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Economic importance and problems of logistics sector

Industrialization and growing consumerism have led to the need for developing an effective transportation system. Key to the success of any product or services lies inease of its availability for the user. A high quality product or service that is not accessible when required by the potential customer is bound to fail. It is as important, if not more, to identify and develop the best logistics system, as is the product design, manufacturing equipment and human resource. Logistics is about planning and executing how the resources are acquired, stored and then the finished product or service is transported and made available in the relevant markets and customers.

Pakistan with its population of 212 million is the fifth most populous country of the world. Pakistan spans over an area of 881,913 square kilometers that is approximately equal to the combined areas of France and UK. This big population spread over vast territory of Pakistan signifies the importance of an efficient logistics system to ensure availability of goods and services to all and sundry living across the country. This has made the logistics industry an important contributor to the overall economy of Pakistan. Logistics industry of Pakistan is about 23% of the service sector and provides approximately 6% of the total employment. Logistics industry grew by about 3.34% in 2019 and contributed 12.9% to the GDP.

Due to the strategic location of Pakistan and transit trade, the logistics have pathway importance as well. China Pakistan Economic Corridor (CPEC) has also added to the quantum of opportunities for the logistics sector. The Industrial Parks and Special Economic Zones of CPEC would add to and further strengthen the road infra structure facilitating the flow of the trucks from and to these SEZs. The country would also have to facilitate international transport by further improving and facilitating border crossings, airports and ports. These CPEC projects have improved business opportunities for warehousing and freight forwarding companies. Efficient logistics, especially international transportation, requires modern warehousing and upgradation of the ports.

Pakistan has a large logistics sector, which is valued at about US$35 billion and has a double-digit growth rate. Pakistan has given prime importance to developing hard infrastructure during the last two decades to facilitate the flow of goods and to ease access to the markets but still there is a long way to go. Pakistan is ranked at 95 among 167 countries on the aggregated Logistic Performance Index (LPI) in 2019. It puts Pakistan behind even some Asian countries due to relatively less spending on infrastructure projects including airports and highways. India is at 35th position while Sri Lanka stands at 92nd in the list.

Logistics sector is constantly improving and attracting continuous investment as well. Industrial sector in Pakistan have expanded significantly over the last two decades. As such, the logistics industry has also expanded to meet the demand of transporting goods made by this expanding industrial sector. To be more efficient the logistics sector needs to be more organized, and adopt 360-dgree business approach to avoid operational losses. No one can deny the importance of support from the government agencies to acquire this goal. In Pakistan, we have roads extending over 264,000 Kms that signifies the importance of trucking in facilitating the efficient flow of goods across the country and beyond its borders to the neighboring countries. The logistics sector is facing myriad of problems including tax structure, port infrastructure, warehousing, rising fuel costs, technology deterrence etc. These problems are most obvious ones and have mostly been discussed and taken care of occasionally. However, the most frequent and practical problems are shortage of trained drivers, cost of new trucks and uncertainty as to the return load/consignment. These are the most common problems having relatively less attention of the logistics sector.

The efficiency is at the heart of any business success, logistics sector cannot achieve this competence without having high quality trucks. The government can facilitate this by ensuring low interest financing for the trucks. This would encourage investments in the logistics sector. This low interest financing for the trucks would add to the number of high quality trucks in the market and can bring down freight charges due to low operational cost of the new high quality trucks. This would also facilitate the flow of goods and add to the economic activity and would strengthen truck-manufacturing/assembling sector as well.

Another major problem is that of the return load for the trucks. The uncertainty as to the return load also adds to the operational costs and freight. This problem can be addressed by close liaison and cooperation between the transporters and their clients and pragmatic planning by the transporters at an association level. This cooperation can also result in mutual benefit by lowering operational costs of the freight. The transporters already practicing this cooperation and planning at certain level but this require further concerted efforts on their part by developing stronger mutually beneficial relationship with the manufacturers and other merchandise suppliers.

The shortage of well-trained drivers is also an issue that have seldom been given a serious thought. A well trained driver can reduce the operational cost by taking proper care of the vehicle and by adopting optimal routes. National Logistics Cell (NLC) have some driver training centers but these are not enough to meet the emerging demand. In association with the logistic companies, the Government should develop modern driving centers for the young people opting to be heavy truck drivers. This will not only facilitate the safety of consignments but would also help to overcome the accidents caused by untrained drivers.

The railway cargo has constantly been ignored and have shrunk to about 10% of the total transportation. Rail Cargo is 40% of the total transportation in India. Road transport is generally preferred over rail transport being quick and more controllable. The Government, however, should concentrate on developing rail infrastructure capable of transporting at least 25% of the total cargo. Effective use of the rail cargo can bring down the freight cost.

Pakistan Vision 2025 also envisages”Modernizing Transportation Infrastructure & Greater Regional Connectivity” as one of its goals. Adopting latest technological trends emerging in the logistics market, like online booking like Careem/Uber and Bykea model, is also pivotal to profitable survival by adding to the efficiency of the logistics sector. The importance of logistics in the whole supply chain process is eminent. No business can survive and flourish without an effective logistics system. So improving logistics sector is in the mutual benefit of the whole business community and Government as well.

(The writer is a sales and business specialist based in Islamabad. He can be reached at [email protected])

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