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Logistics and infrastructure capacity – the backbone of economic development

Published on 26th Jan, Edition 4, 2015

 

An efficient and cost-effective logistics and infrastructure system not only generates economies of scale, but also creates a favorable global image of an economy. And a favorable image means more global linkages, more international business and more foreign direct investment. On domestic side too, sound logistics and infrastructure mean enhanced mobility of goods and services, which is so important for the marketing system to operate efficiently. Logistics and infrastructure are likely to be as sound as the economy of a nation. The health of the system directly reflects on the capacity and vision of a country’s economic managers. An inefficient system not only hinders the growth process but also carries a price tag of lost economic opportunities. Pakistan looses around 5% of GDP every year on account of a wanting infrastructure system.

Pakistan’s deficient infrastructure has roots in public sector apathy and corruption on the one hand and private sector’s failure to sufficiently invest in infrastructure projects, on the other. While Pakistan Railways, under a corrupt public sector management system, has almost given up on its function of a freight service provider, the below-average, inefficient roads system and trucking facilities have hardly risen up to fill the gap. Air cargo system, though limited in its capacity to handle large quantities of load, has also been a big disappointment. Maritime transport, responsible for handling more than 90% of foreign trade cargo, has great room for development on modern lines. A modernized shipping industry and full-scale operations at Gawadar port can give Pakistan’s economy a dream boost. While it is government’s job to stand up to the international resistance to make Gawadar port fully operational, private sector should rise up to put its money on the development of a modern shipping line.

TABLE SHOWING 2014 LPI RANKING OF SOME OF THE WORLD COUNTRIES [RANGE: 0 = WORST; 5 = BEST]
Country
LPI Rank
LPI Score
Customs
Infrastructure
Int. Shipment
Logistics Competence
Tracking & Tracing
Timeless
Germany
1
4.12
4.10
4.32
3.74
4.12
4.17
4.36
Netherlands
2
4.05
3.96
4.23
3.64
4.13
4.07
4.34
Belgium
3
4.04
3.80
4.10
3.80
4.11
4.11
4.39
United Kingdom
4
4.01
3.94
4.16
3.63
4.03
4.08
4.33
Singapore
5
4.00
4.01
4.28
3.70
3.97
3.90
4.25
Sweden
6
3.96
3.75
4.09
3.76
3.98
3.97
4.26
Norway
7
3.96
4.21
4.19
3.42
4.19
3.50
4.36
Luxembourg
8
3.95
3.82
3.91
3.82
3.78
3.68
4.71
United States
9
3.92
3.73
4.18
3.45
3.97
4.14
4.14
Japan
10
3.91
3.78
4.16
3.52
3.93
3.95
4.24
Hong Kong
15
3.83
3.72
3.97
3.58
3.81
3.87
4.06
Malaysia
25
3.59
3.37
3.56
3.64
3.47
3.58
3.92
UAE
27
3.54
3.42
3.70
3.20
3.50
3.57
3.92
China
28
3.53
3.21
3.67
3.50
3.46
3.50
3.87
Qatar
29
3.52
3.21
3.44
3.55
3.47
3.47
3.87
India
54
3.08
2.72
2.88
3.02
3.03
3.11
3.51
Pakistan
72
2.83
2.84
2.67
3.08
2.79
2.73
2.79
Sri Lanka
89
2.70
2.56
2.23
2.56
2.91
2.76
3.12

According to the benchmark “logistics performance index” (LPI), Pakistan’s rank in a league of 160 countries is 72. The index measures the performance on the basis of six sub-indicators on a scale of 5, ranging from zero for worse and five for best. The cumulative point grade of 2.83 suggests that there is a huge quality gap, and therefore, much room for improvement. The corrective measures should start with an extensive overhauling — or even scrapping — of Railways. In the face of our roads handling, 96% of inland cargo and 92% of local passenger traffic, the presence of a perennially loss-making rail business is questionable. If Railways must exist – and it must – then it should be run by the private sector. Federal and Provincial governments should focus on improving and extending the roads network.

 

A World Bank report says that a deficient logistics and infrastructure system is hampering Pakistan’s economic development more than the shortage of energy. We have failed to benefit from our strategic geographical location despite the ownership of two fully operative and one partially operative international sea ports. There is no dearth of opportunities.

China has offered to create an “economic corridor” to enhance regional and international trade linkages. The beneficent neighborhood of the world’s second largest economy is the greatest geographical advantage. We should hold China’s ever-extending helping hand and remove all of the bottlenecks that threaten our economy – a wanting infrastructure being one of them.

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