Regulatory Review of Pakistan's Shipbreaking sector:

Compliance to international environmental health and safety standards and the economic status of the sector

Background:

The Pakistan Regional Economic Integration Activity (PREIA) works to increase Pakistan’s access to regional and international markets and is a key economic growth project that stands to benefit numerous Pakistani businesses. This project’s two strategic objectives are to: 1) improve Pakistan’s business enabling environment so that policies, laws, and regulations are adaptable and more reflective of on-the-ground needs; and 2) improve Pakistan’s capacity to access regional markets by identifying bottlenecks and practical solutions for increasing export efficiency and lowering trade costs.

The Activity is a key component of USAID Pakistan’s overall economic development program and supports achievement of Development Objective #3 from USAID/Pakistan’s Country Development Cooperation Strategy: “Increased Private Sector-Led Inclusive Economic Growth.” PREIA includes the provision of targeted assistance to the Government of Pakistan and other stakeholders in the form of interventions geared towards improving the conditions for international and cross-border trade and transit. A critical component of this Activity is to highlight the significance of climate change and climate change related regulations on the competitiveness of Pakistan’s trade and transit competitiveness.

In this context, PREIA is looking to support the Government of Pakistan and the private sector stakeholders to put shipbreaking in Pakistan on the pathway to align with the goal under the Paris Agreement to limit global temperature increase to 1.5C by 2030.

“Ship breaking” refers to the practice of dismantling ships that have reached the end of their useful lives and breaking up its constituents into steel and other recyclable materials. Because nearly every component of a ship can be recycled into some form of scrap metal for reuse, the practice of ship breaking is considered an ecologically and environmentally friendly method for discarding outdated sea vessels. Despite the advantages, the main issue with the industry remains that a vast majority of global ship breaking activities have shifted to undeveloped and developing countries that provide cheap labor and, therefore, have weak enforcement structures for safety and environmental regulations. This means that the discarded ships piling up at ship breaking yards of these countries start to pose serious negative consequences for both the people and the environment of that region due to the hazardous waste materials and pollutants (asbestos, polychlorinated biphenyls, ozone-depleting substances, heavy metals etc.) released from the scrapped vessels.

According to estimates, the South Asian region forms the global center of the ship breaking and recycling industry. Specifically, Bangladesh, India, and Pakistan account for 70–80 percent of the international market for ship breaking of ocean-going vessels, while China and Turkey cover most of the remaining market. Only about 5 percent of global volumes for discarded ships are scrapped outside these five countries.

The world’s third largest shipbreaking yard, ‘Gadani Shipbreaking Yard’ is situated in Baluchistan, Pakistan, approximately 50 kilometers from Karachi. Due to its ideal location, the yard has attracted significant business in Pakistan and therefore, has made important contributions to the national economy. In its hey-days of 1969-1983, the Gadani Shipping Yard provided direct employment to around 30,000 people and was the largest ship-breaking operation in the world, producing almost million tonnes of scrap metal for the Pakistani steel industry each year. Back then, the Government of Pakistan (GoP) also made efforts to support the industry's growth by building the necessary infrastructure, reducing import tariffs on discarded ships and providing a platform for the National Shipbreakers' Association to advocate for the growth of the industry. The budding developments, however, slowed down in the late 80s as taxation and import duties grew and competition from yards in Bangladesh and India eroded business away from Pakistan. To add to the woes of the once flourishing industry, the GoP had to take various measures to comply with international rules and regulations, especially the ratification and compliance of the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships (HKC), which meant that the thriving ship breaking industry began to face issues of survival.

The challenge was not unique to Pakistan. The ship breaking industry in South Asia in general has been under pressure in recent years because of the alleged abuse of the environment and the adverse effects that the operation of ship breaking yards have on the ecosystem surrounding them. On the one hand, the industry plays an important role in commercial and economic activity of the region, creates employment opportunities, and serves to supply raw material to core industries since most of the countries involved in the ship breaking process have a large appetite for scrap steel. Pakistan and Bangladesh, for example, use the steel from recycled ships in local mills where the steel is rerolled and used directly in associated industries, such as construction. On the other hand, the hazardous waste materials released into the environment and associated occupational health risks arising from ship breaking operations pose a significant national and global concern. The key is to help all stakeholders strike a balance between economic and environmental goals by enabling the uptake of environmentally sustainable ship breaking and recycling operations. For Pakistan, 2023/2024 are critical years for the revival of the ship breaking industry, as shipowners around the world renew and upgrade their fleets to comply with new International Maritime Organization (IMO) Greenhouse gas (GHG) emission regulations. The massive influx of new constructs expected in the coming years means that a large number of containerships are likely to be recycled, and Pakistan must act in urgency to gain a larger share of the demand for shipbreaking and recycling services.

Objectives and Scope

The Government of Pakistan (GoP) is working with the private sector to support the growth of the shipbreaking industry while also ensuring that the health and safety of the people and environment surrounding ship breaking operations are effectively regulated. PREIA plans to facilitate the GoP and the private sector in achieving sustainable economic growth and enhancing Pakistan’s compliance to global environmental standards around green shipping and maritime operations. To this end, PREIA is proposing to understand/assess the current state of ship breaking and recycling operations in Pakistan and devise ways to spur the industry’s growth while protecting the ecological balance of the earth.

PREIA is seeking consultancy services to study the current state including compliances in Pakistan with international, regional, and domestic (Pakistan) conventions, regulations and standards aimed at managing and monitoring from shipbreaking sector.

Tasks (Performance Requirements)

The company/firm is expected to perform the following tasks:

1. Map the state of compliance by Pakistan with the relevant international and regional regulations in terms of identification, accession, ratification, gaps, and implementation (with respect to ship recycling facilities, ship recycling plans, worker safety and health, hazardous waste identification and disposal, and environmental degradation issues in light of the IMO Hong Kong Convention Regulations). The state of compliance will also comment on:

                    a. the key government departments in Pakistan responsible.

                    b. the reasons revealed by the respective stakeholders on compliance gaps.

                    c. The short-, medium-, and long-term steps and actions required for the stakeholder agency to plug compliance gaps.

2. Develop a synopsis of the international, regional, and domestic regulations aimed at managing and monitoring marine and air pollutants from ship-breaking operations. This synopsis should summarize the salient features and objectives of the respective regulations and the key public (federal and provincial) and private sector stakeholders, including their respective roles.

3. Provide regulation and stakeholder-wise short-, medium-, and long-term actions that the government of Pakistan, the government of Baluchistan, and the private sector can commit to improve compliance for shipbreaking in Pakistan.

4. Compile the current economics of shipbreaking and recycling, assess the productivity, competitiveness, and growth potential of the industry in Pakistan, and highlight the direct and indirect economic activity, including the impact on different sectors associated with the shipbreaking industry.

Required Deliverables

The company/firm will be responsible for delivering the following:

1. Inception Report which should include the following (to be submitted in 7 working days after signing of contract)):

• Background and literature review.
• List of tasks to be performed.
• Detailed proposed methodology,
• A work implementation plan, including stakeholder consultation plan.

2. Submit the first draft of the report (to be submitted in 4 working days after receipt of comments)
3. Submit final report after incorporating PREIA feedback (to be submitted in 10 working days after submission of first draft of report).
4. Submit a MS PowerPoint presentation on the final report, presenting its findings, recommendations, etc. for future stakeholder workshops (to be submitted in 3 working days after submission of final report).
5. Participate / present the findings in Public Private Sector Dialogue organized by PREIA.

Qualification and Experience

Eligible entity should have the following qualifications and experience:

1. Subject-matter expertise especially in international and domestic laws and regulations.
2. Demonstrable relevant experience of the firm / consultant in managing and executing similar assessment. 
3. Demonstrable excellent written and verbal communication skills. Strong analytical skills.
4. Experience in research management to ensure quality and timely delivery.
5. Strong interpersonal skills and the ability to work with a team to meet deadlines and desired quality. 

Base of Operations: 

Islamabad and Karachi, Pakistan (flexible). USAID PREIA will cover all travel related expenses.

Reporting:

The company/firm will report to the Regional Trade Promotion Advisor of USAID PREIA.

Payment Schedule

Payment will be made against invoice following submission and acceptance of each deliverable to PREIA.

(Please use attachment 11.2 template)  

Estimated Completion Time