A strong freight forwarding industry is imperative if the country is to capitalise on emerging opportunities as well as enhancing the efficiency of vulnerable industries. The increasing complexity of global trade practices comprising multi-modal transportation, cargo consolidation at origins and / or regional Hubs, distribution at destinations and multiple documentation have increased the importance of Freight Forwarding and Logistics Service Providers.
Reputable Freight Forwarding Players with their presence around the Globe brings a significant concept of an economical value added services to the customers by co-ordinating at both ends ie. Supplier and Customer. This entails with a cheaper freight options, providing updated information and ensuring the product reaches at the right time. Keeping in view its significance, Logistics industry needs to be recognised as a proper industry to build around certain parameters and frame work to regulate this business.
Pakistan International Freight Forwarding Association - PIFFA is the only recognised representative body having around over 500 members. It is the only platform which provides effective representation and support for Freight Forwarders operating in Pakistan.
The objectives of PIFFA are as follows:
I. Uphold a high standard of business ethics and professional conduct among freight forwarders;
II. Promote a high level of professional education and experience, essential to provide services;
III. Encourage operation of financially sound and stable freight forwarders;
IV. Contribute to combating fraud by ensuring improved services by better qualified freight forwarders, and Provide guidelines to PIFFA in establishing and maintaining a freight forwarding system.
PAKISTAN'S LOGISTICS PERFORAMNCE INDICATORS
Some recent studies conducted to analyse environment to do business on the overall Global Competitive Index (2010-11) conducted by World Economic Forum. Pakistan was ranked as 123 out of 139 countries scored below Kenya (106) and Ghana (114).
According to World Bank survey of 2010, Logistics Performance Indicators rating were given based on several parameters of the country's performance. There were 155 countries which were analysed on these indexes. The overall LPI of Pakistan was ranked at 110,
EMERGING MARKET LOGISTICS INDEX
Another study conducted by Transport Intelligence on emerging markets other then China . The survey asked the audience to rate the potential emerging markets which will emerge as logistics Hub in the future.
While in the same survey, the analysis was done on the preference of the logistics Hub and it was analysed that Pakistan's performance was viewed, by far, as the least attractive market, with concerns over security and infrastructure, corruption, ease of doing business, difficult custom procedures and government policies were cited as major issues. India, Brazil, UAE, Russia and Saudi Arabia were recognised as top five investment markets for logistics companies offering the largest opportunities.
Despite having the potential due to our population, strategic location and opportunities but we are being rated least in terms of preferences by the international players based on the reasons mentioned earlier.
Challenges: The challenges facing us to-day as a result of trade liberalisation and globalisation are that of maintaining our international competitiveness. These new compulsions have put enormous pressures on us and poor performance in just one aspect of our logistics supply chain could seriously affect the competitiveness of our exported products. As such an efficient and cost effective supply of logistics services has become vital for our survival.
To advance and realise this vision, we need to collectively work on the infrastructure Development. Improving our basic infrastructure is a key component that will directly and substantially affect our country's global competitiveness and the ability to attract investments. Unfortunately, our country's current infrastructure is still inadequate and in several areas need upgrading. Enhancing our transport network will reshape the country's physical and economic configuration. From fragmented island economies, the country can develop a unified and integrated economy where people and goods can move and trade swiftly and efficiently. It is with this vision that we need to focus our efforts in strengthening our connectivity and trade competitiveness in transport infrastructure and trade facilitation. Hopefully and eventually, they become our vehicle in accessing world markets and integrate our domestic economy to the larger global economy.
The government should support national trade facilitation reforms and mechanisms aiming to reduce the cost of trade and transit, discourage unauthorised trade and access export opportunities more effectively. To ensure reform and sustain the momentum of reform implementation, there is a need for stronger public and private sector institutions and improved co-ordination and exchange of information and consultation between public and private sectors.
Key players in the sector such as the port and airport operators, the cargo handling company, freight forwarders, customs brokers, internal transport enterprises, clearing agents, ship chandlers have to adopt best practices in order to develop a highly competitive logistics chain compared with the best in the world.
Human resource: There are no specialised institutes covering training of our Human Resources in specific fields. Though some of the universities have started Supply Chain management courses but generally the educational institutions are not at all aligned with the industry requirements. PIFFA, however with the support of NTTFC and FIATA, has initiated a formal training education and up gradation program for its members. For this purpose a formal 3 weeks train the trainer programs was conducted by the international trainers of FIATA which helped us to create a faculty of our own members to run formal diploma courses.
Financing facilities: The prevailing interest rate in the country and lack of financing facilities has been a real challenge for the development of logistics and freight forwarding industry. We also face a major challenge in terms of growing working capital requirement and the increased default payment issues in the market.
Freight Forwarders are exposed to extending credit facilities to the trade and on the other hand are bound to outlay to Shipping Lines and Air Lines. This requires a massive investment in terms of working capital. Increasing high interest rates compared with the returns puts a lot of pressure on the Freight Forwarders to meet their ends.
No regulatory Mechanism: Logistics industry needs to be recognised as a proper industry to build around certain parameters and frame work to regulate this business. Lack of no regulatory mechanism has resulted in mushroom growth in the industry with no barrier to entry.
Disintegrated Transport and Logistics Function: One of the major reason of not optimising our flow of goods is disintegrated portfolios of different co-related functions. NHA, Railways, Ports and Shipping, Communications, Post Office - we have all of these dis-integrated functions bringing no combined efficiencies and optimising an integrated approach. All of these functions have silos strategies with no co-ordination with each other.
Unorganized trucking sector: Our trucking fleet composition does not meet the demand of international standards. As per global standards articulated trucks (trailers) should be at least 50% of the truck fleet whereas in Pakistan, articulated trucks are only 12% of the composition. Unavailability of the proper articulated trucks, Overloading, No proper Safety Protocols, and usage of outdated fleets not only damages our road network but also increase our consumption of Fuel directly affecting our foreign exchange being drained out. They are also responsible of increasing our carbon footprint causing a lot of damage to the environment. In addition they are continuous safety risk on our roads. According to a research, inefficiencies involved in goods transportation eats up about 2% of our GDP.
Further, as per estimate 30% - 35% of our Agro base product gets wasted due to inefficiency in our system which otherwise would have contributed to our valuable foreign exchange.
We as a country has still got imbalance trade in terms of higher imports. On the import side we are still a Seller driven market and relying on C&F basis. Our traders are dependent on their Seller's demand for freight and at times face delays in documentation leading to detentions and demurrages and less or no track of their shipments.
OPPERTUNITIES: Pakistan's geographical location has immense potential to become a strong Hub for a flow through traffic between Asia and Europe. Our Geographical connectivity to China on one side and Europe via Iran and Turkey on other side makes us a logical trade corridor and logistics Hub.
With the turmoil settling down, Afghanistan to be stabilise in years to come, Growing interest of China in Gawadar - Pakistan geographically will play a key role for Silk Route, Afghanistan and CIS. The closet hot water accessible Port is with us and Gawadar was developed with the same perspective.
However, Lack of co-ordination between different governmental agencies, Required Road Infrastructure connectivity and law and order situation has affected the development of our this very important prospective project.
Our Population base and consumer market of over 160M people creates lot of opportunities for Logistics Providers to meet the demand and supply in the local market. Underserved logistics infrastructure is a key opportunity for the industry players as there is a room for investment and enhancing the capabilities to capitalise the gaps existing in the system.
Declaring and providing required infrastructure for Pakistan's Port to be a transshipment Hub offering Air /Sea or Sea /Air facilities. If the government provides required infrastructure capabilities and required regulation we can get the advantages of cargo being routed to be used as Transshipment Hub. Since Dubai ports at time is dwelling for space shortages - there is a need for an alternative for a consolidation Hub which can be explored to optimise on our potential.
With the growing awareness and realisation of the fact that the businesses will have to concentrate on their business / activities creates an opportunity for the outsource 3PL and 4PL services. Current inefficiencies and shortage of modern trucking fleet in Pakistan brings lot of opportunities for Logistics Providers to come in and make the required investments for modernisation of trucking services in Pakistan.
Pakistan being an Agro Base country has 4 seasons crops. However the existing inefficiencies in the entire supply chain of Agricultural products is resulting into wastage of around 30% - 35%. This creates an opportunity for the logistics providers to set-up modern processing centers and cool chain systems in the market. This can help us to tap the available export market potential of Fruits, Vegetable, Dairy and live stock to the nearest market of Gulf and Middle East.
Key Recommendations
I. With Integrated multi-model networks and enhanced Ports facilities leading to unified and integrated network where goods can move efficiently, thus reducing the cost of our Supply Chain. We need to develop Rail Networks efficiently to reduce the cost of our intra-cities transportation cost.
II. Keeping in view the importance of Supply Chain in all the industries - universities and educational institution should align with the corporate sector and introduce Supply Chain as a major subject in their business studies. Although we are activating our members to make their contributions but the Government should also come forward in providing required support to PIFFA for the development of proposed training academy.
III. Attractive Financing facilities should be available to the logistics sector which can in turn play a key role in the overall economic cost and cheaper products to consumers. It should be lower than KIBOR and will not only attract into modernising our infrastructure of our transportation and warehousing sector but also with these investments we can seek direct savings on our POL consumptions and wastages in the system. Further, Freight Forwarding companies should also be able to meet their working capital requirements.
IV. Reforms are needed into our legislations to meet the demands of today's world rather than continuing with outdated laws and regulations. There should be change in legislations to meet the industry requirements and should facilitate the trade.
V. There should be unified Ministry of Transport and Logistics as being practiced in the developed world. All related functions Air, Sea, Road Transportation, Railways, Ports and Shipping and trade facilitations should be under one roof providing integrated approach towards improvement of overall logistics performance indicators of our country.
VI. NTCIP (National Trade Corridor Improvement Program) should be completed with a clear target deadline for its implementation. It was much reformed initiative and the savings foreseen were that of USD 500M per annum - 1.34% of the value of Imports and Exports and 0.45% of GDP. If these reforms are not focused at the earliest, it is expected that by 2015, the transport and logistics sector will become a bottleneck for country's economy.
VII. In order to take advantage of the agricultural base and the export market potential, government should assist in development of modern cool chain and infrastructure.
All these, I am confident, will contribute to alleviate the difficulties of our enterprises to compete successfully on the international scene.
====================================================================================
INDICATOR DESCRPITION PAKSITAN
RANK OUT of 155
====================================================================================
Over all LPI Over all logistics performance scores 110
Customs Efficiency of clearance process 134
Infrastructure Quality of trade and transport related infrastructure 120
Logistics Competence Competence and quality of logistics 120
Timeliness Timeliness of shipments in reaching destination 110
Tracking & Tracing Ability to track and trace consignments 93
Int. Shipments Ease of arranging competitively priced shipment 66
====================================================================================