Blue economy in the red

Pakistanis often hear a lot about the geo-strategic importance of their country. We have a large coastline, share borders with the second-largest, and soon-to-be largest, economy in the world and lie at the crossroads of several important trade and resource routes. All of this should, in theory, net the country considerable gains. Official analysis and reports often point in this direction too. Sadly, reality has been quite different, often to the point that one becomes tired of hearing about all this great ‘potential’ that seems like it will never be realised. Why is this the case? A new task force report presented to the prime minister this week might provide some clues. It reportedly claims that Pakistan faces an annual loss of almost Rs5 trillion in the country’s maritime sector because of under-utilised ports, tax evasion, malpractices, fake billing, misuse of the Afghan Transit Trade and a lack of value addition. The report lamented that despite immense potential and geo-strategic advantages, Pakistan has not been able to exploit its real potential. Of all the factors listed by the report to explain Pakistan’s maritime underperformance, under-utilised ports and tax evasion in the maritime sector appear to play the biggest role, costing the country Rs3.19 trillion and Rs1.12 trillion respectively. Taken together, they account for well over 80 per cent of the annual loss in the maritime sector.

Although demand for port services in Pakistan has risen by 3.3 per cent per annum over the last ten years, the Karachi Port Trust (KPT), the country’s busiest port, is only utilising 47 per cent of its total capacity. As such, none of the country’s ports figure among the top 60 ports of the world, with KPT ranked at 61 while the Port Qasim Authority (PQA) is 146th. Only 50 per cent of the total capacity of the latter is being utilised. The Gwadar Port Authority’s (GPA) current capacity is 2.5 million tons and is expected to increase up to 400 million tons by the year 2045. However, one can clearly see that fully realising the potential gains from this expansion would require that the port avoids the chronic underutilisation that has befallen KPT and PQA. It would also require an end to the massive tax evasion currently plaguing the maritime sector, a particularly outrageous problem given how ordinary people in the country have been buried under taxes and tariffs over the past two years. If those getting the most out of Pakistan’s current infrastructure fail to pay the state their fair share and do their part to carry the economic burden, upgrading and expanding infrastructure will remain a challenge and any hopes of turning Pakistan into an attractive destination for investment will remain unfulfilled.

The task force report also highlighted some opportunities that the nation is currently missing out on. The Red Sea Crisis presents a unique chance for Pakistan to exploit its geo-strategic advantage, with several large shipping and logistics firms offering investments to secure their financial interests while channelling trade through Pakistan. Why the government has not already jumped on this opportunity, given the ample underutilised space in our major ports, is unclear. Our coastlines could become a major pillar of our economy, and will indeed have to if Pakistan is to ever become a trade and investment powerhouse, but only if we have the foresight to complement our geo-strategic assets with policy wisdom. At the very least, we could ensure that we at least benefit from what we already have by stopping tax evasion and making sure that what space our ports currently do have is being used to the fullest.