Ship-breaking industry setting new course
Pakistan, India and Bangladesh have become the main centres of the world’s ship-breaking industry, with only Bangladesh contributing almost 45 percent of the global share. Till 1985, Taiwan and Korea were the leading countries in ship-breaking while many other nations were actively involved in this business. Later, the industry went through considerable consolidation as rising labour costs and environmental regulations forced the closure of most ship-breaking yards in developed countries. As a result, the industry shifted towards Asia on the back of environmental issues that gave a chance to Pakistan, India and China to emerge as leading industry drivers.
According to a 2010 World Bank report on the ship-breaking industry of Bangladesh and Pakistan, the ‘global shift’ of the industry to developing economies did not only take place because of labour cost advantage but also because of weaker legal and regulatory frameworks in these economies. This links to the existing loopholes in the industry that need to be addressed.
Four major nations - Pakistan, India, China and Bangladesh - with an abundance of cheap labour, control more than 90 percent of the global ship-breaking market. In this context, the revival of the shipbreaking industry in Pakistan needs to be reviewed. Through measures for revival of the industry, analysts predict bright prospects for the development of the Gaddani ship-breaking industry on the coast of Balochistan.
A major indicator for this revival is the number of ships i.e. 64, which were brought to Gaddani ship-breaking yard for dismantling during the first six months of the current financial year. After 2009-2010, Pakistan has received such a large number of ships for the second time during the last two decades.
In addition to providing jobs to thousands of workers directly, the 64 small and medium-sized old ships presently docked at the Gaddani shipbreaking yard, are expected to produce around 400,000 to 500,000 tonnes of scrap, while the government has received about one billion rupees in customs duty and income tax.
The Pakistani ship breaking industry is mainly located in Gaddani on the Balochistan coast. There are 132 ship breaking plots in Gaddani, some 80 scrap melting plots (induction furnaces) and 334 re-rolling mills in the country (250 in Lahore, 16 in Islamabad, 16 in Gujranwala, and 52 in Karachi). Being one of the biggest industries in Balochistan, shipbreaking provides employment to thousands of workers directly and hundreds of thousands of people indirectly.
In the light of a comparison done by industry stakeholders, it was revealed that the ship- breaking industry also contributes revenue to the tune of billions of rupees to the federal government apart from millions of rupees to the provincial government. The ship-breaking industry has been paying sales tax at the rate of Rs. 4,848 per ton.
The present capacity of steel production in the country is about four million tonnes against a demand of over six million tonnes and the deficit is met through imports. It is planned to raise steel production up to 15 million tonnes by 2015. Presently, steel production units are working below capacity for want of raw material and because of slack demand.
In addition to high quality steel, the dismantled ships also provide cheapest possible materials in copper, brass, aluminum, machinery, generators, boilers, wood and tools of international standards for meeting the ever-growing demand of the country’s fast developing industrial and commercial sectors.
However, there are a number of debates on the environmental regulations enforced by the industry. The practice of inefficient handling of hazardous ship parts and substances obtained from the dismantled ships exposes the surrounding atmosphere to high levels of pollution. Heavy metals and plenty of ozone depleting materials emit greenhouse gases. The risks are not limited to the process of parts dismantling only. The removal of these hazardous materials through vehicles, cables and transformers from the yard poses greater risks. Fortunately, Pakistan is ranked among leading countries where a high level of mechanization of hazardous practices has been adopted. This reduces the risks posed to the environment and human life to some extent but not entirely.
A World Bank report has recommended major investments in building the institutional capacity of the shipbreaking industry in Pakistan. The objective is to provide protection to workers and enforce environment regulations. In this context, public-private partnerships are being recommended as a reliable model for providing sustainability to the industry.
Pakistan must make a range of investments to achieve adequate institutional capacity and provide ground-level enforcement of the protection of workers and the environment in the ship recycling industry. Although situated in a relatively unpopulated area in Balochistan, the infrastructure must be improved in terms of the capacity and safety for transportation of all waste and reusable materials generated in the ship-breaking yards. Significant infrastructure and capacity development in the hazardous waste management sector is required to achieve proper storage and disposal levels leading to compliance with relevant international agreements and guidelines