Role of freight forwarding and logistics industry in economy of Pakistan

Role of freight forwarding and logistics industry in economy of Pakistan

Introduction

Freight Forwarding and Logistics Industry plays a vital role in the economy of any country and therefore It is an important industry all over the world. Logistics Service Providers assist trade in all processes including sea freight, air freight, custom clearance, warehousing, road transportation, rail transportation, packaging, warehousing and other allied value added services.

In global context efficient Freight Forwarding and Logistics Industry is back bone of any country. It plays a significant role in eliminating wastages and makes the process efficient for the availability of right product at the right time at an economical cost. 

Freight forwarding and Logistic Industry of Pakistan

The international freight forwarding industry emerged in Pakistan in the early 1980s. Initially, the industry had restrained growth, due to the huge client was reluctance and did not want to risk their overseas business relationships by giving their consignments in unknown market entities. Later though, this industry evolved as a bridge between shipping lines, exporters, as well as importers. The major factors promoting industry growth included the growth in international trade, the increase in market acceptance of tangible benefits of international freight forwarding services, containerization and the growth in Pakistan’s international trade. 

A strong freight forwarding industry is must if the country is to capitalize 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 regional hubs, distribution at destinations and multiple documentation have increased the importance of intermediaries providing logistics solutions.

The Logistics Industry plays an important role in Pakistan’s economy as well. Yet, it is plagued by inefficiency in terms of lacking a basic infrastructure; cost and time effectiveness with respect of the supply of goods within as well as outside the country. Pakistan, being an agro based country, can easily increase its exports by 30% which as of today turn into wastages due to insufficient logistics system.

Keeping in view its significance, this segment of the economy needs to be recognized as a proper industry to build around certain parameters and frame work to regulate the business. Unfortunately, Pakistan’s Logistics system lacks expertise in various aspects.

As of today this is not a regulated function as an industry and there are no pre-requisites to enter into the field. An effort has been made to bring the reputable players on one platform and "Pakistan International Freight Forwarding Association - PIFFA" acts as a recognized representative body of this Industry.

Importance of logistics industry

The importance of the industry lies in managing the logistics of the Pakistans’ international trade. The services provided by international freight forwarding companies facilitate exports including textile, cotton / CP Goods, leather and leather goods, sports goods, surgical, rice, fruits and vegetable and seafood which collectively generate over 80% of the country's foreign exchange earnings. At the same time, imports handled by the industry ensure uninterrupted flows of industrial raw materials, plant and machinery, spares and components to maintain industrial production at competitive costs.

Types of Freight Forwarding In Pakistan

Today the role of Freight Forwarder in Pakistan can be summarized as follows: 

• Air Freight

• Sea Freight

• Buyer’s Consolidation for international buyers

• Direct-to-Store products

• Origin Cargo Management (OCM)

• Warehousing

• Project Logistics

• Fruits and Vegetable Processing Centers

• Supply Chain Consultancy Services

• Expo and Event Logistics

• Fuel and Liquid Transportation

• Bonded Warehousing services 

• Cold Storages

• Dry Transportation Services

• Reefer Transportation Services etc

Problems of Logistics Industry in Pakistan

Primarily the logistic sector is marked by a poor freight rail service, inferior highway conditions; most of the vehicle system is long outrun and obsolete; there’s inefficiency in terms of long customs clearance whereas the container linger on time at ports; the air freight system can be termed inefficient as well and an undeveloped supply chain system fails to supplement the forte of varied transport modes into a well-integrated system (about 96% of merchandise is moved by costly trucks). Despite Pakistan enjoying a great location strategically with a 1,046 km coastline along the Arabian sea and the gulf of Oman in the south, its location at the crossroads of South Asia, Central Asia and the Middle East - a common 1600 km border shared with India and with the potential for trade with landlocked Central Asian States: Afghanistan (Afghan Transit Trade) and China (Karakoram highway). It is also neglected in terms of investment – private/public; indicating an investment potential in which businessmen can capitalize this industries’ potential. Currently, the logistic cost in Pakistan is way higher than that of its competitors - about 30 % of the total product cost.

Conclusion

There is a wide scope and potential for improvement and investment in this industry. It has huge potential of providing jobs to local young population and creating economic activities in the country.  Moreover, areas such as freight villages providing logistics related services do not exist. There is an utmost need for high quality warehousing, break bulk centers, truck parking and packing re-packing points – there are no such facilities in Pakistan. Out of the many challenges it is crucial and of immense importance for Pakistan to work on its policies, introducing new policies to match up with international standards – also to improve the transit trade procedure as the current transit rules can be termed as cumbersome resulting in procedural delays. Also, the establishment of additional container freight stations hold great importance since they’re working at their full capacity. There’s potential and utmost need for high quality development of the cold chain sector, warehousing and trucking. There is lack of refrigerated vehicles, which limits the volume of temperature sensitive goods to be transported throughout the country. For instance it holds great value for food related industries, dairy etc. and not only to agro based foods. The logistics industry requires well trained manpower in order to manage the specialized tasks – often it is difficult to hire well educated trained workforce from the urban population, since the salaries are way below average. There is a lack of training institutes and guidance – which gives scope for investment. There for public private partnership is needed for this industry to reach its potential and become strong pillar to economy of Pakistan.