ACAAP'S ROLE IN AIRFREIGHT

The Air Cargo Agents Association of Pakistan (ACAAP) is working for years to cater to the needs of the cargo agencies.
In one way it is facilitating the interests of the exporters and in other way it is playing its role in the export growth of the country. We met the Chairman ACAAP, Mohsin Abbas Dharsi, and took his views on the role of cargo sector in exports.

SADAF AURANGZAIB, Senior Correspondent
July 24 - 30, 2006

PAGE: Tell us a little about how ACAAP works and what is the basic function of this association?

M.A: The members of the association are the air cargo agencies. It works for the benefit and the development of the airfreight industry. We deal with airfreight, airfreight forwarding and its procedures and we also discuss the policies with the government and the concerned authorities.

PAGE: How long has this association been working?

MA: Before being registered in 1993, ACAAP was working on ad hoc basis for the trading industry and for its fraternity. We are in this business since early eighties. We got registered by Ministry of Commerce, Director of Trade Organization in 1993.

PAGE: How do you see the role of this association with the cargo agencies that are members of your association?

MA: Well, the agencies who are our members are directly providing services to the exporters and importers and we are a part of their logistic team. Logistics is the backbone of any economy. If the country's logistics are proper then the economy will grow on a much faster pace, but if the country doesn't have the ports and it is confined within the boundaries, there the growth rate would be slower as compared to the country which has ports, airports and export-import facilities because that's a necessity for an exporter to do the business.

PAGE: If I ask you to compare the airfreight with ocean freight forwarding, what will be your answer?

MA: Firstly, it depends on the commodities which a country is exporting or importing, for example, hi-tech items, leather goods, perishable items, fashion garments, all value added goods are airfreight items and those items which are semi-finished or raw material like cloth, knitted garments these are ocean freight items. In Pakistan we are unfortunate due to few factors like electricity and gas, labor and exporters' over commitments which force them to export through air nonetheless if they work on time and take the orders within their limits, it can go as ocean freight. By sea it is always cheaper, competitive and exporters could have a bigger market and will remain in the market for a longer period.

PAGE: As far as commodities' safety is concerned, which medium do you think is the best?

MA: There are two types of safety that is needed, like the one is from terrorism, which is a worldwide phenomena now, in this case no one is safe even ships and aircraft could be targeted. The another kind of safety which has always been an issue and a matter of concern for the exporters is the atmospheric pressures like humidity, high temperature, for example, if you are sending a leather garment shipment from Pakistan, it has to cross the Red Sea and Gulf ocean where at times the temperature is as high as 50 degree Celsius and one can imagine the situation of leather garments wrapped in a polythene bag passing through this high temperature so in that case airfreight forwarding is much safer, faster, not much cost effective but save considerable amount of transit time as compared to ocean freight. If one shipment would take 21 days from ocean to reach its destination, airfreight can reach the same destination in just 28 hours so there is a huge lapse of time as far as ocean freight is concerned.

PAGE: Now tell us a little about yourself, how long have you been working with this organization?

MA: I am with ACAAP for the last 18 years. I was earlier working for a local company as a manager but then started my own clearing and forwarding business in 1990 by the name of Karachi Cargo Services, since then I am in the business of freight. We have branches all over Pakistan like Lahore, Sialkot, Islamabad, Faisalabad, Peshawar, Karachi etc.

PAGE: How do you see the prospects of airfreight business after free trade order?

MA: It has become more competitive. The WTO has given rebirth to this business in the shape of free trade order that is effective from 1st Jan 2005. We are now in the phase of making and designing history as trends have changed. We were in an era in the past when the Europe and US were bound to buy from us but now after free trade they can buy from China or India or from us.

As far as air cargo is concerned, our work starts with the exporters once the orders were placed. Our work is to ask the government to facilitate the exporters and airfreight industry. Prime Minister Shaukat Aziz is working on to develop Pakistan as a national trade corridor. This was my dream too and I have spoken about this idea at many forums that Pakistan is so ideally located that it can serve as a trade corridor. Now the PM is working on the same idea to develop this region as a trade corridor and as a transit point. Prospects are good, we are upbeat about the country and hopeful that PM will do a lot for the country.

PAGE: After free trade order, how do you see the competitive environment in the cargo business and what sort of changes are there in this business after the budget of this fiscal year?

MA: The pricing in air freight depends upon the demand and supply situation. Pakistan has a unique situation in a way that all around the globe the high season for air freight forwarding is from September till December but in Pakistan the high season for it is the mango season which is from May till the mid of August. During the peak season prices do go high but over the years there is no such drastic increase in the air freight charges for the high or low season in Pakistan. Another alarming factor is that the international carriers have been reduced as you can see there are very few European carriers in the whole of Pakistan, there is not a single US carrier landing in Pakistan. In passenger craft only British Airways is landing in Islamabad. The capacity constant has always been there and will remain there till such time that our Civil Aviation Authority introduces soft policies, competitive rates and charges for the aviation sector so that international airlines would come to Pakistan.

As far as excise duty is concerned, we are exempted from 15% sales tax, however, we pay a direct tax that is withholding tax on our commissions that we get from the airlines which is deducted by the airlines.

PAGE: What are the major destinations for cargo aircraft from Pakistan?

MA: The biggest buyer of Pakistan products as far as airfreight is concerned is United States, followed by UK, Canada, Germany, Far-East and Africa.

PAGE: How do you see the role of cargo business in export promotion?

MA: The role of cargo business in export growth is very vital because we are the one who save the exporters from going down in their commitments; we help them fulfilling their commitments in time. We deliver at the right price in the right time and for the right destination.

PAGE: What major problems do you face currently in the air freight industry?

MA: Our major problem is security which we have been demanding for the last few months. We are asking for adequate security system, gadgets or equipment at the airports of Pakistan. This is an alarming situation. Transport Security Agency (TSA) from USA use to visit every country and inspect all the airports and then meet the Civil Aviation Authority to guide them and according to their requirement they need all the airports round the world to be secured. However, they inspected Pakistan and declared it as a danger zone. There is this rule that the crafts from red or black zone would not be able to land at the US airports, we are on the verge of this situation as our passenger aircraft are safe and secured but as far as cargo crafts are concerned they are not secured and there are pilferages and there is always this fear that anyone could take anything in the cargo. We have been demanding screening machine since long. One single machine can resolve this problem as it can detect the powder, gun powder, organic and inorganic substances and metallic substances. There are machines available which can serve this purpose but our Civil Aviation Authority does not take care of this issue.

PAGE: What international rules do you follow as part of this business?

MA: Our association is the associated with IATA (International Air Transport Association). We are IATA's approved freight forwarding association and we have to comply and apply the rules that are set by IATA under the international standards. All the airlines of the world are the members of IATA, PIA is one of the members of IATA and we are approved cargo agents of IATA.

PAGE: How many cargo agencies are the members of the ACAAP?

MA: We have around 120 members and most of them are IATA's approved agencies.

PAGE: How do you see our export growth in future?

MA: Well, figure speaks for itself. It is increasing and InshaAllah will be double in the next couple of months. We are all upbeat and hopeful about the future.

SIMPLE AVERAGE TARIFF RATES IN SOUTH ASIA: 1998-99 -- 2005-06

 

INDIA

PAKISTAN

BANGLADESH

SRILANKA

NEPAL

 

98-99

02-03

04-05

98-99

04-05

05-06

98-99

04-05

98-99

04-Jan

98-99

02-03

ALL TARIFF LINES

Customs duties (CD)

39.6

29.0

22.2

21.3

16.8

14.4

20.0

16.3

17.6

11.3

14.0

13.7

Other general protective taxes

 

6.0

0

 

0

   

3.3

 

2.1

 

2.5

Other selective protective taxes

 

0.0

0

 

1.7

   

6.4

 

0

 

0

Total

 

35

22.2

 

18.5

   

26.5

 

13.4

 

16.2

General maximum CD

45.0

30.0

30

35.0

25.0

 

40.0

25.0

35.0

27.5

80.0

25

Other general protective taxes

 

6.0

0

 

0

   

4.0

 

3.5

 

3

General maximum: CD+ other

 

36.0

30

 

25.0

25.0

 

29.0

 

31.25

 

28

NON-AGRICULTURAL TARIFFS

Customs duties

 

27.4

19.7

 

16.6

10.4

 

15.6

 

8.8

 

13.8

Other general protective taxes

 

5.9

0

 

0

   

3.9

 

1.9

 

2.8

Other selective import taxes

 

0

0

 

0

   

5.9

 

0

 

0

Total

 

33.3

19.7

 

16.6

   

25.4

 

10.7

 

16.6

General maximum: CD+ other

 

36.0

20

 

25

   

29.0

 

31.3

 

28

AGRICULTURAL TARIFFS

Customs duties

 

40.6

40.1

 

18.1

15.6

 

19.7

 

24.6

 

13.5

Other general protective taxes

 

6.5

0

 

0

   

3.7

 

3.5

 

2.8

Other selective import taxes

 

0

0

 

0

   

8.7

 

0

 

0

Total

 

47.1

40.1

 

18.1

   

32.1

 

28.1

 

16.3

General maximum CD

 

100

100

 

25

   

25.0

 

27.5

 

25

Other general protective taxes

 

8.6

0

 

0

   

4.0

 

3.8

 

3

General maximum: CD+ other

 

108.6

100

 

25

   

29.00

 

31.3

 

28