Nikkei Asian Review – Pakistan’s shipbreaking yards face sea change

(Written by Hina Mahgul Rind)

Access the original article

17 July 2015 - KARACHI, Pakistan — Some 50km from the hustle and bustle of Karachi, in the impoverished province of Balochistan, lies Gadani beach.

Rusting ships that have outlived their usefulness are anchored there, no longer seaworthy and destined for the scrap heap.

This was the world’s largest shipbreaking site in the 1980s, where mighty seagoing vessels such as oil tankers and bulk carriers were taken to be dismantled, bolt by bolt. Even now, well past its glory days, metal gathered from the Gadani shipbreaking yards meets 80% of steel demand by local rerolling and melting mills and generates 10 billion rupees ($98 million) in revenue for the government annually, said Dewan Rizwan, chairman of the Pakistan Ship Breaking Association (PSBA).

In Balochistan, shipbreaking is still the largest industry and the yards supply steel to about 300 mills. Scrap collected there is recycled to make everyday products such as utensils, fans and vehicle parts, to name a few.

Despite the importance of this industry, the sun could set on Pakistan’s shipbreaking industry unless it conforms to regulations set by the European Union in 2013, as dismal working conditions at the yards have come to light over the years.

The roughly 6,000 workers at Gadani take on jobs at their own peril. There are few safety regulations, and certainly no contracts or insurance to fall back on. If a worker dies on the job, his family can only hope the labor union will fork out the mere 200,000 rupees that is often only verbally promised.

If they are injured, workers have no local hospital to go to and have to be driven to Karachi for treatment. And they take these risks for wages of 450-1,450 rupees a day. Gul Hasan, who earns just 450 rupees a day said he works in “inhumane conditions.” But he is also thankful that in a country where unemployment is 35-40%, he has a job. Shipbreaking is, he said, “a blessing in disguise.”

The EU has stipulated that recycling of all EU-registered ships must go to approved facilities. But for all the shipbreaking that goes on in Pakistan, there are no EU-approved facilities in the country. Quite simply, Pakistan has flouted all the health and safety rules and the environmental safeguards required by the EU.

This is not refuted by PSBA’s Rizwan, who freely admitted that Gadani lacks the basic facilities required for modern life, such as access to medical care, clean drinking water, electricity, a sewage system, schools and public infrastructure. But he said that it is the fault of the local Gadani government and not the shipbreaking industry. He said that despite paying high taxes to the federal and provincial authorities, little has been done to improve the area. The government charges 4,750 rupees per ton of recycled ship materials.

Rizwan also claimed that the Gadani yards have better conditions than others in Pakistan. “We obtained local environmental agencies’ certificates and several times they have surveyed the Gadani beach and found no destruction to the environment and marine life. The beach is much cleaner, compared to Clifton and Hawke’s Bay in Karachi,” Rizwan said, referring to two other beaches in the region.

Environmentalists disagree. Ahmer Bilal Soofi, president of the World Wide Fund for Nature Pakistan, said: “The current practices of the shipbreaking industry are extremely hazardous, not only to the people involved, but also to the marine life and the overall environment of the area.”

There have not been any studies on the environmental impact of shipbreaking in Pakistan but the seawater around the Gadani yards is contaminated with grease and oil. In Bangladesh, the shipbreaking industry is to blame for wiping out 21 species of marine life and endangering another 11, according to the Institute of Marine Sciences and Fisheries at the University of Chittagong.

“It is not a surprise if the results [of any study in Pakistan] may be equally devastating,” said the WWF’s Soofi.

Pakistan’s shipbreaking industry is also being challenged by cheap metals exported by China.

According to the PSBA, China in 2014 exported to Pakistan 250,000 tons of billets, a substitute for the metal scrap that the Gadani yards produce.

“Gadani will shut down,” PSBA’s Rizwan warned. The shipbreaking industry had lobbied the government to slap a 40% tax on Chinese imports of billets, bars and rods, but the new duty was set at only 15% in January 2015, which Rizwan said had little impact on the trade.

Certainly, some local manufacturers are feeling the pressure. Pakistan Steel Mill said that it has not been able to move its billets since September last year, despite lowering prices and has called on the government to implement some barriers to entry for the industry.

“Chinese producers are looking for avenues to dump their steel products, and Pakistan is a prime target,” said Hussain Agha, CEO of Agha Steel, who also blamed China for hampering growth in the Pakistani shipbreaking industry.

Even if Chinese imports continue to grow, experts said that local shipbreakers can at least ensure that business from EU ships continue to flow this way by making their yards compliant with EU rules.

To that end, the Center for Rule of Law, a nonprofit organization that promotes legal rights in Pakistan, has filed a public interest litigation in the Balochistan High Court to try and force the federal government to wrest control of the industry from the local government. It is hoped that the federal authorities will then oversee EU compliance.

The center has also drawn up a draft law that includes provisions for worker safety, compensation, and the recycling of waste and hazardous materials, in line with International Labour Organization guidelines. The draft law, if adopted by the government, will set the blueprint for industry regulation.

“We foresaw the importance of the shipbreaking industry in Pakistan and its economic impact, and the threat posed to this industry by not complying with the current EU regulations,” Majid Bashir, president of the center, told the Nikkei Asian Review.