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Pakistan Logistics

2009

Constraints Analysis

1

MENA Logistics
An Assessment of Opportunities and Constraints
in the Logistics Industry in Pakistan

Idom Consulting
31/7/2009

Pakistan Logistics
Table of Contents

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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 Pakistan’s 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.

3

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

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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 country’s 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: Pakistan’s Logistics Performance Index (LPI). Source: Doing Business, World Bank. .......................................... 9
Figure 3: Pakistan’s 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

freight forwarders. Participants came from various fields. The analysis focused on quantifying time and cost factors at each point of the logistics chain. The initial field work and analysis was followed by a high profile focus group in Karachi. including exporters of different sizes. Objective and Methodology IFC (International Finance Corporation). 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. 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 seeks to produce findings and recommendations based on original analysis geared towards the stated objective. The citrus logistic chain in Pakistan was then compared to that of a benchmark European Union (EU) country.Pakistan Logistics Objective and Methodology 5 1. The goal of this focus group was to present. A detailed and extensive mapping and analysis of the logistic and value chains of citrus exports to European markets was conducted. citrus is one of Pakistan’s top commodities for both export and the domestic market. Instead. commissioned Idom Consulting to conduct an assessment of the logistics sector in Pakistan. Idom Consulting chose Spain. While extensive research on the transport and logistics sectors in the country already exists. 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. This report summarizes the main findings and provides recommendations on assistance needs in the logistics sector in order to further develop Pakistan’s logistics sector and attract investment. The assessment was conducted over a six-month period and was guided (but not limited to) the analysis of a case study. this assessment is not intended to be a general revision of the already available sector data and information. and close information and data gaps. part of the World Bank Group (WBG). 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. and shipping companies. discuss and validate initial findings and prioritize them. and stakeholders in other sectors were consulted to ensure that findings and recommendations were applicable to other time-sensitive sectors. 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. retailers. Initial desk research showed that in the perishable goods segment. .

This report provides a detailed analysis of the numerous obstacles in Pakistan’s logistics processes and provides recommendations for improvements on a sub-sector basis. lead times and its export performance. . There is a clear relationship between a country’s logistics performance. Road services suffer from a lack of trucking industry regulation. and will take some of the stress away from the overburdened and underdeveloped trucking industry. opening up new markets for exports. It is also a key driver for private sector development. Yet. a detailed analysis of the time-sensitive citrus value chain in Pakistan revealed that there were critical inefficiencies in the country’s logistics value chain. Current regulation is a key disincentive for potential investors. This fact makes reforming and improving the sector particularly important for Pakistani goods to reach international markets. Inefficiencies in the maritime sector are also affecting Pakistan’s logistics performance. The main problem facing Pakistan’s road infrastructure is the critical situation of the National Trade Corridor (NTC). Improving maritime infrastructure and services was identified as an opportunity for critical improvement and high impact. 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. holding back global logistics operators. economic growth and overall development. Rail services in Pakistan are weak and fail to offer an alternative to road transportation. and the extensive commercial activities located along it. 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. which faces severe capacity bottlenecks due to poor physical condition. Developing rail infrastructure and services has cost advantages. is more environmentally friendly than road transportation. which produces numerous downstream problems. both in terms of facilitating trade and investment and for creating jobs. Maritime transport accounts for 91 percent of Pakistan’s international trade. Executive Summary Pakistan’s logistics is an important economic sector with significant growth and investment potential. and other related services providers from fully developing their service in Pakistan. shipping companies. Pakistan’s weak road transportation infrastructure and services were found to be the biggest challenge facing the industry.Pakistan Logistics Executive Summary 6 2. This ultimately translates into higher costs for importers and exporters. 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. the presence of non-motorized traffic.

and developing trading platforms for smaller and medium size producers to sell their goods. but will also help those at the beginning of the supply chain like small farmers and producers. 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. investing in reefer storage facilities to increase the shelf life of perishable goods. 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. further research needs to be done to pinpoint problems and opportunities for the private sector to engage and profit from the logistics industry. . interested private sector players will need to be identified. As part of the effort to engage the private sector in investing in logistics opportunities. Business and investment opportunities and projects will need to be mapped in detail based on areas that are identified as being highest impact. profiled.Pakistan Logistics Executive Summary 7 There are also cross-cutting obstacles in the sector that will need coordinated efforts by the government and private sector to improve logistics efficiencies. Such initiatives would not only help large players in the sector. Going forward. These include: establishing freight villages to serve as logistics hubs.

37) and “Customs” (2.38 2. implementing. A graphic representation of the complexity involved in logistics can be found in the annex of this document. while five is the highest. Note that this definition includes inbound.Pakistan Logistics The Logistics Sector at a Glance 8 3. services. 1 Source: Council of Logistics Management. However. The Logistics Sector at a Glance 3. a good way to measure a country’s logistics expertise is the Logistic Performance Index (LPI). Pakistan’s biggest weaknesses according to the LPI are in the “Infrastructure” (2.42 2. In that context. Source: Doing Business.73 3.92 2.37 2.21 3. Efficient logistics is a necessary condition for a country’s overall development and economic growth. 3 In terms of LPI.37 2.76 2.09 2. as well as the return of materials for environmental purposes.06 Table 1: Logistics Performance Index (LPI).62 2. Country UAE EU Israel Saudi Arabia Oman Jordan Tunisia Pakistan MENA Morocco Egypt Lebanon Syria Algeria Overall LPI 3. outbound.02 2. World Bank.41) categories. internal and external movements. Pakistan lags slightly above the regional average and is clearly behind the EU average3. and related information from point of origin to point of consumption for the purpose of conforming to customer requirements”. and controlling the efficient. 2 . other factors such as customs inspection or the level of support from the banking and insurance sectors also have a notable influence on a country’s logistics abilities2.1 Importance of the Logistics Sector Logistics is described1 as “the process of planning. According to this index. effective flow and storage of goods. Pakistan can make improvements in most of the areas included in the above definition. one is the lowest possible score. an indicator compiled by the World Bank.67 3.89 2.

GDP-PPP LPI Germany Singapore Spain Pakistan Morocco Egypt Algeria GDP-PPP per Capita(US$) Figure 1: LPI vs.3 percent export increase in countries in the Middle East and North Africa. World Bank. Countries with a high LPI typically have a high GDP-PPP.Pakistan Logistics The Logistics Sector at a Glance 9 This is important because there is a clear relationship between logistics performance. Source: Doing Business. GDP-PPP per capita. Figure 2: Pakistan’s Logistics Performance Index (LPI). Moreover. there is a clear link between the performance of a country’s logistics sector and its overall level of development. The LPI is clearly positively correlated with the country’s gross domestic product (GDP) per capita at purchasing power parity. World Bank Group studies have shown that a 10 percent reduction in overall lead time results in a 4. Slovakia CORRELATION LPI vs. lead times and export performance. World Bank. Source: Doing Business. .

but it is equally important in and of itself as an economic sector with significant growth and investment potential.4 percent in Pakistan). Warehousing USD 10 million Transport USD 480 million Other Services USD 40 million Total Market Size USD 530 million Figure 3: Pakistan’s Logistic Sector Size.4% Road Rail 16. while road accounts for most of Pakistan’s domestic traffic.4% 5. accounting for roughly 93 percent of the total tons-km transported within the country.1% 93. Source: Business Monitor International + Eurostat.0 percent in OECD vs.2% 2.1% Figure 4: Transport mode split in terms of tons-km transported. While most OECD countries also heavily rely on road transportation. . 0.2 Composition and Characteristics of Pakistan’s Transport Market Maritime transport accounts for 91 percent of Pakistan’s international trade. 2.3% 5. 3.0% River Air Pipeline 73. rail services are used in a higher percentage in OECD countries than in Pakistan (16. The sector in Pakistan moves a yearly figure estimated to be over USD 500 million.Pakistan Logistics The Logistics Sector at a Glance 10 The logistics sector is not only important for private sector and economic development. as seen in the below graphs. Source: Pakistan International Freight Forwarders Association estimation.

comparing the overall structure of the logistical value chain. At each stage of the route. The same exercise was carried out for a container of oranges in the value chain in Spain (the ‘Spanish Case”).: 2-4 Days 1.5 Days <1 Day 4 Days 0-0. The citrus value chain was analyzed in detail. . In order to do this. In sum. 45 percent (12 days) is due to Pakistan’s lower efficiency in the logistics chains. Source: own analysis from Doing Business and Trading across Borders data. Although 55 percent of this time (15 days) is due to Pakistan’s longer distance to the European destination markets. in order to identify logistical inefficiencies and bottlenecks in a time-sensitive value chain of a perishable product. we mapped the transport of a container of oranges from the harvesting field to its destination market.500 $/ 20-foot container Time 0-0.5 Days To Final Destin. it does not look at quality and efficiency.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 $ 650–800 $/ 20-foot container Figure 5: Orange exports value chain. and the time and costs involved at each stage. Due to inefficiencies at several points in the logistics chain. The ‘Pakistani Case’ was benchmarked against the ‘Spanish Case’. Done in trucks. we identified key actors and quantified the involved time and costs (the ‘Pakistani Case’). both domestically and abroad. 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. inefficiencies in Pakistan’s logistics value chain are responsible for a 45 percent excess time.3 11 Where in the Value Chain Are Logistical Weaknesses? While the snapshot of Pakistan’s logistics sector provides an overview of the size and composition of the transport sector.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. citrus export times in Pakistan were found to be 27 days longer than in Spain.200-1.Pakistan Logistics The Logistics Sector at a Glance 3. and the importance and frequency of the different modes of transportation.

Pakistan Logistics The Logistics Sector at a Glance 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 5 Document preparation 0 Pakistan Spain Figure 6: Orange exports lead times. 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 0 0 Retail Price Importer Price Price at Destination Producer Price Price at Harvesting Field 1 Figure 7: Orange exports price structure. Source: local experts + interviews with orange exporters. whereas logistics costs account for only 22 percent in Spain. . In Pakistan. Doing Business and Logistics Performance Index. logistics costs represent on average 35-40 percent of the total retail price. Source: own analysis. These delays and the inefficiencies that cause them also have an impact in terms of logistics costs.

and costs in the Pakistani citrus export chain.Pakistan Logistics The Logistics Sector at a Glance 13 There are opportunities to improve reliability. in areas such as trucking. The next chapters will look at the most critical of those inefficiencies. . lead times. These opportunities are at the most critical points of the logistics chain. warehousing. predictability. and maritime services. describe the trouble spots in more detail and analyze the underlying cause as well as suggest initiatives to address these. customs.

mainly comprising single and two lane roads. The main problem facing Pakistan’s road infrastructure is in the critical situation of the National Trade Corridor (NTC). rail. It is managed by the National Highway Authority (NHA). This is similar to most OECD countries. thereby opening up new markets for Pakistani exports. and shipping) exist. a 1.1 Road Infrastructure Assessment In Pakistan. of which about 60 percent are paved. but it serves over 80 percent of the urban population and carries over 60 percent of inter-city traffic. Its length is less than 1 percent of the total road network of Pakistan. Pakistan’s weak road transportation infrastructure and services were found to be the biggest challenge facing the industry. which faces severe capacity bottlenecks due to poor physical condition.760 km long highway that crosses Pakistan from north to south. 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. the assessment found that while all modes of transportation (road. the presence of non-motorized traffic. Source: National Highway Authority (NHA). there are approximately 260.000 km of roads. The main artery in the country is the National Trade Corridor (NTC).Pakistan Logistics Road Transport 14 4. Road Transport After mapping the Pakistani logistics industry. air. . which produces numerous downstream problems. Pakistan’s freight transport is dominated by road transportation. Road services suffer from a lack of trucking industry regulation. Figure 8: Pakistan National Motorways. 4. however rail services play a bigger role in these countries than in Pakistan. and the extensive commercial activities located along it.

India or Afghanistan.a. The consequence is in the high travel times that particularly penalize long-distance trips. construct and operate a facility according to a concession contract.610 3.01 0. Source: own analysis. poor physical condition of the roads. Because of bottlenecks like a large informal trucking sector and a lack of refrigerated vehicles. in which a private entity receives a concession from the public sector to finance. The presence of non-motorized traffic and even pedestrians reduces traffic capacity. 4. design.a.758 42. and lack of traffic management in towns. n. making it more difficult to compete internationally. This allows the project promoter to recover its investment in the project. 2012 2011 Funds Origin NHA NHA NHA RDA Table 3: Current projects in road infrastructure.500 Ratio 1. Another feature of Pakistan’s road network is its low density.150 Area 141.48 1. while one from Peshawar to Karachi (1.Ratodero road (885 km) Rawalpindi .000 65.07 Table 2: Road network size (in km) in terms of a country’s area (in sq-km).G. 4 BOT: this is a form of project financing.32 0. . which leaves several areas underserved.226 97. Source: Ministry of Transport.Pakistan Logistics Road Transport 15 Pakistan’s road system main challenge is to raise its service standards.Islamabad ring road (80 km) Investment (USD Million) 642 (BOT) 420 (BOT) 296 (BOT) 98 Time Frame n. This shows when comparing Pakistan’s road density with that of neighboring countries such as Bangladesh.700 km) takes 3 days.286 3. Project Sheikhupura – D. Build-Operate-Transfer (BOT) schemes4 are used for some of these new developments. Sri Lanka.940 647.70 1. Operating conditions are further exacerbated by extensive commercial activities located along the roads. different roads are currently being upgraded as part of a plan by the country’s government to improve the national road infrastructure. In that context. Country Bangladesh Sri Lanka India Pakistan Afghanistan Network Size 239. Khan motorway (405 km) Makran Coastal road (653 km) Gwadar . In this comparison Pakistan only is in a better position than Afghanistan.452 259. Pakistani perishable goods face a lower price and shelf life.260 km) takes about 2 days. Transit times currently are three times those in Europe and East Asia.316.590 803.287. A trip from Lahore to Karachi (1. as well as the subsequent operating and maintenance expenses.2 Road Services Assessment Weak road transportation services were identified as one of the main logistical challenges in Pakistan.

One of the issues identified in our study is a lack of qualified service providers. driving license concession. there is no alternative transport mean for transporting fruits and vegetables out of rural harvesting areas. about 93 percent of the country’s total. Other problems include the lack of standard cargo and load trucking legislation. 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. irrespective of axle loads or resulting vehicle speeds.404 million tons-km of goods per year. This means that most trucks are not owned by a formal company. Producers of certain goods are also forced to invest their resources in non-core activities such as their own truck fleet. as higher safety inventories are needed. the trucking sector in Pakistan is poorly regulated with about 70 percent of trucks5 part of the informal sector. crew hours. One direct consequence of the unreliable service available in the country is high working capital requirements. 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). and hazardous cargo handling. Another externality is road damage from overloading. reflected in the industry average of below two trucks per owner. Most providers have a small fleet. which increases shipping-related costs and entry barriers to the sector. and limited availability of insurance coverage for cargo. but are mostly informal businesses owned by individual drivers. five major domestically-owned companies still account for 78 percent of that market. to a lesser extent. but it is also an essential link in the Pakistani export chain for goods shipped by sea and. However. low margins and generally unfair competition. by air. and few specialized vehicles with reefer devices or refrigerated trucks available to transport perishable goods. incorporating federal and provincial amendments. Despite its importance. . many trucks are in poor condition. In summary. is an archaic and outdated regulation if compared with best practices 5 Source: local experts’ estimations. as trucks are loaded to their maximum cubic capacity. Truck loads account for 206. This environment provides little appeal to large sophisticated operators and service providers willing to enter the market due to low prices.Pakistan Logistics Road Transport 16 Not only is trucking the main way for moving goods domestically. The Motor Vehicle Ordinance 1965. Moreover. Foreign investors are now allowed to hold up to 51 percent equity share of companies operating in the general insurance sector. Freight forwarders in Pakistan do not have a widely accepted liability scheme comparable to general practice in the global forwarding business. the Pakistani road transport is immature as a service sector. overloading. For agricultural goods. with a vehicle‐park of a high average age.

and reshaping the current truck insurance schemes. instructors. equipped vehicles. 6 Source: National Highway Authority. repair and maintenance of the national highways and other strategic roads. However. we recommend to improve the operating conditions of the National Trade Corridor (NTC). safe. The National Highway Authority (NHA). operation. 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. However. Having a regulated trucking industry with capacity for transporting perishable goods will increase the quality and shelf life of products. Road condition could be improved in many parts of the 1. However. or testing and licensing facilities. focuses its activity in the planning. After our analysis we recommend improving regulation of the transport and trade logistics sector. including works on the NTC6. development. Obtaining a driving license in Pakistan is relatively easy. above all these.780 km. the total length of the roads under NHA management only stands at 8.1 Improve the Operation of the National Trade Corridor (NTC) The National Trade Corridor (NTC) is a critical artery in Pakistan’s road network and should be in an excellent condition both from the infrastructure and the service point of view. implementing reforms and improvements are vital for increasing the competitiveness of Pakistan’s products. which was created in 1991. A sum of $5 billion has already been budgeted over the next four years to spend on the improvement of the country's highways. 7 .Pakistan Logistics Road Transport 17 from OECD countries. Commercial activities along it should be regulated.760-km long highway. There are no proper training schools. supporting incentives to renew trucking fleets. and efficient logistics road transport sector in Pakistan and aim to create transparent regulation for market entry and service provision.3. It is also recommended to close the NTC to non-motorized traffic. allowing companies and smaller growers to earn a greater profit margin domestically and compete internationally.3 Road Transport Recommendations Given the dependence of Pakistani transportation on road services. 4. These should include public-private partnership (PPP) arrangements7. as this will most likely not be enough. These recommendations support the development of a modern. it is recommended to explore further opportunities in order to embark on an upgrading process as wide as possible. 4. This would contribute to increase its capacity. which accounts for about 3 percent of the entire road network in the country. The improvement of its operation is the single most pressing issue regarding logistics in Pakistan.

Possible benchmarks are the Spanish General Directorate for Traffic (DGT).700 km). maintenance. but outside. . o Information provision to road users about interurban traffic o Education of traffic agents regarding the management of traffic flows Road Security Education Division: o Driver education on road safety o Traffic safety advertising campaigns o Supervision of driving schools o Definition of drivers license tests o Training and certification test providers and evaluators o Oversight of centers performing medical checks on drivers seeking license renewal Normative Arrangement Division: o Oversees the organization that issues fines for traffic violations o Analysis and resolution of traffic violation appeals IT Department: o Creation. vehicle checks. the Finnish National Road Administration (Finnra). 4. road transportation regulation agencies have the following divisions:     Traffic Management and Mobility Division: o Interurban traffic management and control: radars. In general. These are autonomous agencies under the supervision of the relevant ministry (typically transport or interior).Pakistan Logistics Road Transport 18 allowing only services to the driver and the vehicle. These actions should result in a notable increase in the average transit speeds on the NTC. driver education centers. the road itself. or the Dutch Road Authority.3. etc. development. drivers and traffic rules infringers. operation. contracting and construction of the whole road network. etc.260 km) or 72 hours from Peshawar to Karachi (1. significantly reducing the current trip times of 48 hours from Lahore to Karachi (1. and custody of the registries and databases of vehicles. 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. as well as the regulation of interurban road freight and passenger transport. These should be offered in clearly designated areas in the vicinity of.2 Improve Regulation of the Transport and Trade Sector With the NHA exclusively focused on a marginal part of the network. driving educators.

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. the average age of the trucks needs to be decreased. would be to reduce truck-generated pollution. but also help reduce accidents. 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. and environmental contamination.Pakistan Logistics Road Transport  4. This should be arranged by international standards. it is recommended that the forwarders association PIFFA agrees on an overall liability and insurance scheme for their members. . 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. In that context.  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.000 cars. Mexico ran a payments program between 2003 and 2007 to replace old inefficient freight vehicles.3. Fleet renewal will not only increase the quality of the transport of goods. so that the liability and coverage becomes part of the image and profile of the forwarders being PIFFA members. Mexico and the USA have successfully implemented similar programs that Pakistan could use as a model. helping retire 140. a similar program is currently being discussed in California. 4.000 older cars were retired during this time.3 o Management of organization activities statistics o Providing IT support to the rest of the authority 19 National Observatory of Road Security: o Investigation of all aspects related to road security o Analysis of road security data and statistics o 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. which represented 14 percent of cars that were older than 10 years. The goal of the program. health problems. 170. in line with the California Clean Air Act. This program would subsidize the purchase of 2007model or newer trucks that can meet US-emission requirements. Spain also had a program to remove older cars in the mid-90s that was very successful.

This ultimately translates into higher costs for importers and exporters. The regulation in place in Pakistan is a key disincentive for potential investors. Source: Drewry Consultants. holding back global logistics operators. 5. the problems facing both parts of the maritime logistics industry and recommendations for improvement are outlined below. both in terms of facilitating trade and investment and for creating jobs.2 percent since 2000. Source: Drewry Consultants. Maritime Transport Maritime transport accounts for 91 percent of Pakistan’s international trade. which then allowed us to recommend solutions based on other countries experiences. since higher port and terminal handling costs are transferred into final transport fees. This fact makes reforming and improving the sector particularly important for Pakistani goods to reach international markets. This need is particularly pressing in relation to maritime services.85 million tons of cargo8 was transported through them. and other related services providers from fully developing their service. 55. All in all. 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).1 Maritime Infrastructure Assessment The main ports in Pakistan are Karachi. In 2006. Qasim and Gwadar. Container throughput has grown at an average annual rate of 15.Pakistan Logistics Maritime Transport 20 5. shipping companies. In recent years Karachi has lost ground to Qasim. . 8 9 Source: Federal Bureau of Statistics.8 million TEUs at the two container ports in use in 2006. reaching 1. Reforming the maritime infrastructure and services was identified as an opportunity for high improvement and high impact. diminishing from a 79 percent share in 2000 to a 65 percent share in 20069. Our case study of the transport of a container of oranges further highlighted the problems facing the industry.

It has two container terminals. being constructed in two phases with heavy investment from China. in the Balochistan region. The port is managed by the Karachi Port Trust (KPT). one of which operated by Hutchison.2 Maritime Services Assessment Maritime services in Pakistan are away from OECD standards in terms of service level and availability. a board of trustees comprising a chairman and 10 trustees. directly linked to the railway network through six tracks and 22 km away from the international airport. there are aspects that could be improved. 35 km east of Karachi. handling about 60 percent of the nation's cargo. . Project rd 3 Container Terminal at the Karachi Port Gwadar Port 2nd Phase: container. Port infrastructure in Pakistan is overall in good shape. Privatization in the maritime services sector 10 These will be analyzed at a later point in their own specific sections. 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. It is a deep-sea water port. It is located in an old channel of the Indus river. oil and bulk grain terminals. Of course. such as the connection of the Karachi Port with other transport means or the custom and storage facilities10. 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. It became operational in 2008. by providing them with short access route to the markets in the Middle East and Europe. handling about 40 percent of the nation's cargo. Source: KPT & PSA International.Pakistan Logistics Maritime Transport 21 The port of Karachi is Pakistan's largest and busiest seaport. several upgrades affecting the country’s commercial ports are already underway. A third one. It is 15 km away from a national highway. Integration with international regulation is a necessary step. One of its major advantages is its proximity to different national transport facilities. Port Qasim is Pakistan's second busiest port. The approach to the port is through a long 45 km navigation channel. In any case. 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 Karachi Port Trust (KPT) Table 4: Current projects in maritime infrastructure. focused on transshipment. is set to open in 2012. 5. 5 of which appointed by the private sector.

The private sector already plays a noteworthy role in port infrastructure in Pakistan. which account for 85 percent of its total shipments. there is an inherent need for harmonization and standardization of regulation across countries. These do not appear to be real candidates for privatization at the moment. resulting in efficiency gains. the refineries’ decision was to some extent influenced by the Pakistani government. we recommend that Pakistan liberalize the maritime transport industry in order to attract the top maritime services providers at a global level.3. The state-owned Pakistan National Shipping Corporation (PNSC) is the country’s largest shipping company. In the case of liner shipping13. Source: Drewry Shipping Consultants-IFC. Its major shareholder is the Ministry of Communications. It is therefore recommended that Pakistan adapts its regulation on maritime transport to the standards set by OECD countries. A similar liberalization process of the maritime transport industry would entail a number of benefits for the country. should help to attract the top maritime services providers at a global level. particularly container shipping. 13 Liner shipping is regular shipping with set schedules in different harbors published in advance. By analyzing the industry and using our case study as proof of the delays in the transportation chain.Pakistan Logistics Maritime Transport 22 has not followed the pace of the one in ports. and create port quality assurance programs based in international best practices. It was established with the assistance of the Pakistan Navy in 1963 and nationalized by the government in 197111.1 Liberalize the Maritime Transport Industry Since maritime transportation is international in character. Implementing these recommendations will increase Pakistani exports by making them more competitive with other regional goods. To have legislation in line with that of the leading countries in the sector. Source: Business Monitor International (BMI). Several state-owned firms in the shipping. The capital-intensive character of liner shipping. This is in part the result of a successful negotiation with three of Pakistan’s major oil refineries to undertake crude oil shipments in 2002. it has also stated that it wants to promote and protect PNSC12. 5. According to BMI’s assessment. PNSC is mainly focused on liquids.3 Maritime Transport Recommendations While maritime transportation accounts for most of Pakistan’s international trade. including:  11 Liberalization policies would enhance competition within the sector. Although the government plans to induct the private sector into direct shipping. ship-building and repair sector exist. 5. has led to a substantial degree of concentration. 12 . inefficiencies and opportunities for improvement in the sector exist. the basic regulatory framework among OECD countries consists of “The Code of Liberalization of Current Invisible Operations” and “The Common Shipping Principles”.

’ This should be done by monitoring a series of key performance indicators (KPI) through a balanced scorecard. containers depot. loading and unloading rates. customs hangar.Pakistan Logistics Maritime Transport 23  Increased competition would force providers to improve the quality of their service. The quality assurance program of the Barcelona Port Authority14 (APB) includes the following customer service guarantees: 14 Source: Barcelona Port Authority (APB).  Availability of services to the ship: Bunkers.  Compliance with security.2 Quality Assurance Programs In order to create good practices that help raise the overall service level at Pakistani ports. punctuality. consolidation/de-consolidation. capacity. The purpose of tracking these KPIs is twofold. safety and environment regulation: Observance of the SOLAS and SAFEMED IMO conventions. transit times.  Users of maritime transport services would have a wider choice of options at competitive rates. cost. o Connection with logistics platforms. towage. IT expertise: Tracking and tracing processes and IT. Self-managed programs typically have penalty measures for poor port handling performance and have proven to reduce errors and delays. including:  Port operational performance: Dwell time.3. 5. and agriculture and sanitary area. ISPS code.  Quality of maritime services: Frequency. It will help identify the areas that lag behind international best practices and help the sector work towards overcoming these deficiencies. . In addition. as done in several OECD countries. waste treatment. this data should contribute to the implementation of quality assurance programs in ports. pilotage.  Availability of services to the goods: Reefer container service. water.   Degree of intermodal and logistic integration: o Access to land transport including rail and road. it is recommended that ports introduce their own ‘quality assurance program. The KPIs should cover various fields. and mooring. availability of door-to-door service. power. bounded warehouse. provisions. and availability of daytime or 24/7 port services. transit time. and FAL standards. and clarity on costs.  Liberalization should ensure greater transparency and thus create an investment favorable environment in the sector.

 Coordinated physical inspection: If a maximum set time for inspection is exceeded. and ultimately become more competitive.  Information: If no answer is provided to questions regarding container traffic procedures within four working hours. The penalty for not fulfilling this policy is of €450.Pakistan Logistics Maritime Transport  24 Safe handling: In the case of damaged or absence of goods. a penalty ranging from €150 (less than 24 hours delay) to €450 (over 48 hours delay) applies. . In the long run. gradually raise the standard of their services. This is also applicable if wrong information is provided. a performance monitoring process (balanced scorecard) combined with a quality assurance program (service guarantees) should allow Pakistani ports to improve their performance.  Transit: The APB guarantees that customs procedures for containerized goods on transit take place within the same day that transit documents are admitted. a minimum amount of €150 and a maximum amount of €450 per container is paid. a penalty of €30 is applied.

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. Most importers and exporters are not satisfied with the railway services. 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. with weak infrastructure and a sector dominated by a public operator. cement and sugar. of which broad gauge tracks account for 7. inefficiencies in the railways service include:  Rates are based in market trends in road transport. Developing rail infrastructure and services has cost advantages. This transport mean is only used for a few specific goods such as wheat.1 Rail Infrastructure and Services Assessment Pakistan’s rail network is operated by the state-owned Pakistan Railways (PR) under the supervision of the Ministry of Railways. coal.  PR has continued to offer the traditional pattern of supply-driven services. it is hardly used for the transport of perishable goods.718 km and narrow gauge tracks for the remaining 445 km.021 Table 5: Pakistan-Germany rail network size comparison. The consequence is that Pakistan Railways has lost a considerable share of its private freight traffic.Pakistan Logistics Rail Transport 25 6. Largely neglected for decades. Concept Network size (km) Country area (sq-km) Pakistan 8. It only has international active links with India.163 km. However. The dominance of road transport up to now has been evident. even though the rationale for many lines had effectively disappeared. plans exist to also establish a further connection with China and other neighboring countries. but railways use for freight transport in Pakistan is limited in volume.640 Germany 41. fertilizer. which is the main competitor to rail transport. 6. missing an opportunity to reduce the number of trucks on the roads and the problems that these cause.315 357.  PR has continued to operate the entire network by cross-subsidizing profitable and non-profitable freight routes. Weak rail services in Pakistan fail to offer an alternative to road transportation. This implies that no efficient alternative transport mean to the congested National Trade Corridor (NTC) exist. It comprises 8.  PR has failed to downsize staff substantially and streamline operations. is more environmentally friendly than road transportation. Pakistan Railways’ freight business unit operates over 200 freight stations. .163 881. Eurostat and BMI. and will take some of the stress away from the overburdened and underdeveloped trucking industry. and so urgent consignments are usually transported by truck. Source: Pakistan Railways.

In a context in which there are no alternative providers in the market offering competitive rail services. 6. we recommend promoting public-private partnerships to upgrade the railway network and introducing management techniques in the railway’s freight division as important initial steps towards the development of a modern rail transport.9% 26 Table 6: Pakistan-Germany rail network usage comparison.5 823 5.4% 346 309 106. Despite its poor track record. Publicprivate partnerships (PPP) can help to increase the pace at which this is upgraded. Pakistan Railways needs to take major steps to improve the freight services quality.355 2. Source: Pakistan Railways. The main benefit of investing in rail transport is to reduce road traffic.Pakistan Logistics Rail Transport Concept Tons per year (million) Avg.914 21. In that context. Challenges faced today include improving delivery times. the implementation of double tracks in different parts of the network would allow notably increasing . rail has commercial potential and could play a valuable transport role in the country. no modern management techniques have been introduced in the public railways operator up to now.2. Source: Ministry of Railways.2 Rail Transport Recommendations Rail transport in Pakistan has a high opportunity for improvement.000 km Investment (USD Million) 160 Time Frame Funds Origin 2014 Pakistan Government 25 2012 Pakistan Government 8 2010 Pakistan Railways Table 7: Current projects in rail infrastructure. reliability and tracking information. the rail network in Pakistan can significantly be enlarged. All in all. Eurostat and BMI. 1. 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. The underlying reason for the current situation is the total lack of competition within the sector. trip distance (km) Tons-km (million) per year Usage in land transport Pakistan Germany 6. 6. Besides.1 Promote PPP Initiatives for the Development of the Rail Network With a number of areas still underserved. a number of upgrading works in different areas of the rail network are currently underway. provide a fast and cheaper way of moving goods domestically. and if the necessary reforms are taken.

PPP arrangements should also contribute to bring the latest know-how and technology into the sector. competitive. .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. the long-term goal of reforms would be to open up the sector to private competition in order to allow a specialized.Pakistan Logistics Rail Transport 27 frequencies and reducing trip times. other additional actions should include:  Eradicate cross-subsidizing practices between profitable and non-profitable freight routes. but that same experiment was not done for freight trains.  Eliminate the lines for which its commercial justification has effectively disappeared. 6. rail freight operator to enter the market. moving away from the long established pattern in the company of supply-driven services.  Listen to the demands of its present and potential customers. Ideally. 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.2. Besides. A pilot program was run in the country for operating passenger trains under a private sector scheme through lease. However. We recommend establishing a department in Pakistan Railways dedicated to freight transport and building its capacity as a necessary first step. 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.

0 percent owned by private individuals. Islamabad. Pakistan exporters complain about the extremely long reimbursement time of air freight subsidies (i. Peshawar.1 Air Infrastructure and Services Assessment There are 139 airports in Pakistan. Besides. although important in certain circumstances. Air freight rate level is normally linked to capacity available. but even with it the rates ex India are lower. Air Transport Air cargo services in Pakistan are limited and fail to complement other transport means. and cut down on transport times to places like Europe. Canada and Libya. Quetta and Sialkot. so it can be concluded that air freight rates out of Pakistan reflect the existing capacity limitations. 26.Pakistan Logistics Air Transport 28 7. Palletized direct routes to Europe are only available from Pakistan International Airlines (PIA) and British Airways. such in those occasions where the planned transport mode would result in late delivery and penalties. Source: Logistics Consulting Group. increasing the capital costs during transportation and making it difficult to cope with demand for frequent on-time deliveries requested by overseas importers. Lahore. While a few niche markets rely on air transport. some exporters claim that it takes 3-6 months to be reimbursed). Pakistan’s major competitor in this field. and in connection to the subsidies issue. Air cargo is still infrequently used in Pakistan. including international ones at Karachi.7 percent state-owned. damaging customer satisfaction. There is a freight subsidy of 25 percent offered to Pakistan exporters. 16 . In addition. an study of the air freight rates for general cargo17 showed that India. 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. the USA. Air transport options are rather reduced. there are few options to choose from.3 percent owned by state-run institutions and 16. 15 Source: Business Monitor International (BMI). offers air freight rates out of Pakistan that are on average 30 percent lower.e. It provides passenger air travel and freight services to destinations in Europe. The Pakistani government has recently agreed to provide $150 million to support the renewal of its fleet15. Transit opportunities are available via the Emirates and Turkey. It is 57. 7. 17 Source: Logistics Consulting Group. Such a delay has a negative impact on the supply line. Developing this industry and encouraging more operators to enter the market would open up more markets for perishable goods. PIA is the major national airline.

as envisioned on the “Vision 2030” paper.  Bifurcation of regulatory.  Regionally competitive user charges and fuel prices.Pakistan Logistics Air Transport 7.  Encouragement of private sector airlines to operate on international routes.  Liberalization of air service agreements.  Demand-based infrastructure development. the actions suggested to be taken in the field include:  Unilateral open sky policy. commercial and operating functions. If only these steps already identified by the country’s authorities were put in practice.2 29 Air Transport Recommendations 7.1 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 country’s leading airports in order to meet the delivery requirements of a modern global supply chain.2. the improvement in the air freight scenario would be notable. Not many further recommendations could be proposed. . There.

Freight villages can vary in size. Freight villages are often PPPs. which provide various logistics-related activities such as warehousing. packing. but will also help those at the beginning of the supply chain like small farmers and producers. developed by large scale operators that host complimentary services and related operators. invest in reefer storage facilities to increase the shelf life of perishable goods. unlicensed workshops. Other Logistical Infrastructure Overall.1 Freight Villages Freight villages are logistics concentration points. and then private sector operators develop the facilities. from few hectares to thousands of hectares. freight villages are typically a private sector business. In parallel. As a result. The proposed initiatives will not only help the sector nationally. 8. where an area is defined as a freight village by the public sector usually at the intersection of major multimode routes. cutting out intermediaries that add little value to the products. the situation is more worrying than ever before. the surroundings of the larger cities are congested with on the rise disorganized parking and waiting areas. contributing to traffic jams and pollution. developed at strategic locations. This combines with a widespread lack of metropolitan regulations (or enforcement when these exist) on specific timings for trucks to load. 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. break-bulk centre. and open new markets for Pakistani goods. depending on their functions. With an ever growing truck fleet. increase product quality. unload and circulate inside metropolitan areas. All these recommendations are intended to strengthen the logistics industry in Pakistan and help make the country’s products more competitive by adding value while reducing logistics costs. not even a downgraded version of such facilities with limited features exists. In fact.Pakistan Logistics Other Logistical Infrastructure 30 8. the logistics sector in Pakistan needs a number of national improvements that will facilitate the flow of goods. Long stretches of roads leading into cities or circumvallation roads around them have de facto been turned into truck queuing and waiting areas. and truck parking. In Europe. and develop public trading platforms for smaller and medium size producers to sell their goods. No such facilities exist in Pakistan. service facilities and spare parts outlets have emerged in such areas. re-packing. .

should contribute to raise Pakistan’s logistics infrastructure overall level.3 Trading Spaces Logistics chains of perishables in Pakistan are characterized by an abundance of intermediaries that add little value to the supply chain. intermediaries typically retain a share of the profits.4. are better preserved. they would have more money to invest in new equipment and be able to adapt to international harvesting quality standards. and are of higher quality.4 8. Well-stored perishables have a longer shelf life.1 Logistical Infrastructure Recommendations Development of Public-Private Trans-Freight Stations and Reefer Storage Areas The development of public-private freight villages. and so are generally located within larger logistic centers such as freight villages. they sell at higher prices. 8. but the economy as a whole as well.2 31 Reefer Storage There is a lack of reefer storage facilities in Pakistan. Because there are few public trading spaces that smaller farmers can sell their goods to. As a result. 8. These facilities require strategic location choice and a set of complementary services to be operationally viable. logistic platforms and reefer storage areas at key locations throughout the country such as ports.Pakistan Logistics Other Logistical Infrastructure 8. Source: University of California. we recommend the development of a network . As an initial step. as most of them are unable to sell to wholesalers without going through an intermediary. The lack of reefer storage facilities at key locations for exports is particularly critical for companies dealing with agricultural perishable goods. benefiting not only the individual farmers. airports or the main connection nodes. Farmers thus make less profit than they otherwise could. If farmers were able to capture a larger portion of the profit. Fruit Apricot Strawberry Pineapple Oranges Banana Mango Kiwi Range (ºC) 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. This could open up new markets for Pakistani goods.

 Inspection: It will make quality procedures and checks easier to be enforced.  Product quality: It will be improved through better storage in shared common facilities. The Spanish MERCAs model18 has proved very successful and is regarded as a good practice.000 tons. Such a move is expected to generate the following positive effects: 18  Price structure: Prices will be set more clearly. while the rest are companies dedicated to complementary activities such as distribution.650 companies work through it. It is recommended to consider this model as a possible benchmark. 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. 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. Source: Merca Zaragoza. In absolute terms. fishing products to 0.2 Development of Wholesale Central Markets In order to eliminate intermediaries that add little value. About 3.  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.  Services to the truck: TFS would be a single-point solution for truck operators by hosting there all facilities and services they might need. logistic or customer services. . 8. MERCAs annual sales of fruits and vegetables add up to 4.Pakistan Logistics Other Logistical Infrastructure 32 of simple logistic platforms that we might prefer to refer to as trans-freight stations (TFS).5 million tons. as the market will be more transparent. it is recommended to promote the development of regional wholesale central markets. Smaller vehicles would then carry the load to multiple destinations within the metropolitan city limits. TFS would be a point of load breakdown.200 are wholesalers that are part of the different food markets. and meat products to 175.4. As on how to proceed.  Cargo breakdown: For larger trucks.  Finance development: Identify and define financing options for the construction of these facilities through grants or soft credits.  Accessibility: It will make easier for small producers to access large retailers. The MERCAs network is formed by 23 units across Spain. from which about 2.1 million tons.

.Pakistan Logistics Other Logistical Infrastructure  33 Logistical education: Markets can be used as education centers. hence these will help to improve logistical know-how of users.

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. It results in lower cost control and so lower profits. as the industry grows. Most individuals do not understand how important their role is in securing that their function is fulfilled. operational malpractices occur. poorer planning. In Pakistan. 9. It brings longer lead times. The IT system is mainly being used for emails. except by the larger corporations. . This occurs due to inappropriate infrastructure. supply line control and logistics cost control required to qualify as a partner for international clients. However. suppliers and public bodies (customs). 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). but even in the few cases that this is available.  Control mechanisms: Few Pakistani enterprises can provide the merchandising and quality control. and reforming customs procedures.  IT Culture: EDI and other IT solutions are not commonly used in the private sector.  Quality management: There is a general lack of understanding and support of total quality and zero errors concepts. there need to be certain national initiatives to ensure that the logistics industry is both sustainable and efficient. Namely. This has increased the need for a continuing education targeted to provide specific answers to the latest developments on the field. 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.1 Logistical Education Over the last few years. the situation is especially critical. The lack of IT utilization hampers communication with buyers. and higher cost margins than desirable.Pakistan Logistics Cross-Cutting Issues 34 9. logistics has evolved into a wide-ranging subject that covers all aspects related to supply chain management (SCM). inferior customer service. Logistics and SCM know-how is not common even in issues often labeled as “essential” elsewhere. these national initiatives should focus on developing standard educational training to create a knowledge base of expertise for the sector.

bureaucracy in customs is high. which is generally not the case. Lead times could be cut if the GD-PRAL system was further aligned. However. goods are inspected in largely unsuitable facilities. Server capacity also needs to be improved. Dwell time is also not yet satisfactory. Interference from other departments is also another usual source of delay. The higher percentage of goods inspected implies . Besides. inspections are not risk-based. lead times and deliveries are often unpredictable. with a notably high percentage of goods being inspected. Containers are sometimes retained for examination and clearance by the Anti-Narcotics Force (ANF) or other departments involved in control over drugs illegal imports. This means that a higher inventory level is needed for both importers and exporters. leaving room for and being subject to the discretion of inspectors. 15 Customs clearance 10 Document preparation 5 0 Pakistan Spain Figure 10: Duration of customs procedures. Processing time with an on-line system should make it possible to clear as much as 90 percent of the consignments within 3 days. In addition. the Pakistan Customs Computerized System (PACCS) is so far only implemented at Karachi International Container Terminal (KICT). so that many signatures were avoided and took place electronically instead. Source: World Bank. as it is currently delaying the processes and creating longer lead times.Pakistan Logistics Cross-Cutting Issues 9. The break in the cold chain reduces shelf life and quality of Pakistani products to be shipped abroad. As a result. Delays on imports often arise in connection with valuation of goods. As a result of all of the above. Perishable goods are mostly inspected in non-reefer facilities. This is the case even at the main logistic nodes such as the country’s main export ports. customs officials tend to act more like an auditor than as a facilitator. with customs not accepting the shippers’ invoice as to reflect true value. The extent of paperwork in GD (now on computer) is still large. as 63 fields and numerous background details have to be fulfilled. the cold chain is interrupted even if inspections are performed quickly. still generating too much red tape.2 35 Customs and Inspection In Pakistan. Overall. Inspection rules are unclear. Such a time frame would be in line with international best practice standards.

.3.Pakistan Logistics Cross-Cutting Issues 36 higher direct costs in the value chain. 9.3. Order processing times tend to hamper overall lead times across sectors. The industry needs to promote training within the sector. 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. and have a negative effect on the distribution lead time due 19 20 Source: “Overview of IFC Advisory Programs” document. Business Edge covers19 a range of practical management training products and services. Source: “Transport Logistics: shared solutions to common challenges” document.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. 9.3 Recommendations 9. the private sector will want to have a sufficient local pool of qualified people to recruit from. IFC’s Business Edge advisory product might be a good fit to address training needs in the sector. resulting in increased rewards to the more skilled certified workers. develop and operate the most advanced automated systems. However. the cost of moving and positioning the container for customs inspection. it can be adapted to the requirements of specific industries. it is recommended to focus efforts on building local know-how throughout the logistics chain. for example. continuous training and personnel development in logistics are critical for responding to advanced technology and global business trends. for example.1 Develop Logistic Training Modules With an emerging logistics industry. Given that there is a critical lack of local logistics expertise in Pakistan. and so skilled people are needed to plan. Therefore. workers’ skills can be improved through education and certification. as recommended by the OECD20:  Build up qualified workforce: Workers’ skills have to accommodate the technology available. Logistics training should be geared towards two long-term goals. being able to properly operate a reefer facility. Flexible in its application. In addition to training programs.  Respond to new developments in the field: Technology is rapidly changing. as well as help promote relevant skills for jobs in the sector.

IT can enhance the efficiency of supply chain management significantly. weaknesses. Customs should create risk profiles of traders. opportunities and threats. allowing traders with a good reputation to go through fewer inspections. in particular that of logistics operations. and order processing. It is recommended to assess IT training needs in the sector and develop an IT training module customized to logistics operations. and ultimately increase competitiveness. Internet application. 9. but provides the best cost-benefit balance. should be extended across the country and complemented with required training and investment support.3 Customer-Oriented Approach in Customs Customs officers are perceived by the private sector as difficult to deal with. One way to counteract these problems is through targeted training and capacity building on risk management techniques and efficient customer-service. The initiative should focus on:  IT business diagnostic services in order to provide companies with an insight into their business' strengths. now mainly limited to Karachi.  Assisting IT acquisition and usage. and the changes that can be made. at least at the bigger .  Advisory services to introduce IT products in the workplace such as EDI. 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.Pakistan Logistics Cross-Cutting Issues 37 to the low level of integration of the parties involved in-between. A major effort has to be made to have PACCS available in other cities in Pakistan. and lacking customer-service orientation. 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. in order to increase traceability and streamlining of tools like radio-frequency.3. service-oriented. and data bases. This approach acknowledges that customs will never catch every fraud. and integrate physical inspections into a single system with referrals to other relevant border control agencies. bar codes. work culture. invoicing. The purpose is to create an efficient business process coupled with a customer-friendly.  Specific actions for the usage of e-platforms across the supply chain. particularly at ports and storage areas. html. unknowledgeable about modern customs inspection procedures.

Potential savings are promising. LC and insurance through GD-PRAL. Facilitation measures should be put in place with the aim to reduce the quantity of information to be provided directly by trade. thus making it accessible for a bigger part of the import-export industry. 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. As a first step. it is recommended to further simplify the E-filing of pro-forma invoice.Pakistan Logistics Cross-Cutting Issues 38 customs stations. . 21 Calculation based on 2005 imports. as well as to reduce red tape.  Build capacity: Improving the efficiency of customs and technical control agencies requires modern inspection facilities. including reefer rooms and inspection posts.

further research needs to be done to pinpoint problems and opportunities for the private sector to engage and profit from the logistics industry. There are numerous examples of other countries with successful logistics industries that can be used as a baseline for best practice logistics policy. Having strong and strategic policies in place will attract further investment into the sector. business and investment opportunities and projects will need to be mapped in detail based on areas that are identified as being highest impact. particularly perishable goods. 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. and encouraged to communicate with policy makers. profiled. As part of the effort to engage the private sector in investing in logistics opportunities. and help increase the incomes of stakeholders from the largest companies down to the smallest growers. The case study of the path of a crate of oranges in Pakistan was compared to a similar crate in Spain. and ongoing investment projects. The study also ascertained the exact amount of days spent for different logistics processes like customs clearance and transport. ensuring its sustainability. face in making their way from grower and producer to the final consumer. this case study helped the study gain valuable insight into the different obstacles that goods. attract new players into the sector. 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. enabling the analysis to identify where Spain’s logistics sector was able to exceed that of Pakistan’s. research of the sector from government and other resources. interested private sector players will need to be identified. Further. Going forward. this sector will open up new opportunities. 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. . By having an efficient and competitive logistics industry. Strengthening the logistics sector has numerous benefits.Pakistan Logistics Conclusion and Going Forward 10. Also. Pakistan will be able to increase their exports and reach different markets with high quality standards. 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. While this report has highlighted the numerous obstacles in logistics processes and detailed recommendations on a sector and national basis.

Annex 11.Pakistan Logistics Annex 11.1 Acronyms ANF Anti-Narcotics Force APB Autoritat Portuària de Barcelona (Barcelona Port Authority) BMI Business Monitor International BOT Build Operate Transfer DGT Dirección General de Tráfico (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 .

 Logistics Consulting Group (2006). Services. Strategic Directions to Achieve Vision 2030.  Government of Pakistan (2007). Pakistan Infrastructure Report. Hamid (2004). Pakistan Shipping Report.  Government of Pakistan (2007).  Guindy. S.  Business Monitor International (2009).  Business Monitor International (2009).  Devlin & Yee (2005). Safe and High Quality Supply Chains and Networks for the Citrus Industry between Mediterranean Partner Countries and Europe. Pakistan Freight Transport Report. E. (2007). Capital and Labor Market: A Policy Research Agenda for the MENA Region.2 Bibliography  Alavi. MEDA MoS Project.-l.  Business Monitor International (2009). Transport Logistics: Shared Solutions to Common Challenges.  World Trade Organization (2008). Pakistan in the 21st Century: Vision 2030. .  Hoekman.  OECD (2006). Trade Facilitation: the Role of Modern Technology (presentation). (2007).  Consortium. Trade Logistics in Developing Countries: The Case of Middle East and North Africa. B. Pakistan: Logistics Cost Study. Deeper Integration of Goods. Bernard (2009). Trucking Policy for the Modernization of the Trucking Sector under the National Trade Corridor Improvement Program (presentation). Country Trade Profiles.Pakistan Logistics Annex 42 11.  Government of Pakistan (2007).

pk seema.pk noman.3 List of Interviewees Contact Company Phone Email Ahmed Mansoor Sabir Imtiaz Brig.com amir.riaz@packages.lutfi@unilever.com marek.pk citkhipak@yahoo. 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. S.com.Pakistan Logistics Annex 11.S.minkiewicz@makropakistan.A.com 43 .com.pk sabirimtiaz@centurypaper.com cjambrose@engro.com.janjua@packages. Khan Marek Minkiewicz M. Qasim Abdul S.pk babarb@eculine.com.

Project 3rd Container Terminal at the Karachi Port Gwadar Port 2nd Phase: container.a. Khan motorway (405 km) Makran Coastal road (653 km) Gwadar . n. 2012 2014 Karachi Port Trust (KPT) Gwadar Port Authority & PSA International NHA NHA NHA Pakistan Government 98 50 2011 2011 RDA Karachi Port Trust (KPT) 25 2012 Pakistan Government 8 2010 Pakistan Railways .a.Pakistan Logistics Annex 44 11.000 km Investment (USD mill.G.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. oil and bulk grain terminals. plus Ro-Ro berth Sheikhupura – D.) Time Frame Funds Origin 950 840 2012 2014 642 420 296 160 n.Ratodero road (885 km) Development of double track from Peshawar to Lodhran (884 km) Rawalpindi . 1.4 Projects Summary This is a consolidated list of the different recent and on-going projects mentioned in different tables throughout the report.

Regulation. Logistics operators Intermodality.Policies related to logistics. transport and exports.Customs and Inspection Freight consolidation. processing plants. Country-wide distribution. Existing plans and government actions. etc. Logistics activities Logistics platforms Dry ports Rail transport Truck transport Road transportation services Road infrastructures Annex Handling & Storage at Intermediate Nodes Industries. Local /urban transport Transport of agricultural products Processing and packaging Rail services and infrastructures Pakistan Logistics 45 11.5 The Logistics of Citrus . Distribution. 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 .