Pakistan & Gulf Economist

Pakistan’s system of transport modes needs mending

Pakistan’s system of transport modes needs mending

*Gwadar and Thar coal surely put Pakistan in the ranks of a developed nation
*Intra-transport shortcomings, capacity deficiencies, obsolete laws and rules must be resolved
*Pakistan maritime sector needs investment and policy changes

Interview with Mr Majyd Aziz – – President UN Global Network Pakistan

PAGE: Tell me something about yourself and your organization, please:

Majyd Aziz: I am an industrialist and businessman. Presently, I am President UN Global Network Pakistan. I am Former President of Employers Federation of Pakistan, South Asian Forum of Employers, and Karachi Chamber of Commerce and Industry, Former Chairman of SITE Association of Industry, and ex Member Board of Directors of Zarai Taraqiati Bank Ltd, KESC, and SITE Ltd. I was Chairman of Board of Directors of SME Bank Ltd. I am Senior Advisor for Pakistan for Transnational Strategy Group, Washington. I am on the Governing Body of ILO and Executive Committee of Confederation of Asia Pacific Employers. I am also Secretary General of English Speaking Union of Pakistan besides being Founding Chairman of Pakistan Sri Lanka and Pakistan Indonesia Business Forums and was Founding Secretary General and Vice Chairman of Pakistan Japan Business Forum.

PAGE: What are your views on logistics solutions for industry in Pakistan?

Majyd Aziz: Over the past many years, transportation of goods, petroleum products, water, agricultural produce, and minerals, both imports as well as exports, have witnessed a phenomenal rise. Transportation of goods is a difficult environment in Pakistan. The primary mode of inter-provincial transportation are trucking, trains and by air. All three have been neglected over many decades and there is no logistical structure that pragmatically facilitates users. Road transport is the backbone of Pakistan’s transport system. The less than 10,000 km long National Highway and Motorway network – which is around four percent of the total road network – carries eighty percent of Pakistan’s total traffic. The Pakistan Railways has not modernized nor kept up with the latest requirements.

There is a perpetual shortage of wagons and it is a harrowing task to book wagons, especially for goods moving inwards from the Ports. However, the freight forwarders dispatching goods under the Afghan Pakistan Transit Trade Agreement and supposedly destined for across the Durand Line seldom face difficulty in reserving wagons while this is not the case for goods for the Pakistani manufacturers and commercial enterprises. The reason is obvious and does not need any explanation. It is now crucial to modernize the railway infrastructure to establish a competitive and an efficient network to the key cities across the country. There is an imperative need to increase the number of rolling stock to handle the growing trade. This will include extending the rail network to the ports and the dry ports, enhancing the capacity for the containerized goods and enabling the cold-storage supply chains. Every Railways Minister comes up with announcements of a grandiose nature but the ground reality is still what it has always been. The trucking sector is also under pressure because of the shortage of trucks as well as the system of owner-operators.

The Pakistani economy is on an upward trajectory and the ensuing outcome of shortage of vehicles has increased freight cost substantially. In this case too, the prices vary when there is excessive demand for trucks especially during fruit transport seasons. The system of owner-operators and a very low number of established trucking companies have exacerbated the already distressing situation. Naturally, the high cost of transportation is passed on to the consumers resulting in increase in prices of goods and commodities. There is also an acute shortage of reefer trucks that are crucial for transportation of fruits from the northern areas to the Ports. Pakistan’s total fleet of trucks of all sizes and capacity include even those vehicles that are unsuited for long hauls or are environmentally unfit to traverse the Motorway network. Many trucks do not ply inter-city but are generally utilized for intra-city haulage.

An informal survey done some years ago highlighted a shortage of nearly 75,000 trucks of different specifications. Nowadays, many Chinese trucks are traversing daily from China to Gwadar Port and back. Most of these trucks return empty and hence the element of added cost is there. One solution is to negotiate an official agreement where most of these trucks could be sold in Pakistan. Pakistan has four or five airlines depending on which airline is either operating or parked at airports for whatever reasons. These airlines do not have cargo planes for intercity haulage. Until these airlines have the cargo carrying capacity, the foreign cargo airlines should be allowed to fly directly to the cities so that users in the northern areas are able to get their consignments in a faster mode. All in all, if Pakistan economy is to boom, these intra-transport shortcomings, capacity deficiencies, obsolete laws and rules, and incentives for investors must be addressed and resolved on a fast track basis.

PAGE: How would you describe Gwadar Port?

Majyd Aziz: If to “describe” Gwadar Port refers to its strategic location on convergence of three most commercially important regions of the world, that is, oil-rich Middle East, or Central Asian region, or South Asia, or that without Gwadar, the dynamics of Belt Road Initiative will not be so influential or global, or that the new world epicenter revolves around Gwadar, or that Gwadar is around 3,000 km from the Chinese Khunjerab Pass, 1000 km from Chaman, and 2000 km from Torkham, then it can be rightly said that Gwadar is the Future of Pakistan. These important facts are not the only ways to describe Gwadar. What is prominent about Gwadar, with its Deep Sea Port, is its potential as the economic hub that is destined to be the center of all future trade, investment and economic prosperity. Gwadar Port is well-placed to be the gateway Port for monumental movement of trade, both from maritime as well as road networks. On the map, the location of Gwadar Port is ideal than locations of Ports of Iran, Oman and Dubai.

Gwadar Port will have the distinctive advantage as a facilitative transshipment hub for Pakistan and, significantly, for China, Russia, Central Asia, and Afghanistan. This would enable it to be among the top eight or nine busiest container ports and if China, which has six ports, diverts substantial cargo to Gwadar, then it could become among the very few top container transshipment ports of the world. At the same time, Gwadar could have one of the larger warehousing yards, and this is one area where Pakistan can earn billions every year.

Importantly, Pakistan now has three Ports and Gwadar would also be the source of entry for goods destined for Afghanistan, especially for transportation of minerals. A sister-Port agreement with Chahbahar Port of Iran would further enhance the importance of Gwadar. The marginalized people of Balochistan, especially the youth, would benefit from the huge demand for human resources, once Gwadar becomes the Port of Call and once investors establish refineries, industries, commercial construction projects, hospitality sector, and fisheries, etc. It is estimated that there would be 30,000 Port-related jobs and overall 1.50-2.00 million jobs could be created. Pakistan’s revenue is expected to be $15 billion in transit fees, $10 billion from Port, $2-3 billion from toll tax, and billions of Rupees from economic activities. There is a potential of $30 billion investment in commercial, residential and industrial construction and over $1 billion in setting up hotels and rest houses. Undoubtedly, Gwadar (alongwith Thar coal) would put Pakistan in the ranks of a developed nation.

PAGE: How do you see the shipping industry of Pakistan vis-a-vis the neighboring countries?

Majyd Aziz: The Pakistani shipping sector is limited to PNSC for varied reasons. The most important ones relate to the architecture of government policies for the maritime sector. The lack of newcomers willing to invest in setting up own shipping lines needs to be understood. The fact is that ownership of a shipping line under the Pakistan flag is not feasible in the present environment since investors are not comfortable with the policies and also the cost per crew member is much higher than in neighboring countries such as India, Sri Lanka, Bangladesh and Myanmar. The personnel in these countries are much more efficient, trained, able to converse in English, and cheaper than the crew from Pakistan. The potential investors also face immense difficulties because of government policy that each Pakistani ship should hire a prescribed number of Pakistani crew thus adding to the cost of operations.

Moreover, the labor union representing them is strong and forceful and the attitude of most of the Pakistani crew is unbecoming and thus these are deterrents and not welcomed my investors. Moreover, compared to neighboring countries, there are issues with the immigration department where excessive red tape is a normal activity and where corruption is endemic. At the same time, despite a laid down Maritime Policy, there are daily issues related to foreign exchange receipts and remittances. Why are permissions required for receipt and for disbursement of expenses in respect of foreign exchange because these are everyday, normal shipping business procedures? Furthermore, because of low number of berths, because of monopolistic nature of FAP Terminal and PIBT (for coal), and because of shortage of internal transportation, millions are paid for demurrage and that too in precious foreign exchange. Then there is the matter of “light” fees charged by the Customs Department, ostensibly for the lighthouse facility. These charges are anywhere between $1100 to $1300 per vessel, and billions have been collected over the decades but no one seems to know where these have been expensed.

There is a 10% discount for Pakistan flag ships on Port charges which usually are $3000-4000. In fact, to encourage investment, the discount should be atleast 25% of what the foreign vessels are charged. Another issue that disrupts movement of vessels is the inability of proper dredging and the lackadaisical attitude of concerned authorities to float dredging tenders and calls for intent to offer. One very disturbing factor is the right of first refusal accorded to PNSC. Even in the Maritime Policy, government cargo preference is given to PNSC and then to Pakistan flag vessels. Admittedly, there is no preference of PNSC for private sector cargo, but why is this clause in the Maritime Policy? Why doesn’t the government open up the oil tanker business instead of giving first right of refusal to PNSC? There are investors willing to enter the oil tanker trade if such roadblocks are removed. There should be a fair and genuine mode of business instead of creating a monopolistic environment. In most of the neighboring countries, open and transparent competition is allowed and hence shipping companies prosper and invest more.

In conclusion, the three Ports have to be real time user-friendly as this would attract more ships to call at the Ports. Then of course is the possibility of another future Port at Keti Bundar under CPEC. Therefore, Pakistan must address all issues faced by Ports as well as by truckers and airlines so that in a few years the solutions of various issued would propel Pakistan into the big leagues and lead to national economic prosperity. As Albert Einstein once said, “We cannot solve our problems with the same thinking we used when we created them”.

“Pakistan maritime sector needs investment and policy changes” ~~ Majyd Aziz

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