Hutchison Ports invests despite Pakistan's slowing economy

Drop in import cargo hits terminal operator investing $240m in expansion

KARACHI: The government’s focus on accelerating economic growth and providing an enabling environment for investment has raised the level of confidence in foreign investors. Despite a slowing economy, Hutchison Ports has made no change in its investment plan for Pakistan and will increase its capacity up to 3.2 million TEUs by 2022.

“Drop in import cargo is not good for terminal operators but we are happy to see that the government is successfully narrowing down the trade deficit, which is a major problem for Pakistan’s economy,” Hutchison Ports General Manager and Head of Business Unit of Pakistan Syed Rashid Jamil told The Express Tribune.

A delegation of Hutchison Ports, led by Group Managing Director Eric Ip, met Prime Minister Imran Khan in mid-October and apprised him of its decision to make fresh investment in the country.

Talking about the progress on phase-II of the Hutchison Ports’ terminal with an additional investment of $240 million, he said it would help expand the installed capacity for handling containerised cargo at the terminal located at the Karachi Port. “With this, the total investment in the terminal by Hutchison Ports Pakistan will increase to over $600 million,” he said.

In a bid to improve the deteriorating macroeconomic indicators, the federal government took measures to narrow the twin deficits in first quarter of the current fiscal year 2019-20.

“Declining imports are favourable for the economy, but ports and terminal operators are losing revenue and import cargoes are going down,” said Rashid. “This is even more challenging for us as we have no sovereign guarantee for payments.”

However, he said despite the tough times, Karachi Port had the potential of becoming the transit and transhipment hub in the near future.

“We are very optimistic about the economy of Pakistan and despite the hard times due to decreasing imports, our investment plan in phase-II is very much on track.

“Our total investment in Pakistan will touch $1 billion by the end of this investment cycle,” he added.

He pointed out that civil work in the second phase was ahead of schedule and would be completed in 2021, while additional equipment would be installed by 2022.

“It will be a state-of-the-art terminal, which will use remote-controlled ship-to-shore cranes and semi-automated yard cranes, which were first introduced in the country by Hutchison Ports Pakistan.”

Hutchison Ports is also planning to invest in logistics services both upstream and downstream and for this it is in talks with Pakistan Railways.

The development of phase-II includes three internal railway tracks, which will connect the terminal to the main lines. Movement of cargo through rail will be a public-private partnership with Pakistan Railways.

“We have chalked out our strategy in view of the economic slowdown, as at the time of the decision on raising investment in the terminal, the present situation of economic slowdown was not expected,” Jamil said.

He said cargo volumes at terminals had been constantly declining for the last two years and imports of consumer goods had gone down. Balancing, modernisation and replacement activities in the industries are also slowing down and no major plant and machinery are being imported.

“On the other hand, exports are increasing and imports of industrial raw material have also gone up. We will manage this situation by rescheduling of delay in equipment purchase as this will help us get the latest equipment and technology.”

Pakistan’s first deep-water container terminal is capable of handling the world’s largest vessels. Currently, it has the capacity of handing 1.5 million TEUs annually. The terminal was utilising 50% capacity about a few weeks ago, but currently it is operating at 64% capacity utilisation.

“The terminal was at its peak at 100% capacity utilisation in January 2019 due to a push in CPEC-related consignments.” The terminal operator is looking for a partnership with a consolidated big shipping line. It would most probably be an eastern shipping line to achieve economies of scale and utilise its enhanced capacity after the completion of phase-II.

Compared to other terminals, Hutchison Ports Pakistan is paying almost double charges to the land authority in the form of royalty, which makes it expensive for its customers.

Increasing efficiency is the only way to minimise the cost for which Hutchison Ports is investing in technologies and human resources.

Published in The Express Tribune, November 24^th, 2019.

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