ABSTRACT

This study presents an economic analysis of the ship recycling industry in Pakistan, focusing on market structure and conditions, as well as the formation and forecasting of demolition prices. The study also aims to conduct a policy gap analysis to identify areas for improvement in order to retain Pakistan’s competitive advantage in the ship recycling industry.

Using a mixed methods approach encompassing both qualitative and quantitative research, primary data was collected through observation and in-depth interviews. Thematic analysis was employed to analyze the qualitative data, which served as the basis for formulating a theoretical model, supplemented by theoretical foundations derived from the relevant literature.

Empirical investigation of the relationships among ship scrapping prices (the demolition prices), steel scrap prices, exchange rates, and international oil prices was carried out using the Gregory Hansen Procedure for testing Cointegration in the presence of structural breaks. The analysis revealed the existence of a long-term relationship among the variables, with steel scrap prices demonstrating a dominant and significant role in determining ship demolition prices in Pakistan.

Additionally, a comprehensive policy gap analysis was conducted to identify and highlight areas of improvement in the ship recycling industry’s policies and regulations in Pakistan. The findings suggest that Pakistan can only retain its competitive position in the industry by ratifying Hong Kong Convention (HKC) and complying to other international regulations as is done by India and Bangladesh. Furthermore, safeguarding domestic demand for ship steel, establishing a clear administrative jurisdiction for development of dedicated regulatory framework coupled with grant of industry status, capacity building through investments in infrastructure and R&D are requisites for the maintenance of Pakistan’s competitive advantage in ship recycling.

This study contributes to the understanding of the economic dynamics and policy landscape of the ship recycling industry in Pakistan. The findings provide valuable insights for industry stakeholders, policymakers, and researchers, aiding in the formulation of effective strategies and policies to enhance the industry’s competitiveness and sustainable growth.