International Development Association (IDA) will provide US $25 million for "Trade and Transport Facilitation Project - II" to improve performance of trade and transport logistics by facilitating the implementation of the NTCIP; and the simplification and modernisation of Pakistan's international trade procedures and practices.
In a project update report, Jean Noel Guillossou, Senior Transport. Economist of World Bank said that Pakistan has faced both external and internal shocks during the past 12 months resulting in a deteriorating macro-economic situation. The government is now determined to regain and maintain macroeconomic stability and has been discussing with the IMF and the World Bank measures to put the economy back to a path of high sustainable growth.
Jean Noel Guillossou mentioned that the economic growth accelerated from the average of 4.6 percent during the 1990's to an average of 7.2 percent during the five years preceding the recent crisis, driven by solid performances in the services and industrial sectors, with contribution from agriculture. With the support of the community of development partners and implementation of measures to improve macro-economic performance which is underway showing positive results, the GOP aims to realise its goal of sustained 7 to 8 percent economic growth to achieve middle income country status by 2030.
WB report observed that the Pakistan Government recognises that transport and trade logistics efficiencies are necessary for economic stabilisation, sustained growth and international competitiveness. Supportive transport infrastructure remains one of the pre-requisites for sustained high economic growth. This was identified by the Government as a priority in the 2003-06 Poverty Reduction Strategy Paper (PRSP-I) and confirmed in the PRSP-II for 2008-11 under preparation by the Government where the objective of removing infrastructure bottlenecks through public-private partnership is one of the seven pillars of the Government's strategy. The Government intends to achieve this objective by continuing implementing the National Trade Corridor Improvement Program (NTCIP) adopted in 2005.
WB report pointed out that the main weaknesses of the Pakistan transport system in relation to what might be termed "international norms" can be summarised as follows:
-- High port costs and high port profits, resulting in higher charges to users than might be considered as desirable in terms of overall economic policy, increasing openness to the world economy and stimulating trade.
-- Long dwell times for inbound containers, resulting in congested terminals and the need to construct additional facilities. Ports with relatively shallow draft, which will increasingly limit shipping connections as the size of container vessels on direct service increase.
-- A fragmented approach towards trade facilitation with improvements to be made in the National Trade and Transport Facilitation Committee (NTTFC), the public private forum on trade facilitation issues. A weak, fragmented and relatively under-developed freight forwarding/ logistics sector, which has yet to provide the breadth of services and levels of vertical integration which are increasingly found elsewhere.
-- A rail system with the haul distances and engineering standards which should provide the potential for rail to take a substantial share of the long distance freight market but carries insignificant levels of freight traffic and has been largely abandoned by the private sector.
-- A main road infrastructure which requires major investment to provide the accessibility, capacity and quality required for rapid and reliable road services.
-- A trucking sector, operating old and technologically outdated trucks, which offers low freight rates but long transit times and unreliable service quality unless shippers are prepared to introduce additional and costly measures. Import regulations and tariff structures that inhibit the modernisation of the trucking fleet. A trucking sector which has low private costs but high external costs in terms of vehicle overloading, leading to road damage and high accident rates, and congestion.
World Bank report revealed that the development objectives of the NTCIP are to reduce the cost of trade and transport logistics and bring services' quality to international standards in order to reduce the cost of doing business in Pakistan and ultimately enhance export competitiveness and accelerate industrialisation.
The NTCIP is a holistic and integrated approach which encompasses the public and the private sector, services and infrastructure, reforms and investments, and the various sectors which are responsible for the level of performance of the National Trade Corridor (NTC).
The sectors include highways, road transport, ports and shipping, civil aviation, railways, and customs and trade logistics. NTC serves domestic needs and links the main industrial centres in Punjab and neighbouring countries in the north-west (Afghanistan) and north (China) with international markets through the southern Karachi area ports and the Gwadar port.
Most of Pakistan's external and internal trade transits through NTC - together the ports, roads and railways along the NTC handle 95% of external trade, 65% of total land freight and serve the regions of the country which contribute 80 to 85 percent of GDP. With a strong reform agenda supplemented by a comprehensive investment program, NTCIP has become essentially the medium term transport master plan for the country.
WB projected report mentioned that the strategic thrust of the program involves an extensive consultation and consensus building process with all public and private sector stakeholders, focusing on: (i) quick results through policy interventions, systemic and procedural improvements; and (ii) deep rooted institutional reforms to ensure sustainability.
The key policy areas targeted by NTCIP include policies that would: (a) lead to modern and streamlined trade and transport logistics practices; (b) improve port efficiency, reduce the costs for port users and enhance port management accountability; (c) create a commercial and accountable environment in Pakistan Railways and increase private sector participation in operation of rail services; (d) modernise the trucking industry and reduce the cost of externalities for the country; (e) sustain delivery of an efficient, safe and reliable National Highways system; and (f) promote and ensure safe, secure, economical and efficient civil aviation operations and boost air trade.
The proposed operation is fully consistent with the strategic objective of the FY 06-09 Country Assistance Strategy (CAS) to remove infrastructure bottlenecks supports sustained economic growth and improves competitiveness.
The CAS identifies the need for significant investment in Pakistan's infrastructure, in particular for the modernisation of the National Trade Corridor, to support Pakistan's growth and service delivery goals. The second Poverty Reduction Strategy Paper under preparation by the Government of Pakistan for the period 2009-2011 is based on ten pillars with pillar 7 "Removing Infrastructure Bottlenecks through Public-Private Partnerships" providing the objective to which the transport sector is expected to contribute.
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