Professional Documents
Culture Documents
Karachi Fish Harbour showing the overcrowding among the fishing boats
Competitiveness Support Fund
Karachi Fish Harbour - Roadmap for Restructuring Harbour Management and Operations
Abbreviations
Beopari A moneylender and middleman
BOT Build, Operate, Transfer
CSF Competitiveness Support Fund
EOI Expression of Interest
EU European Union
FCS Fishermen’s Cooperative Society
GoS Government of Sindh
Ha Hectare
KFH Karachi Fisheries Harbour
KFHA Karachi Fisheries Harbour Authority
Mole Same as Mole holder, though perhaps not officially
sanctioned
Mole holder A seafood commission agent. Sometimes a boat
owner and exporter, and a moneylender. “Official”
moles are sanctioned at the KFH
PR Pakistani Rupee
STOFA Sindh Trawler Owners & Fishermen Association
TORs Terms of Reference
Currency
On 26th May 2008 US$1.00 bought PR 69.36 (State Bank of Pakistan)
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Contents
Executive Summary..............................................................................................................iii
1. Introduction........................................................................................................................1
2. Objective.............................................................................................................................4
3. Rationale.............................................................................................................................5
5. Timeframe.........................................................................................................................11
6. Getting consensus...........................................................................................................13
Executive Summary
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Aim
4. The aim of the process of change and restructuring agreed with the
Government of Sindh is to move forward the privatization of the KFH in
respect of an international management company to be brought in to take
over and manage the operations and assets in the Harbour. This should
improve the quality of the fish passing through Karachi Fish Harbour by
improving the management of the Karachi Fish Harbour, and through this
improvement in management2 also address income, infrastructure and
quality control issues.
Findings
5. The key finding of all the work undertaken by CSF related to the
Karachi Fish Harbour is that the problems there are not purely physical or
technical; the technical issues (e.g., condition of the auction halls, sewage
1
The work commenced in early 2007 with CSF’s initial report on the KFH and resulting Action
Plan. In January 2008 a Prime Ministerial Committee confirmed CSF’s approach. Other
related work has been undertaken by UNIDO in conjunction with the Federal Marine Fisheries
Department of MinFAL
2
The ADB (2007) Port Reform Toolkit (363 pp) has been used as the main guide to practical
issues.
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Next steps
8. Once an implementing agency and its primary staff are chosen, then
certain key things will need to be done by the agency on the GoS side
before CSF can continue its work on the project. These are:
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9.Once these steps have been taken, CSF can move forward with the next
activities on the Roadmap for restructuring the KFH, such as preparing a
lease agreement, seeking possible management partners and developing
a PC-1 for federal funding if required.
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1. Introduction
3
Competitiveness Support Fund (2007) Action Plan for Fish Quality and Value Adding at
Karachi Fisheries Harbour
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12. Furthermore regarding the failure to maximise the value of the catch;
the situation at Karachi Fish Harbour was identified as critical, in that the
infrastructure and management of the harbour was inadequate for the
needs of the fishing industry and required strengthening before significant
progress towards alleviating quality control problems could be achieved.
14. Export fish generally passes through the Karachi Fisheries harbour,
around which the 32 major fish processing companies are concentrated,
and which has three auction halls. Some export fish and shrimp, coming
from Baluchistan, and the Indus delta, and possibly Ibrahim Hyderi on
Korangi Creek in Karachi, does not pass through the landing and auction
facilities and goes straight to the processors. Some fish is exported
directly to Iran and the Middle East from the Western ports of Baluchistan.
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15. KFH needs to deal with a number of disparate activities: the movement
of large numbers of fishing boats (large and small), the loading and
unloading of fishing boats to the various auction halls, management of the
auction houses, allocation of space to fish processors, vessel repair
facilities, boatbuilding activities and administration. Berths, warehouse
and other storage spaces have to be allocated and released. Many
thousands of people also rely on the KFH for their livelihoods. The
efficient management of KFHA involves managing these activities and
resources, managing the flows of money involved between the agents
providing and using these resources, and providing management
information to users and administrators.
16. In principle (or on paper) the Sindh Provincial Government owns the
KFA. The Karachi Fish Harbour Authority (KFHA) is the agency of the
Sindh Provincial Government that is responsible for managing the
harbour. KFHA receives money from Government of Sindh (GoS)
budgets and additional income from the hire of space on the harbours
already crowded site, for boatbuilding and for processing, and from the
use of the slipway, though this is rarely used for fishing boats.
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17. This system has not worked in reality and the facilities at the harbour
are deteriorating (though there has been some investment to improve
auction facilities). Many of the businesses operating out of the harbour
are not contributing adequately to the upkeep of the area and there are
serious shortcomings in the collection of dues. This has contributed to a
reduction in the quality of the fish landed and its value.
2. Objective
19. The main objective of the process is to improve the quality of the fish
passing through Karachi Fish Harbour by improving the management of
the Karachi Fish Harbour, and through this improvement in management 4
also address income, infrastructure and quality control issues.
20. This much has been agreed already by the Government of Sindh
(GoS), assisted by the Competitiveness Support Fund (CSF), and
memoranda have been issued to this effect. Regarding management it
has also been agreed that5, inter alia :-
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privatise the auction of fish, with the particularly the mole holders will have to be
proceeds being split between the carefully worked out, and enshrined in new
Fishermen’s’ Cooperative Society and legislation, otherwise the privatisation will
the Management Company/KFHA. face legal challenges and serious lack of
cooperation.
The CSF will continue to assist the Dependant on success of the above.
6 KFA and also through their place on
the board, monitor and evaluate the
functioning of the harbour
3. Rationale
21. Karachi Fisheries Harbour is obviously not run efficiently, does not
cover its running costs and provides a very poor service to its users. This
is accepted by all stakeholders, and is obvious to even the casual
observer. The whole country pays for these inefficiencies in that the price
of fish is not maximized due to poor quality, affecting fishermen
(incomes), traders (export earnings) and the consumer.
23. Some of the reasons for the lack of efficiency, and its costs lie with
poor management, in that the administration by the various bodies
charged with management of the various functions is lax, overweight and
reported to be corrupt. Reform would overcome many of these
shortcomings and also remove the long term financial burden for
infrastructure investment, maintenance and some recurrent costs
presently lying with the GoS6.
6
Through attracting foreign investment, reforming labour practices, making the harbour a
commercial entity etc
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25. The auction of fish at the Karachi Fish Harbour site began in 1959
when the fish market moved from Karachi town to the harbour.
Responsibility for the auction was given to the FCS7 as the MFD, as it was
then, did not have the capability to run it.
26. The ownership of the KFH assets passed to the Sindh Government
when the responsibility for fisheries passed to the Provinces after 1973.
FCS claimed that an earlier understanding that they had with the Federal
Fisheries gave them ownership of the KFH but this claim was thrown out
after a court case.
27. The Karachi Fish Harbour Authority has been in existence since the
early 1980’s. It was constituted to receive a grant from the EU but has not
been disbanded since. Under its management the harbour has not been
well maintained over the last few years. Facilities are run down and there
has been a serious lack of investment in plant and equipment. Staff strive
to manage but their actions are constrained by the structure of the KFH
management (with the auction, the main revenue stream, controlled by
the Moles and the FCS) and a lack of will to change from above.
28. Although the Sindh Government and various donors have made
piecemeal investments to improve the facilities for handling and
auctioning fish (such as K1 Auction Hall and refurbishing K2 Auction Hall)
there remain many infrastructure problems. Recently GoS has made
available more than Pak Rupees 200 million in development funds, mostly
for maintenance and equipment, and the improvement of vessels fishing
to the harbor.
29. KFH has not in the past maximised its incomes. Some examples
(there are probably several others) include:
• rents for plots on the Harbour Lands are much lower than commercial
rents elsewhere in West Karachi
• no dues are collected by KFHA from boats entering or leaving the
harbour, or unloading, or just tied up in the harbour
7
With the FCS came the moles.
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• the FCS owes more than Pak Rupees 30 million for rent of the auction
halls which remains uncollected.
30. KFHA is striving to collect outstanding rents and other receivables, and
is having some success. They are however, problems since many of
those owing money claim they have no money to pay. The fishing
industry has not been as profitable of late as in recent past years.
31. It is only relatively recently that there has been the political will in the
GoS to tackle the problem apparent at KFH, rectify the shortcomings in
management of the harbour and lack of investment in facilities.
32. Various vested interests, most notably the moles, have sound
economic reasons not to support change.
33. The EU has, through the de-listing of Pakistan processing units, made
it impossible to export directly to the European Union; but at the same
time brought the failings of the KFH to public attention and to the attention
of the Federal and Sindh Government. The Competitiveness Support
Fund has been instrumental in maintaining the high profile of the need for
change.
35. The task therefore is to design a Management System that will allow
the assets of the KFH to remain with Sindh whilst transferring the day to
day management of the whole harbour activities to the private sector.
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37. Privatizing the management of the KFHA will not be a simple nor quick
process8. Port and harbour privatization has occurred in many parts of
the world, including Pakistan, and a body of experience has been built up
which shows that the process is both more involved and more drawn out
than at first appears.
39. For KFH the concept of a “landlord” port9 has generally been accepted
as the best model to follow. If GoS, in the light of the possible difficulties
of getting consensus on introducing private management to the KFH
would prefer another arrangement, this could be re-considered, though
the alternatives do not offer the same advantages.
40. The first stage is the acceptance of all parties that change is to happen.
There is already a widespread recognition in the higher echelons of
decision making at Provincial and Central Government level that the
present situation cannot continue. KFHA is financially compromised, the
harbour is a drain on the public funds, development funds do not reach
the intended destinations, vested interests hinder change and the
financial losses to the fishing industry through continued failures in the
cool chain from capture to consumer are catastrophic. The management
structure of KFH has not changed significantly since 1984 when it was
formed, 24 years ago; the structure of the auction has not changed since
1958, 50 years ago when the harbour opened, and this was merely a
8
See: Port Reform Toolkit, World Bank Transport Division. (2007).
9
In the landlord port model, infrastructure is leased to private operating companies. The
lease to be paid to the port authority is usually a fixed sum per square meter per year.
Depending on the lease conditions the private port operators may provide and maintain their
own superstructure including buildings (offices, sheds, auction halls, factories etc). They also
purchase and install their own equipment on the port grounds as required by their business.
In an established harbour such as KFH arrangements for the labour, infrastructure and
revenue have to be decided.
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41. Unfortunately it is still not certain that some of the powerful vested
interests, nor even the labour force of KFHA and FCS or other
stakeholders are fully convinced of the benefits of privatization.
Consensus must be obtained through negotiation and compromise
because a confrontational approach is unlikely to be successful.
Currently (May 2008) many people claim never to have heard that there
was a proposal that the management of the harbour might be privatized.
43. Finally this all has to have a solid legal basis, particularly since the
management company or institution will require that its investment is
protected by law, as will the GoS who will retain ownership of the assets.
44. The GoS, through the KFHA has access to legal advice and services
which will allow it to alter, at little cost, the current legislation related to
changing the composition of the board of directors of the KFHA and
introducing more stakeholder participation.
45. Similarly the change of the ordinances and regulations relating to the
change of management of the KFHA can probably be addressed via
these channels.
46. Where the GoS and KFHA will probably require bringing in outside
legal advice or assistance is in the drafting and preparation of the TORs
and contract to engage the Management Company to manage the KFH.
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5. Timeframe
47. It is advisable if a timeframe is placed on the various actions that have to be completed. This gives targets and helps the
planning process. For the KFH the following timetable may be appropriate:-
To be Responsibilities
Activity complete
by KFHA Government of Sindh CSF
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Tender
Provisional
On
award
Progress
Negotiations Must be fully transparent
With
Final Award
of tender to TORs
winning
company
Handover
Dispute with
Forever!
the moles!
The CSF envisages continuing assistance to the GoS to help progress towards the ultimate goal of privatisation of the KFH.
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6. Getting consensus
49. A brief list of the main stakeholders and their main concerns in the KFH
includes:-
Stakeholder Concerns
Currently 2000 boat owners land to Karachi
1. 2000+ fishing boat owners, all Fish Harbour. They wish to continue to do so
members of the Fishermen’s and also to be guaranteed a reasonable price
Cooperative Society (FCS) who fish to for their labours. If possible they would like to
the harbour. Also their crews, see price rises for landings coming from any
probably another 70,000. privatisation. The crews are worried about
their jobs.
3. The administration and numerous They are concerned about their jobs.
junior employees of the FCS (380)
4. The KFHA staff and its numerous KFHA staff is concerned about their jobs and
employees (~200) long term future.
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12. Consumers of marine fish from the Want a supply of good quality healthy food
KFH
Wishes to protect its assets whilst reducing
13. The Government of Sindh, which the KFH reliance on recurrent and
owns the KFH assets development funding. Would like a return
from the 34 Ha of land.
Nothing to be done is allowed to “rock the
boat” politically. The politicians do not wish
14. Local Politicians for a large disaffected group to be created in
West Karachi.
51. It is thus incumbent on the GoS, through the KFHA to ensure that
change is on the agenda at all levels. The GoS must appoint a person or
10
It was obvious on 22.5.08 that nobody had spoken to the Moleholders about privatising the
auction.
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a. It will flush out the dissenters, who will be encouraged to put forward
their objections early on in the process; enabling the GoS/KFHA to
incorporate changes to the privatization process to satisfy their worries.
b. It will avoid problems, particularly with the diverse labour groups
employed at the harbour, who are already fearful that changes may
impact adversely on their livelihoods, because they will receive
reassurances.
c. It will convince the public, the stakeholders themselves and Aid Donors
that change is on the way and the problems of KFH are to be
addressed. This will lead to conformity of decision making in
investment and development options.
d. It will convince potential bidders for the management contract that the
GoS has approached the privatization process in an open and
transparent way.
52. The consultation process will also crystallize in the minds of the
decision makers at the GoS, the nature of the arrangements they wish to
make to privatize the operations of the harbour; what parts can be
privatised and what, if any, cannot.
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contract (or lease), legally binding, whereby the GoS will transfer
operating rights to the Management Company for the KFH. The
Management Company will then manage the harbour and the assets in
the 34 Ha of land of the harbour under the terms of this contract.
54. The assets, land, buildings and other infrastructure currently owned
by the GoS will remain the property of the GoS, though depending on the
decision of the GoS, it may be leased to the Management Company for a
period not yet determined, though 20 years would seem appropriate.
55. The main point about any contracts that the GoS enters into regarding
management of KFH is that all are legal documents, and if not watertight
and clearly defining the rights and responsibilities of both sides, they are
practically worthless, since no responsible private company will be
attracted to sign up to a contract that does not make clear its
responsibilities.
57. It may be possible to privatize the actual operations of the KFH, and
lease out the infrastructure, but major investment in infrastructure must, in
the short term at least, come from the Government (of Sindh, or Federal)
so as to allow the harbour to be privatized. The lease contract could
11
This latter most unlikely to be granted!
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perhaps allow for capital investment from income when harbour income
reaches a pre-determined level.
58. The first matter to be addressed is whether the legal structure currently
existing in Sindh allows for the reconstitution of the KFHA board as
agreed and minuted12 in the agreement between GoS and CSF in January
2008. Apparently (Junaid Farooki, KFHA Advocate, Pers comm) this
does not constitute much of a problem and does not require a change of
legislation, merely a “notification” which is easily arranged.
60. The lease agreement between the FCS and the GoS pursuant to
Agriculture, Livestock and Fisheries Department, GoS, Notification
No.2(5) SO (FISH)/1996AL&F/2002 dated 13th February 2002, will have to
be cancelled. FCS are in breach of a large number of the clauses in this
lease agreement and the lease agreement in any case has clauses
allowing GoS to take back the assets after giving adequate advance
notice, or in the case of a breach of the lease clauses straight away
without compensation. The FCS currently owe Pak Rupees 30 million in
unpaid rent.
61. Work on the contents of the future lease agreement with the private
company could go ahead in anticipation of the passing of these various
amendments.
12
Gov Sindh. No EC(Fish)(L&F)/15(15)2007. Minutes of the meeting regarding
Competitiveness Support Fund – Action Plan for Karachi Fisheries Harbour Authority held
under the Chairmanship of the Chief Secretary, Sindh on 22.1.2008. Karachi dated 24 th
January 2008.
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13
The auction has the potential to be one of the prime income generators in the harbour.
Auctioning is currently undertaken by the moles (less than 30 in number) who raise 6.25% of
the value of the catch and split this with the FCS, the FCS using their share to undertake
social works with the fishermen members and to pay (or not as the case is) Rp10 million
annual rent for the auction halls to KFHA. It has been proposed that the auction will be sub-
contracted by the management company who will collect the 6.25%, providing half of this to
the FCS who will withdraw completely from the KFH and restrict themselves to their social
works with their members. The balance of the auction fees will pay for the sub-contract and
provide income to the management company as revenue to be split up between it and the
KFHA as agreed in the contract. The moles will no longer be responsible for auctioning the
fish. FCS and the moles are yet to formally agree to this. There may be difficulties in getting
their formal agreement and this has already been indicated in very strong terms by the senior
mole holder.
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xx. Cooperation with policing, customs and health authorities. The role
of the KFHA and the Management Company.
xxi. Dredging of the harbour. Who decides and how is this to be paid
for?
xxii. Access agreements with the GoS and municipal authorities for
people, boats and vehicles to the harbour area.
xxiii. Award of building contracts between the Management Company
and a construction company for construction or development work
(with the KFHA exercising some form of quality control?).
xxiv. Access for KFHA staff and other statutory bodies to the harbour
environs and what they are allowed to do there.
xxv. More esoteric activities such as the promotion of the harbour,
restaurants, tourism etc
xxvi. Arrangements for violations of the lease agreement by any of the
contracting parties and a dispute resolution path, clearly laid out.
xxvii. Arrangements for the termination of the lease, either at the end of
its term or prior to that, in the case of gross violations of its clauses
by one of the two contracting parties. This would cover the return of
assets, among other things
xxviii. Any other issues that may become apparent during either the
preparation of the draft leases or the contractual negotiations.
65. The GoS will enter into a contract with a Management Company to
provide the management services required. This process has to be
completely transparent, or potential bidders will be put off.
66. The exact procedure will be in line with GoS standard tendering rules.
It will involve advertised invitation to make Expressions of Interest (EOI), a
shortlist, tender, assessment of tenders, decision on preferred bidder,
negotiations with preferred bidder and award of tender.
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Appendix 1
References
CSF (2007) Action Plan for Fish Quality and Value Adding at Karachi
Fisheries Harbour
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Appendix 2
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Appendix 3
Terms of Reference for the Project
a. PHASE 1 - Groundwork
1. Defining the objectives that the GoS wishes to achieve in the KFA
2. Identifying the basic public functions and public responsibilities that will
remain with the GoS and which will define the role of the KFHA in
management of the public assets.
3. Identifying the functions and responsibilities that will be suitable to be
privately managed, either through concessions or under leases, and
thus to be managed through the proposed management company.
4. Identifying the assets needed to support each of the functions, their
adequacy, available funding and improvement schemes.
5. Defining the methods of oversight so that the public interest is
protected: strategic planning, technical and economic regulation of the
port management and the port itself.
6. Addressing labour issues
7. Ensuring that the legislative base for the new management structure is
compliant with existing Pakistan and Sindh laws, decrees and by-laws.
8. Ensuring that the proposal fits in with International law, environmental
legislation and any coastal zone management issues current in
Pakistan and the region.
9. Ensuring that the various actors (notably the GoS and its subsidiary
body, the KFHA, together with the Auctioneers and Co-operatives)
accept the responsibility for port reform at KFH, though a suitable
legislative act.
It will be necessary for the various parties to be aware of and support the
reform process, so the CSF will organise a series of meetings to explain the
process, involving all the stakeholders at the KFH. Feedback from these
meetings will be incorporated into any plans.
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b. PHASE 2 - Establishment
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