Exorbitant hike in cost of shipping, airfreight, courier service hitting Apparel SMEs
After the exorbitant hike in the cost of shipping lines, the major global logistics and airfreight companies have also increased their courier as well as cargo rates by up to 70% during the last 6 months, affecting the exporters generally and creating trouble for the apparel sector’s SMEs.
The Pakistan Readymade Garments Manufacturers & Exporters Association (PRGMEA) Central Chairman Sohail A. Sheikh and Chief Coordinator Ijaz Khokhar have appealed to the government to intervene so that exports growth could be sustained, suggesting the government revive and strengthen the national shipping line to break the international cartel of cargo services in Pakistan.
The new young entrepreneurs, who have been working mostly online, have been affected severely due to continuous hike in rates of DHL parcel service. As a short-term solution the government should waive off taxes on courier service, especially for the export-oriented SME sector to reduce its cost of doing business, PRGMEA central chairman suggested. As a long-term measure, we will have to revive and upgrade our PIA Cargo service, national shipping line and Pakistan postal service to lessen our absolute dependence on global cargo and courier services, Sohail Sheikh pointed out.
The government, under the umbrella of the Pakistan National Shipping Corporation (PNSC), which is presently non-operative, should acquire containerized ships on lease to facilitate the exporters, as this strategy could help the government keep freight cost in control and making textile exports competitive in the global market.
It seems that Covid-19 has provided an opportunity for international logistic companies and shipping lines to increase freight charges. We know that government is not responsible for the situation in international trade. And it is also fact there was no short-term solution for the government. However, in the long run, it should enhance the number of shipping companies in Pakistan, so that it could intervene, Sohail Sheikh added.
Ijaz Khaokhar said that this is severely affecting small and medium enterprises and overall exporters, especially in Sialkot. He said that the shipping lines are increasing rates every month as the 20-feet container before Covid was charging around $600 and 40-feet container $900 and now it is $4,582/20 and $5,553/40 for Europe based port, while the rates of USA east coast included $7,200/20, $8,500/40 and USA west coast $8,500/20 $10,000/40. “Nowadays lines are increasing rate vessel to vessel. And despite high rates, lines are still facing space and equipment issues very badly,” he added.
“Moreover, we are also facing serious difficulty in getting space for the USA sector where space is available in September.”
Sohail Sheikh pointed out that both regional as well as the international cargo services seemed to have formed a cartel to impose exorbitantly high freight charges in a bid to cash in on the post-Covid situation. He said that Pakistan’s importers and exporters pay to shipping companies at least 5 billion dollars annually in international freight charges. He said that the jump in international freight charges had increased the cost of doing business in Pakistan and apparel exporters could not remain competitive in the international market if government did not interfere.
He said that freight charges have been increased on the plea of high growth despite the fact that lockdowns have been ended for a long time and now there is a routine traffic of vessels. He said that freight charges have surged abnormally and exports industry has never seen such a huge jump in rates over the past 50 years across the world.
PRGMEA central chairman said that Pakistan mostly imports cargoes through the Far Eastern countries like Thailand, China, Hong Kong and Singapore, and sends exports to the EU, the USA and the Middle East.