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Pakistan logistics and transport: problems and solutions

Transport & Logistics is not restricted to physical infrastructure usage of rails, roads and transport, sea trade and related freight, but it also includes packaging, delivery, storage facility and trade logistics. Moreover, insurance, renewal costs, high freight, longer delivery times also add up to costs. Opportunity cost, service standards and trade facilitation play pivotal, crucial and detrimental role in defining efficacy of transport and logistics.

For sustainable development of Pakistan we need robust and cost effective Transport & Logistics Sector. Export also depends on this very important sector. Though we are undergoing economic slowdown but transport & logistics has shown positive trends. In 2018 the inland traffic by road and rail was estimated 433 billion passengers kilometer (BP-Km) and 269 billion tonnes-km(BT-Km)respectively and it is likely to increase to 614 BP-Km and 381 BT-Km. The sector was providing jobs to 3 million people and the same is expected to rise more than ever. The sector is getting 25-30% share of the annual public sector program (PSDP) but concerted efforts are required to promote public-private partnership for leveraging higher investments from the private sector.

Pakistan has ranking of 142 (out of 160 countries) in World Bank’s Logistics Performance Index(LPI). This standing is because of poor performance in custom clearance, tracking, tracing and time lines through our country. Pakistan is also experiencing the same political, industrial and financial difficulties as are faced by Bangladesh, India and Nepal. There is no long term government plan to develop logistic value chain as a means to climb out of the economic black hole Pakistan is trapped in.

Logistic industry is contributing globally $4.3 trillion, contributing 8-10% to the GDP, creating thousands of new jobs and improving export competitiveness substantially. The nations with top twenty LPI are among the 10 strongest economies of the world. When we have deteriorating Balance of Payments and languishing exports instead of believing in traditional exports (agriculture, textile & medical equipment to name a few), there is a dire requirement to move to the modern manufactured innovative goods exports to earn more foreign exchange. The need is to eradicate supply chain inefficiencies in bringing products, raw materials and finished goods to market for making Pakistan’s exports more competitive. If quality and linkages of transportation infrastructure are improved then our exports can be increased.

In 2015 World Bank reported that Logistic Sector of Pakistan could capitalize an untapped potential worth $30.77 billion. This value would be realized by developing integrated road/rail networks(including air, sea & dry ports) thereby, improving connectivity interlinking the rural and urban markets viz-a-viz among regional trading partners.

Roads carry approximately 93% of passengers and 94% of the freight traffic while Railways is only adding about 6% to freight traffic. This heavy burden on road has resulted into traffic congestion, pollution and fair, wear & tear of roads. Roads traffic costs too much due to imported fuel. Almost 35% of the fuel is consumed by the transport sector.

Pakistan Railways is perpetually running at loss due to low freight traffic and subsidized passenger traffic. According to the World Bank one freight train is equivalent to 100 trucks. As Logistics is price sensitive sector so private and public investment must be brought in for rail development. Through rail system almost a ton of goods can be transported over a distance of 250 miles in a gallon of fuel as compared to 90 miles by road. Internationally 50% of cargo is carried/traded through rail development. In Pakistan Rail share is just 5% due to lack of quality containers & non container freight trains. Pakistan Railways has launched very first freight train with 75 containers on the Karachi to Lahore route through private public partnership. There is a plan to bring improvement in the existing rail system and setting up new railway tracks. Moreover, cold storage containers are very much required to reduce/minimize the wastage of farm produce & other perishables items that Pakistan is currently unable to produce.

 

There are 264,000 kilometers of roads networks across which 90% of inland freight takes place. There are 500,000 registered trucks operating in Pakistan, of which the majority are obsolete old vintage trucks with rigid suspensions. That have limited speeds and are heavy on fuel consumption that make them highly inefficient in terms of time & cost. Most of the truck owners have undocumented trucks who do not follow regulation and are prone to overloading. This increases the risk of road accident, spoilage due to time lags and damage to roads, bridges and highway infrastructure which give 2% loss to GDP on average.

This substandard quality fleet trucks and absence of comprehensive regulatory system not only has decreased our exports but has resulted in poor ranking of our LPI. Since our trucks do not comply with international standards so local logistics companies automatically disqualify from the regional road freight trade.

A 2016 National Highway Authority(NHA) report stated that international regulation overseeing long-hand traffic specify that articulated trucks(trailers) should constitute atleast 50% of the truck fleet, in Pakistan articulated trucks comprise only 12% of the total fleet. This is because of the need of massive investment which may not be possible for small & medium transporters to undertake.

Trade is handled by Karachi Port & Qasim Port. Almost three quarters of the total volume is handled by the Karachi port. The capacity of these two ports is less as these are congested with limited infrastructure development.

Pakistan has 46 airports, 10 are international. Out of total 42 are owned by Civil Aviation Authority(CAA). Amongst them 13 are used for both international and domestic operations, 11 are for domestic operations. Remaining 22 have been sealed or closed down for operations due to various reasons. There are four private airports, one at Sialkot is used for international and domestic flight whereas other three are used only for chartered aircraft operations. PIA is handling 87% of passenger and freight traffic along with other airlines. Due to high freight charges, inadequate Cargo Facilities at airports, are not helping to use air route for trade. Custom procedures are cumbersome. The gap is filled by international airlines.

We have canal system based on five rivers in Pakistan but inland water transport is almost absent.

Technology being innovative enhances the competency of business and leads to development and implementation of a new business model. Above all, the internet & information and communication technologies (ILT) are in controvertible enablers for logistics innovation by sharing information to the all business involved and to connect them to facilitate better flow of information and technology.

With the advent of internet the e-commerce business has emerged. The growing global logistics firms as FedEx and United Parcel Service (UPS) could become full service logistics by securing the technological capability to coordinate the flow of goods and information within supply chains. Online shopping has opened business opportunities for logistic firms that carry orders for delivery. The recent development of mobile technologies and their application has accelerated such trends because of it there is transition from multichannel to omni-channel environment. Now customers have multiple options to interact with firms and need an integrated logistics system to give customer satisfaction and improved company performance.

Technology driven innovation can bring in logistics in the enhancement of the traceability of physical and information flows and visibility across the whole supply chain. These technologies in logistics develop operation efficiency, improve customer satisfaction and financial performance in logistics. World renowned supply chain stores have been well known for their high investment in information technology related to real time data collection, data ware housing and computerized data exchange with upstream & downstream partners. It has improved stock turnover, achieving cost competitiveness and a quick response CJ-GLS, a Korean third party Logistic(3PL) provides, showed that the successful application of advanced technologies like RFID, aligned with a corporate strategy, could be a critical source of differentiation & competitiveness. Amazon (3PL) has gone one step further by predicting consumer’s demand at an individual level and implementing anticipatory shipping by analyzing big data gathered from its well-connected supply chain.

The contributor is Senior Asst. Professor – Bahria University, Karachi

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