Pakistan ranks 122 in the logistics performance index which is the lowest in South Asia. The market of 220 million consumers and international geographic location connects Pakistan with the neighboring countries via ports, borders and air ports. The market size and the location provide immense opportunities both at individual and macro level for trade, natural corridor for transit trade, supply chain inclusiveness, e-commerce. Yet, this is possible only with an efficient and modern transport and logistics sector. Globally the logistics are declared as an important component of any economy. Several countries have efficiently reduced the cost of logistics with supporting policies and regulations. In USA, it is only 8.5 % of GDP. While it is high for China (17.8 %) and Vietnam (22.5 %) restricting development. Pakistan ranks 122 in the logistics performance index (LPI, 2018), lowest in South Asia.
According to the National Logistics and Freight policy (NFLP) 2021, the sector is highly fragmented and in dire need of modernization.
National Freight and Logistics Policy
The development of this National Freight and Logistics Policy (NFLP) was guided by the Steering Committee and the Working Group on National Freight and Logistics, chaired by the Ministry of Communications; published in September 2020. It has greatly benefitted from the discussions held and contributions received from all Members of the Steering Committee and Working Group.
In the modern world, nations compete intensely to attract investment, increase exports and improve the livelihood of their citizens. While there are many underlying conditions and reasons for attaining success, one common denominator is the presence of a modern and efficient transport and logistics infrastructure. The ability to handle, store and transport goods to and from international markets is essential in achieving global competitiveness. Yet the capacity to move cross-border goods can be a challenging task. Efficient transport and logistics sector require reliable and modernized infrastructure; appropriate industrial capacity; business friendly institutions to maximize contribution to trade and economy. Together they can strengthen trade and facilitate business, providing growth to the economy and people. Pakistan’s freight and logistics sector is poised with tremendous potential, owing to its’ domestic market with over 220m people and international strategic geographic location. The Government is improving the transport infrastructure through the investment programs under the China-Pakistan Economic Corridors (CPEC) and Central Asia Regional Economic Cooperation Program (CAREC) and is facilitating business by acceding to and agreeing international trade and transport conventions.
Elements of Logistics
- Infrastructural capacity: It refers to the quality and extensiveness of transportation infrastructure, such as road network, railway stations, seaport terminals, and a host of logistics facilities such as distribution centres, container freight stations and logistics parks.
- Institutional capacity: It refer to the governance, enforcements and incentives to develop the sector. Laws, regulations and procedures are necessary.
- Industrial capacity: It is defined by the market structure, productivity of the labour force, application of technology and the deployment of assets. All these three elements shape the transport and logistical efficiency in each country
In 2015, the World Bank estimated that the logistics sector’s worth in Pakistan could reach approximately USD 30.77 billion. The country could achieve this by capitalizing on untapped potential and develop road and rail networks, including air, sea and dry ports, eventually integrating rural areas and urban markets, through efficient infrastructure and enhanced connectivity. Under China—Pakistan Economic Corridor (CPEC) of the Belt and Road Initiative (BRI), Pakistan undertook several infrastructure projects, most of which reached completion in 2020. Therefore, the fiscal year 2019-20 was crucial, as the extensive road network was expected to lower costs of services, logistics and transport with the added benefit of increased efficiency. In 2019, the transport and logistics sector grew at an annual rate of 3.34 % and contributed 12.9 % to the GDP. According to the Pakistan Economic Survey 2018-19, the transport sector was the second-highest contributor to GDP in the services sector. The transport sector employs a significant number of people and it was expected to create an additional 0.6 million jobs approximately after completion of CPEC’s physical infrastructure projects. However, with limited mobility, operational growth for the sector remains bleak.
Pakistani courier and logistics companies can benefit from massive opportunities created by the China-Pakistan Economic Corridor (CPEC) to enhance the logistic network via road links in regional countries. CPEC offers a huge business opportunity to Pakistan’s logistic companies in the areas of truck operations. The CPEC offered huge business opportunities to logistics companies in truck operations with a focus to provide them access to Central Asian countries till Uzbekistan, for which the policy framework was being finalised to kick-start the operations. Various pilot projects of cargo transportation have been completed successfully between Pakistan and Uzbekistan with private companies. There are multiple challenges for streamlining the logistic channels in Pakistan with different countries which may take time to proceed but it will ultimately enhance the reach of Pakistani brands and products in different countries. The cost of operations of the logistics operators increased 50 per cent due to the increasing prices of petroleum products in the country but the companies did pass on the prices by 4 per cent at a local level,
e-Commerce in Pakistan
Pakistan is still largely a cash-based, informal economy. The majority of transactions are conducted in cash, except for large ones requiring a bank draft or pay order. Several studies suggest that up to 60% percent of the economy is informal.
Revenue in the eCommerce market is projected to reach US$6,807.00m in 2022. Revenue is expected to show an annual growth rate (CAGR 2022-2027) of 8.49%, resulting in a projected market volume of US$10,230.00m by 2027.
A number of government departments have started to offer services via the Internet. In the private sector, four Pakistani airlines now offer e-ticketing and almost all local banks offer online banking services. This segment of the economy is expected to grow steadily as there are approximately 100 million Internet subscribers in Pakistan, a figure that is expected to growth significantly over the next five years. As per local trade resources, Pakistan is the 39th largest market for eCommerce with a revenue of 7.4 billion in 2021, placing it ahead of South Africa and behind Nigeria.
With an increase of 84%, the Pakistani eCommerce market contributed to the worldwide growth rate of 18% in 2021. Just like in Pakistan, global eCommerce sales are expected to increase over the next years. As new markets are emerging, global growth will continue over the next years. This development will be propelled by East and Southeast Asia with their growing middle class and their lagging offline infrastructure.
With a yearly growth rate of 5% between 2021 and 2025, Pakistan is expected to grow at a slower rate than the global average of 10%
According to the Q2 2022 B2C Ecommerce Survey, the market in Pakistan is expected to grow by 24.47% on annual basis to reach US$12.0 billion in 2022. The medium to the long-term growth story of the B2C Ecommerce industry in Pakistan promises to be attractive.
The B2C Ecommerce is expected to grow steadily over the forecast period, recording a CAGR of 18.53% during 2022-2026. The country’s B2C Ecommerce Gross Merchandise Value will increase from US$9.7 billion in 2021 to reach US$23.7 billion by 2026. This report provides a detailed data centric analysis of B2C ecommerce market dynamics, covering over 100 KPIs in Pakistan.
It details market opportunity across key B2C verticals – Retail Shopping, Travel & Hospitality, Online Food Service, Media and Entertainment, Healthcare and Wellness, and Technology Products and Services. It provides market share by key players across key verticals along with sales channels (Platform to Consumer, Direct to Consumer, Consumer to Consumer). In addition, it provides spending pattern by payment instruments along with a snapshot of consumer behaviour in Pakistan.
The report also covers niche trends such as market size by live streaming engagement model and cross border purchases. It also covers ecommerce spend share by operating systems, device (mobile vs desktop) and cities.
In addition, to detailed data-centric analysis, this report provides analyst commentary on key trends, drivers, strategies, and innovations in the B2C ecommerce industry in Pakistan.
The author, Mr. Nazir Ahmed Shaikh is freelance writer, columnist, blogger and motivational speaker. He write articles on diversified topics. Mr. Shaikh could be contacted at nazir_shaikh86@hotmailcom.