Pakistan As A Key Player In The Regional Logistics Chain

The foremost question we need to ask ourselves is whether Pakistan has got what it takes to be a key player in the regional logistics chain. Though certainly endowed with the right credentials, it’s aspirations will remain a mirage unless it learns to embrace new concepts, act decisively in the national interest and formulate policies that encourage efficiency.

Goods always have and continue to be shipped through sea, rail and road. So what exactly is new about the concept of multimodal transportation? For one thing, it is meant to effectively utilize these means of transportation to make the entire journey seamless, fast, cheap, efficient and hassle-free.

 

There are two other terms which are often used interchangeably with multi-modal transportation but are in actuality more efficient variations of the same theme. Multi-modal transportation is simply the door-to-door freighting of goods from one country to another using two or more modes of transport. Intermodality goes a step further, whereby two or more modes of transport are used to transport the same loading unit or truck in an integrated manner, without loading or unloading. ‘Integrated Freight Transport’ goes on to provide a choice of alternative competing routes, with the capacity of changing both the destination and the delivery path for goods already en route.

 

In this age of competition and commerce, the customer is the king. Logistics companies vie with each other to give him what he wants and thereby enhance their own business prospects. So what exactly does the customer want? Put simply, all he desires is a one-stop, efficient, customized solution. In the past, he had to deliver the cargo to the port of lading and ensure that it gets picked up from the port of destination. The advent of containerization and the later day concept of multimodal transportation changed all that. The Multimodal Transport Operators (MTOs) can now undertake door-to-door deliveries without inconveniencing the customer in any way.

 

From the MTOs perspective, the entire process still involves services like putting the cargo into containers, haulage and customs clearance at both ends, sea transportation on mother vessel and feeder vessel, rail and / or road transportation and warehousing. MTOs are also required to handle import and export documentation including licensing, consular requirements and letter of credit negotiations and processing.

 

It still results in a win-win situation for everyone. The state benefits because of the revenues trickling in, as well as the resultant GDP and trade growth rate. The consignor benefits through a hassle – free, low cost experience. The MTOs enjoy greater earnings by streamlining the entire logistics chain. The operators and workers of the multimodal supply chain contribute significantly to it’s efficiency and are suitably rewarded.

 

The world is moving on to newer and newer concepts to facilitate customers, while keeping costs and hassles to a minimum. Pakistan cannot afford to keep still if it is to realize it’s due place in the global logistics chain. But first we have to understand where we currently stand. This can best be illustrated through the Logistics Performance Index (LPI) prepared under a world bank sponsored initiative.

 

In the 2010 index, Pakistan ranks 110 out of 154 countries. By contrast, Bangladesh is ranked 79, India 47, Turkey 39 and Malaysia 29. The index reveals that higher placed countries are those that have been investing more in reforms and improvements and are accordingly registering significant GDP and trade growth as well. The LPI is intended to help countries identify the challenges and opportunities they face in trade logistics performance and consequently needs to be viewed in a positive perspective if any improvement is to be sought.

 

The following six areas capture the most important aspects of the current logistics environment and is according reflected in the index:

 

  • Efficiency of the customs clearance process
  • Quality of trade and transport-related infrastructure
  • Ease of arranging competitively priced shipments
  • Competence and quality of logistics services
  • Ability to track and trace consignments
  • Frequency with which shipments reach the consignee within the scheduled or expected time

 

One fact that is widely known about multimodal usage in logistics is that it reduces the number of agencies a consignor has to deal with to just one: the multimodal transport operator. What is lesser known is that it enables the country to integrate seamlessly into the wider global logistics network.

 

For this to happen, the state has a significant role to play. For one thing, the state controls the nation’s ports, which, viewed from the perspective of global connectivity, constitutes a vital component. The customs clearance process is likewise governed by legislation enacted by the state and it’s execution by state functionaries is reputedly riddled with corruption, which goes on unchecked and unhindered. After clearance, the most efficient way to transport this cargo from the port all the way to Peshawar or Quetta and beyond is by rail, which again is state – owned.

 

It should be obvious to everyone by now that ports are no longer simply places where cargo is stored and handled. They are key constituents of any supply chain and play a major role in international distribution. The fourth generation ports of today are highly innovational in terms of the range of logistics and value-added services on offer. In Pakistan likewise, port managers should not act as mere traditional landlords but strive to actively facilitate the various stakeholders involved in the supply chain, to enable the whole process to become fully integrated and seamless. Customs processing should also be made efficient and corruption – free to facilitate the customers, shippers and end users.

 

The very concept of multimodality or intermodality envisages the most competitive and cost-effective utilization of each mode of transportation in the supply chain. Generally speaking, water transport is the cheapest mode for very long distances, railway is the cheapest over medium to long distances and road transport is the cheapest over short distances. Given Pakistan’s peculiar geography, transportation by rail should have been the instant and obvious choice for freight movement from the ports of Karachi, Bin Qasim and Gwadar right upto Peshawar and Quetta and beyond.

 

The possibilities for Pakistan to become a regional trade hub are limitless. A number of feasibility studies have indeed been undertaken for enhancement of our domestic and regional network. Gwadar can be linked to the existing rail system in Balochistan’s Mastung district and also directly to Quetta. Quetta in turn can be linked to Kandahar and onward to Turkmenistan and other Central Asian States. Peshawar can be linked to the Chinese East-West railway network through the Chinese border city of Kashi. A proposed line from Havelian to the Chinese railhead at Kashgar via the Khunjerab pass is already being actively deliberated upon.

 

On the eastern side, both trade as well as rail cartage has fallen prey to politics. The recent Pakistani decision to confer MFN status to India can well signal the revival of the Lahore – Amritsar, Munabao – Khokrapar and Ferozepur – Samasata links. Once functional, not only would travel and trade receive a boost, prices of goods would also come down, to the ultimate benefit of the common man.

 

On the western side, the revival of the Quetta – Zahedan rail link and it’s onward link-up with the rest of the Iranian rail network through Kerman in 2009, can now theoretically allow direct access to the Middle-East via Baghdad and Europe via Istanbul. One of the likely problems pertains to gauge incompatibility, with Pakistan Railways using the broad gauge and the standard gauge in place in Iran, Western Europe and most of the Middle East. This can however be eased by either converting the Quetta line to standard gauge or setting up a mechanized freight transfer facility at Chaman. Another precondition for interconnecting with this regional network into Europe and the Middle East is membership of the intergovernmental Organization for International Carriage by Rail (OTIF), which can be obtained by fulfilling the preconditions and acceding to the uniform rules laid down under the OTIF Convention (COTIF).

 

We never tire of touting Pakistan’s central geographical position in the trade matrix. It’s good to dream big but our aspirations can only be achieved if our vision is translated into reality. Even if translated into reality, like in the case of Gwadar port, whose Phase I encompassing four berths, has been completed since 2007, it still remains commercially meaningless unless all other parts of the logistics chain are in place. The Gwadar Port Authority has set aside around 923 hectares land adjacent to the planned container terminal for the establishment of a Free Zone. Despite being an attractive proposition for investors, there is no sign of this taking off in the short term either.

 

Many of the possibilities and much of the vision revolves around the rail network. Sadly, the Pakistan Railways, which had been heading downhill for a long time, is now close to self-destruction, it’s losses in excess of Rs. 55 billion during the current fiscal year alone. Nearly 60% of it’s locomotives are over 33 years old, with some even less than 15 years old in a state of disrepair. What is more worrying is that neither the railway workshops at Moghulpura nor the Risalpur Locomotive Factory is undertaking any production or repair work of significance.

 

In the late seventies, when congestion at Karachi Port was seen to be mounting, steps could have been initiated to restructure the railways to meet this requirement for freight movement, being ideally poised for cartage of heavy duty commodities in particular. Instead, the military clique, which had just assumed power, preferred a military solution: the setting up of an Army – run National Logistics Cell. The institution of the NLC, which many informed observers credit inter alia for the downfall of the Railways, introduced containerization to Pakistan and went on to rapidly become the largest freight handler in the region. It’s a pity though that 30 years on, despite state patronization, the institution is mired in a debt of over Rs. 4 billion and bearing a daily loss of Rs. 2.7 million on account of interest. Enjoying a virtual monopoly over state freight, the only way NLC could have bitten dust was through poor governance, which coupled with nepotism and bad decision-making, was what led to it’s currently poor financial state.

 

So, coming back to our central theme, can Pakistan really become a key player in the regional logistics network? Yes it can, provided it rationalizes it’s planning and execution process. Hinterland access needs to be immediately provided to Gwadar Port for inland connectivity. A direct road and rail link with Afghanistan via Quetta needs to be established. Afghanistan should also be encouraged to set up it’s own rail network for regional interconnectivity with Central Asia. But first and foremost, we need to revitalize our own railway system so that it not only becomes the main freight carrying mode from our ports to the provincial capitals but also beyond, to the markets of Europe, Middle-East and Central Asia. Another major weakness that we should seek to remedy is the development of suitable feeder roads that link up remote towns and villages to the national highway system. Allowing our eastern neighbor India transit facilities to Afghanistan would not only establish our commerce-friendly credentials, but would also be instrumental in generating revenues and job opportunities, which at the moment are going elsewhere.

 

We can’t afford to lose sight of the fact that change is in the air. For the first time perhaps in Afghanistan’s history, a railway line has been laid by NATO from Termez in Uzbekistan to Mazar Sharif, if only for the purpose of ferrying NATOs military supplies. India is also fast forwarding it’s plans for a north-south corridor to the markets of Central Asia through Iran and Northern Afghanistan. India is also eyeing another alternative route that would link up Bandar Abbas with Mazar Sharif through the Iranian cities of Sangan and Kerman. So unless we get our act together now, tomorrow may be too late.

 

The world is becoming intensely competitive and in order to survive, we must not hesitate to tap into any source of legitimate revenue, which furthers our broader economic interests at the same time. And for that to happen, we need to modify our mindset to embrace change and innovation, to enable idle dreams to be converted into a living vibrant reality.

 

Note: This constitutes the text of a talk delivered at Pakistan’s 1st Multi-modal International Transport & Logistics Conference at the Karachi Expo Centre on 9 May 2012. The theme of the conference was ‘Role of Pakistan’s Transportation & Logistics Industry in the 21st Century’. It was also published in the February 2013 issue of the ‘Navy News’.

2 Comments

  1. AvatarHaroon Khan December 15, 2013 at 5:13 AM

    Dear Pervaiz Asghar,
    My name is Haroon Khan and I am student of business Studies at Bahria University Islamabad Campus. I am writing to get your permission for quoting some information from your article i.e. Pakistan As A Key Player In The Regional Logistics Chain,
    in one of my subject (New Product Development) final project. Waiting for your kind response.

    Warm Regards!
    Haroon Khan

    1. pervaizpervaiz December 24, 2013 at 11:24 AM

      Yes, certainly.

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