Pakistan is in dire need of financing to the tune of Rs 35 billion per year for 'Indus Trade Corridor' for maintaining the current growth rate of GDP. This was the gist of a working paper prepared by South Asia Energy & Infrastructure Unit of World Bank, which is going to be discussed by the WB team with Pakistan Government.
'Indus Trade Corridor' is a 'gateway' to Central Asian States and Afghanistan. The 'corridor' area contributes 80 to 85 percent of GDP and encompasses nearly 80 percentage of urban population living around the 'corridor'.
Experts of South Asia Energy and Infrastructure Unit of World Bank contend that Pakistan requires major investment and policy changes and full support of 'Leadership and Management' to achieve the goal. "The future must not only be conceived, it must be carefully carved", they say.
According to the working paper of the study, the 'Indus Trade Corridor' takes care of Pakistan's external and internal trade. Presently, two ports are handling 95 percent of its external trade. Two main roads and a main railway line are handling 65 percent of total land freight. Ten dry ports are catering to high-value external trade, while the existing pipelines are carrying six million tons POL and natural gas.
Pakistan government is fully cognisant of the importance of transport to economy, but has somehow not been able to focus its vision on supporting trade. An investment of at least Rs 35 billion per year for development of ports, rail and roads for establishment of an efficient logistic network is essential to meet the high-trajectory growth in the economy.
World Bank experts have emphasised the need for launching reforms in Pakistan Railways and inclusion of private sector in ports, improvement of TF--especially documentation and legal environment of transport. 'Indus Trade Corridor' is not just ports, roads, rail, warehouses, dry ports and pipelines. This 'corridor' should also deal with services, eg shipping and port services, trucking, railways, handling, warehousing, customs, insurance, banking, ICT, freight forwarding etc, which require up-to-date procedures, legislation, regulation, administration, documentation and data processing.
They have said that in Pakistan on the one hand the quality for a complete logistic system and the quality of service is poor, while on the other it is also inefficient, which tends to escalate cost of trading very much to the detriment of the national economy.
They further pointed out that the container dwell times at Pakistan ports are 11 times higher than those of developed countries and 3 times higher than those of East Asia. Trucking rates for high value commodity traders are much higher than India, Brazil and China where the quality of service is much better. In Pakistan, rail carries less than 5 percent of freight and takes 21 to 28 days to deliver goods to upcountry destinations, which is 4 to 7 times slower than China and US. Can it support 7-8 percent sustained growth?
Even at this poor level of service, they added, the 'corridor' utilisation is more than 80 percent of existing capacity. According to projected forecast, the projected growth would be doubled by 2015 which would require much higher levels of service. On top of that, passenger demand would be competing for available capacity, while Pakistan government is investing five times less than East Asia/China in terms of present rate of GDP.
Ports Deterring Trade: The World Bank experts observed that the high cost and poor performance are creating more complications for trade and business. It is a costly port to enter, as it costs 5-9 times more than other ports in the region. The ports' limited draught precludes the latest and most efficient ships from calling. Port booking for more space against berth occupancy is low. Informal/outdated trade practices are hurting Pakistan's competitiveness.
Non-factor services (transport, insurance and related services) are approximately 16 percent of the foreign trade account, while in EU it is a bare 4-6 percent. Customs clearance takes an average 2-3 days longer than East-Asian norms (an additional day of delay=0.55 value loss), while poor physical logistics, eg local transit time alone is 40 percent of total transit (to markets).
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