Transcript Pakistan Competitiveness and Logistics

Pakistan Competitiveness and Logistics Challenges
Presented by Moin Malik, Chief Executive
22 November 2011
Geographic Overview
― Pakistan is located at a strategic and
important location at the cross-roads of
South Asia, the Middle East and Central
Asia.
― It has 1,046 km coastline along the
Arabian Sea and Gulf of Oman in the
South.
― Pakistan has great potential for trade with
landlocked Central Asian States,
Afghanistan for the Afghan Transit Trade
and to the west and north into China, via
the Karakoram highway.
― There is a common border of 1600
kilometer between Pakistan & India.
— A study by Peterson Institute for International Economics (PIIE) gravity
model, shows the potential of formal trade between India and Pakistan is
roughly 20 times greater than recorded trade.
Logistics & transport impediments in South Asia
―
In recent years, Pakistan's growth of imports has far
outpaced growth of exports, resulting in a large and
growing trade deficit.
―
Refusal to allow overland routes to third countries is a
major impediment to regional trade.
―
Long cargo dwell times, limited implementation of transit
agreements, and high transit costs are just some of the
trade constraints that hinder movement of goods.
―
Customs and border procedures are not oriented to
facilitate trade where as in sufficient infrastructure add
on to the problems.
―
High costs and dwell times have contributed to
unauthorized cross border trade.
―
Pakistan lacks solid trade relationship with its large and
economically dynamic neighbors.
Pakistan can become Asia’s trade, energy and transport corridor
Pakistan's Logistics performance indicators
Indicator
Description
Pakistan
rank
(out of 155)
Over all LPI
Over all Logistics performance scores
110
Customs
Efficiency of clearance process
134
Infrastructure
Quality of trade and transport related infrastructure
120
Logistics Competence
Competence of quality of logistics
120
Timeliness
Timeliness of shipments in reaching destinations
110
Tracking & Tracing
Ability to track and trace consignments
93
International Shipments
Ease of arranging competitively priced shipments
66
Source: World Bank – LPI 2010
Tunisia
Turkey
Indonesia
South Africa
Russia
India
UAE
Mexico
Jordan
Oman
Uganda
Nigeria
Czech Republic
Malaysia
Qatar
Vietnam
Turkey
Saudia Arabia
Russia
140
UAE
Brazil
India
Respondants
160
Egypt
60
Venezuela
Ethiopia
Brazil
Bangladesh
Pakistan
Respondants
Emerging markets Logistics index
Top Ten Logistics Hub
120
100
80
60
40
20
0
Least Attractive Logistics Hubs
50
40
30
20
10
0
Logistics infrastructure in Pakistan
Sea Ports
― Port traffic in Pakistan grows at 8 percent annually in recent years.
― Two major ports, Port Karachi and Port Qasim, handle 95 percent of all
international trade.
― Port Gawadar, operated by Singapore Port Authority, is aiming to
develop into a central energy port in the region. If fully operational
the port will be in competition with the other ports in the region like
Chabahar port in Iran, as well as Dubai in the United Arab Emirates.
― The local road infrastructure is insufficient and depleted. The need is to
construct major new motorways and highways linking ports to main
urban and industrial centers.
Airports
―
There are 36 operational airports. Karachi is Pakistan's main
airport but significant levels of both domestic and international
cargo are also handled at Islamabad and Lahore.
―
Pakistan International Airlines (PIA), the major public sector
airline, is facing the competition from a few private airlines.
―
Poor infrastructure, lack of proper storage, racking &
temperature-controlled facilities are lacking even at the major
Airports.
Railways
―
Railways are the cheapest mode of transportation and plays a vital
role in passenger and freight transportation for a country.
―
At present Pakistan railways is ineffective, trains, tracks and
machinery are outdated or faulty- the losses have reached billions of
rupees.
―
A number of services of Pakistan Railways have been cancelled
because of mismanagement and shortage of locomotives, fuel and
financing.
―
The need is to emphasizes private sector participation in an attempt
to increase responsiveness, efficiency and competitiveness of the
railways sector.
Trucking
― Road transport is the backbone of Pakistan’s transport system,
accounting for 96 percent of freight movement.
― Currently there is a fleet of over 0.2 million trucks plying on the roads.
― The technology of over 96% fleet consists of rigid suspension of old &
obsolete Bedford trucks out of which about 67% are 2 & 3 axle rigid
trucks, 8% articulated and 25% multi-axles trucks.
―
The illegal modification of trucks, low freight rates due to unhealthy
competition and prevalence of ineffective vehicle examination system
in the country, encourages overloading which damages the roads and
cause accidents.
―
According to an estimate, 70% of the 2, 3 axle trucks are overloaded
while 40% of 4, axle trucks are overloaded.
―
Roads deterioration and damages due to overloading are imposing
huge infrastructure maintenance cost, slow travel times and high fuel
costs.
Challenges
1. Government policies
― Inconsistent Government policies – No Progress on the great initiative
of NTCIP.
2.
Rising cost of fuel & electricity
— Electricity & fuel cost are the major components of logistics operating
cost which is continuously rising.
3. Financing facilities
― High interest rates vs. Profit returns and high risk on credit in this
vulnerable market is a challenge for this highly capital intensive
product.
― Unavailability of financial arrangement from government in terms of
soft loans or tax relaxation to boost this industry.
4. Inefficient transport sector
― Although the transport sector is functional, its inefficiencies with long
waiting and traveling times, high costs, and low reliability are dragging
the country’s economic growth.
― The poor performance of the sector is estimated to cost the economy
4-6 percent of GDP each year.
Challenges :
5. Human Resource
― Limited local technical expertise , capacity building required in
terms of trained Human Resources
6. Disintegrated transport function
― Disintegrated Transport and Logistics Functions – NHA, Post Office,
Communications and Ports and Shipping.
7. Legislation
— Pakistan’s regulations are not in line of the International Best
Practices; we are still following Carriage of Goods by Sea, Road and
Air Act of 1925 and Bill of Lading law of 1865.
8. Regulatory Mechanism
― Logistics industry in Pakistan lacks regulatory mechanism leading
to mushroom growth.
9. Unorganized Trucking Sector
— Unorganized Trucking Sector eating 2% of our GDP.
— Inefficient trucking system not only increases our POL consumption
but also affects our Road Infrastructure.
Challenges :
10. Limited local infrastructure
― Lack of required infrastructure for an efficient supply chain
system
11. Lack of cold storage facilities
—
Around 30% - 35% of our perishable products gets wasted
based on the inefficiency of the cold chain.
— Poor infrastructure, lack of temperature-controlled storage
facilities and processing centers at Airports, Seaports and closer
to production base
12. Technical knowledge
—
Lack of Awareness of the Incoterms and International Best
Practices with no optimization and benefits of Importing on FOB
or Ex-works basis.
Opportunities
1. Geographic Location
― Pakistan’s geographical location can make it a strong Hub
for the flow through traffic between Asia and Europe.
― Our strategic project of GAWADAR Port can make us an
obvious choice / market as logistics Hub to cater for
transit trade to and from Afghanistan, CIS and Western
China.
2. Attractive consumer market
― With the rising population and consumer market of over
180M people, Pakistan is an attractive retail market in
terms of potential growth for temperature controlled
cargo mainly F&V, poultry products, fast food chain,
consumer products (ice creams, dairy, edibles,) &
pharmaceuticals.
3. Logistics infrastructure
― Presently, underserved logistics infrastructure is a key
opportunity for the industry players. Declaring and
providing required infrastructure for Pakistan’s Port to be
a transshipment Hub offering Air /Sea or Sea /Air
facilities can bring a lot of savings for our exports &
imports.
Opportunities
4. Increasing awareness for 3PLs
― Growing market and awareness of the outsources
supply chain services – business to concentrate on
their core products / functions
5. Trucking sector
―
Trucking sector has great potential for modernization
of trucking industry
6. Agro based economy
―
Strong Agriculture base has high export market
potential for Gulf / Middle East, particularly for Fruits,
Dairy and Live Stock
Recommendations
― Government should encourage investor friendly financing arrangements & policies enabling more
organized players to enter into this market.
― NTCIP should be implemented completely with the approx. expected saving of USD 500M per
annum – 1.34% of the value of Imports and Exports and 0.45% of GDP.
― Integrated multi-model networks and enhanced Ports facilities will lead to a unified and integrated
network where goods can move efficiently, thus reducing the cost of transportation.
― Trained manpower to manage specialized tasks. Need is to build the capacity of the industry’s work
force. PIFFA has established certified training courses on freight forwarding - however this needs
to be further enhanced.
― Necessary legislations to meet the requirement of Global Trade and improvement on LPIs.
― Government and Trade bodies should accept Freight Forwarding as a proper industry and should
optimize on their capabilities.
― Unified Ministry of Transport and Logistics should be established integrating all function including
Air, Sea, Road Transportation, Ports and Shipping and trade facilitation.
Thank you