port.
The same, however, cannot be said of Bangladesh, where the Chittagong Port in Bangladesh is still struggling to lift its head above the water. Chittagong Port could avail itself of the opportunities to grow its own industries and to serve the East India region. The readymade garment industry has grown rapidly and currently produces a value of US$ 19 billion. However, the malaise of bureaucracy and lack of vision or will has left Chittagong with low efficiency and complaints by the trade.
It is interesting to note that the port’s way of responding to congestion, is by imposing congestion charges on the shippers. Attempts to bring international expertise have been plagued by vested local interests, who have frustrated efforts by the port authority to complete any tendering process.
Since 2006, tenders have been issued, submission dates postponed and eventually cancelled. At the date of writing, a tender has been issued and the submission dates have been postponed three times.
Let’s take a look at Vietnam, although not in this region, is yet a developing country with similar dynamics. Thanks to the decision to privatise its ports in the last decade, the ports in Vietnam are ahead of Chittagong in terms of efficiency, capacity and container growth.
The overall capacity of Vietnamese ports is almost double to Bangladeshi ports. According to Containerisation International data, container traffic in Vietnam during the past five years increased about 19%, which is higher than its GDP growth for the same period. Compared with Bangladesh, the growth of container traffic in the same five-year period is just about 11%, which has not kept pace with the double digit growth of its economy. Serious indecisions about the infrastructure development from its Government officials have diminished the efficiency of the ports and ultimately lowered the competitiveness of the country within the region.
For Bangladesh to maintain its position as a major RMG exporter, urgent action is needed to set in place a system, import international expertise and advanced technology, to substantially upgrade the efficiency of Bangladeshi ports.
Loss of credibility
According to one industry source, the Chittagong port privatisation process has lost its credibility. It should be noted that the incumbent government upon coming to the seat of power had outlined its vision to leverage the private sector to effect higher economic growth.
The plight of Chittagong was commented on only recently by a World bank official on a Facebook page as: “There are many factors that drive port performance but I think they can be categorised into three groups: a) state of the infrastructure; b) efficiency of use of the infrastructure, including the provision of supporting services; and c) regulatory and administrative processes, such as those related to customs clearance. Private sector participation brings the necessary management skills which can indeed help upgrade and expand infrastructure and also enhance efficiency of use. Improvements in regulatory and administrative processes require public sector reforms but here also there is scope for private sector participation (automation of processes being one example).”
This call from the World Bank to bring in private sector participation can provide capital, entrepreneurship and technological innovation, which are essentials to sustain economic growth and create jobs and economic opportunities for the region.
A few years ago, there was the concern that Vallarpadam would be completed ahead of Colombo and would therefore have the first mover advantages. However, the partnership with the Chinese have proven to be the right solution for Sri Lanka since they are now moving forward to bring development benefits to the country as well as the South Asian region, to create investment and employment.
Meanwhile, the Indian ports sector is being dragged down by bureaucracy, and is very much behind the rest of the region and the world. This brings up liberalisation issue that comes along with privatisation.
Contrary to Sri Lanka, the bureaucratic actions of Cabotage law, exorbitant and hidden charges for handling containers from the Indian authorities has quickly turned the Vallarpadam International Container Transhipment Terminal into a liability for the Cochin Port Trust. Huge money was invested to setup all the related facilities, but all those policies were acting as a constraint in realising the port’s full potential.
Taking the lesson learnt in Sri Lanka and Vietnam, it is obvious that without the liberalisation of governments and public-private cooperation of port construction and operation, not only will South Asian countries be prevented from enjoying the benefits of a higher economic growth, but it will also create a huge disincentive to shipping lines that operate vessels within the region, and drive down port revenues in the long term.
Dire need for coordinated development
There is a dire need for some coordinated development in South Asian ports. For one, this would give a signal of stability to the region on their deliverables. Without that factor, Government industries and various other exports, which need to be developed for consumption outside the region can get destabilised.
The formula for actually getting FDIs to develop infrastructure is one fraught with issues. Due to the various political and economic policies and allegiances, the composite of who gets into partnership with the government and what is the makeup of a long-term deal may differ from country to country.
But it is important that well planned out infrastructure is an important factor towards securing the future of trade for any of these South Asian countries. South Asian countries still hold the edge when it comes to economy in production largely due to the vast labour force which comes at a low cost. And for this factor to work for their advantage, no bottlenecks can be allowed in the system.
In Sri Lanka, a lot of these issues have been ironed out and there is finally some focus in the direction of port development, largely thanks to the Chinese element, which is keeping to schedules and delivering on time. The Chinese factor may work for Sri Lanka because of the long-term political ties the island has with China, especially with the sitting Government.
What would work out for Bangladesh might be an entirely different formula, one which they would be comfortable with; but what has to be known is that there is no time to be dilly dallying. Time is of essence and the infrastructure of the ports needs to be developed in every sense.
Out of the region’s seven South Asian countries, two are landlocked and five have the opportunity to develop sea ports. But if one takes Maldives out of this equation due to the country’s size and the fact that its mainstay is tourism, we are left with Pakistan, Bangladesh, Sri Lanka, and India. It is vital therefore that these countries develop their ports in ways that complement each other and by so doing facilitate the growth of the south Asian industry.