IBRD to provide $79 million to increase Karachi port productivity

International Bank for Reconstruction and Development will provide $79 million to increase productivity of the Karachi port by reducing Karachi Dock Labour Board-related labour costs; and to facilitate the re-entry of former KDLB registered workers and employees into the labour market.
A Project report said the World Bank, with the support of Pakistan Government recently completed a major study titled "Pakistan: Labour Market Study - Regulation, Job Creation, and Skills Formation", which has informed the development of the KDLB.
Labour issues at the Karachi Port Trust reflect similar challenges faced by the country as a whole. The report shows that the rate of job creation observed in Pakistan at the moment is far below what it should be, partly because of the excessive regulatory burden existing labour laws imposed on businesses.
It also offers evidence that, beyond reducing job creation, excessive regulation tends to aggravate the shortage of industrial skills by discouraging firms from sponsoring on-the-job training schemes.
The report mentioned that the transport system in Pakistan generates high economic losses due to a mismatch between supply and demand for transport services and supporting infrastructure. Poor performance of the trade logistics sector significantly reduces the competitiveness of the actual and potential export industries. It is estimated that overall the inadequate and inefficient transport and trade logistics system is imposing a cost to the economy equivalent to 4 to 6 percent of the GDP.
WB experts said the ports in Pakistan recently started to take measures to improve their performance. They were contributing to the overall poor performance and high costs of the transport sector. Port costs were high as compared to other ports in the region.
Container handling charges in the port of Karachi were 1.5 to 3 times more than the charges in Colombo (Sri Lanka) or in the port of Nhava Sheva near Mumbai in India. Ship dues per ship calls were five times more than those ports in Sri Lanka and Hong Kong and 20 percent higher than in Nhava Sheva. Port productivity was also low with an average ratio of 55 containers handled per ship berth per hour as compared to a range between 65 and 100 in the three regional ports.
The report said the KDLB scheme was created in 1973 to protect the rights of dock workers by registering them and providing regular work on a rotational basis. Previously dock workers in the port of Karachi were employed on a casual basis without employment contract and access to social services (health insurance and pension).
When KDLB started its activities, more than twice the requirement of dock workers registered. Since then, increased containerisation and other forms of mechanised handling have greatly reduced the need for manual workers.
The majority of dock workers currently registered by KLDB has low education and do not have the skills for modern cargo handling operations, having been trained for outdated general cargo manual operations. Containers represent now more than two third of Karachi port's dry cargo.
Since most KDLB registered dock workers do not have the necessary skills, stevedoring companies have to employ other workers from the open market for mechanised operations that require skills. Nevertheless, under the KDLB scheme, they are forced to pay for KDLB-provided teams, which are scheduled for work, but not participating to and in fact often not physically present on port operations.
In addition, the number of dock workers in KDLB is also higher than requirement.
Salaries of KDLB registered dock workers are much higher than salaries of other dock workers employed by stevedores from the open market. The gross wage costs, including wages, overtime, special allowances and social services per KDLB registered worker per month is about Rs 31,000, which is five times high than the average wage per skilled worker in the Karachi region, they pointed out.
Currently 3,272 dock workers are registered by KDLB, down from about 9,000 when KDLB was created. KDLB also employs 155 permanent staff and officers. When dock workers registered with KDLB are not actually scheduled for work, they receive a minimum wage allowance and social services financed by a Cess.
The Cess is paid for 52 percent by shipping agents, 30 percent by the Karachi Port Trust (KPT) and 18 percent by stevedores. On average, taking into account the four categories of dock workers' have been employed in the port of Karachi, the KDLB scheme results in employing about twice the number of workers than what is actually required.
Therefore, the cost of using KDLB workers is 8 times high than the normal cost, which is estimated to be around $1.4 million annually. Closing KDLB would then save about $9.6 million per year to the stevedores and to the economy. At project completion, it is hoped that the cost per TEU of using the port is reduced by 7 percent in six months after the project effectiveness.
It said the proposed project is one of the components of the package developed by the World Bank in support of the National Trade Corridor Improvement Programme (NTCIP). To address the key constraints faced by the transport and trade logistics sectors, the government has decided to launch a major initiative, targeted at improving the National Trade Corridor, which links Pakistan's major ports in the South with the country's major cities and trade corridors to the North.
Together, the ports, road and railways along this corridor handle 95 percent of the country's external trade and 65 percent of total land freight.
In support of the proposed project, the Bank brings its extensive experience of similar operations. The government is seeking to benefit from this experience as other retrenchment plans executed in the past either in KDLB or other government agencies had significant social consequences, having not been designed to mitigate these impacts.