Pakistan’s Logistics Sector Shouldn’t Be Underperforming: ADB

Despite the presence of major international players and good capabilities, Pakistan’s logistics sector is underperforming – the cumulative effect of infrastructure obsolescence, strong inertias at all levels that delay reforms, says Asian Development Bank (ADB).

ADB, in its latest report, “Ports and Logistics Scoping Study in CAREC Countries,” stated that though Karachi is still by large the major gateway port for Afghanistan, and that the new Gwadar port ambitions to become a second one, there is a risk that a growing share of this trade shifts to Iranian ports. A new government Logistics Policy, the implementation of the International Road Transports Convention, and stability in Afghanistan offer some opportunities for ports in Pakistan to increase their role as gateways into Central Asia.

The report noted that strong inertias at all levels (government, vested interests, industry lobbies, and unions) are delaying much-needed reforms. Underperforming railways because of many factors (poor infrastructure, shortage of rolling stock and obsolescence, governance) is another weak area. Among weakness obsolescence of road transport fleet, noncompliance to international standards, high costs, delays, and limited reliability for transit trade to Afghanistan, hurdles of different type make transit trade to Central Asia across Afghanistan or the People’s Republic of China (PRC) still too complicated.

The report noted that that regional and domestic instability and security, Afghanistan transit trade shifting to Iran, country indebtedness, and allocation of public resources to high profile but less productive projects are some of the threats.

The report noted that Pakistan and the People’s Republic of China (PRC) are the only two CAREC countries that host open-sea ports capable of serving large bulk and container ships. Before considering the significance of open-sea ports in third-party countries, international trade through seaports in Pakistan and the PRC cannot offer a total solution to the CAREC region as a whole. This is because the varied locations of traded goods to and from CAREC countries will dictate the use of third-party ports and various modalities. These factors emphasize the importance of international seaports and transport corridors located in third-party countries to the CAREC nation’s trade activity.

The report noted that port hinterlands are defined not only by distance but by a series of factors such as the main origin and destination of cargoes, the maritime connectivity of ports, the existence of consolidated, and reliable multimodal transport, availability of backhaul cargoes, and institutional aspects (e.g., ease to cross borders, security, trade and transport agreements).

These kinds of factors explain that though Iran and Pakistan ports are closer to some Central Asian countries such as Tajikistan, Turkmenistan, or Uzbekistan (on the range of 2,000 km), they are less used than other ports located much further away (up to 4,000 and 5,000 km) in the Pacific or the Baltic.

Chinese merchandise trade may also be routed via Pakistan and Iran for connection to Afghanistan and, to a much lesser extent, other CAREC countries, it added.

The report noted that Pakistan port administrators have long struggled to move ahead with a reform agenda, particularly at Karachi Ports Trust (KPT). However, legacy issues seem to be hampering a full transition to a landlord model, allowing private sector contracts for harbor towage, dredging of channels, pilotage, and stevedoring of bulk cargoes. Instead, KPT maintains full services for nearly all port functions, purchases capital equipment, and employs full-time staff and management.

It could also be said that port development and planning at KPT is restricted given the segregation from direct involvement in hinterland transport access to the port areas. KPT also manages a large portfolio of commercial real estate that reportedly contributes a major part of its operations. An absence of coordination between Pakistan government authorities (Pakistan Railways, National Highways Authority, and Ministry of Ports and Shipping) is evident in developing meaningful improvements to port access for rail and road links. The strong labor unions in Karachi have been able to resist the modernization of work practices and rationalization of workers employed for port labor.

In Pakistan, the hinterland access to the port of Karachi is severely limited due to urban development and the lack of road and railway capacity to keep pace with the increase in containerized volumes. The road transport fleet in Pakistan is mostly obsolete and non-compliant with international standards.

Though the Afghan-Pakistan Transit Trade Agreement (APTTA) has been operational since 2011, from its beginnings, there have been issues involving the processes such as excessive dwell time, delays at the port of entry, cost burdens involving financial guarantees for transit trucks, monopoly trucking by licensing limited numbers of bonded carriers or insurance guarantees for freight. Despite TIR, as a rule of thumb, Pakistan plated trucks would not drive beyond Jalalabad, and Afghanistan trucks will not go beyond Peshawar.

Transit cargo is subject to jealous monitoring as pilfering and smuggling is a major problem. Thus both countries have made efforts on tight security protocols for the transit route to avoid containers in transit being stolen or pilfered.

Following the transit agreement, 100 percent of transit to Afghanistan is sealed containers. But concerns about loss and delayed return of transit containers on the Pakistan–Afghanistan route have been prevalent.

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