An Assessment of Opportunities and 2009 IFC Constraints in The Logistics Industry in Pakistan PDF

Pakistan Logistics
2009
Constraints Analysis
MENA Logistics
An Assessment of Opportunities and Constraints
in the Logistics Industry in Pakistan
Idom Consulting
31/7/2009
Pakistan Logistics
Table of Contents
Table of Contents
1.
Objective and Methodology ....................................................................................................................................... 5
2.
Executive Summary .................................................................................................................................................... 6
3.
The Logistics Sector at a Glance .................................................................................................................................. 8
4.
5.
6.
7.
3.1
Importance of the Logistics Sector .................................................................................................................... 8
3.2
Composition and Characteristics of Pakistans Transport Market .................................................................. 10
3.3
Where in the Value Chain Are Logistical Weaknesses?................................................................................... 11
Road Transport ......................................................................................................................................................... 14

4.1
Road Infrastructure Assessment ..................................................................................................................... 14
4.2
Road Services Assessment .............................................................................................................................. 15
4.3
Road Transport Recommendations................................................................................................................. 17
4.3.1
Improve the Operation of the National Trade Corridor (NTC) .................................................................... 17
4.3.2
Improve Regulation of the Transport and Trade Sector ............................................................................. 18
4.3.3
Support Incentives for the Renewal of Fleets in the Freight Transport Sector ........................................... 19
4.3.4
Reshape Current Truck Insurance Schemes ................................................................................................ 19
Maritime Transport .................................................................................................................................................. 20

5.1
Maritime Infrastructure Assessment .............................................................................................................. 20
5.2
Maritime Services Assessment ........................................................................................................................ 21
5.3
Maritime Transport Recommendations .......................................................................................................... 22
5.3.1
Liberalize the Maritime Transport Industry ................................................................................................ 22
5.3.2
Quality Assurance Programs ....................................................................................................................... 23
Rail Transport............................................................................................................................................................ 25
6.1
Rail Infrastructure and Services Assessment................................................................................................... 25
6.2
Rail Transport Recommendations ................................................................................................................... 26
6.2.1
Promote PPP Initiatives for the Development of the Rail Network ............................................................ 26
6.2.2
Introduce Modern Management Techniques in Pakistan Railways Freight Division ................................. 27
Air Transport ............................................................................................................................................................. 28

7.1
Air Infrastructure and Services Assessment .................................................................................................... 28
Pakistan Logistics
Table of Contents
7.2
Air Transport Recommendations .................................................................................................................... 29
7.2.1
8.
Pun in Practice Vision 2030 Policies ........................................................................................................ 29
Other Logistical Infrastructure .................................................................................................................................. 30

8.1
Freight Villages ................................................................................................................................................ 30
8.2
Reefer Storage ................................................................................................................................................. 31
8.3
Trading Spaces ................................................................................................................................................ 31
8.4
Logistical Infrastructure Recommendations ................................................................................................... 31
9.
8.4.1
Development of Public-Private Trans-Freight Stations and Reefer Storage Areas ..................................... 31
8.4.2
Development of Wholesale Central Markets .............................................................................................. 32
Cross-Cutting Issues .................................................................................................................................................. 34

9.1
Logistical Education ......................................................................................................................................... 34
9.2
Customs and Inspection .................................................................................................................................. 35
9.3
Recommendations .......................................................................................................................................... 36
9.3.1
Develop Logistic Training Modules ............................................................................................................. 36
9.3.2
Develop IT in Logistics Awareness Program: How Useful Is IT In My Supply Chain? ............................... 36
9.3.3
Customer-Oriented Approach in Customs .................................................................................................. 37
10.
Conclusion and Going Forward ............................................................................................................................ 39
11.
Annex ................................................................................................................................................................... 40
11.1
Acronyms......................................................................................................................................................... 40
11.2
Bibliography .................................................................................................................................................... 42
11.3
List of Interviewees ......................................................................................................................................... 43
11.4
Projects Summary ........................................................................................................................................... 44
11.5
The Logistics of Citrus ...................................................................................................................................... 45
Pakistan Logistics
Table of Contents
Tables Index
Table 1: Logistics Performance Index (LPI). Source: Doing Business, World Bank. ............................................................ 8
Table 2: Road network size (in km) in terms of a countrys area (in sq-km). Source: own analysis. ................................ 15
Table 3: Current projects in road infrastructure. Source: Ministry of Transport.............................................................. 15
Table 4: Current projects in maritime infrastructure. Source: KPT & PSA International. ................................................. 21
Table 5: Pakistan-Germany rail network size comparison. Source: Pakistan Railways, Eurostat and BMI. ..................... 25
Table 6: Pakistan-Germany rail network usage comparison. Source: Pakistan Railways, Eurostat and BMI. .................. 26
Table 7: Current projects in rail infrastructure. Source: Ministry of Railways. ................................................................. 26
Table 8: Fruits conservation temperature requirements and maximum life. Source: University of California. ............... 31
Figures Index
Figure 1: LPI vs. GDP-PPP per capita. Source: Doing Business, World Bank. ...................................................................... 9
Figure 2: Pakistans Logistics Performance Index (LPI). Source: Doing Business, World Bank. .......................................... 9
Figure 3: Pakistans Logistic Sector Size. Source: Pakistan International Freight Forwarders Association estimation. ... 10
Figure 4: Transport mode split in terms of tons-km transported. Source: Business Monitor International + Eurostat. .. 10
Figure 5: Orange exports value chain. Source: own analysis from Doing Business and Trading across Borders data. .... 11
Figure 6: Orange exports lead times. Source: own analysis, Doing Business and Logistics Performance Index. ............. 12
Figure 7: Orange exports price structure. Source: local experts + interviews with orange exporters. ............................ 12
Figure 8: Pakistan National Motorways. Source: National Highway Authority (NHA)...................................................... 14
Figure 9: Container traffic at Pakistani ports (in 000 TEUs). Source: Drewry Consultants. .............................................. 20
Figure 10: Duration of customs procedures. Source: World Bank. .................................................................................. 35
Pakistan Logistics
Objective and Methodology
1. Objective and Methodology

IFC (International Finance Corporation), part of the World Bank Group (WBG), commissioned Idom
Consulting to conduct an assessment of the logistics sector in Pakistan. The objective of the assessment
was to identify priority issues along the logistical value-chain which constrain the competitiveness of the
agro and time-sensitive manufacturing sector in Pakistan.
The ultimate objective of this assessment is to provide recommendations as to how to remove critical
sector constraints and open the sector for investments in order to further its development and ultimately
strengthen private sector development in Pakistan. While extensive research on the transport and logistics
sectors in the country already exists, this assessment is not intended to be a general revision of the already
available sector data and information. Instead, this report seeks to produce findings and recommendations
based on original analysis geared towards the stated objective.
The assessment was conducted over a six-month period and was guided (but not limited to) the analysis of
a case study. Initial desk research showed that in the perishable goods segment, citrus is one of Pakistans
top commodities for both export and the domestic market. A detailed and extensive mapping and analysis
of the logistic and value chains of citrus exports to European markets was conducted. The analysis focused
on quantifying time and cost factors at each point of the logistics chain. The citrus logistic chain in Pakistan
was then compared to that of a benchmark European Union (EU) country. Idom Consulting chose Spain,
which is a top exporter of oranges and other time-sensitive commodities and has successfully undergone
major developments in its logistics sector in the last 20 years.
This was followed by extensive field work that comprised interviews with representatives at all levels of the
logistics value chain. The field work and analysis was by no means limited to the citrus sector, and
stakeholders in other sectors were consulted to ensure that findings and recommendations were applicable
to other time-sensitive sectors.
The initial field work and analysis was followed by a high profile focus group in Karachi. The goal of this
focus group was to present, discuss and validate initial findings and prioritize them, and close information
and data gaps. Participants came from various fields, including exporters of different sizes, retailers, freight
forwarders, and shipping companies.
These consultations in the field were followed by a questionnaire-based survey to confirm workshop
conclusions and bring a more detailed in-depth analysis which produced final findings and
recommendations. This report summarizes the main findings and provides recommendations on assistance
needs in the logistics sector in order to further develop Pakistans logistics sector and attract investment.
Pakistan Logistics
Executive Summary
2. Executive Summary
Pakistans logistics is an important economic sector with significant growth and investment potential. It is
also a key driver for private sector development, economic growth and overall development. There is a
clear relationship between a countrys logistics performance, lead times and its export performance. Yet, a
detailed analysis of the time-sensitive citrus value chain in Pakistan revealed that there were critical
inefficiencies in the countrys logistics value chain, resulting in a 45 percent excess in export times
(compared to Spain) and higher logistics costs (35-40 percent of retail price compared to 22 percent in
Spain), leaving much room for improvements in the sector. This report provides a detailed analysis of the
numerous obstacles in Pakistans logistics processes and provides recommendations for improvements on a
sub-sector basis.
Pakistans weak road transportation infrastructure and services were found to be the biggest challenge
facing the industry. The main problem facing Pakistans road infrastructure is the critical situation of the
National Trade Corridor (NTC), which faces severe capacity bottlenecks due to poor physical condition, the
presence of non-motorized traffic, and the extensive commercial activities located along it. Road services
suffer from a lack of trucking industry regulation, which produces numerous downstream problems. The
dependence of the Pakistani logistics chain on road services makes it critical for these problems to be
corrected to decrease export time and increase product quality, opening up new markets for exports.
Inefficiencies in the maritime sector are also affecting Pakistans logistics performance. Maritime transport
accounts for 91 percent of Pakistans international trade. This fact makes reforming and improving the
sector particularly important for Pakistani goods to reach international markets. Current regulation is a key
disincentive for potential investors, holding back global logistics operators, shipping companies, and other
related services providers from fully developing their service in Pakistan. This ultimately translates into
higher costs for importers and exporters. Improving maritime infrastructure and services was identified as
an opportunity for critical improvement and high impact, both in terms of facilitating trade and investment
and for creating jobs.
Rail services in Pakistan are weak and fail to offer an alternative to road transportation, with weak
infrastructure and a sector dominated by a public operator. Rail transport is currently only used for the
transport of a few non-time sensitive goods. Developing rail infrastructure and services has cost
advantages, is more environmentally friendly than road transportation, and will take some of the stress
away from the overburdened and underdeveloped trucking industry.
Pakistan Logistics
Executive Summary
There are also cross-cutting obstacles in the sector that will need coordinated efforts by the government
and private sector to improve logistics efficiencies. These include: establishing freight villages to serve as
logistics hubs, investing in reefer storage facilities to increase the shelf life of perishable goods, and
developing trading platforms for smaller and medium size producers to sell their goods. Such initiatives
would not only help large players in the sector, but will also help those at the beginning of the supply chain
like small farmers and producers.
Going forward, further research needs to be done to pinpoint problems and opportunities for the private
sector to engage and profit from the logistics industry. This process will need to include in-depth
conversations with private sector stakeholders and the government to identify ways the public and private
sectors can work together to build a sustainable and efficient logistics industry. Business and investment
opportunities and projects will need to be mapped in detail based on areas that are identified as being
highest impact. As part of the effort to engage the private sector in investing in logistics opportunities,
interested private sector players will need to be identified, profiled, and encouraged to communicate with
policy makers. Assisting the private sector in becoming involved in the logistics industry will help policy
makers understand which policies need to be changed and will encourage more private sector investment.
Pakistan Logistics
The Logistics Sector at a Glance
3. The Logistics Sector at a Glance

3.1
Importance of the Logistics Sector
Logistics is described1 as the process of planning, implementing, and controlling the efficient, effective
flow and storage of goods, services, and related information from point of origin to point of consumption
for the purpose of conforming to customer requirements. Note that this definition includes inbound,
outbound, internal and external movements, as well as the return of materials for environmental purposes.
However, other factors such as customs inspection or the level of support from the banking and insurance
sectors also have a notable influence on a countrys logistics abilities2.
Efficient logistics is a necessary condition for a countrys overall development and economic growth.
Pakistan can make improvements in most of the areas included in the above definition. In that context, a
good way to measure a countrys logistics expertise is the Logistic Performance Index (LPI), an indicator
compiled by the World Bank. According to this index, Pakistan lags slightly above the regional average and
is clearly behind the EU average3. Pakistans biggest weaknesses according to the LPI are in the
Infrastructure (2.37) and Customs (2.41) categories.
Country
UAE
EU
Israel
Saudi Arabia
Oman
Jordan
Tunisia
Pakistan
MENA
Morocco
Egypt
Lebanon
Syria
Algeria
Overall LPI
3.73
3.67
3.21
3.02
2.92
2.89
2.76
2.62
2.42
2.38
2.37
2.37
2.09
2.06
Table 1: Logistics Performance Index (LPI). Source: Doing Business, World Bank.
Source: Council of Logistics Management.

A graphic representation of the complexity involved in logistics can be found in the annex of this document.
3
In terms of LPI, one is the lowest possible score, while five is the highest.
2
Pakistan Logistics
This is important because there is a clear relationship between logistics performance, lead times and export
performance. World Bank Group studies have shown that a 10 percent reduction in overall lead time
results in a 4.3 percent export increase in countries in the Middle East and North Africa. Moreover, there is
a clear link between the performance of a countrys logistics sector and its overall level of development.
The LPI is clearly positively correlated with the countrys gross domestic product (GDP) per capita at
purchasing power parity. Countries with a high LPI typically have a high GDP-PPP.
Slovakia
CORRELATION LPI vs. GDP-PPP
LPI
Germany
Singapore
Spain
Pakistan
Morocco
Egypt
Algeria
GDP-PPP per Capita(US$)
Figure 1: LPI vs. GDP-PPP per capita. Source: Doing Business, World Bank.
Figure 2: Pakistans Logistics Performance Index (LPI). Source: Doing Business, World Bank.
Pakistan Logistics
10
The logistics sector is not only important for private sector and economic development, but it is equally
important in and of itself as an economic sector with significant growth and investment potential. The
sector in Pakistan moves a yearly figure estimated to be over USD 500 million.
Warehousing
USD 10 million
Transport
USD 480 million
Other Services
USD 40 million
Total Market Size

USD 530 million
Figure 3: Pakistans Logistic Sector Size. Source: Pakistan International Freight Forwarders Association estimation.
3.2
Composition and Characteristics of Pakistans Transport Market
Maritime transport accounts for 91 percent of Pakistans international trade, while road accounts for most
of Pakistans domestic traffic, accounting for roughly 93 percent of the total tons-km transported within the
country. While most OECD countries also heavily rely on road transportation, rail services are used in a
higher percentage in OECD countries than in Pakistan (16.0 percent in OECD vs. 2.4 percent in Pakistan), as
seen in the below graphs.
0.2%
2.4%
5.3%
5.4%
Road
Rail
16.0%
River
Air
Pipeline
73.1%
93.1%
Figure 4: Transport mode split in terms of tons-km transported. Source: Business Monitor International + Eurostat.
Pakistan Logistics
3.3
11
Where in the Value Chain Are Logistical Weaknesses?
While the snapshot of Pakistans logistics sector provides an overview of the size and composition of the
transport sector, and the importance and frequency of the different modes of transportation, it does not
look at quality and efficiency. The citrus value chain was analyzed in detail, in order to identify logistical
inefficiencies and bottlenecks in a time-sensitive value chain of a perishable product. In order to do this, we
mapped the transport of a container of oranges from the harvesting field to its destination market, both
domestically and abroad. At each stage of the route, we identified key actors and quantified the involved
time and costs (the Pakistani Case). The same exercise was carried out for a container of oranges in the
value chain in Spain (the Spanish Case). The Pakistani Case was benchmarked against the Spanish Case,
comparing the overall structure of the logistical value chain, and the time and costs involved at each stage.
Done in trucks, often
unrefrigerated (or with the
cooling system turned off)
Analysis of Orange
Export Logistics Chains
Highly manual process +
Lack of refrigerated
storage facilities
Low tech plants with

limited cold storage space
Highly bureaucratic
procedure
Unsuitable facilities
for perishables
Lack of refrigerated
warehouses within or
nearby ports
Customs Inspection
Bodies
Destination Port (export)
Origin Port
Processing Plant
The Karachi and Qasim ports

account for almost all the
container traffic in the country
Production Field
Spain
Pakistan
Cost Structure
Concept
Harvesting
Field
Processing*
Documents
Preparation
Inland Truck
Transport to Port
Customs Clearance
Access to Port
Port & Terminal

Handling
Sea Transport***
Time
(non-cumulative)
0.5 Days
<1 Day
11 Days
6 Days
3 Days
<1 Day
4 Days
18-22 Days
Cost in USD
(non-cumulative)
90 $/Ton
96 $/20-foot
container**
200 $/20-foot
container**
200 $/20-foot
container**
115 $
1,200-1,500 $/
20-foot container
Time
0-0.5 Days
<1 Day
4 Days
0-0.5 Days
To Final Destin.:
2-4 Days
1.5 Days
0 Days
2 Days
4-6 Days
Cost in USD
(non-cumulative)
295 $/Ton
250 $/20-foot
co ntainer**
500 $/20-foot
co ntainer**
150 $/20-foot
container**
221 $
650800 $/
20-foot container
Figure 5: Orange exports value chain. Source: own analysis from Doing Business and Trading across Borders data.
Due to inefficiencies at several points in the logistics chain, citrus export times in Pakistan were found to be
27 days longer than in Spain. Although 55 percent of this time (15 days) is due to Pakistans longer distance
to the European destination markets, 45 percent (12 days) is due to Pakistans lower efficiency in the
logistics chains. In sum, inefficiencies in Pakistans logistics value chain are responsible for a 45 percent
excess time.
Pakistan Logistics
Days
45
Maritime
transport to
destination
(Rotterdam)
40
35
55%
12
Port and
terminal
handling
30
25
Customs /
technical
control
20
45%
15
Inland
transport and
handling
10
Total Time
Difference is
of 27 Days
Document
preparation
0
Pakistan
Spain
Figure 6: Orange exports lead times. Source: own analysis, Doing Business and Logistics Performance Index.
These delays and the inefficiencies that cause them also have an impact in terms of logistics costs. In
Pakistan, logistics costs represent on average 35-40 percent of the total retail price, whereas logistics costs
account for only 22 percent in Spain.
Price per
ton (USD)
Pakistan
Spain
2000
2000
1800
1800
1600
1600
1400
1400
1200
1200
1000
1000
800
800
600
600
400
400
200
200
Retail Price
Importer Price
Price at Destination
Producer Price
Price at
Harvesting Field
Figure 7: Orange exports price structure. Source: local experts + interviews with orange exporters.
Pakistan Logistics
13
There are opportunities to improve reliability, predictability, lead times, and costs in the Pakistani citrus
export chain. These opportunities are at the most critical points of the logistics chain, in areas such as
trucking, warehousing, customs, and maritime services. The next chapters will look at the most critical of
those inefficiencies, describe the trouble spots in more detail and analyze the underlying cause as well as
suggest initiatives to address these.
Pakistan Logistics
Road Transport
14
4. Road Transport
After mapping the Pakistani logistics industry, the assessment found that while all modes of transportation
(road, rail, air, and shipping) exist, Pakistans freight transport is dominated by road transportation. This is
similar to most OECD countries; however rail services play a bigger role in these countries than in Pakistan.
Pakistans weak road transportation infrastructure and services were found to be the biggest challenge
facing the industry. The main problem facing Pakistans road infrastructure is in the critical situation of the
National Trade Corridor (NTC), which faces severe capacity bottlenecks due to poor physical condition, the
presence of non-motorized traffic, and the extensive commercial activities located along it. Road services
suffer from a lack of trucking industry regulation, which produces numerous downstream problems.
The dependence of the Pakistani logistics chain on road services makes it even more vital for these
problems to be corrected to decrease export time and increase product quality, thereby opening up new
markets for Pakistani exports.
4.1
Road Infrastructure Assessment
In Pakistan, there are approximately 260,000 km of roads, of which about 60 percent are paved, mainly
comprising single and two lane roads. The main artery in the country is the National Trade Corridor (NTC), a
1,760 km long highway that crosses Pakistan from north to south. Its length is less than 1 percent of the
total road network of Pakistan, but it serves over 80 percent of the urban population and carries over 60
percent of inter-city traffic. It is managed by the National Highway Authority (NHA).
Figure 8: Pakistan National Motorways. Source: National Highway Authority (NHA).
Pakistan Logistics
Road Transport
15
Pakistans road system main challenge is to raise its service standards. Transit times currently are three
times those in Europe and East Asia. A trip from Lahore to Karachi (1,260 km) takes about 2 days, while one
from Peshawar to Karachi (1,700 km) takes 3 days. The presence of non-motorized traffic and even
pedestrians reduces traffic capacity. Operating conditions are further exacerbated by extensive commercial
activities located along the roads, poor physical condition of the roads, and lack of traffic management in
towns. The consequence is in the high travel times that particularly penalize long-distance trips.
Another feature of Pakistans road network is its low density, which leaves several areas underserved. This
shows when comparing Pakistans road density with that of neighboring countries such as Bangladesh, Sri
Lanka, India or Afghanistan. In this comparison Pakistan only is in a better position than Afghanistan.
Country
Bangladesh
Sri Lanka
India
Pakistan
Afghanistan
Network Size
239,226
97,286
3,316,452
259,758
42,150
Area
141,000
65,610
3,287,590
803,940
647,500
Ratio
1.70
1.48
1.01
0.32
0.07
Table 2: Road network size (in km) in terms of a countrys area (in sq-km). Source: own analysis.
In that context, different roads are currently being upgraded as part of a plan by the countrys government
to improve the national road infrastructure. Build-Operate-Transfer (BOT) schemes4 are used for some of
these new developments.
Project
Sheikhupura D.G. Khan motorway (405 km)
Makran Coastal road (653 km)
Gwadar - Ratodero road (885 km)
Rawalpindi - Islamabad ring road (80 km)
Investment
(USD Million)
642 (BOT)
420 (BOT)
296 (BOT)
98
Time
Frame
n.a.
n.a.
2012
2011
Funds
Origin
NHA
NHA
NHA
RDA
Table 3: Current projects in road infrastructure. Source: Ministry of Transport.
4.2
Road Services Assessment
Weak road transportation services were identified as one of the main logistical challenges in Pakistan.
Because of bottlenecks like a large informal trucking sector and a lack of refrigerated vehicles, Pakistani
perishable goods face a lower price and shelf life, making it more difficult to compete internationally.
BOT: this is a form of project financing, in which a private entity receives a concession from the public sector to
finance, design, construct and operate a facility according to a concession contract. This allows the project promoter
to recover its investment in the project, as well as the subsequent operating and maintenance expenses.
Pakistan Logistics
Road Transport
16
Not only is trucking the main way for moving goods domestically, but it is also an essential link in the
Pakistani export chain for goods shipped by sea and, to a lesser extent, by air. Truck loads account for
206,404 million tons-km of goods per year, about 93 percent of the countrys total. For agricultural goods,
there is no alternative transport mean for transporting fruits and vegetables out of rural harvesting areas.
Despite its importance, the Pakistani road transport is immature as a service sector. One of the issues
identified in our study is a lack of qualified service providers. Most providers have a small fleet, reflected in
the industry average of below two trucks per owner. This means that most trucks are not owned by a
formal company, but are mostly informal businesses owned by individual drivers. Moreover, many trucks
are in poor condition, with a vehiclepark of a high average age, and few specialized vehicles with reefer
devices or refrigerated trucks available to transport perishable goods.
Other problems include the lack of standard cargo and load trucking legislation, and limited availability of
insurance coverage for cargo. Freight forwarders in Pakistan do not have a widely accepted liability scheme
comparable to general practice in the global forwarding business. This occurs despite the considerable
changes towards openness that the insurance market in Pakistan has undergone since 1996 (part of a wider
reform process of the financial sector by the government). Foreign investors are now allowed to hold up to
51 percent equity share of companies operating in the general insurance sector. However, five major
domestically-owned companies still account for 78 percent of that market.
One direct consequence of the unreliable service available in the country is high working capital
requirements, as higher safety inventories are needed. Producers of certain goods are also forced to invest
their resources in non-core activities such as their own truck fleet, which increases shipping-related costs
and entry barriers to the sector.
Another externality is road damage from overloading, as trucks are loaded to their maximum cubic
capacity, irrespective of axle loads or resulting vehicle speeds.
In summary, the trucking sector in Pakistan is poorly regulated with about 70 percent of trucks5 part of the
informal sector. This environment provides little appeal to large sophisticated operators and service
providers willing to enter the market due to low prices, low margins and generally unfair competition.
These problems are mainly caused by the lack of a formal legal and institutional framework for the trucking
industry coupled with a lack of enforcement of rules on vehicle inspection, driving license concession,
overloading, crew hours, and hazardous cargo handling. The Motor Vehicle Ordinance 1965, incorporating
federal and provincial amendments, is an archaic and outdated regulation if compared with best practices
Source: local experts estimations.
Pakistan Logistics
Road Transport
17
from OECD countries. Obtaining a driving license in Pakistan is relatively easy. There are no proper training
schools, instructors, equipped vehicles, or testing and licensing facilities.
The National Highway Authority (NHA), which was created in 1991, focuses its activity in the planning,
development, operation, repair and maintenance of the national highways and other strategic roads.
However, the total length of the roads under NHA management only stands at 8,780 km, which accounts
for about 3 percent of the entire road network in the country.
4.3
Road Transport Recommendations
Given the dependence of Pakistani transportation on road services, implementing reforms and
improvements are vital for increasing the competitiveness of Pakistans products. Having a regulated
trucking industry with capacity for transporting perishable goods will increase the quality and shelf life of
products, allowing companies and smaller growers to earn a greater profit margin domestically and
compete internationally. After our analysis we recommend improving regulation of the transport and trade
logistics sector, supporting incentives to renew trucking fleets, and reshaping the current truck insurance
schemes. These recommendations support the development of a modern, safe, and efficient logistics road
transport sector in Pakistan and aim to create transparent regulation for market entry and service
provision. However, above all these, we recommend to improve the operating conditions of the National
Trade Corridor (NTC).
4.3.1
Improve the Operation of the National Trade Corridor (NTC)
The National Trade Corridor (NTC) is a critical artery in Pakistans road network and should be in an
excellent condition both from the infrastructure and the service point of view. The improvement of its
operation is the single most pressing issue regarding logistics in Pakistan.
Road condition could be improved in many parts of the 1,760-km long highway. A sum of $5 billion has
already been budgeted over the next four years to spend on the improvement of the country's highways,
including works on the NTC6. However, as this will most likely not be enough, it is recommended to explore
further opportunities in order to embark on an upgrading process as wide as possible. These should include
public-private partnership (PPP) arrangements7. It is also recommended to close the NTC to non-motorized
traffic. This would contribute to increase its capacity. Commercial activities along it should be regulated,
Source: National Highway Authority.

PPP: this describes a government service or private business venture which is funded and operated through a
partnership of government and one or more private sector companies.
7
Pakistan Logistics
Road Transport
18
allowing only services to the driver and the vehicle. These should be offered in clearly designated areas in
the vicinity of, but outside, the road itself.
These actions should result in a notable increase in the average transit speeds on the NTC, significantly
reducing the current trip times of 48 hours from Lahore to Karachi (1,260 km) or 72 hours from Peshawar
to Karachi (1,700 km).
4.3.2
Improve Regulation of the Transport and Trade Sector
With the NHA exclusively focused on a marginal part of the network, there still exists the need for an entity
taking care of road transportation with a much broader approach. It is therefore recommended to
introduce an independent agency assuming the management of maintenance, contracting and construction
of the whole road network, as well as the regulation of interurban road freight and passenger transport.
Possible benchmarks are the Spanish General Directorate for Traffic (DGT), the Finnish National Road
Administration (Finnra), or the Dutch Road Authority. These are autonomous agencies under the
supervision of the relevant ministry (typically transport or interior). In general, road transportation
regulation agencies have the following divisions:
Traffic Management and Mobility Division:

o
Interurban traffic management and control: radars, vehicle checks, etc.
Information provision to road users about interurban traffic
Education of traffic agents regarding the management of traffic flows
Road Security Education Division:

o
Driver education on road safety
Traffic safety advertising campaigns
Supervision of driving schools
Definition of drivers license tests
Training and certification test providers and evaluators
Oversight of centers performing medical checks on drivers seeking license renewal
Normative Arrangement Division:

o
Oversees the organization that issues fines for traffic violations
Analysis and resolution of traffic violation appeals
IT Department:
o
Creation, development, maintenance, operation, and custody of the registries and

databases of vehicles, drivers and traffic rules infringers, driving educators, driver
education centers, etc.
Pakistan Logistics
Road Transport
4.3.3
Management of organization activities statistics
Providing IT support to the rest of the authority
19
National Observatory of Road Security:

o
Investigation of all aspects related to road security
Analysis of road security data and statistics
Promotion of new road security policies
Support Incentives for the Renewal of Fleets in the Freight Transport Sector
In order to improve the quality of the trucking fleets, the average age of the trucks needs to be decreased.
One way to do this is to introduce a truck modernization incentive program that creates financial
incentives and support for truck owners to trade in their trucks for newer models. Fleet renewal will not
only increase the quality of the transport of goods, but also help reduce accidents, health problems, and
environmental contamination.
Mexico and the USA have successfully implemented similar programs that Pakistan could use as a model.
Mexico ran a payments program between 2003 and 2007 to replace old inefficient freight vehicles; a similar
program is currently being discussed in California. This program would subsidize the purchase of 2007model or newer trucks that can meet US-emission requirements. The goal of the program, in line with the
California Clean Air Act, would be to reduce truck-generated pollution. Spain also had a program to remove
older cars in the mid-90s that was very successful. The program was run in two phases:
Plan Renove I: Between April and October 1994 the program provided 600 to anyone retiring a
vehicle over 10 years old in order to purchase a new car. 170,000 older cars were retired during this
time, which represented 14 percent of cars that were older than 10 years.
Plan Renove II: Between March and June 1995 the program provided 500 to anyone retiring a
vehicle over seven years old in order to purchase a new car, helping retire 140,000 cars.
4.3.4
Reshape Current Truck Insurance Schemes
Freight forwarders in Pakistan do not have a widely accepted liability scheme comparable to general
practice in the global forwarding business. In that context, it is recommended that the forwarders
association PIFFA agrees on an overall liability and insurance scheme for their members. This should be
arranged by international standards, so that the liability and coverage becomes part of the image and
profile of the forwarders being PIFFA members.
Pakistan Logistics
Maritime Transport
20
5. Maritime Transport
Maritime transport accounts for 91 percent of Pakistans international trade. This fact makes reforming and
improving the sector particularly important for Pakistani goods to reach international markets. Our case
study of the transport of a container of oranges further highlighted the problems facing the industry, which
then allowed us to recommend solutions based on other countries experiences.
The regulation in place in Pakistan is a key disincentive for potential investors, holding back global logistics
operators, shipping companies, and other related services providers from fully developing their service.
This ultimately translates into higher costs for importers and exporters, since higher port and terminal
handling costs are transferred into final transport fees.
Reforming the maritime infrastructure and services was identified as an opportunity for high improvement
and high impact, both in terms of facilitating trade and investment and for creating jobs. This need is
particularly pressing in relation to maritime services. All in all, the problems facing both parts of the
maritime logistics industry and recommendations for improvement are outlined below.
5.1
Maritime Infrastructure Assessment
The main ports in Pakistan are Karachi, Qasim and Gwadar. In 2006, 55.85 million tons of cargo8 was
transported through them. Container throughput has grown at an average annual rate of 15.2 percent
since 2000, reaching 1.8 million TEUs at the two container ports in use in 2006. In recent years Karachi has
lost ground to Qasim, diminishing from a 79 percent share in 2000 to a 65 percent share in 20069.
2000
1500
1000
500
0
716
615 650
739
848
1024
1178
Karachi
Port Qasim
495 544 634

160 200 227 333
2000 01
02
03
04
05
06
Figure 9: Container traffic at Pakistani ports (in 000 TEUs). Source: Drewry Consultants.
8
9
Source: Federal Bureau of Statistics.

Source: Drewry Consultants.
Pakistan Logistics
Maritime Transport
21
The port of Karachi is Pakistan's largest and busiest seaport, handling about 60 percent of the nation's
cargo. It has two container terminals, one of which operated by Hutchison. A third one, focused on
transshipment, is set to open in 2012. The port is managed by the Karachi Port Trust (KPT), a board of
trustees comprising a chairman and 10 trustees, 5 of which appointed by the private sector.
Port Qasim is Pakistan's second busiest port, handling about 40 percent of the nation's cargo. It is located
in an old channel of the Indus river, 35 km east of Karachi. The approach to the port is through a long 45 km
navigation channel. One of its major advantages is its proximity to different national transport facilities. It is
15 km away from a national highway, directly linked to the railway network through six tracks and 22 km
away from the international airport.
The port of Gwadar is a new development located at the entrance of the Persian Gulf on the Arabian Sea
and about 460 km west of Karachi, in the Balochistan region. It became operational in 2008. It is a deep-sea
water port, being constructed in two phases with heavy investment from China. The government of
Pakistan has projected this port as the first link in the development of an energy and trade corridor to
China and Central Asian republics, by providing them with short access route to the markets in the Middle
East and Europe.
Port infrastructure in Pakistan is overall in good shape. Of course, there are aspects that could be improved,
such as the connection of the Karachi Port with other transport means or the custom and storage
facilities10. In any case, several upgrades affecting the countrys commercial ports are already underway.
Project
rd
3 Container Terminal at the Karachi Port

Gwadar Port 2nd Phase: container, oil and bulk
grain terminals, plus Ro-Ro berth
Development of multipurpose cargo handling
terminals each at 3-4 existing berths
Investment
(USD
Million)
950
Time
Frame
Funds Origin
2012
Karachi Port Trust (KPT)
840
2014
50
2011
Gwadar Port Authority

& PSA International
Table 4: Current projects in maritime infrastructure. Source: KPT & PSA International.
5.2
Maritime Services Assessment
Maritime services in Pakistan are away from OECD standards in terms of service level and availability.
Integration with international regulation is a necessary step. Privatization in the maritime services sector
10
These will be analyzed at a later point in their own specific sections.
Pakistan Logistics
Maritime Transport
22
has not followed the pace of the one in ports. Several state-owned firms in the shipping, ship-building and
repair sector exist. These do not appear to be real candidates for privatization at the moment.
The state-owned Pakistan National Shipping Corporation (PNSC) is the countrys largest shipping company.
It was established with the assistance of the Pakistan Navy in 1963 and nationalized by the government in
197111. Its major shareholder is the Ministry of Communications. PNSC is mainly focused on liquids, which
account for 85 percent of its total shipments. This is in part the result of a successful negotiation with three
of Pakistans major oil refineries to undertake crude oil shipments in 2002. According to BMIs assessment,
the refineries decision was to some extent influenced by the Pakistani government. Although the
government plans to induct the private sector into direct shipping, it has also stated that it wants to
promote and protect PNSC12.
5.3
Maritime Transport Recommendations
While maritime transportation accounts for most of Pakistans international trade, inefficiencies and
opportunities for improvement in the sector exist. By analyzing the industry and using our case study as
proof of the delays in the transportation chain, we recommend that Pakistan liberalize the maritime
transport industry in order to attract the top maritime services providers at a global level, and create port
quality assurance programs based in international best practices. Implementing these recommendations
will increase Pakistani exports by making them more competitive with other regional goods.
5.3.1
Liberalize the Maritime Transport Industry
Since maritime transportation is international in character, there is an inherent need for harmonization and
standardization of regulation across countries. To have legislation in line with that of the leading countries
in the sector, should help to attract the top maritime services providers at a global level. It is therefore
recommended that Pakistan adapts its regulation on maritime transport to the standards set by OECD
countries. In the case of liner shipping13, the basic regulatory framework among OECD countries consists of
The Code of Liberalization of Current Invisible Operations and The Common Shipping Principles.
The private sector already plays a noteworthy role in port infrastructure in Pakistan. A similar liberalization
process of the maritime transport industry would entail a number of benefits for the country, including:
11
Liberalization policies would enhance competition within the sector, resulting in efficiency gains.
Source: Business Monitor International (BMI).

Source: Drewry Shipping Consultants-IFC.
13
Liner shipping is regular shipping with set schedules in different harbors published in advance. The capital-intensive
character of liner shipping, particularly container shipping, has led to a substantial degree of concentration.
12
Pakistan Logistics
Maritime Transport
23
Increased competition would force providers to improve the quality of their service.
Users of maritime transport services would have a wider choice of options at competitive rates.
Liberalization should ensure greater transparency and thus create an investment favorable
environment in the sector.
5.3.2
Quality Assurance Programs
In order to create good practices that help raise the overall service level at Pakistani ports, it is
recommended that ports introduce their own quality assurance program. This should be done by
monitoring a series of key performance indicators (KPI) through a balanced scorecard. The KPIs should
cover various fields, including:
Port operational performance: Dwell time, transit times, loading and unloading rates, and
availability of daytime or 24/7 port services.
Availability of services to the ship: Bunkers, waste treatment, provisions, water, power, pilotage,
towage, and mooring.
Availability of services to the goods: Reefer container service, customs hangar, bounded
warehouse, consolidation/de-consolidation, containers depot, and agriculture and sanitary area.
Quality of maritime services: Frequency, transit time, availability of door-to-door service, capacity,
punctuality, cost, and clarity on costs.
Compliance with security, safety and environment regulation: Observance of the SOLAS and
SAFEMED IMO conventions, ISPS code, and FAL standards.
Degree of intermodal and logistic integration:

o
Access to land transport including rail and road.
Connection with logistics platforms.
IT expertise: Tracking and tracing processes and IT.
The purpose of tracking these KPIs is twofold. It will help identify the areas that lag behind international
best practices and help the sector work towards overcoming these deficiencies. In addition, this data
should contribute to the implementation of quality assurance programs in ports, as done in several OECD
countries. Self-managed programs typically have penalty measures for poor port handling performance and
have proven to reduce errors and delays. The quality assurance program of the Barcelona Port Authority14
(APB) includes the following customer service guarantees:
14
Source: Barcelona Port Authority (APB).
Pakistan Logistics
Maritime Transport
24
Safe handling: In the case of damaged or absence of goods, a minimum amount of 150 and a
maximum amount of 450 per container is paid.
Coordinated physical inspection: If a maximum set time for inspection is exceeded, a penalty
ranging from 150 (less than 24 hours delay) to 450 (over 48 hours delay) applies.
Information: If no answer is provided to questions regarding container traffic procedures within

four working hours, a penalty of 30 is applied. This is also applicable if wrong information is
provided.
Transit: The APB guarantees that customs procedures for containerized goods on transit take place
within the same day that transit documents are admitted. The penalty for not fulfilling this policy is
of 450.
In the long run, a performance monitoring process (balanced scorecard) combined with a quality assurance
program (service guarantees) should allow Pakistani ports to improve their performance, gradually raise
the standard of their services, and ultimately become more competitive.
Pakistan Logistics
Rail Transport
25
6. Rail Transport
Rail has become a key transport mode for freight in OECD countries and could be used to transport a higher
share of heavy non-perishable goods. Weak rail services in Pakistan fail to offer an alternative to road
transportation, with weak infrastructure and a sector dominated by a public operator. Developing rail
infrastructure and services has cost advantages, is more environmentally friendly than road transportation,
and will take some of the stress away from the overburdened and underdeveloped trucking industry.
6.1
Rail Infrastructure and Services Assessment
Pakistans rail network is operated by the state-owned Pakistan Railways (PR) under the supervision of the
Ministry of Railways. It comprises 8,163 km, of which broad gauge tracks account for 7,718 km and narrow
gauge tracks for the remaining 445 km. It only has international active links with India. However, plans exist
to also establish a further connection with China and other neighboring countries.
Concept
Network size (km)
Country area (sq-km)
Pakistan
8,163
881,640
Germany
41,315
357,021
Table 5: Pakistan-Germany rail network size comparison. Source: Pakistan Railways, Eurostat and BMI.
Pakistan Railways freight business unit operates over 200 freight stations, but railways use for freight
transport in Pakistan is limited in volume. This transport mean is only used for a few specific goods such as
wheat, coal, fertilizer, cement and sugar; it is hardly used for the transport of perishable goods. Largely
neglected for decades, inefficiencies in the railways service include:
Rates are based in market trends in road transport, which is the main competitor to rail transport.
The dominance of road transport up to now has been evident.
PR has continued to operate the entire network by cross-subsidizing profitable and non-profitable
freight routes, even though the rationale for many lines had effectively disappeared.
PR has continued to offer the traditional pattern of supply-driven services.
PR has failed to downsize staff substantially and streamline operations.
The consequence is that Pakistan Railways has lost a considerable share of its private freight traffic. Most
importers and exporters are not satisfied with the railway services, and so urgent consignments are usually
transported by truck. The result is that rail freight is now largely confined to segments where rail is
protected by regulation or to usage by public sector entities. This implies that no efficient alternative
transport mean to the congested National Trade Corridor (NTC) exist, missing an opportunity to reduce the
number of trucks on the roads and the problems that these cause.
Pakistan Logistics
Rail Transport
Concept
Tons per year (million)
Avg. trip distance (km)
Tons-km (million) per year
Usage in land transport
Pakistan
Germany
6.5
823
5,355
2.4%
346
309
106,914
21.9%
26
Table 6: Pakistan-Germany rail network usage comparison. Source: Pakistan Railways, Eurostat and BMI.
The underlying reason for the current situation is the total lack of competition within the sector. In a
context in which there are no alternative providers in the market offering competitive rail services, no
modern management techniques have been introduced in the public railways operator up to now.
All in all, a number of upgrading works in different areas of the rail network are currently underway.
Project
Development of double track from Peshawar
to Lodhran (884 km)
Development of double track from Lahore to
Faisalabad (141 km)
Extension of VIIF & UIIF communication over
c. 1,000 km
Investment
(USD
Million)
160
Time
Frame
Funds Origin
2014
Pakistan Government
25
2012
Pakistan Government
2010
Pakistan Railways
Table 7: Current projects in rail infrastructure. Source: Ministry of Railways.
6.2
Rail Transport Recommendations
Rail transport in Pakistan has a high opportunity for improvement. Despite its poor track record, rail has
commercial potential and could play a valuable transport role in the country. The main benefit of investing
in rail transport is to reduce road traffic, and if the necessary reforms are taken, provide a fast and cheaper
way of moving goods domestically. Pakistan Railways needs to take major steps to improve the freight
services quality. Challenges faced today include improving delivery times, reliability and tracking
information. In that context, we recommend promoting public-private partnerships to upgrade the railway
network and introducing management techniques in the railways freight division as important initial steps
towards the development of a modern rail transport.
6.2.1
Promote PPP Initiatives for the Development of the Rail Network
With a number of areas still underserved, the rail network in Pakistan can significantly be enlarged. Publicprivate partnerships (PPP) can help to increase the pace at which this is upgraded. Besides, the
implementation of double tracks in different parts of the network would allow notably increasing
Pakistan Logistics
Rail Transport
27
frequencies and reducing trip times. PPP arrangements should also contribute to bring the latest know-how
and technology into the sector.
6.2.2
Introduce Modern Management Techniques in Pakistan Railways Freight Division
The legal framework currently in place that supports Pakistan Railways monopoly and undermines
competition should be revamped. A pilot program was run in the country for operating passenger trains
under a private sector scheme through lease, but that same experiment was not done for freight trains.
Ideally, the long-term goal of reforms would be to open up the sector to private competition in order to
allow a specialized, competitive, rail freight operator to enter the market. However, this initiative does not
seem very much aligned with current governmental policies, and so it is not much likely to actually be
implemented either in the short or the mid-term.
It is therefore recommended to focus sector development efforts on improving Pakistan Railways freight
transport services by modernizing freight transport management and operations within the operator. We
recommend establishing a department in Pakistan Railways dedicated to freight transport and building its
capacity as a necessary first step. Besides, other additional actions should include:
Eradicate cross-subsidizing practices between profitable and non-profitable freight routes.
Eliminate the lines for which its commercial justification has effectively disappeared.
Listen to the demands of its present and potential customers, moving away from the long
established pattern in the company of supply-driven services.
Pakistan Logistics
Air Transport
28
7. Air Transport
Air cargo services in Pakistan are limited and fail to complement other transport means. While a few niche
markets rely on air transport, there are few options to choose from. Developing this industry and
encouraging more operators to enter the market would open up more markets for perishable goods, and
cut down on transport times to places like Europe.
7.1
Air Infrastructure and Services Assessment
There are 139 airports in Pakistan, including international ones at Karachi, Lahore, Islamabad, Peshawar,
Quetta and Sialkot. Air cargo is still infrequently used in Pakistan, although important in certain
circumstances, such in those occasions where the planned transport mode would result in late delivery and
penalties. PIA is the major national airline. It is 57.7 percent state-owned, 26.3 percent owned by state-run
institutions and 16.0 percent owned by private individuals. It provides passenger air travel and freight
services to destinations in Europe, the USA, Canada and Libya. The Pakistani government has recently
agreed to provide $150 million to support the renewal of its fleet15.
Air transport options are rather reduced. Palletized direct routes to Europe are only available from Pakistan
International Airlines (PIA) and British Airways. Transit opportunities are available via the Emirates and
Turkey. Another limitation comes from the fact that the dwelling time at the airport is two to three times
longer than the actual time of transport16. Such a delay has a negative impact on the supply line, damaging
customer satisfaction, increasing the capital costs during transportation and making it difficult to cope with
demand for frequent on-time deliveries requested by overseas importers.
Besides, an study of the air freight rates for general cargo17 showed that India, Pakistans major competitor
in this field, offers air freight rates out of Pakistan that are on average 30 percent lower. There is a freight
subsidy of 25 percent offered to Pakistan exporters, but even with it the rates ex India are lower. Air freight
rate level is normally linked to capacity available, so it can be concluded that air freight rates out of
Pakistan reflect the existing capacity limitations. In addition, and in connection to the subsidies issue,
Pakistan exporters complain about the extremely long reimbursement time of air freight subsidies (i.e.
some exporters claim that it takes 3-6 months to be reimbursed).
15
Source: Business Monitor International (BMI).

Source: Logistics Consulting Group.
17
Source: Logistics Consulting Group.
16
Pakistan Logistics
Air Transport
7.2
29
Air Transport Recommendations
7.2.1
Pun in Practice Vision 2030 Policies
The government of Pakistan is well aware of the need to develop and improve the cargo infrastructure at
the countrys leading airports in order to meet the delivery requirements of a modern global supply chain,
as envisioned on the Vision 2030 paper. There, the actions suggested to be taken in the field include:
Unilateral open sky policy.
Demand-based infrastructure development.
Regionally competitive user charges and fuel prices.
Bifurcation of regulatory, commercial and operating functions.
Liberalization of air service agreements.
Encouragement of private sector airlines to operate on international routes.
Not many further recommendations could be proposed. If only these steps already identified by the
countrys authorities were put in practice, the improvement in the air freight scenario would be notable.
Pakistan Logistics
Other Logistical Infrastructure
30
8. Other Logistical Infrastructure

Overall, the logistics sector in Pakistan needs a number of national improvements that will facilitate the flow of
goods, increase product quality, and open new markets for Pakistani goods. The proposed initiatives will not
only help the sector nationally, but will also help those at the beginning of the supply chain like small farmers
and producers. The main hindrances to the sector that will need coordinated efforts by the government and
private sector to improve include: establishing freight villages to serve as logistics hubs, invest in reefer storage
facilities to increase the shelf life of perishable goods, and develop public trading platforms for smaller and
medium size producers to sell their goods, cutting out intermediaries that add little value to the products. All
these recommendations are intended to strengthen the logistics industry in Pakistan and help make the
countrys products more competitive by adding value while reducing logistics costs.
8.1
Freight Villages
Freight villages are logistics concentration points, developed at strategic locations, which provide various
logistics-related activities such as warehousing, packing, re-packing, break-bulk centre, and truck parking. In
Europe, freight villages are typically a private sector business, developed by large scale operators that host
complimentary services and related operators. Freight villages are often PPPs, where an area is defined as a
freight village by the public sector usually at the intersection of major multimode routes, and then private
sector operators develop the facilities. Freight villages can vary in size, from few hectares to thousands of
hectares, depending on their functions.
No such facilities exist in Pakistan. In fact, not even a downgraded version of such facilities with limited
features exists. As a result, the surroundings of the larger cities are congested with on the rise disorganized
parking and waiting areas. With an ever growing truck fleet, the situation is more worrying than ever before.
Long stretches of roads leading into cities or circumvallation roads around them have de facto been turned into
truck queuing and waiting areas. In parallel, unlicensed workshops, service facilities and spare parts outlets
have emerged in such areas. This combines with a widespread lack of metropolitan regulations (or
enforcement when these exist) on specific timings for trucks to load, unload and circulate inside metropolitan
areas, contributing to traffic jams and pollution.
Pakistan Logistics
8.2
31
Reefer Storage
There is a lack of reefer storage facilities in Pakistan. These facilities require strategic location choice and a set
of complementary services to be operationally viable, and so are generally located within larger logistic centers
such as freight villages. The lack of reefer storage facilities at key locations for exports is particularly critical for
companies dealing with agricultural perishable goods. Well-stored perishables have a longer shelf life, are
better preserved, and are of higher quality. As a result, they sell at higher prices.
Fruit
Apricot
Strawberry
Pineapple
Oranges
Banana
Mango
Kiwi
Range (C)
0-5
0-5
8-12
8-12
12-16
10-15
0-5
Maximum
Up to 1 month
Up to 1 month
Up to 1 month
Up to 3 months
Up to 3 months
Up to 3 months
Up to 6 months
Table 8: Fruits conservation temperature requirements and maximum life. Source: University of California.
8.3
Trading Spaces
Logistics chains of perishables in Pakistan are characterized by an abundance of intermediaries that add little
value to the supply chain. Because there are few public trading spaces that smaller farmers can sell their goods
to, intermediaries typically retain a share of the profits. Farmers thus make less profit than they otherwise
could, as most of them are unable to sell to wholesalers without going through an intermediary. If farmers
were able to capture a larger portion of the profit, they would have more money to invest in new equipment
and be able to adapt to international harvesting quality standards. This could open up new markets for
Pakistani goods, benefiting not only the individual farmers, but the economy as a whole as well.
8.4
8.4.1
Logistical Infrastructure Recommendations

Development of Public-Private Trans-Freight Stations and Reefer Storage Areas
The development of public-private freight villages, logistic platforms and reefer storage areas at key locations
throughout the country such as ports, airports or the main connection nodes, should contribute to raise
Pakistans logistics infrastructure overall level. As an initial step, we recommend the development of a network
Pakistan Logistics
32
of simple logistic platforms that we might prefer to refer to as trans-freight stations (TFS). These should at least
offer the following services:
Waiting area: Acting as waiting points for trucks until these are allowed to enter the city in specified
hours of day/night to unload cargo.
Cargo breakdown: For larger trucks, TFS would be a point of load breakdown. Smaller vehicles would
then carry the load to multiple destinations within the metropolitan city limits.
Services to the truck: TFS would be a single-point solution for truck operators by hosting there all
facilities and services they might need.
As on how to proceed, it is recommended to use the following approach:
Identify key locations: The identification of strategic sites for such facilities is an action that should be
done in cooperation with the leading export companies operating in Pakistan.
Foster development: The creation of agreements between regional authorities and the private sector
to develop logistics facilities at the identified locations will contribute to their implementation.
Finance development: Identify and define financing options for the construction of these facilities
through grants or soft credits.
8.4.2
Development of Wholesale Central Markets
In order to eliminate intermediaries that add little value, it is recommended to promote the development of
regional wholesale central markets. The Spanish MERCAs model18 has proved very successful and is regarded as
a good practice. It is recommended to consider this model as a possible benchmark. Such a move is expected to
generate the following positive effects:
18
Price structure: Prices will be set more clearly, as the market will be more transparent.
Product quality: It will be improved through better storage in shared common facilities.
Inspection: It will make quality procedures and checks easier to be enforced.
Accessibility: It will make easier for small producers to access large retailers.
The MERCAs network is formed by 23 units across Spain. About 3,650 companies work through it, from which about
2,200 are wholesalers that are part of the different food markets, while the rest are companies dedicated to
complementary activities such as distribution, logistic or customer services. In absolute terms, MERCAs annual sales of
fruits and vegetables add up to 4.1 million tons; fishing products to 0.5 million tons; and meat products to 175,000 tons.
Source: Merca Zaragoza.
Pakistan Logistics
33
Logistical education: Markets can be used as education centers; hence these will help to improve
logistical know-how of users.
Pakistan Logistics
Cross-Cutting Issues
34
9. Cross-Cutting Issues
On a sector by sector basis there seems to be growing interest and awareness about the importance of logistics
and the role it can play in increasing exports and thereby GDP. However, as the industry grows, there need to
be certain national initiatives to ensure that the logistics industry is both sustainable and efficient. Namely,
these national initiatives should focus on developing standard educational training to create a knowledge base
of expertise for the sector, and reforming customs procedures.
9.1
Logistical Education
Over the last few years, logistics has evolved into a wide-ranging subject that covers all aspects related to
supply chain management (SCM). This has increased the need for a continuing education targeted to provide
specific answers to the latest developments on the field.
In Pakistan, the situation is especially critical. Logistics and SCM know-how is not common even in issues often
labeled as essential elsewhere. This limited logistical expertise is perceived by both users and providers of
logistics services as one of the most critical issues affecting business operations in the country. Examples of
where the lack of logistics expertise is more pressing include:
Cold chain: There is little respect for cold chain procedures for goods that need to be transported
under a controlled atmosphere (temperature and humidity). This occurs due to inappropriate
infrastructure, but even in the few cases that this is available, operational malpractices occur.
Control mechanisms: Few Pakistani enterprises can provide the merchandising and quality control,
supply line control and logistics cost control required to qualify as a partner for international clients.
Quality management: There is a general lack of understanding and support of total quality and zero
errors concepts. Most individuals do not understand how important their role is in securing that their
function is fulfilled.
IT Culture: EDI and other IT solutions are not commonly used in the private sector, except by the larger
corporations. The IT system is mainly being used for emails. The lack of IT utilization hampers
communication with buyers, suppliers and public bodies (customs). It brings longer lead times, poorer
planning, inferior customer service, and higher cost margins than desirable. It results in lower cost
control and so lower profits.
Pakistan Logistics
9.2
35
Customs and Inspection
In Pakistan, goods are inspected in largely unsuitable facilities. This is the case even at the main logistic nodes
such as the countrys main export ports. Perishable goods are mostly inspected in non-reefer facilities. As a
result, the cold chain is interrupted even if inspections are performed quickly, which is generally not the case.
The break in the cold chain reduces shelf life and quality of Pakistani products to be shipped abroad.
In addition, customs officials tend to act more like an auditor than as a facilitator. Delays on imports often arise
in connection with valuation of goods, with customs not accepting the shippers invoice as to reflect true value.
Besides, inspections are not risk-based, with a notably high percentage of goods being inspected. Inspection
rules are unclear, leaving room for and being subject to the discretion of inspectors. Interference from other
departments is also another usual source of delay. Containers are sometimes retained for examination and
clearance by the Anti-Narcotics Force (ANF) or other departments involved in control over drugs illegal imports.
Overall, bureaucracy in customs is high. The extent of paperwork in GD (now on computer) is still large, as 63
fields and numerous background details have to be fulfilled. Lead times could be cut if the GD-PRAL system was
further aligned, so that many signatures were avoided and took place electronically instead. Server capacity
also needs to be improved, as it is currently delaying the processes and creating longer lead times.
Dwell time is also not yet satisfactory. Processing time with an on-line system should make it possible to clear
as much as 90 percent of the consignments within 3 days. Such a time frame would be in line with international
best practice standards. However, the Pakistan Customs Computerized System (PACCS) is so far only
implemented at Karachi International Container Terminal (KICT), still generating too much red tape.
15
Customs
clearance
10
Document
preparation
5
0
Pakistan
Spain
Figure 10: Duration of customs procedures. Source: World Bank.
As a result of all of the above, lead times and deliveries are often unpredictable. This means that a higher
inventory level is needed for both importers and exporters. The higher percentage of goods inspected implies
Pakistan Logistics
36
higher direct costs in the value chain, for example, the cost of moving and positioning the container for
customs inspection.
9.3
Recommendations
9.3.1
Develop Logistic Training Modules
With an emerging logistics industry, the private sector will want to have a sufficient local pool of qualified
people to recruit from. Given that there is a critical lack of local logistics expertise in Pakistan, it is
recommended to focus efforts on building local know-how throughout the logistics chain.
IFCs Business Edge advisory product might be a good fit to address training needs in the sector. Business Edge
covers19 a range of practical management training products and services. Flexible in its application, it can be
adapted to the requirements of specific industries. However, building up knowledge in the logistics sector
should be a continuing process with a strategic vision to support the development of the sector and should
involve all relevant stakeholders. Logistics training should be geared towards two long-term goals, as
recommended by the OECD20:
Build up qualified workforce: Workers skills have to accommodate the technology available, for
example, being able to properly operate a reefer facility. The industry needs to promote training within
the sector, as well as help promote relevant skills for jobs in the sector. In addition to training
programs, workers skills can be improved through education and certification, resulting in increased
rewards to the more skilled certified workers.
Respond to new developments in the field: Technology is rapidly changing, and so skilled people are
needed to plan, develop and operate the most advanced automated systems. Therefore, continuous
training and personnel development in logistics are critical for responding to advanced technology and
global business trends.
9.3.2
Develop IT in Logistics Awareness Program: How Useful Is IT In My Supply Chain?
There clearly is an under-utilization of IT systems in logistics operations in Pakistan. Order processing times
tend to hamper overall lead times across sectors, and have a negative effect on the distribution lead time due
19
20
Source: Overview of IFC Advisory Programs document.

Source: Transport Logistics: shared solutions to common challenges document.
Pakistan Logistics
37
to the low level of integration of the parties involved in-between. IT can enhance the efficiency of supply chain
management significantly, in particular that of logistics operations, and ultimately increase competitiveness. It
is recommended to assess IT training needs in the sector and develop an IT training module customized to
logistics operations. The initiative should focus on:
IT business diagnostic services in order to provide companies with an insight into their business'
strengths, weaknesses, opportunities and threats, and the changes that can be made.
Advisory services to introduce IT products in the workplace such as EDI, Internet application, html,
invoicing, and order processing.
Assisting IT acquisition and usage.
Specific actions for the usage of e-platforms across the supply chain, particularly at ports and storage
areas, in order to increase traceability and streamlining of tools like radio-frequency, bar codes, and
data bases.
9.3.3
Customer-Oriented Approach in Customs
Customs officers are perceived by the private sector as difficult to deal with, unknowledgeable about modern
customs inspection procedures, and lacking customer-service orientation. One way to counteract these
problems is through targeted training and capacity building on risk management techniques and efficient
customer-service. The purpose is to create an efficient business process coupled with a customer-friendly,
service-oriented, work culture. The initiative should focus in three areas:
Introduce risk management techniques: Customs should use risk management techniques to optimize
resources and reduce costs to more effectively set priorities and efficiently allocate the necessary
resources for maintaining a proper balance between controls and facilitating legitimate trade. Customs
should create risk profiles of traders, allowing traders with a good reputation to go through fewer
inspections, and integrate physical inspections into a single system with referrals to other relevant
border control agencies. This approach acknowledges that customs will never catch every fraud, but
provides the best cost-benefit balance. Risk management also helps limit corruption by automating
part of the process and decreasing the number of discretionary inspections.
Simplify procedures and spread IT usage: Electronic solutions, now mainly limited to Karachi, should be
extended across the country and complemented with required training and investment support. A
major effort has to be made to have PACCS available in other cities in Pakistan, at least at the bigger
Pakistan Logistics
38
customs stations, thus making it accessible for a bigger part of the import-export industry. Facilitation
measures should be put in place with the aim to reduce the quantity of information to be provided
directly by trade, as well as to reduce red tape. As a first step, it is recommended to further simplify the
E-filing of pro-forma invoice, LC and insurance through GD-PRAL. Potential savings are promising. One
day less in customs for all imports would have been equivalent to annual financials cost savings for
goods in transit of around USD 5 million21.
Build capacity: Improving the efficiency of customs and technical control agencies requires modern
inspection facilities, including reefer rooms and inspection posts.
21
Calculation based on 2005 imports.
Pakistan Logistics
Conclusion and Going Forward
10.
39
Conclusion and Going Forward
This analysis of the Pakistani logistics sector used original research obtained through a case study tracking a
crate of oranges from grower to end consumer, research of the sector from government and other resources,
and ongoing investment projects. The case study of the path of a crate of oranges in Pakistan was compared to
a similar crate in Spain, and was useful in the analysis of this sector because it focused on a perishable good
that depends both on a continuous cold chain to maintain quality and speed of transport to increase shelf life.
Also, this case study helped the study gain valuable insight into the different obstacles that goods, particularly
perishable goods, face in making their way from grower and producer to the final consumer. The study also
ascertained the exact amount of days spent for different logistics processes like customs clearance and
transport, enabling the analysis to identify where Spains logistics sector was able to exceed that of Pakistans.
While this report has highlighted the numerous obstacles in logistics processes and detailed recommendations
on a sector and national basis, further research needs to be done to pinpoint problems and opportunities for
the private sector to engage and profit from the logistics industry. This process will need to include in-depth
conversations with private sector stakeholders and the government to identify ways the public and private
sectors can work together to build a sustainable and efficient logistics industry.
Going forward, business and investment opportunities and projects will need to be mapped in detail based on
areas that are identified as being highest impact. As part of the effort to engage the private sector in investing
in logistics opportunities, interested private sector players will need to be identified, profiled, and encouraged
to communicate with policy makers. Assisting the private sector in becoming involved in the logistics industry
will help policy makers understand which policies need to be changed and why in order to encourage more
private sector investment. There are numerous examples of other countries with successful logistics industries
that can be used as a baseline for best practice logistics policy.
Strengthening the logistics sector has numerous benefits. By having an efficient and competitive logistics
industry, Pakistan will be able to increase their exports and reach different markets with high quality standards.
Having strong and strategic policies in place will attract further investment into the sector, ensuring its
sustainability. Further, this sector will open up new opportunities, attract new players into the sector, and help
increase the incomes of stakeholders from the largest companies down to the smallest growers.
Pakistan Logistics
Annex
11.
Annex
11.1 Acronyms
ANF
Anti-Narcotics Force
APB
Autoritat Porturia de Barcelona (Barcelona Port Authority)
BMI
Business Monitor International
BOT
Build Operate Transfer
DGT
Direccin General de Trfico (Spanish Road Authority)
EDI
Electronic Data Interchange
EU
European Union
FIATA
International Federation of Freight Forwarders Association
GAP
Good Agricultural Practices
GDP
Gross Domestic Product
IATA
International Air Transport Association
IFC
International Finance Corporation
IMO
International Maritime Organization
IT
Information Technology
KICT
Karachi International Container Terminal
KPI
Key Performance Indicator
KPT
Karachi Port Trust
LPI
Logistics Performance Index
MARPOL
International Convention for the Prevention of Pollution from Ships
MENA
Middle East & North Africa
NHA
National Highway Authority
NTC
National Trade Corridor
40
Pakistan Logistics
Annex
OECD
Organization for Economic Co-operation and Development
PA
Port Authority
PACCS
Pakistan Customs Computerized System (PACCS)
PIA
Pakistan International Airlines
PIFFA
Pakistan International Freight Forwarders Association
PR
Pakistan Railways
PPP
Public-Private Partnership
RDA
Rawalpindi Development Authority
RDT
Radio Data Terminal
SAD
Single Administrative Document
SCM
Supply Chain Management
SME
Small and Medium Enterprises
SOLAS
Safety Of Life At Sea
SSSR
Short Sea Shipping Route
TEU
Twenty-Foot Equivalent Units
TFS
Trans-Freight Stations
TIR
Transit International Routier (or International Road Transit)
USD
United States Dollar
VTS
Vessel Traffic Services
WCO
World Customs Organization
WTO
World Trade Organization
41
Pakistan Logistics
Annex
42
11.2 Bibliography
Alavi, Hamid (2004). Trade Facilitation: the Role of Modern Technology (presentation).
Business Monitor International (2009). Pakistan Freight Transport Report.
Business Monitor International (2009). Pakistan Infrastructure Report.
Business Monitor International (2009). Pakistan Shipping Report.
Consortium, B.-l. (2007). MEDA MoS Project.
Devlin & Yee (2005). Trade Logistics in Developing Countries: The Case of Middle East and North Africa.
Government of Pakistan (2007). Pakistan in the 21st Century: Vision 2030.
Government of Pakistan (2007). Strategic Directions to Achieve Vision 2030.
Government of Pakistan (2007). Trucking Policy for the Modernization of the Trucking Sector under the
National Trade Corridor Improvement Program (presentation).
Guindy, S. E. (2007). Safe and High Quality Supply Chains and Networks for the Citrus Industry between
Mediterranean Partner Countries and Europe.
Hoekman, Bernard (2009). Deeper Integration of Goods, Services, Capital and Labor Market: A Policy
Research Agenda for the MENA Region.
Logistics Consulting Group (2006). Pakistan: Logistics Cost Study.
OECD (2006). Transport Logistics: Shared Solutions to Common Challenges.
World Trade Organization (2008). Country Trade Profiles.
Pakistan Logistics
Annex
11.3 List of Interviewees

Contact
Company
Phone
Email
Ahmed Mansoor
Sabir Imtiaz
Brig. S.S.A. Qasim
Abdul S. Khan
Marek Minkiewicz
M. Amir Janjua
Seema Riaz
Babar Bidat
Noman Lutfi
Nasar Hayat
Century Paper
Century Paper
CIL&T
Engro Chemicals
Makro
Packages Limited
Packages Limited
PIFFA
Unilever Pakistan
USAID
021 568 2843

021 569 8266
021 904 3234
021 529 7537
042 57164515
042 581 1541
042 581 1541
021 522 1881
021 566 0062
051 208 2902
ahmed-mansoor@centurypaper.com.pk
sabirimtiaz@centurypaper.com.pk
citkhipak@yahoo.com
cjambrose@engro.com
marek.minkiewicz@makropakistan.com
amir.janjua@packages.com.pk
seema.riaz@packages.com.pk
babarb@eculine.com.pk
noman.lutfi@unilever.com
43
Pakistan Logistics
Annex
44
11.4 Projects Summary

This is a consolidated list of the different recent and on-going projects mentioned in different tables
throughout the report.
Project
3rd Container Terminal at the Karachi Port
Gwadar Port 2nd Phase: container, oil and
bulk grain terminals, plus Ro-Ro berth
Sheikhupura D.G. Khan motorway (405 km)
Makran Coastal road (653 km)
Gwadar - Ratodero road (885 km)
Development of double track from Peshawar
to Lodhran (884 km)
Rawalpindi - Islamabad ring road (80 km)
Development of multipurpose cargo
handling terminals each at 3-4 existing
berths
Development of double track from Lahore to
Faisalabad (141 km)
Extension of VIIF & UIIF communication over
c. 1,000 km
Investment
(USD mill.)
Time
Frame
Funds Origin
950
840
2012
2014
642
420
296
160
n.a.
n.a.
2012
2014

Gwadar Port Authority
& PSA International
NHA
NHA
NHA
Pakistan Government
98
50
2011
2011
RDA
25
2012
Pakistan Government
2010
Pakistan Railways
Policies related to
logistics, transport and
exports. Regulation.
Existing plans and
government actions.
Wholesale
distribution
Capilar distribution
Country-wide
transport
Airports
Ports
Air Services
Handling & Storage at Ports
Maritime services
Maritime infrastructure
International
trade
Non-custom
inspection services
Export and
import
processes
Banking and
insurance for the
logistics industry
Money & Risk Banking & Insurance
Custom-related
activities
Documents & Processes - Customs and Inspection
Freight consolidation. Country-wide

distribution. Logistics operators
Intermodality,
Distribution,
Logistics activities
Logistics platforms
Dry ports
Rail transport
Truck
transport
Road transportation services

Road infrastructures
Annex
Handling & Storage at

Intermediate Nodes
Industries,
processing
plants, etc.
Local /urban
transport
Transport of
agricultural
products
Processing
and
packaging
Rail services and

infrastructures
Pakistan Logistics
45
11.5 The Logistics of Citrus

An Assessment of Opportunities and 2009 IFC Constraints in The Logistics Industry in Pakistan PDF

Transféré par

Informations du document

Titre original

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

An Assessment of Opportunities and 2009 IFC Constraints in The Logistics Industry in Pakistan PDF

Transféré par

Droits d'auteur :

Formats disponibles

Pakistan Logistics

Objective and Methodology ....................................................................................................................................... 5

Executive Summary .................................................................................................................................................... 6

The Logistics Sector at a Glance .................................................................................................................................. 8

Importance of the Logistics Sector .................................................................................................................... 8

Composition and Characteristics of Pakistans Transport Market .................................................................. 10

Where in the Value Chain Are Logistical Weaknesses?................................................................................... 11

Road Transport ......................................................................................................................................................... 14

Road Infrastructure Assessment ..................................................................................................................... 14

Road Services Assessment .............................................................................................................................. 15

Road Transport Recommendations................................................................................................................. 17

Improve the Operation of the National Trade Corridor (NTC) .................................................................... 17

Improve Regulation of the Transport and Trade Sector ............................................................................. 18

Reshape Current Truck Insurance Schemes ................................................................................................ 19

Maritime Transport .................................................................................................................................................. 20

Maritime Infrastructure Assessment .............................................................................................................. 20

Maritime Services Assessment ........................................................................................................................ 21

Maritime Transport Recommendations .......................................................................................................... 22

Liberalize the Maritime Transport Industry ................................................................................................ 22

Quality Assurance Programs ....................................................................................................................... 23

Rail Infrastructure and Services Assessment................................................................................................... 25

Rail Transport Recommendations ................................................................................................................... 26

Introduce Modern Management Techniques in Pakistan Railways Freight Division ................................. 27

Air Transport ............................................................................................................................................................. 28

Air Infrastructure and Services Assessment .................................................................................................... 28

Air Transport Recommendations .................................................................................................................... 29

Pun in Practice Vision 2030 Policies ........................................................................................................ 29

Other Logistical Infrastructure .................................................................................................................................. 30

Freight Villages ................................................................................................................................................ 30

Reefer Storage ................................................................................................................................................. 31

Trading Spaces ................................................................................................................................................ 31

Logistical Infrastructure Recommendations ................................................................................................... 31

Development of Public-Private Trans-Freight Stations and Reefer Storage Areas ..................................... 31

Development of Wholesale Central Markets .............................................................................................. 32

Cross-Cutting Issues .................................................................................................................................................. 34

Logistical Education ......................................................................................................................................... 34

Customs and Inspection .................................................................................................................................. 35

Develop Logistic Training Modules ............................................................................................................. 36

Develop IT in Logistics Awareness Program: How Useful Is IT In My Supply Chain? ............................... 36

Customer-Oriented Approach in Customs .................................................................................................. 37

Conclusion and Going Forward ............................................................................................................................ 39

List of Interviewees ......................................................................................................................................... 43

Projects Summary ........................................................................................................................................... 44

The Logistics of Citrus ...................................................................................................................................... 45

1. Objective and Methodology

3. The Logistics Sector at a Glance

Importance of the Logistics Sector

Source: Council of Logistics Management.

GDP-PPP per Capita(US$)

Total Market Size

Composition and Characteristics of Pakistans Transport Market

Where in the Value Chain Are Logistical Weaknesses?

Low tech plants with

Destination Port (export)

The Karachi and Qasim ports

Port & Terminal

Road Infrastructure Assessment

Figure 8: Pakistan National Motorways. Source: National Highway Authority (NHA).

Table 3: Current projects in road infrastructure. Source: Ministry of Transport.

Road Services Assessment

Source: local experts estimations.

Road Transport Recommendations

Improve the Operation of the National Trade Corridor (NTC)