PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

23
PAKISTAN BUSINESS REVIEW APRIL 2016 267 Discussion PAKISTAN’S POTENTIALAS A TRANSIT TRADE CORRIDOR AND TRANSPORTATION CHALLENGES Introduction From a strategic perspective, Pakistan lies at the hub of Central Asia, Middle East and South Asia providing the most economical strategic link between the resource affluent Persian Gulf / Central Asia and the energy scarce wider South Asia. Pakistan also offers the shortest route to China / CARs vis-à-vis Iran / Turkey. Land locked Afghanistan now entering the reconstruction / rehabilitation phase, also finds its way through Pakistan. Moreover, the deep water Gwadar port being linked with major urban centers through coastal highway as well as planned /under construction network of motorways /rail offers comparatively superior opportunities to countries like China, Afghanistan and CARs, not only for mutual trade but also for their trade with the rest of the world. Pakistan’s present transportation system is barely satisfying the current transport demands of domestic and regional /international transit trade mostly directed towards Afghanistan from Karachi port. With some semblance of peace returning to the region, the transit trade from our immediate as well as distant neighbors is likely to increase substantially putting added stress on transport demand – supply chain. It is therefore imperative to examine the efficacy of Pakistan’s transportation system to enhance its capacity to meet the challenges of potential transit trade through its geographical boundaries. M. Tahir Masood 1 , M.Farooq 2 & Syed Bashir Hussain 3 1-2: LMS Department, NDU Islamabad, Pakistan 3-GPP Department, NDU Islamabad, Pakistan brought to you by CORE View metadata, citation and similar papers at core.ac.uk provided by Institute of Business Management, Karachi, Pakistan: Journal Management System

Transcript of PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

Page 1: PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

PAKISTAN BUSINESS REVIEW APRIL 2016267

Discussion Pakistanrsquos Potential as A Transit Trade CorridorDiscussion

PAKISTANrsquoS POTENTIAL AS A TRANSITTRADE CORRIDOR AND

TRANSPORTATION CHALLENGES

Introduction

From a strategic perspective Pakistan lies at the hub of CentralAsia Middle East and South Asia providing the most economicalstrategic link between the resource affluent Persian Gulf Central Asiaand the energy scarce wider South Asia Pakistan also offers the shortestroute to China CARs vis-agrave-vis Iran Turkey Land locked Afghanistannow entering the reconstruction rehabilitation phase also finds itsway through Pakistan Moreover the deep water Gwadar port beinglinked with major urban centers through coastal highway as well asplanned under construction network of motorways rail offerscomparatively superior opportunities to countries like ChinaAfghanistan and CARs not only for mutual trade but also for theirtrade with the rest of the world

Pakistanrsquos present transportation system is barely satisfyingthe current transport demands of domestic and regional internationaltransit trade mostly directed towards Afghanistan from Karachi portWith some semblance of peace returning to the region the transit tradefrom our immediate as well as distant neighbors is likely to increasesubstantially putting added stress on transport demand ndash supply chain

It is therefore imperative to examine the efficacy of Pakistanrsquostransportation system to enhance its capacity to meet the challengesof potential transit trade through its geographical boundaries

M Tahir Masood1 MFarooq2 amp Syed Bashir Hussain3

1-2 LMS Department NDU Islamabad Pakistan

3-GPP Department NDU Islamabad Pakistan

brought to you by COREView metadata citation and similar papers at coreacuk

provided by Institute of Business Management Karachi Pakistan Journal Management System

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

268

Pakistanrsquos Potential as A Transit Trade Corridor

Geo Strategic Construct ndash Significance of Pakistan

Since the dawn of 21st Century Geo-economics has dominatedpolitico-strategic orientations securing of economic interests hasforced alterations in political inclinations of the past An apt exampleis US ndash China economic interdependence despite competing geo-political interests Being the Worldrsquos economically most dynamicregion the prospects of global peace and prosperity would bedetermined in wider South Asia Russiarsquos ldquoPivot to Asiardquo anddramatically enhanced relations with China coupled with her quest forfriendly relations with regional countries like Pakistan is likely to haveprofound impact on this broader region The central role will howevercontinue to be played by between the US and China being deeplyinterdependent for economic growth as well as global stability

Pakistan ndash China Equation

When viewed from the perspective of Chinese growing concerns overUS Asia Pivot Policy emanating perpetual threat to her internationaltrade and energy economic lifeline Pakistan serves as Chinarsquosinsurance policy it provides an alternative link bypassing potentiallyhostile chokepoints Also the planned oil pipeline from Gwadar toChina is likely to save a distance of over 7580 miles (Table 14 3626miles vis-agrave-vis 11206 miles via Dubai ndash Shanghai ndash Central China)currently 80 of Chinarsquos oil is imported through Straits of Malacca(Figure 1)5 and is likely to grow

Table 1 Saving in terms of Distances (Via Shanghai vs Gwadar) Ser From To Via Shanghai

(miles) Via Pakistan

(miles) Saved (miles)

Saved ( age)

a Central China Middle East 11206 3626 7580 68 b Central China Europe 17801 10928 6873 39 c Central China Pakistan

(Gwadar) 10601 3081 7520 71

d Western China Middle East 12537 2295 10242 82 e Western China Europe 19132 9597 9535 50 f Western China Pakistan

(Gwadar) 11932 1750 10182 85

PAKISTAN BUSINESS REVIEW APRIL 2016269

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Figure 1Global Trade Route of China

The Completion of China Pakistan Economic Corridor (CPEC)is expected to reduce the travel distance by 50 ndash 85 for more than 33 of Chinarsquos current container traffic directed towards Europe MiddleEast and Africa (Figure 2)6 70 million containers with Europe alone7trade estimated over USD 1 Trillion with these regions details atAnnexure A8 Pakistanrsquos share including 10-15 Chinese trade wouldhowever depend upon its capacity to handle the volume of transittrade

Figure 2Container Traffic of China

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

270

Pakistanrsquos Potential as A Transit Trade Corridor

Indian Aspirations ndash Pakistan Sole Stumbling Block

Indian ldquoConnect Central Asiardquo Policy9 with objectives ofrebuilding Afghanistan into a trade hub closer military cooperationand a proactive diplomacy exploiting interactions at forums like SCOand Eurasian Economic Community aims at directing all efforts tobypass Pakistan making it irrelevant Alleged Indian involvement inperpetrated terrorism in Balochistan affirms the clash of interests

Indian potential transit trade of oil gas through Pakistan isestimated around USD 104 to 107 Bn10 thus making it economicallymost viable route for flow of energy especially from CARs as well asIndian trade with CARs Afghanistan Trade via Iran may not beeconomically as viable sustainable

Figure 3

Gwadar vs Chahbahar

Chahbahar port of Iran being built and promoted by India asan alternative to Gwadar appears to be at a relatively disadvantageousposition on three accounts (Figure 311) its close proximity to the chokepoint of Strait of Hormuz shallow waters land connectivity betweenPakistan and China contrary to India ndash Iran and possibility of accessto four CARs (except Turkmenistan) via Gwadar ndash CPEC (bypassingAfghanistan)

PAKISTAN BUSINESS REVIEW APRIL 2016271

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

CARs ndash Relevance of Pakistan

Pakistan offers shortest land route to CARs for access tothe Arabian Sea for their trade 2600 km via Afghanistan as comparedto Iran (4500 km) or Turkey (5000 km)12 Moreover CPEC furtherextended to Tajikistan Kyrgyzstan Kazakhstan and Uzbekistan offersyet another lucrative option bypassing Afghanistan the route isoperational since 2004 under a Quadrilateral Trade Agreement betweenChina Kyrgyzstan Tajikistan and Kazakhstan13

Actualization of energy projects like TAPI and TKPI forflow of gas to South Asia remains contingent upon peace and stabilityin Afghanistan TKPI (Termez Kabul Peshawar Islamabad) is analternative project of TAPI with a length of 750 km (nearly half ofTAPI 1700 km) to reach Islamabad14

Afghanistan

The bulk of Afghan trade including daily commodities essential food items is through Pakistan though mostly informalAfter withdrawal of international security forces Pakistanrsquos assistancefor the reconstruction rehabilitation phase would be inevitableNotwithstanding Indian investment or desire for alternatives likeChahbahar Port of Iran Pakistan virtually remains the most viableoption for regional connectivity with Afghanistan

Significance of Gwadar Deep Seaport

Gwadar deep seaport offers two way outlets to the marketsof east west and north south For China and Pakistan it isconvergence of overlapping shared key interests of long term mutualeconomic development regional economic integration developmentof mutually beneficial infrastructure and joint efforts to countercommon threats adversaries

In the global maritime picture Gwadar figures out prominentlyas an alternative to Dubai (outside choke point of Strait of Hormuz

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

272

Pakistanrsquos Potential as A Transit Trade Corridor

and shallow waters) proximity to Vital SLOCs and relevance to thenew great game as part of the so called String of Pearls

For China it provides diversity security and enhancementof energy supplies Currently oil tanker takes approximately 20 - 30days to reach from Gulf to Shanghai while through Gwadar it is likelyto take much lesser time (may be less than a week) and also avoidchoke points like Straits of Malacca etc In the strategic domain theport is likely to serve China more than Pakistan as it provides a landbased oil supply port under a trusted ally

Pakistan as a Consumer Market

Notwithstanding its significance for its near and distantneighbours Pakistan is a promising market of over 196 Million15 peopleOn the one hand it needs energy to meet its industrial growth (largestimports are oil related items) while on the other it produces top qualityfood items best fruits sports items medical instruments textile leathergoods cement etc just to name a few which are needed by the world atlarge

Opportunities

Pakistanrsquos geo-strategic relevance situated between energyresource rich and energy starved regions andneighbourhood of emerging centres of global economicactivity

Regional transit trade hub energy corridor Pakistanrsquosgateway to potentially Worldrsquos largest flow of commerce andtrade Economic integration with regional countries especiallyChina and India is inevitable for mutual economic growthProspects of trade link with Iran Afghanistan and CARs arealso significant

Increased consciousness among regional countries towardsenhancing regional connectivity and economic integration

PAKISTAN BUSINESS REVIEW APRIL 2016273

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

visible during summits of SAARC SCO and other regionalforums

Impacts of Investment on Transportation Sector

High density transportation infrastructures and networksare often related to the highest levels of economic activity development Efficient transport system ensures better access tomarket reduction in cost of production more job opportunities betterquality of life additional investments etc while inefficient systemresults in retarded economic growth reduced (often missed)opportunities rapid inflation and poor quality of life

The investment in transportation sector is likely to haveprofound impact on regional trade especially when viewed from theperspective of Pakistan as a transit trade hub energy corridor Someestimates are reproduced below to highlight the quantum of impact16-

Xinjiang region is responsible for 80 of Chinarsquos total tradewith Central Asia Sea route via Asia Pacific to Europe costsaround $167 per ton and takes around 45 days the Euroasianland bridge is likely to cut transport time by more than halfand would cost $110 per ton Travel distance would bereduced from around 26000 kms to 6379 kms

Indian trade with Europe Commonwealth of IndependentStates (CIS) Iran Afghanistan and Pakistan is likely to cross$ 500 Bn mark in next ten years If only 20 of Indian tradepasses through Pakistan it is likely to stager around $ 100Bn annually

Transportation ChallengesExisting Transportation System

Pakistan has a fairly developed road transportationinfrastructure in the form of intercity highways motorways managed

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

274

Pakistanrsquos Potential as A Transit Trade Corridor

by National Highway amp Motorway Authority (NHMA) but aconstantly deteriorating rail network Successive governmentsdeliberately shifted their focus to roads instead of improving railnetwork possibly due to vested interests of few transport giants mafia who managed this shift through their influence in the politicalpower structure Similar lack of focus is visible in the maritime and airtransportation domains

Challenges to Regional Economic Integration

Regional instability continues to inhabit regional connectivityand economic integration Impending disputes present aformidable challenge

Competing interests of global and regional players posedilemma for Pakistan Balancing relations in this competitiveenvironment is challenging as often competing economic political interests lead to covert hostility Quest for politicalspace in Afghanistan and Gwadar vs Chahbahar competitionhas added fuel to proxies in Khyber Pakhtoonkhwa Balochistan

Pakistanrsquos fragile internal security environment continues tohurt the state economically depriving us of emergingopportunities External meddling in domestic and regionalaffairs add complexity to the already intricate security matrix

Poor border management informal illegal trade run by mafias Inappropriate transport mix focus on road infrastructure than

rail network

Challenges ndash Road Network Poor quality inadequate road transport services Half of national highway network in low condition Poor road safety record Highly fragmented freight transport industry

PAKISTAN BUSINESS REVIEW APRIL 2016275

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Poor truck fleet ndash mostly obsolete underpowered pollutingand grossly overloaded

Slower truck speed 40 ndash 50 kmph for container traffic halfof that in Europe Freight takes 3 ndash 4 times longer thaninternational standards17

Table 2Progress ndash Road Development (2009 ndash March 2014) 18

Years Catego ry Total (km)

Low Type (km) High Type (km)

2009-10 79850 180910 260760 2010-11 78597 180866 259463 2011-12 79655 181940 261595 2012-13 80515 182900 263415 2013-14 79635 184120 263755

Challenges ndash Rail Network

Perpetual shortage of locomotives has been the primaryreason for decline in passenger and freight services over the yearsother factors include over aged infrastructure and rolling stock risein fuel prices and subsidized rail fare Some of the challenges19

confronting rail transportation network of Pakistan are summarizedbelow-

Productivity of PRrsquos freight service is about 18th of ChineseRailway 13rd of Indian Railway and half of Thai Railway (anetwork of comparable size)

PR continues to cross subsidize passenger services fromfreight services resulting in non-competitive freight ratesover road transport Chinese freight service is 2 ndash 3 timescheaper than road

PR has low stagnant share in transportation market ndash lessthan 10 of passenger and 5 of freight traffic

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

276

Pakistanrsquos Potential as A Transit Trade Corridor

Table 3 Earning of Pakistan Railway (2007 ndash March 2014)2 0

Years Earning (Rs in Mn) Change 2009-10 21886 -55 2010-11 18740 -144 2011-12 15444 -175 2012-13 18070 170

2013-14 (July ndash March) 17736 - Table 4 Passenger and Freight Traffic (201112 ndash 201213)2 1

Subject 2011-12 2012-13 Number of Passengers Carried (M) 411 42 Passenger Traffic (M kms) 16093 17388 Freight Carried Tonnes (M) 13 10 Freight Tonnes (M kms) 402 419

Challenges ndash Air Transportation Ever increasing competition in aviation industry Fleet constraints exacerbated by operational issues

management Passenger volumes are 110th of rail and 1100th of road

transport22 Lack of fiscal space retarding growth of PIA

Strict governmental control has prevented PIA from operating oncommercial lines thus often resulting in huge operating losses andconsequent negative growth

Challenges ndash Ports and Shipping

Cargo handling capacity of ports is constantly on the declinedue neglect at the policy level Some of the challenges confrontingmaritime shipping seaport cargo operations in Pakistan are summarizedbelow-

Port charges ndash not competitive still above internationalstandards

Implementation of Pakistan Customs Computerized System(PACCS) has substantially reduced the customs clearancetime from 4-5 days to less than 24 hours in KarachiInternational Container Terminal (KICT)23

PAKISTAN BUSINESS REVIEW APRIL 2016277

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Free storage period shortened from 7 to 4-5 dayscontainer dwell time 5-6 days on the average still aboveinternational standard of 3-5 days24 It reduces thecapacity of container terminal to less than its duepotential

Ports limited draft at 10 ndash 12 Ms keeps latest mostefficient ships from calling25

Performance of Port Operations ndash though improving butstill much short of international standards would not beable to handle anticipated transit trade in the event ofoperationalization of Economic CorridorTable 5 Cargo Handled by Karachi Port and Port Qasim (Million Tonnes) 26

Years Karachi Port Port Qasim Grand Total Exports Imports Total Exports Imports Total

2009-10 13528 27892 41420 6380 19226 25626 67046 2010-11 12843 28589 41432 6657 19511 26168 67600 2011-12 11674 26201 37875 5950 18075 24025 61900 2012-13 12150 26700 38850 7047 17754 24801 63651 2013-14 (July-

March)

8452 22225 30677 5887 13084 18971 49648

Some Common Challenges to Transportation Sector Long waiting hours and travelling time Ever rising high cost of travel Increased cost of doing business Reduced competitiveness of countryrsquos exports Constraints curtailing retarding Pakistanrsquos ability to integrate

into global supply chains which require just in time delivery Poor performance of transport sector costs around 5 of

GDP each year27

Way Forward

Future Initiatives ndash Regional Connectivity and Trade Facilitation

Projects like National Trade Corridor (NTC) and CPEC areindicative of growing recognition at the policy level of inescapablelinkage between efficient transportation system and sustainable

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

278

Pakistanrsquos Potential as A Transit Trade Corridor

economic growth GoP has set forth an ambitious development planfor transportation and logistics In PSDP ndash 201314 the share ofTransport and Logistics stands around 25 while the requirement is2-3 times more28 Draft National Transport Policy (NTP) has beenformulated by Ministry of Communication though yet to be formallyapproved and implemented

China ndash Pakistan Economic Corridor (CPEC)

CPEC connecting Kashgar Xinjiang (China) with Gwadar Karachi ports of Pakistan would serve two purposes internationally itwould be Worldrsquos pivotal trade route to scale down globaltransportation distances between continents while domestically itwould help in invigorating Pakistanrsquos stagnant economy This wouldprovide a link between long distance partners Russia China CARsand ME Europe India Iran and Afghanistan can also benefit throughlateral links with CPEC China is expected to spend USD 30 ndash 40 Bn ina span of next seven years29

Figure 4

China - Pakistan Economic Corridor30

CPEC would essentially have three tiers at the first tierKashgar and Gwadar would be connected through highways motorways while at the second tier through establishment of railnetwork and at third tier linked via energy pipeline and establishmentof an oil refinery at Gwadar Freight terminals planned along the corridorwill facilitate logistic industry trucks carrying freight while economic

PAKISTAN BUSINESS REVIEW APRIL 2016279

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

zones industrial parks would essentially target local products industry and services

Figure 5

Freight Rail Link31

Out of Chinarsquos annual container trade of 225 Bn containersaround 30 (70 Million containers) of this trade is with Europeannations and around 6 with Africa32 Even if Pakistan gets 10 share of container flow to European nations (70000 containersannually) Pakistanrsquos logistic industry and transport sector would geta huge boost

Diplomatic Maneuver

Maintain strategic balance in relations with US and China Capitalize on rapprochement with Russia and offer trade via

CPEC through a trilateral agreement between China ndash Russiandash Pakistan Capacity building of PR acquisition of heavymachinery revival of steel mill industry is suggested areasof mutual cooperation

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

280

Pakistanrsquos Potential as A Transit Trade Corridor

Build upon Quadrilateral Trade Agreement between China Kyrgyzstan Tajikistan and Kazakhstan (operational since2004) and expand mutual trade relations through exchangesbetween business communities of respective countries Offerfor transit trade and access to Arabian sea as well as Indiathrough Pakistan be extended to these countries

Efforts be made to formalize trade with Afghanistan tradefacilitation customs offices be established on all formalcrossings and trade through these points should beincentivized ndash subsidize the customs duty other taxes

Manage pending disputes with India till their resolution tocreate environment for mutual trade for the benefit of peopleon both sides India should be encouraged to trade withCARs Afghanistan through Pakistan and import energy fromCARs Middle East through Pakistan this will create herstakes in stability of Pakistan

Explore avenues with Iran ndash seek points of convergences Gwadar is not a military outpost of China misperceptions be

cleared loudly and squarely It is a mutual economiccooperation venture FDI from other countries like OmanUAE Turkey etc be encouraged as it would help in clearingmisperceptions as well as creating healthy competitiveenvironment

Transportation Sector

Undertake long term perspective planning for periods beyond10-15 years

Investment must focus on capacity building developmentof new transportation infrastructure enhancing operationalefficiency of transport system and extending access to distantmarkets domestically as well as regionally

Transportation projects must be analyzed critically andprioritized from the perspective of their urgency vis-agrave-visaffordability fiscal space these are often vulnerable to

PAKISTAN BUSINESS REVIEW APRIL 2016281

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

miscalculations and mal-investment Dead investments drivenby purely political considerations (bumper sticker projects) oftenturn out to be counterproductive ndash bridges to nowhere hencemust be discouraged ruthlessly

Speedy completion of CPEC be ensured for continuity inpolicy such mega initiatives must be given legal patronagethrough act of parliament

Capacity building of the transport sector services to handlethe potential transit trade from China and other neighbours beensured expected potential is around 70000 ndash 100000 containersannually if only 10 of Chinese trade with Europe is rootedthrough Pakistan

Develop intermodal transportation system on modern lines(Figure 6) gradually shift from age old fragmented logisticindustry to modern state of the art efficient fully integratedlogistic system bridge gaps and establish linkages withindifferent transportation modes Well reputed international firmscan be contracted ndash public-private partnership is perhaps thesolution to fill fiscal gaps

Curtail cost of travel to reduce the cost of doing businessthis will make countryrsquos exports competitive in internationalmarket

Figure 6

Intermodal Transportation Infrastructure33

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

282

Pakistanrsquos Potential as A Transit Trade Corridor

Enhance accessibility farm to market roads and warehousescold storage to save losses in agriculture sector ndash perishablegoods vegetables fruits

TOT based projects be preferred China Turkey Russia andJapan may be engaged for development of transportationsector especially rail network

Road Network

Improve the condition of national highway network througha prioritized and phased programme in line with the priorityset for National Trade Corridor CPEC

Revamp freight transportation industry on modern linesthrough public-private partnership large scale logisticenterprise with integral integrated transport services is needof the hour

Initiate program for progressive replacement of obsolete truckfleet offering loans and incentives Comparatively newerinventory of trucks will not only be environmental friendlybut will also reduce transportation times of freight closer tointernational standards

Rail Network

Enhance the quantity quality of locomotives to meet thedemand of passenger and freight services

Take steps to gradually phase out and replace over agedinfrastructure and rolling stock

The policy of cross subsidy from freight to passengerservices should be done away with to make freight ratesmore competitive with road transport PR should take majorinitiatives to make freight service commercially viable

PAKISTAN BUSINESS REVIEW APRIL 2016283

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Air Transportation PIA should either be privatized or allowed to operate on

commercial lines with minimum governmental control so that itcan compete in the aviation market It will not only be able tomeet its operating expenses but also earn and improve its fleetinstead of becoming a public sector liability

Management of PIA should be cut to size to reduce operationallosses

Ports and Shipping

Improve cargo handling capacity of Karachi port and PortQasim and create space by removing containers awaiting disposalbeyond100 days figures are fairly large

Make port charges competitive with international standards Reduce customs clearance time to less than 12 hours at all

terminals of Karachi Port Qasim and Gwadar

Gwadar Seaport

Speedy operationalization of Gwadar seaport and connectivitywith hinterland to exploit its full potential

Develop maritime industry prospects of industrial zone dedicatedto seafood be explored near Gwadar Karachi and other coastalareas The potential for export of value added seafood productsis phenomenal hither-to-fore untapped

Parallel work on pipeline project between Gwadar and Xinjiangincluding establishment of oil refinery at Gwadar be initiated

Efforts be made to expedite other energy pipeline projects ie IPIand TAPI TKPI

Miscellaneous Recommendations

Concerted efforts be made at all levels to defeat militancyand improve internal security through capacity building of law

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

284

Pakistanrsquos Potential as A Transit Trade Corridor

enforcement agencies ndash conducive environment is inevitable forpromotion of regional connectivity and economic integration

Initiate steps towards progressive development in restiveregions of Pakistan like FATA and Baluchistan to includeexploration of fossil fuels this economic activity will lead toprosperity and stability in these areas

Prudent fiscal management and stringent punitive measuresagainst corruption will ensure transparency ndash this will attract FDIand encourage international business community Pakistanidiaspora to invest in Pakistan

Capitalize on political awakening of middle class and youth bulgeSay NO to bumper sticker projects built at exorbitant prohibitive

costs ndash build consensus through debate between leadership

Conclusion

The paper has endeavored to underline Pakistanrsquos transittrade potential being a regional hub economic corridor and hassuggested few policy guidelines at various levels and for differentmodes of transportation Pakistan offers the most economic strategiclink between the resource affluent and the energy scarce regions inaddition to providing the shortest trade route In changed geo politicalcum strategic environment opportunities are knocking at our doorWith some peace retuning to the region the transit trade from ourimmediate as well as distant neighbors is likely to increase substantiallyPakistanrsquos present transportation system is however barely enoughto meet the demands of regional international transit trade

PAKISTAN BUSINESS REVIEW APRIL 2016285

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

References

Anwar Dr Zafar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo South Asian Studies Jan-Jun 2011Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20AnwarpdfldquoChabahar port vs Gwadar portrdquo Indian Defence Forum AccessedDecember 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtmlldquoChinarsquos Statistical Yearbook 2013 Accessed November 30 2014httpwwwstatsgovcntjsjndsj2013indexehhtmldquoDemographics of Pakistanrdquo Wikipedia Accessed November 302014 httpenwikipediaorgwikiDemographics_of_PakistanldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum CivilServices of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtmlHassan Mehmood ul ldquoPak-China Friendship New Dimensions andNew Opportunitiesrdquo Overseas Pakistani Friends March 252013Accessed December 11 2014 httpwwwopfblogcom13906pak-china-friendship-new-dimensions-and-new-opportunitiesHaq Shahram ldquoPakistan rank 71 in World Bank LogisticPerformance Indexrdquo Express Tribune July 22 2012 httptribunecompkstory411560pakistan-ranked-71-in-world-bank-logistics-performance-indexKhan Dr Shabir Ahmed ldquoGeo Economic Imperatives of GwadarSeaport and Kashgar Economic Zone for Pakistan and Chinardquo IPRIJournal XIII Summer 2013 Accessed December 8 2014 httpgreatgwadarcomvzpaneldocsGwadar20Sea20Port20amp20Kashgar20Economic20Zone20-20Pakistan20amp20ChinapdfKumar Rohit ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014 httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

286

Pakistanrsquos Potential as A Transit Trade Corridor

ldquoPakistan Economic Survey 2013-14rdquo Ministry of Finance GoPAccessed December 14 2014 httpfinancegovpksurveychapters_1413_Transport_and_comspdfldquoPak ndash China Economic Corridor to help setup new dry ports incountryrdquo Business Recorder November 25 2014 AccessedDecember 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-countryldquoPakistan Transport Sectorrdquo World Bank Accessed December 142014 httpwebworldbankorgWBSITEEXTERNALCOUNTRIESSOUTHASIAEXTEXTSARREGTOPTRANSPORT0contentMDK20699058~menuPK869060~pagePK34004173~piPK34003707~theSitePK57959800htmlPaton James and Aibing Guo ldquoRussia China add to $400 bn GasDeal with Accordrdquo Bloomberg November 10 2014 httpwwwbloombergcomnews2014-11-10russia-china-add-to-400-billion-gas-deal-with-accordhtmlSeethi K M ldquoIndiarsquos lsquoConnect Central Asiarsquo Policyrdquo DiplomatDecember 13 2013 Accessed December 7 2014 httpthediplomatcom201312indias-connect-central-asia-policySiddiqui Asim ldquoDeveloping the Pak ndash China Economic Corridor tofacilitate Sino ndash Europe Traderdquo presented at Intermodal Europe2014 held at Rotterdam (11-13 November 2014) Accessed December26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdfSiddiqui Asim ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdfldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp Reforms GoPAccessed December 14 2014 httpwwwpcgovpkannual20plans2012-13chapter-20_transport_and_logisticspdf

PAKISTAN BUSINESS REVIEW APRIL 2016287

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Notes4 Asim Siddiqui ldquoUnderstanding Economic benefits of Trade

corridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdf

5 Ibid

6 Ibid7 ldquoPak ndash China Economic Corridor to help setup new dry ports

in countryrdquo Business Recorder November 25 2014Accessed December 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-country

8 ldquoChinarsquos Statistical Yearbook 2013 Accessed November302014 httpwwwstatsgovcntjsjndsj2013indexehhtm

9 K M Seethi ldquoIndiarsquos lsquoConnect Central Asiarsquo PolicyrdquoDiplomat December 13 2013 Accessed December 7 2014http thediplomatcom201312indias-connect-central-asia-policy

10 Rohit Kumar ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

11 ldquoChabahar port vs Gwadar portrdquo Indian Defence ForumAccessed December 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtml

12 ldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum Civil Services of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtml

13 Dr Shabir Ahmed Khan ldquoGeo Economic Imperatives ofGwadar Seaport and Kashgar Economic Zone for Pakistanand Chinardquo IPRI Journal XIII Summer 2013 AccessedDecember 8 2014 httpgreatgwadarcomvzpaneldocs

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

288

Pakistanrsquos Potential as A Transit Trade Corridor

14 Dr Zafar Anwar ldquoDevelopment of Infrastructural linkagesbetween Pakistan and Central Asiardquo South Asian StudiesJan-Jun 2011 Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20Anwarpdf

15 ldquoDemographics of Pakistanrdquo Wikipedia AccessedNovember 30 2014 httpenwikipediaorgwikiDemographics_of_Pakistan

16 Anwar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo

17 ldquoPakistan Transport Sectorrdquo World Bank AccessedDecember 14 2014 httpwebworldbankorgWBSITEEXTERNALCOUN

18 Pakistan Economic Survey 2013-1419 ldquoPakistan Transport Sectorrdquo World Bank20 Pakistan Economic Survey 2013-14

21 Ibid22 ldquoPakistan Transport Sectorrdquo World Bank23 Ibid24 Ibid25 Ibid26 Pakistan Economic Survey 2013-1427 Ibid

28 ldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp ReformsGoP Accessed December 14 2014 httpwwwpcgovpk20_transport_and_logisticspdf

29 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

30 Siddiqui ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal Networkrdquo

31 Asim Siddiqui ldquoDeveloping the Pak ndash China EconomicCorridor to facilitate Sino ndash Europe Traderdquo presented atIntermodal Europe 2014 held at Rotterdam (11-13 November2014) Accessed December 26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdf

PAKISTAN BUSINESS REVIEW APRIL 2016289

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

32 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

Annexure A

CHINArsquoS TRADE WITH REGIONS COUNTRIES (USD BILLION)

Ser Region Country 2011 2012

Total Exports Imports Total Exports Imports a Afghanistan 0234 023 004 0469 0464 0005

b India 7391 5054 2337 6647 4768 18 80

c Pakistan 1056 844 212 1241 928 314

d Iran 451 1476 3034 3647 116 24 87 e Iraq 1427 382 1044 1757 491 12 66

f Israel 978 674 304 991 699 292

g Jordon 277 251 026 326 296 028

h Lebanon 148 146 0026 171 169 002

i Syria 245 242 0026 12 119 0011 j Turkey 1874 1561 312 1910 1558 351

k Palestine 0 049 0048 0001 0041 004 0001 l Bahrain 120 088 032 155 120 035

m Kuwait 1130 213 918 1256 209 10 47 n Cyprus 115 112 003 124 110 014 o Oman 1587 099 1488 1879 181 16 98 p Qatar 589 120 469 848 120 728 q KSA 6432 1485 4947 7331 1845 54 86

r UAE 3512 2681 831 4042 2957 10 85 s Yemen 424 110 314 556 196 360 t Africa 1663 7308 9324 1986 8531 1133 u Europe 7008 4136 2872 6831 3964 2867 v Latin America 2414 1217 1197 2613 1352 1261 w North America 4944 3501 1443 5363 3801 1562

Page 2: PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

268

Pakistanrsquos Potential as A Transit Trade Corridor

Geo Strategic Construct ndash Significance of Pakistan

Since the dawn of 21st Century Geo-economics has dominatedpolitico-strategic orientations securing of economic interests hasforced alterations in political inclinations of the past An apt exampleis US ndash China economic interdependence despite competing geo-political interests Being the Worldrsquos economically most dynamicregion the prospects of global peace and prosperity would bedetermined in wider South Asia Russiarsquos ldquoPivot to Asiardquo anddramatically enhanced relations with China coupled with her quest forfriendly relations with regional countries like Pakistan is likely to haveprofound impact on this broader region The central role will howevercontinue to be played by between the US and China being deeplyinterdependent for economic growth as well as global stability

Pakistan ndash China Equation

When viewed from the perspective of Chinese growing concerns overUS Asia Pivot Policy emanating perpetual threat to her internationaltrade and energy economic lifeline Pakistan serves as Chinarsquosinsurance policy it provides an alternative link bypassing potentiallyhostile chokepoints Also the planned oil pipeline from Gwadar toChina is likely to save a distance of over 7580 miles (Table 14 3626miles vis-agrave-vis 11206 miles via Dubai ndash Shanghai ndash Central China)currently 80 of Chinarsquos oil is imported through Straits of Malacca(Figure 1)5 and is likely to grow

Table 1 Saving in terms of Distances (Via Shanghai vs Gwadar) Ser From To Via Shanghai

(miles) Via Pakistan

(miles) Saved (miles)

Saved ( age)

a Central China Middle East 11206 3626 7580 68 b Central China Europe 17801 10928 6873 39 c Central China Pakistan

(Gwadar) 10601 3081 7520 71

d Western China Middle East 12537 2295 10242 82 e Western China Europe 19132 9597 9535 50 f Western China Pakistan

(Gwadar) 11932 1750 10182 85

PAKISTAN BUSINESS REVIEW APRIL 2016269

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Figure 1Global Trade Route of China

The Completion of China Pakistan Economic Corridor (CPEC)is expected to reduce the travel distance by 50 ndash 85 for more than 33 of Chinarsquos current container traffic directed towards Europe MiddleEast and Africa (Figure 2)6 70 million containers with Europe alone7trade estimated over USD 1 Trillion with these regions details atAnnexure A8 Pakistanrsquos share including 10-15 Chinese trade wouldhowever depend upon its capacity to handle the volume of transittrade

Figure 2Container Traffic of China

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

270

Pakistanrsquos Potential as A Transit Trade Corridor

Indian Aspirations ndash Pakistan Sole Stumbling Block

Indian ldquoConnect Central Asiardquo Policy9 with objectives ofrebuilding Afghanistan into a trade hub closer military cooperationand a proactive diplomacy exploiting interactions at forums like SCOand Eurasian Economic Community aims at directing all efforts tobypass Pakistan making it irrelevant Alleged Indian involvement inperpetrated terrorism in Balochistan affirms the clash of interests

Indian potential transit trade of oil gas through Pakistan isestimated around USD 104 to 107 Bn10 thus making it economicallymost viable route for flow of energy especially from CARs as well asIndian trade with CARs Afghanistan Trade via Iran may not beeconomically as viable sustainable

Figure 3

Gwadar vs Chahbahar

Chahbahar port of Iran being built and promoted by India asan alternative to Gwadar appears to be at a relatively disadvantageousposition on three accounts (Figure 311) its close proximity to the chokepoint of Strait of Hormuz shallow waters land connectivity betweenPakistan and China contrary to India ndash Iran and possibility of accessto four CARs (except Turkmenistan) via Gwadar ndash CPEC (bypassingAfghanistan)

PAKISTAN BUSINESS REVIEW APRIL 2016271

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

CARs ndash Relevance of Pakistan

Pakistan offers shortest land route to CARs for access tothe Arabian Sea for their trade 2600 km via Afghanistan as comparedto Iran (4500 km) or Turkey (5000 km)12 Moreover CPEC furtherextended to Tajikistan Kyrgyzstan Kazakhstan and Uzbekistan offersyet another lucrative option bypassing Afghanistan the route isoperational since 2004 under a Quadrilateral Trade Agreement betweenChina Kyrgyzstan Tajikistan and Kazakhstan13

Actualization of energy projects like TAPI and TKPI forflow of gas to South Asia remains contingent upon peace and stabilityin Afghanistan TKPI (Termez Kabul Peshawar Islamabad) is analternative project of TAPI with a length of 750 km (nearly half ofTAPI 1700 km) to reach Islamabad14

Afghanistan

The bulk of Afghan trade including daily commodities essential food items is through Pakistan though mostly informalAfter withdrawal of international security forces Pakistanrsquos assistancefor the reconstruction rehabilitation phase would be inevitableNotwithstanding Indian investment or desire for alternatives likeChahbahar Port of Iran Pakistan virtually remains the most viableoption for regional connectivity with Afghanistan

Significance of Gwadar Deep Seaport

Gwadar deep seaport offers two way outlets to the marketsof east west and north south For China and Pakistan it isconvergence of overlapping shared key interests of long term mutualeconomic development regional economic integration developmentof mutually beneficial infrastructure and joint efforts to countercommon threats adversaries

In the global maritime picture Gwadar figures out prominentlyas an alternative to Dubai (outside choke point of Strait of Hormuz

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

272

Pakistanrsquos Potential as A Transit Trade Corridor

and shallow waters) proximity to Vital SLOCs and relevance to thenew great game as part of the so called String of Pearls

For China it provides diversity security and enhancementof energy supplies Currently oil tanker takes approximately 20 - 30days to reach from Gulf to Shanghai while through Gwadar it is likelyto take much lesser time (may be less than a week) and also avoidchoke points like Straits of Malacca etc In the strategic domain theport is likely to serve China more than Pakistan as it provides a landbased oil supply port under a trusted ally

Pakistan as a Consumer Market

Notwithstanding its significance for its near and distantneighbours Pakistan is a promising market of over 196 Million15 peopleOn the one hand it needs energy to meet its industrial growth (largestimports are oil related items) while on the other it produces top qualityfood items best fruits sports items medical instruments textile leathergoods cement etc just to name a few which are needed by the world atlarge

Opportunities

Pakistanrsquos geo-strategic relevance situated between energyresource rich and energy starved regions andneighbourhood of emerging centres of global economicactivity

Regional transit trade hub energy corridor Pakistanrsquosgateway to potentially Worldrsquos largest flow of commerce andtrade Economic integration with regional countries especiallyChina and India is inevitable for mutual economic growthProspects of trade link with Iran Afghanistan and CARs arealso significant

Increased consciousness among regional countries towardsenhancing regional connectivity and economic integration

PAKISTAN BUSINESS REVIEW APRIL 2016273

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

visible during summits of SAARC SCO and other regionalforums

Impacts of Investment on Transportation Sector

High density transportation infrastructures and networksare often related to the highest levels of economic activity development Efficient transport system ensures better access tomarket reduction in cost of production more job opportunities betterquality of life additional investments etc while inefficient systemresults in retarded economic growth reduced (often missed)opportunities rapid inflation and poor quality of life

The investment in transportation sector is likely to haveprofound impact on regional trade especially when viewed from theperspective of Pakistan as a transit trade hub energy corridor Someestimates are reproduced below to highlight the quantum of impact16-

Xinjiang region is responsible for 80 of Chinarsquos total tradewith Central Asia Sea route via Asia Pacific to Europe costsaround $167 per ton and takes around 45 days the Euroasianland bridge is likely to cut transport time by more than halfand would cost $110 per ton Travel distance would bereduced from around 26000 kms to 6379 kms

Indian trade with Europe Commonwealth of IndependentStates (CIS) Iran Afghanistan and Pakistan is likely to cross$ 500 Bn mark in next ten years If only 20 of Indian tradepasses through Pakistan it is likely to stager around $ 100Bn annually

Transportation ChallengesExisting Transportation System

Pakistan has a fairly developed road transportationinfrastructure in the form of intercity highways motorways managed

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

274

Pakistanrsquos Potential as A Transit Trade Corridor

by National Highway amp Motorway Authority (NHMA) but aconstantly deteriorating rail network Successive governmentsdeliberately shifted their focus to roads instead of improving railnetwork possibly due to vested interests of few transport giants mafia who managed this shift through their influence in the politicalpower structure Similar lack of focus is visible in the maritime and airtransportation domains

Challenges to Regional Economic Integration

Regional instability continues to inhabit regional connectivityand economic integration Impending disputes present aformidable challenge

Competing interests of global and regional players posedilemma for Pakistan Balancing relations in this competitiveenvironment is challenging as often competing economic political interests lead to covert hostility Quest for politicalspace in Afghanistan and Gwadar vs Chahbahar competitionhas added fuel to proxies in Khyber Pakhtoonkhwa Balochistan

Pakistanrsquos fragile internal security environment continues tohurt the state economically depriving us of emergingopportunities External meddling in domestic and regionalaffairs add complexity to the already intricate security matrix

Poor border management informal illegal trade run by mafias Inappropriate transport mix focus on road infrastructure than

rail network

Challenges ndash Road Network Poor quality inadequate road transport services Half of national highway network in low condition Poor road safety record Highly fragmented freight transport industry

PAKISTAN BUSINESS REVIEW APRIL 2016275

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Poor truck fleet ndash mostly obsolete underpowered pollutingand grossly overloaded

Slower truck speed 40 ndash 50 kmph for container traffic halfof that in Europe Freight takes 3 ndash 4 times longer thaninternational standards17

Table 2Progress ndash Road Development (2009 ndash March 2014) 18

Years Catego ry Total (km)

Low Type (km) High Type (km)

2009-10 79850 180910 260760 2010-11 78597 180866 259463 2011-12 79655 181940 261595 2012-13 80515 182900 263415 2013-14 79635 184120 263755

Challenges ndash Rail Network

Perpetual shortage of locomotives has been the primaryreason for decline in passenger and freight services over the yearsother factors include over aged infrastructure and rolling stock risein fuel prices and subsidized rail fare Some of the challenges19

confronting rail transportation network of Pakistan are summarizedbelow-

Productivity of PRrsquos freight service is about 18th of ChineseRailway 13rd of Indian Railway and half of Thai Railway (anetwork of comparable size)

PR continues to cross subsidize passenger services fromfreight services resulting in non-competitive freight ratesover road transport Chinese freight service is 2 ndash 3 timescheaper than road

PR has low stagnant share in transportation market ndash lessthan 10 of passenger and 5 of freight traffic

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

276

Pakistanrsquos Potential as A Transit Trade Corridor

Table 3 Earning of Pakistan Railway (2007 ndash March 2014)2 0

Years Earning (Rs in Mn) Change 2009-10 21886 -55 2010-11 18740 -144 2011-12 15444 -175 2012-13 18070 170

2013-14 (July ndash March) 17736 - Table 4 Passenger and Freight Traffic (201112 ndash 201213)2 1

Subject 2011-12 2012-13 Number of Passengers Carried (M) 411 42 Passenger Traffic (M kms) 16093 17388 Freight Carried Tonnes (M) 13 10 Freight Tonnes (M kms) 402 419

Challenges ndash Air Transportation Ever increasing competition in aviation industry Fleet constraints exacerbated by operational issues

management Passenger volumes are 110th of rail and 1100th of road

transport22 Lack of fiscal space retarding growth of PIA

Strict governmental control has prevented PIA from operating oncommercial lines thus often resulting in huge operating losses andconsequent negative growth

Challenges ndash Ports and Shipping

Cargo handling capacity of ports is constantly on the declinedue neglect at the policy level Some of the challenges confrontingmaritime shipping seaport cargo operations in Pakistan are summarizedbelow-

Port charges ndash not competitive still above internationalstandards

Implementation of Pakistan Customs Computerized System(PACCS) has substantially reduced the customs clearancetime from 4-5 days to less than 24 hours in KarachiInternational Container Terminal (KICT)23

PAKISTAN BUSINESS REVIEW APRIL 2016277

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Free storage period shortened from 7 to 4-5 dayscontainer dwell time 5-6 days on the average still aboveinternational standard of 3-5 days24 It reduces thecapacity of container terminal to less than its duepotential

Ports limited draft at 10 ndash 12 Ms keeps latest mostefficient ships from calling25

Performance of Port Operations ndash though improving butstill much short of international standards would not beable to handle anticipated transit trade in the event ofoperationalization of Economic CorridorTable 5 Cargo Handled by Karachi Port and Port Qasim (Million Tonnes) 26

Years Karachi Port Port Qasim Grand Total Exports Imports Total Exports Imports Total

2009-10 13528 27892 41420 6380 19226 25626 67046 2010-11 12843 28589 41432 6657 19511 26168 67600 2011-12 11674 26201 37875 5950 18075 24025 61900 2012-13 12150 26700 38850 7047 17754 24801 63651 2013-14 (July-

March)

8452 22225 30677 5887 13084 18971 49648

Some Common Challenges to Transportation Sector Long waiting hours and travelling time Ever rising high cost of travel Increased cost of doing business Reduced competitiveness of countryrsquos exports Constraints curtailing retarding Pakistanrsquos ability to integrate

into global supply chains which require just in time delivery Poor performance of transport sector costs around 5 of

GDP each year27

Way Forward

Future Initiatives ndash Regional Connectivity and Trade Facilitation

Projects like National Trade Corridor (NTC) and CPEC areindicative of growing recognition at the policy level of inescapablelinkage between efficient transportation system and sustainable

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

278

Pakistanrsquos Potential as A Transit Trade Corridor

economic growth GoP has set forth an ambitious development planfor transportation and logistics In PSDP ndash 201314 the share ofTransport and Logistics stands around 25 while the requirement is2-3 times more28 Draft National Transport Policy (NTP) has beenformulated by Ministry of Communication though yet to be formallyapproved and implemented

China ndash Pakistan Economic Corridor (CPEC)

CPEC connecting Kashgar Xinjiang (China) with Gwadar Karachi ports of Pakistan would serve two purposes internationally itwould be Worldrsquos pivotal trade route to scale down globaltransportation distances between continents while domestically itwould help in invigorating Pakistanrsquos stagnant economy This wouldprovide a link between long distance partners Russia China CARsand ME Europe India Iran and Afghanistan can also benefit throughlateral links with CPEC China is expected to spend USD 30 ndash 40 Bn ina span of next seven years29

Figure 4

China - Pakistan Economic Corridor30

CPEC would essentially have three tiers at the first tierKashgar and Gwadar would be connected through highways motorways while at the second tier through establishment of railnetwork and at third tier linked via energy pipeline and establishmentof an oil refinery at Gwadar Freight terminals planned along the corridorwill facilitate logistic industry trucks carrying freight while economic

PAKISTAN BUSINESS REVIEW APRIL 2016279

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

zones industrial parks would essentially target local products industry and services

Figure 5

Freight Rail Link31

Out of Chinarsquos annual container trade of 225 Bn containersaround 30 (70 Million containers) of this trade is with Europeannations and around 6 with Africa32 Even if Pakistan gets 10 share of container flow to European nations (70000 containersannually) Pakistanrsquos logistic industry and transport sector would geta huge boost

Diplomatic Maneuver

Maintain strategic balance in relations with US and China Capitalize on rapprochement with Russia and offer trade via

CPEC through a trilateral agreement between China ndash Russiandash Pakistan Capacity building of PR acquisition of heavymachinery revival of steel mill industry is suggested areasof mutual cooperation

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

280

Pakistanrsquos Potential as A Transit Trade Corridor

Build upon Quadrilateral Trade Agreement between China Kyrgyzstan Tajikistan and Kazakhstan (operational since2004) and expand mutual trade relations through exchangesbetween business communities of respective countries Offerfor transit trade and access to Arabian sea as well as Indiathrough Pakistan be extended to these countries

Efforts be made to formalize trade with Afghanistan tradefacilitation customs offices be established on all formalcrossings and trade through these points should beincentivized ndash subsidize the customs duty other taxes

Manage pending disputes with India till their resolution tocreate environment for mutual trade for the benefit of peopleon both sides India should be encouraged to trade withCARs Afghanistan through Pakistan and import energy fromCARs Middle East through Pakistan this will create herstakes in stability of Pakistan

Explore avenues with Iran ndash seek points of convergences Gwadar is not a military outpost of China misperceptions be

cleared loudly and squarely It is a mutual economiccooperation venture FDI from other countries like OmanUAE Turkey etc be encouraged as it would help in clearingmisperceptions as well as creating healthy competitiveenvironment

Transportation Sector

Undertake long term perspective planning for periods beyond10-15 years

Investment must focus on capacity building developmentof new transportation infrastructure enhancing operationalefficiency of transport system and extending access to distantmarkets domestically as well as regionally

Transportation projects must be analyzed critically andprioritized from the perspective of their urgency vis-agrave-visaffordability fiscal space these are often vulnerable to

PAKISTAN BUSINESS REVIEW APRIL 2016281

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

miscalculations and mal-investment Dead investments drivenby purely political considerations (bumper sticker projects) oftenturn out to be counterproductive ndash bridges to nowhere hencemust be discouraged ruthlessly

Speedy completion of CPEC be ensured for continuity inpolicy such mega initiatives must be given legal patronagethrough act of parliament

Capacity building of the transport sector services to handlethe potential transit trade from China and other neighbours beensured expected potential is around 70000 ndash 100000 containersannually if only 10 of Chinese trade with Europe is rootedthrough Pakistan

Develop intermodal transportation system on modern lines(Figure 6) gradually shift from age old fragmented logisticindustry to modern state of the art efficient fully integratedlogistic system bridge gaps and establish linkages withindifferent transportation modes Well reputed international firmscan be contracted ndash public-private partnership is perhaps thesolution to fill fiscal gaps

Curtail cost of travel to reduce the cost of doing businessthis will make countryrsquos exports competitive in internationalmarket

Figure 6

Intermodal Transportation Infrastructure33

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

282

Pakistanrsquos Potential as A Transit Trade Corridor

Enhance accessibility farm to market roads and warehousescold storage to save losses in agriculture sector ndash perishablegoods vegetables fruits

TOT based projects be preferred China Turkey Russia andJapan may be engaged for development of transportationsector especially rail network

Road Network

Improve the condition of national highway network througha prioritized and phased programme in line with the priorityset for National Trade Corridor CPEC

Revamp freight transportation industry on modern linesthrough public-private partnership large scale logisticenterprise with integral integrated transport services is needof the hour

Initiate program for progressive replacement of obsolete truckfleet offering loans and incentives Comparatively newerinventory of trucks will not only be environmental friendlybut will also reduce transportation times of freight closer tointernational standards

Rail Network

Enhance the quantity quality of locomotives to meet thedemand of passenger and freight services

Take steps to gradually phase out and replace over agedinfrastructure and rolling stock

The policy of cross subsidy from freight to passengerservices should be done away with to make freight ratesmore competitive with road transport PR should take majorinitiatives to make freight service commercially viable

PAKISTAN BUSINESS REVIEW APRIL 2016283

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Air Transportation PIA should either be privatized or allowed to operate on

commercial lines with minimum governmental control so that itcan compete in the aviation market It will not only be able tomeet its operating expenses but also earn and improve its fleetinstead of becoming a public sector liability

Management of PIA should be cut to size to reduce operationallosses

Ports and Shipping

Improve cargo handling capacity of Karachi port and PortQasim and create space by removing containers awaiting disposalbeyond100 days figures are fairly large

Make port charges competitive with international standards Reduce customs clearance time to less than 12 hours at all

terminals of Karachi Port Qasim and Gwadar

Gwadar Seaport

Speedy operationalization of Gwadar seaport and connectivitywith hinterland to exploit its full potential

Develop maritime industry prospects of industrial zone dedicatedto seafood be explored near Gwadar Karachi and other coastalareas The potential for export of value added seafood productsis phenomenal hither-to-fore untapped

Parallel work on pipeline project between Gwadar and Xinjiangincluding establishment of oil refinery at Gwadar be initiated

Efforts be made to expedite other energy pipeline projects ie IPIand TAPI TKPI

Miscellaneous Recommendations

Concerted efforts be made at all levels to defeat militancyand improve internal security through capacity building of law

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

284

Pakistanrsquos Potential as A Transit Trade Corridor

enforcement agencies ndash conducive environment is inevitable forpromotion of regional connectivity and economic integration

Initiate steps towards progressive development in restiveregions of Pakistan like FATA and Baluchistan to includeexploration of fossil fuels this economic activity will lead toprosperity and stability in these areas

Prudent fiscal management and stringent punitive measuresagainst corruption will ensure transparency ndash this will attract FDIand encourage international business community Pakistanidiaspora to invest in Pakistan

Capitalize on political awakening of middle class and youth bulgeSay NO to bumper sticker projects built at exorbitant prohibitive

costs ndash build consensus through debate between leadership

Conclusion

The paper has endeavored to underline Pakistanrsquos transittrade potential being a regional hub economic corridor and hassuggested few policy guidelines at various levels and for differentmodes of transportation Pakistan offers the most economic strategiclink between the resource affluent and the energy scarce regions inaddition to providing the shortest trade route In changed geo politicalcum strategic environment opportunities are knocking at our doorWith some peace retuning to the region the transit trade from ourimmediate as well as distant neighbors is likely to increase substantiallyPakistanrsquos present transportation system is however barely enoughto meet the demands of regional international transit trade

PAKISTAN BUSINESS REVIEW APRIL 2016285

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

References

Anwar Dr Zafar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo South Asian Studies Jan-Jun 2011Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20AnwarpdfldquoChabahar port vs Gwadar portrdquo Indian Defence Forum AccessedDecember 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtmlldquoChinarsquos Statistical Yearbook 2013 Accessed November 30 2014httpwwwstatsgovcntjsjndsj2013indexehhtmldquoDemographics of Pakistanrdquo Wikipedia Accessed November 302014 httpenwikipediaorgwikiDemographics_of_PakistanldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum CivilServices of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtmlHassan Mehmood ul ldquoPak-China Friendship New Dimensions andNew Opportunitiesrdquo Overseas Pakistani Friends March 252013Accessed December 11 2014 httpwwwopfblogcom13906pak-china-friendship-new-dimensions-and-new-opportunitiesHaq Shahram ldquoPakistan rank 71 in World Bank LogisticPerformance Indexrdquo Express Tribune July 22 2012 httptribunecompkstory411560pakistan-ranked-71-in-world-bank-logistics-performance-indexKhan Dr Shabir Ahmed ldquoGeo Economic Imperatives of GwadarSeaport and Kashgar Economic Zone for Pakistan and Chinardquo IPRIJournal XIII Summer 2013 Accessed December 8 2014 httpgreatgwadarcomvzpaneldocsGwadar20Sea20Port20amp20Kashgar20Economic20Zone20-20Pakistan20amp20ChinapdfKumar Rohit ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014 httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

286

Pakistanrsquos Potential as A Transit Trade Corridor

ldquoPakistan Economic Survey 2013-14rdquo Ministry of Finance GoPAccessed December 14 2014 httpfinancegovpksurveychapters_1413_Transport_and_comspdfldquoPak ndash China Economic Corridor to help setup new dry ports incountryrdquo Business Recorder November 25 2014 AccessedDecember 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-countryldquoPakistan Transport Sectorrdquo World Bank Accessed December 142014 httpwebworldbankorgWBSITEEXTERNALCOUNTRIESSOUTHASIAEXTEXTSARREGTOPTRANSPORT0contentMDK20699058~menuPK869060~pagePK34004173~piPK34003707~theSitePK57959800htmlPaton James and Aibing Guo ldquoRussia China add to $400 bn GasDeal with Accordrdquo Bloomberg November 10 2014 httpwwwbloombergcomnews2014-11-10russia-china-add-to-400-billion-gas-deal-with-accordhtmlSeethi K M ldquoIndiarsquos lsquoConnect Central Asiarsquo Policyrdquo DiplomatDecember 13 2013 Accessed December 7 2014 httpthediplomatcom201312indias-connect-central-asia-policySiddiqui Asim ldquoDeveloping the Pak ndash China Economic Corridor tofacilitate Sino ndash Europe Traderdquo presented at Intermodal Europe2014 held at Rotterdam (11-13 November 2014) Accessed December26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdfSiddiqui Asim ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdfldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp Reforms GoPAccessed December 14 2014 httpwwwpcgovpkannual20plans2012-13chapter-20_transport_and_logisticspdf

PAKISTAN BUSINESS REVIEW APRIL 2016287

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Notes4 Asim Siddiqui ldquoUnderstanding Economic benefits of Trade

corridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdf

5 Ibid

6 Ibid7 ldquoPak ndash China Economic Corridor to help setup new dry ports

in countryrdquo Business Recorder November 25 2014Accessed December 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-country

8 ldquoChinarsquos Statistical Yearbook 2013 Accessed November302014 httpwwwstatsgovcntjsjndsj2013indexehhtm

9 K M Seethi ldquoIndiarsquos lsquoConnect Central Asiarsquo PolicyrdquoDiplomat December 13 2013 Accessed December 7 2014http thediplomatcom201312indias-connect-central-asia-policy

10 Rohit Kumar ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

11 ldquoChabahar port vs Gwadar portrdquo Indian Defence ForumAccessed December 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtml

12 ldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum Civil Services of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtml

13 Dr Shabir Ahmed Khan ldquoGeo Economic Imperatives ofGwadar Seaport and Kashgar Economic Zone for Pakistanand Chinardquo IPRI Journal XIII Summer 2013 AccessedDecember 8 2014 httpgreatgwadarcomvzpaneldocs

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

288

Pakistanrsquos Potential as A Transit Trade Corridor

14 Dr Zafar Anwar ldquoDevelopment of Infrastructural linkagesbetween Pakistan and Central Asiardquo South Asian StudiesJan-Jun 2011 Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20Anwarpdf

15 ldquoDemographics of Pakistanrdquo Wikipedia AccessedNovember 30 2014 httpenwikipediaorgwikiDemographics_of_Pakistan

16 Anwar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo

17 ldquoPakistan Transport Sectorrdquo World Bank AccessedDecember 14 2014 httpwebworldbankorgWBSITEEXTERNALCOUN

18 Pakistan Economic Survey 2013-1419 ldquoPakistan Transport Sectorrdquo World Bank20 Pakistan Economic Survey 2013-14

21 Ibid22 ldquoPakistan Transport Sectorrdquo World Bank23 Ibid24 Ibid25 Ibid26 Pakistan Economic Survey 2013-1427 Ibid

28 ldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp ReformsGoP Accessed December 14 2014 httpwwwpcgovpk20_transport_and_logisticspdf

29 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

30 Siddiqui ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal Networkrdquo

31 Asim Siddiqui ldquoDeveloping the Pak ndash China EconomicCorridor to facilitate Sino ndash Europe Traderdquo presented atIntermodal Europe 2014 held at Rotterdam (11-13 November2014) Accessed December 26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdf

PAKISTAN BUSINESS REVIEW APRIL 2016289

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

32 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

Annexure A

CHINArsquoS TRADE WITH REGIONS COUNTRIES (USD BILLION)

Ser Region Country 2011 2012

Total Exports Imports Total Exports Imports a Afghanistan 0234 023 004 0469 0464 0005

b India 7391 5054 2337 6647 4768 18 80

c Pakistan 1056 844 212 1241 928 314

d Iran 451 1476 3034 3647 116 24 87 e Iraq 1427 382 1044 1757 491 12 66

f Israel 978 674 304 991 699 292

g Jordon 277 251 026 326 296 028

h Lebanon 148 146 0026 171 169 002

i Syria 245 242 0026 12 119 0011 j Turkey 1874 1561 312 1910 1558 351

k Palestine 0 049 0048 0001 0041 004 0001 l Bahrain 120 088 032 155 120 035

m Kuwait 1130 213 918 1256 209 10 47 n Cyprus 115 112 003 124 110 014 o Oman 1587 099 1488 1879 181 16 98 p Qatar 589 120 469 848 120 728 q KSA 6432 1485 4947 7331 1845 54 86

r UAE 3512 2681 831 4042 2957 10 85 s Yemen 424 110 314 556 196 360 t Africa 1663 7308 9324 1986 8531 1133 u Europe 7008 4136 2872 6831 3964 2867 v Latin America 2414 1217 1197 2613 1352 1261 w North America 4944 3501 1443 5363 3801 1562

Page 3: PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

PAKISTAN BUSINESS REVIEW APRIL 2016269

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Figure 1Global Trade Route of China

The Completion of China Pakistan Economic Corridor (CPEC)is expected to reduce the travel distance by 50 ndash 85 for more than 33 of Chinarsquos current container traffic directed towards Europe MiddleEast and Africa (Figure 2)6 70 million containers with Europe alone7trade estimated over USD 1 Trillion with these regions details atAnnexure A8 Pakistanrsquos share including 10-15 Chinese trade wouldhowever depend upon its capacity to handle the volume of transittrade

Figure 2Container Traffic of China

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

270

Pakistanrsquos Potential as A Transit Trade Corridor

Indian Aspirations ndash Pakistan Sole Stumbling Block

Indian ldquoConnect Central Asiardquo Policy9 with objectives ofrebuilding Afghanistan into a trade hub closer military cooperationand a proactive diplomacy exploiting interactions at forums like SCOand Eurasian Economic Community aims at directing all efforts tobypass Pakistan making it irrelevant Alleged Indian involvement inperpetrated terrorism in Balochistan affirms the clash of interests

Indian potential transit trade of oil gas through Pakistan isestimated around USD 104 to 107 Bn10 thus making it economicallymost viable route for flow of energy especially from CARs as well asIndian trade with CARs Afghanistan Trade via Iran may not beeconomically as viable sustainable

Figure 3

Gwadar vs Chahbahar

Chahbahar port of Iran being built and promoted by India asan alternative to Gwadar appears to be at a relatively disadvantageousposition on three accounts (Figure 311) its close proximity to the chokepoint of Strait of Hormuz shallow waters land connectivity betweenPakistan and China contrary to India ndash Iran and possibility of accessto four CARs (except Turkmenistan) via Gwadar ndash CPEC (bypassingAfghanistan)

PAKISTAN BUSINESS REVIEW APRIL 2016271

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

CARs ndash Relevance of Pakistan

Pakistan offers shortest land route to CARs for access tothe Arabian Sea for their trade 2600 km via Afghanistan as comparedto Iran (4500 km) or Turkey (5000 km)12 Moreover CPEC furtherextended to Tajikistan Kyrgyzstan Kazakhstan and Uzbekistan offersyet another lucrative option bypassing Afghanistan the route isoperational since 2004 under a Quadrilateral Trade Agreement betweenChina Kyrgyzstan Tajikistan and Kazakhstan13

Actualization of energy projects like TAPI and TKPI forflow of gas to South Asia remains contingent upon peace and stabilityin Afghanistan TKPI (Termez Kabul Peshawar Islamabad) is analternative project of TAPI with a length of 750 km (nearly half ofTAPI 1700 km) to reach Islamabad14

Afghanistan

The bulk of Afghan trade including daily commodities essential food items is through Pakistan though mostly informalAfter withdrawal of international security forces Pakistanrsquos assistancefor the reconstruction rehabilitation phase would be inevitableNotwithstanding Indian investment or desire for alternatives likeChahbahar Port of Iran Pakistan virtually remains the most viableoption for regional connectivity with Afghanistan

Significance of Gwadar Deep Seaport

Gwadar deep seaport offers two way outlets to the marketsof east west and north south For China and Pakistan it isconvergence of overlapping shared key interests of long term mutualeconomic development regional economic integration developmentof mutually beneficial infrastructure and joint efforts to countercommon threats adversaries

In the global maritime picture Gwadar figures out prominentlyas an alternative to Dubai (outside choke point of Strait of Hormuz

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

272

Pakistanrsquos Potential as A Transit Trade Corridor

and shallow waters) proximity to Vital SLOCs and relevance to thenew great game as part of the so called String of Pearls

For China it provides diversity security and enhancementof energy supplies Currently oil tanker takes approximately 20 - 30days to reach from Gulf to Shanghai while through Gwadar it is likelyto take much lesser time (may be less than a week) and also avoidchoke points like Straits of Malacca etc In the strategic domain theport is likely to serve China more than Pakistan as it provides a landbased oil supply port under a trusted ally

Pakistan as a Consumer Market

Notwithstanding its significance for its near and distantneighbours Pakistan is a promising market of over 196 Million15 peopleOn the one hand it needs energy to meet its industrial growth (largestimports are oil related items) while on the other it produces top qualityfood items best fruits sports items medical instruments textile leathergoods cement etc just to name a few which are needed by the world atlarge

Opportunities

Pakistanrsquos geo-strategic relevance situated between energyresource rich and energy starved regions andneighbourhood of emerging centres of global economicactivity

Regional transit trade hub energy corridor Pakistanrsquosgateway to potentially Worldrsquos largest flow of commerce andtrade Economic integration with regional countries especiallyChina and India is inevitable for mutual economic growthProspects of trade link with Iran Afghanistan and CARs arealso significant

Increased consciousness among regional countries towardsenhancing regional connectivity and economic integration

PAKISTAN BUSINESS REVIEW APRIL 2016273

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

visible during summits of SAARC SCO and other regionalforums

Impacts of Investment on Transportation Sector

High density transportation infrastructures and networksare often related to the highest levels of economic activity development Efficient transport system ensures better access tomarket reduction in cost of production more job opportunities betterquality of life additional investments etc while inefficient systemresults in retarded economic growth reduced (often missed)opportunities rapid inflation and poor quality of life

The investment in transportation sector is likely to haveprofound impact on regional trade especially when viewed from theperspective of Pakistan as a transit trade hub energy corridor Someestimates are reproduced below to highlight the quantum of impact16-

Xinjiang region is responsible for 80 of Chinarsquos total tradewith Central Asia Sea route via Asia Pacific to Europe costsaround $167 per ton and takes around 45 days the Euroasianland bridge is likely to cut transport time by more than halfand would cost $110 per ton Travel distance would bereduced from around 26000 kms to 6379 kms

Indian trade with Europe Commonwealth of IndependentStates (CIS) Iran Afghanistan and Pakistan is likely to cross$ 500 Bn mark in next ten years If only 20 of Indian tradepasses through Pakistan it is likely to stager around $ 100Bn annually

Transportation ChallengesExisting Transportation System

Pakistan has a fairly developed road transportationinfrastructure in the form of intercity highways motorways managed

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

274

Pakistanrsquos Potential as A Transit Trade Corridor

by National Highway amp Motorway Authority (NHMA) but aconstantly deteriorating rail network Successive governmentsdeliberately shifted their focus to roads instead of improving railnetwork possibly due to vested interests of few transport giants mafia who managed this shift through their influence in the politicalpower structure Similar lack of focus is visible in the maritime and airtransportation domains

Challenges to Regional Economic Integration

Regional instability continues to inhabit regional connectivityand economic integration Impending disputes present aformidable challenge

Competing interests of global and regional players posedilemma for Pakistan Balancing relations in this competitiveenvironment is challenging as often competing economic political interests lead to covert hostility Quest for politicalspace in Afghanistan and Gwadar vs Chahbahar competitionhas added fuel to proxies in Khyber Pakhtoonkhwa Balochistan

Pakistanrsquos fragile internal security environment continues tohurt the state economically depriving us of emergingopportunities External meddling in domestic and regionalaffairs add complexity to the already intricate security matrix

Poor border management informal illegal trade run by mafias Inappropriate transport mix focus on road infrastructure than

rail network

Challenges ndash Road Network Poor quality inadequate road transport services Half of national highway network in low condition Poor road safety record Highly fragmented freight transport industry

PAKISTAN BUSINESS REVIEW APRIL 2016275

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Poor truck fleet ndash mostly obsolete underpowered pollutingand grossly overloaded

Slower truck speed 40 ndash 50 kmph for container traffic halfof that in Europe Freight takes 3 ndash 4 times longer thaninternational standards17

Table 2Progress ndash Road Development (2009 ndash March 2014) 18

Years Catego ry Total (km)

Low Type (km) High Type (km)

2009-10 79850 180910 260760 2010-11 78597 180866 259463 2011-12 79655 181940 261595 2012-13 80515 182900 263415 2013-14 79635 184120 263755

Challenges ndash Rail Network

Perpetual shortage of locomotives has been the primaryreason for decline in passenger and freight services over the yearsother factors include over aged infrastructure and rolling stock risein fuel prices and subsidized rail fare Some of the challenges19

confronting rail transportation network of Pakistan are summarizedbelow-

Productivity of PRrsquos freight service is about 18th of ChineseRailway 13rd of Indian Railway and half of Thai Railway (anetwork of comparable size)

PR continues to cross subsidize passenger services fromfreight services resulting in non-competitive freight ratesover road transport Chinese freight service is 2 ndash 3 timescheaper than road

PR has low stagnant share in transportation market ndash lessthan 10 of passenger and 5 of freight traffic

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

276

Pakistanrsquos Potential as A Transit Trade Corridor

Table 3 Earning of Pakistan Railway (2007 ndash March 2014)2 0

Years Earning (Rs in Mn) Change 2009-10 21886 -55 2010-11 18740 -144 2011-12 15444 -175 2012-13 18070 170

2013-14 (July ndash March) 17736 - Table 4 Passenger and Freight Traffic (201112 ndash 201213)2 1

Subject 2011-12 2012-13 Number of Passengers Carried (M) 411 42 Passenger Traffic (M kms) 16093 17388 Freight Carried Tonnes (M) 13 10 Freight Tonnes (M kms) 402 419

Challenges ndash Air Transportation Ever increasing competition in aviation industry Fleet constraints exacerbated by operational issues

management Passenger volumes are 110th of rail and 1100th of road

transport22 Lack of fiscal space retarding growth of PIA

Strict governmental control has prevented PIA from operating oncommercial lines thus often resulting in huge operating losses andconsequent negative growth

Challenges ndash Ports and Shipping

Cargo handling capacity of ports is constantly on the declinedue neglect at the policy level Some of the challenges confrontingmaritime shipping seaport cargo operations in Pakistan are summarizedbelow-

Port charges ndash not competitive still above internationalstandards

Implementation of Pakistan Customs Computerized System(PACCS) has substantially reduced the customs clearancetime from 4-5 days to less than 24 hours in KarachiInternational Container Terminal (KICT)23

PAKISTAN BUSINESS REVIEW APRIL 2016277

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Free storage period shortened from 7 to 4-5 dayscontainer dwell time 5-6 days on the average still aboveinternational standard of 3-5 days24 It reduces thecapacity of container terminal to less than its duepotential

Ports limited draft at 10 ndash 12 Ms keeps latest mostefficient ships from calling25

Performance of Port Operations ndash though improving butstill much short of international standards would not beable to handle anticipated transit trade in the event ofoperationalization of Economic CorridorTable 5 Cargo Handled by Karachi Port and Port Qasim (Million Tonnes) 26

Years Karachi Port Port Qasim Grand Total Exports Imports Total Exports Imports Total

2009-10 13528 27892 41420 6380 19226 25626 67046 2010-11 12843 28589 41432 6657 19511 26168 67600 2011-12 11674 26201 37875 5950 18075 24025 61900 2012-13 12150 26700 38850 7047 17754 24801 63651 2013-14 (July-

March)

8452 22225 30677 5887 13084 18971 49648

Some Common Challenges to Transportation Sector Long waiting hours and travelling time Ever rising high cost of travel Increased cost of doing business Reduced competitiveness of countryrsquos exports Constraints curtailing retarding Pakistanrsquos ability to integrate

into global supply chains which require just in time delivery Poor performance of transport sector costs around 5 of

GDP each year27

Way Forward

Future Initiatives ndash Regional Connectivity and Trade Facilitation

Projects like National Trade Corridor (NTC) and CPEC areindicative of growing recognition at the policy level of inescapablelinkage between efficient transportation system and sustainable

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

278

Pakistanrsquos Potential as A Transit Trade Corridor

economic growth GoP has set forth an ambitious development planfor transportation and logistics In PSDP ndash 201314 the share ofTransport and Logistics stands around 25 while the requirement is2-3 times more28 Draft National Transport Policy (NTP) has beenformulated by Ministry of Communication though yet to be formallyapproved and implemented

China ndash Pakistan Economic Corridor (CPEC)

CPEC connecting Kashgar Xinjiang (China) with Gwadar Karachi ports of Pakistan would serve two purposes internationally itwould be Worldrsquos pivotal trade route to scale down globaltransportation distances between continents while domestically itwould help in invigorating Pakistanrsquos stagnant economy This wouldprovide a link between long distance partners Russia China CARsand ME Europe India Iran and Afghanistan can also benefit throughlateral links with CPEC China is expected to spend USD 30 ndash 40 Bn ina span of next seven years29

Figure 4

China - Pakistan Economic Corridor30

CPEC would essentially have three tiers at the first tierKashgar and Gwadar would be connected through highways motorways while at the second tier through establishment of railnetwork and at third tier linked via energy pipeline and establishmentof an oil refinery at Gwadar Freight terminals planned along the corridorwill facilitate logistic industry trucks carrying freight while economic

PAKISTAN BUSINESS REVIEW APRIL 2016279

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

zones industrial parks would essentially target local products industry and services

Figure 5

Freight Rail Link31

Out of Chinarsquos annual container trade of 225 Bn containersaround 30 (70 Million containers) of this trade is with Europeannations and around 6 with Africa32 Even if Pakistan gets 10 share of container flow to European nations (70000 containersannually) Pakistanrsquos logistic industry and transport sector would geta huge boost

Diplomatic Maneuver

Maintain strategic balance in relations with US and China Capitalize on rapprochement with Russia and offer trade via

CPEC through a trilateral agreement between China ndash Russiandash Pakistan Capacity building of PR acquisition of heavymachinery revival of steel mill industry is suggested areasof mutual cooperation

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

280

Pakistanrsquos Potential as A Transit Trade Corridor

Build upon Quadrilateral Trade Agreement between China Kyrgyzstan Tajikistan and Kazakhstan (operational since2004) and expand mutual trade relations through exchangesbetween business communities of respective countries Offerfor transit trade and access to Arabian sea as well as Indiathrough Pakistan be extended to these countries

Efforts be made to formalize trade with Afghanistan tradefacilitation customs offices be established on all formalcrossings and trade through these points should beincentivized ndash subsidize the customs duty other taxes

Manage pending disputes with India till their resolution tocreate environment for mutual trade for the benefit of peopleon both sides India should be encouraged to trade withCARs Afghanistan through Pakistan and import energy fromCARs Middle East through Pakistan this will create herstakes in stability of Pakistan

Explore avenues with Iran ndash seek points of convergences Gwadar is not a military outpost of China misperceptions be

cleared loudly and squarely It is a mutual economiccooperation venture FDI from other countries like OmanUAE Turkey etc be encouraged as it would help in clearingmisperceptions as well as creating healthy competitiveenvironment

Transportation Sector

Undertake long term perspective planning for periods beyond10-15 years

Investment must focus on capacity building developmentof new transportation infrastructure enhancing operationalefficiency of transport system and extending access to distantmarkets domestically as well as regionally

Transportation projects must be analyzed critically andprioritized from the perspective of their urgency vis-agrave-visaffordability fiscal space these are often vulnerable to

PAKISTAN BUSINESS REVIEW APRIL 2016281

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

miscalculations and mal-investment Dead investments drivenby purely political considerations (bumper sticker projects) oftenturn out to be counterproductive ndash bridges to nowhere hencemust be discouraged ruthlessly

Speedy completion of CPEC be ensured for continuity inpolicy such mega initiatives must be given legal patronagethrough act of parliament

Capacity building of the transport sector services to handlethe potential transit trade from China and other neighbours beensured expected potential is around 70000 ndash 100000 containersannually if only 10 of Chinese trade with Europe is rootedthrough Pakistan

Develop intermodal transportation system on modern lines(Figure 6) gradually shift from age old fragmented logisticindustry to modern state of the art efficient fully integratedlogistic system bridge gaps and establish linkages withindifferent transportation modes Well reputed international firmscan be contracted ndash public-private partnership is perhaps thesolution to fill fiscal gaps

Curtail cost of travel to reduce the cost of doing businessthis will make countryrsquos exports competitive in internationalmarket

Figure 6

Intermodal Transportation Infrastructure33

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

282

Pakistanrsquos Potential as A Transit Trade Corridor

Enhance accessibility farm to market roads and warehousescold storage to save losses in agriculture sector ndash perishablegoods vegetables fruits

TOT based projects be preferred China Turkey Russia andJapan may be engaged for development of transportationsector especially rail network

Road Network

Improve the condition of national highway network througha prioritized and phased programme in line with the priorityset for National Trade Corridor CPEC

Revamp freight transportation industry on modern linesthrough public-private partnership large scale logisticenterprise with integral integrated transport services is needof the hour

Initiate program for progressive replacement of obsolete truckfleet offering loans and incentives Comparatively newerinventory of trucks will not only be environmental friendlybut will also reduce transportation times of freight closer tointernational standards

Rail Network

Enhance the quantity quality of locomotives to meet thedemand of passenger and freight services

Take steps to gradually phase out and replace over agedinfrastructure and rolling stock

The policy of cross subsidy from freight to passengerservices should be done away with to make freight ratesmore competitive with road transport PR should take majorinitiatives to make freight service commercially viable

PAKISTAN BUSINESS REVIEW APRIL 2016283

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Air Transportation PIA should either be privatized or allowed to operate on

commercial lines with minimum governmental control so that itcan compete in the aviation market It will not only be able tomeet its operating expenses but also earn and improve its fleetinstead of becoming a public sector liability

Management of PIA should be cut to size to reduce operationallosses

Ports and Shipping

Improve cargo handling capacity of Karachi port and PortQasim and create space by removing containers awaiting disposalbeyond100 days figures are fairly large

Make port charges competitive with international standards Reduce customs clearance time to less than 12 hours at all

terminals of Karachi Port Qasim and Gwadar

Gwadar Seaport

Speedy operationalization of Gwadar seaport and connectivitywith hinterland to exploit its full potential

Develop maritime industry prospects of industrial zone dedicatedto seafood be explored near Gwadar Karachi and other coastalareas The potential for export of value added seafood productsis phenomenal hither-to-fore untapped

Parallel work on pipeline project between Gwadar and Xinjiangincluding establishment of oil refinery at Gwadar be initiated

Efforts be made to expedite other energy pipeline projects ie IPIand TAPI TKPI

Miscellaneous Recommendations

Concerted efforts be made at all levels to defeat militancyand improve internal security through capacity building of law

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

284

Pakistanrsquos Potential as A Transit Trade Corridor

enforcement agencies ndash conducive environment is inevitable forpromotion of regional connectivity and economic integration

Initiate steps towards progressive development in restiveregions of Pakistan like FATA and Baluchistan to includeexploration of fossil fuels this economic activity will lead toprosperity and stability in these areas

Prudent fiscal management and stringent punitive measuresagainst corruption will ensure transparency ndash this will attract FDIand encourage international business community Pakistanidiaspora to invest in Pakistan

Capitalize on political awakening of middle class and youth bulgeSay NO to bumper sticker projects built at exorbitant prohibitive

costs ndash build consensus through debate between leadership

Conclusion

The paper has endeavored to underline Pakistanrsquos transittrade potential being a regional hub economic corridor and hassuggested few policy guidelines at various levels and for differentmodes of transportation Pakistan offers the most economic strategiclink between the resource affluent and the energy scarce regions inaddition to providing the shortest trade route In changed geo politicalcum strategic environment opportunities are knocking at our doorWith some peace retuning to the region the transit trade from ourimmediate as well as distant neighbors is likely to increase substantiallyPakistanrsquos present transportation system is however barely enoughto meet the demands of regional international transit trade

PAKISTAN BUSINESS REVIEW APRIL 2016285

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

References

Anwar Dr Zafar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo South Asian Studies Jan-Jun 2011Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20AnwarpdfldquoChabahar port vs Gwadar portrdquo Indian Defence Forum AccessedDecember 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtmlldquoChinarsquos Statistical Yearbook 2013 Accessed November 30 2014httpwwwstatsgovcntjsjndsj2013indexehhtmldquoDemographics of Pakistanrdquo Wikipedia Accessed November 302014 httpenwikipediaorgwikiDemographics_of_PakistanldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum CivilServices of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtmlHassan Mehmood ul ldquoPak-China Friendship New Dimensions andNew Opportunitiesrdquo Overseas Pakistani Friends March 252013Accessed December 11 2014 httpwwwopfblogcom13906pak-china-friendship-new-dimensions-and-new-opportunitiesHaq Shahram ldquoPakistan rank 71 in World Bank LogisticPerformance Indexrdquo Express Tribune July 22 2012 httptribunecompkstory411560pakistan-ranked-71-in-world-bank-logistics-performance-indexKhan Dr Shabir Ahmed ldquoGeo Economic Imperatives of GwadarSeaport and Kashgar Economic Zone for Pakistan and Chinardquo IPRIJournal XIII Summer 2013 Accessed December 8 2014 httpgreatgwadarcomvzpaneldocsGwadar20Sea20Port20amp20Kashgar20Economic20Zone20-20Pakistan20amp20ChinapdfKumar Rohit ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014 httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

286

Pakistanrsquos Potential as A Transit Trade Corridor

ldquoPakistan Economic Survey 2013-14rdquo Ministry of Finance GoPAccessed December 14 2014 httpfinancegovpksurveychapters_1413_Transport_and_comspdfldquoPak ndash China Economic Corridor to help setup new dry ports incountryrdquo Business Recorder November 25 2014 AccessedDecember 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-countryldquoPakistan Transport Sectorrdquo World Bank Accessed December 142014 httpwebworldbankorgWBSITEEXTERNALCOUNTRIESSOUTHASIAEXTEXTSARREGTOPTRANSPORT0contentMDK20699058~menuPK869060~pagePK34004173~piPK34003707~theSitePK57959800htmlPaton James and Aibing Guo ldquoRussia China add to $400 bn GasDeal with Accordrdquo Bloomberg November 10 2014 httpwwwbloombergcomnews2014-11-10russia-china-add-to-400-billion-gas-deal-with-accordhtmlSeethi K M ldquoIndiarsquos lsquoConnect Central Asiarsquo Policyrdquo DiplomatDecember 13 2013 Accessed December 7 2014 httpthediplomatcom201312indias-connect-central-asia-policySiddiqui Asim ldquoDeveloping the Pak ndash China Economic Corridor tofacilitate Sino ndash Europe Traderdquo presented at Intermodal Europe2014 held at Rotterdam (11-13 November 2014) Accessed December26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdfSiddiqui Asim ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdfldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp Reforms GoPAccessed December 14 2014 httpwwwpcgovpkannual20plans2012-13chapter-20_transport_and_logisticspdf

PAKISTAN BUSINESS REVIEW APRIL 2016287

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Notes4 Asim Siddiqui ldquoUnderstanding Economic benefits of Trade

corridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdf

5 Ibid

6 Ibid7 ldquoPak ndash China Economic Corridor to help setup new dry ports

in countryrdquo Business Recorder November 25 2014Accessed December 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-country

8 ldquoChinarsquos Statistical Yearbook 2013 Accessed November302014 httpwwwstatsgovcntjsjndsj2013indexehhtm

9 K M Seethi ldquoIndiarsquos lsquoConnect Central Asiarsquo PolicyrdquoDiplomat December 13 2013 Accessed December 7 2014http thediplomatcom201312indias-connect-central-asia-policy

10 Rohit Kumar ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

11 ldquoChabahar port vs Gwadar portrdquo Indian Defence ForumAccessed December 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtml

12 ldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum Civil Services of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtml

13 Dr Shabir Ahmed Khan ldquoGeo Economic Imperatives ofGwadar Seaport and Kashgar Economic Zone for Pakistanand Chinardquo IPRI Journal XIII Summer 2013 AccessedDecember 8 2014 httpgreatgwadarcomvzpaneldocs

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

288

Pakistanrsquos Potential as A Transit Trade Corridor

14 Dr Zafar Anwar ldquoDevelopment of Infrastructural linkagesbetween Pakistan and Central Asiardquo South Asian StudiesJan-Jun 2011 Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20Anwarpdf

15 ldquoDemographics of Pakistanrdquo Wikipedia AccessedNovember 30 2014 httpenwikipediaorgwikiDemographics_of_Pakistan

16 Anwar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo

17 ldquoPakistan Transport Sectorrdquo World Bank AccessedDecember 14 2014 httpwebworldbankorgWBSITEEXTERNALCOUN

18 Pakistan Economic Survey 2013-1419 ldquoPakistan Transport Sectorrdquo World Bank20 Pakistan Economic Survey 2013-14

21 Ibid22 ldquoPakistan Transport Sectorrdquo World Bank23 Ibid24 Ibid25 Ibid26 Pakistan Economic Survey 2013-1427 Ibid

28 ldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp ReformsGoP Accessed December 14 2014 httpwwwpcgovpk20_transport_and_logisticspdf

29 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

30 Siddiqui ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal Networkrdquo

31 Asim Siddiqui ldquoDeveloping the Pak ndash China EconomicCorridor to facilitate Sino ndash Europe Traderdquo presented atIntermodal Europe 2014 held at Rotterdam (11-13 November2014) Accessed December 26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdf

PAKISTAN BUSINESS REVIEW APRIL 2016289

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

32 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

Annexure A

CHINArsquoS TRADE WITH REGIONS COUNTRIES (USD BILLION)

Ser Region Country 2011 2012

Total Exports Imports Total Exports Imports a Afghanistan 0234 023 004 0469 0464 0005

b India 7391 5054 2337 6647 4768 18 80

c Pakistan 1056 844 212 1241 928 314

d Iran 451 1476 3034 3647 116 24 87 e Iraq 1427 382 1044 1757 491 12 66

f Israel 978 674 304 991 699 292

g Jordon 277 251 026 326 296 028

h Lebanon 148 146 0026 171 169 002

i Syria 245 242 0026 12 119 0011 j Turkey 1874 1561 312 1910 1558 351

k Palestine 0 049 0048 0001 0041 004 0001 l Bahrain 120 088 032 155 120 035

m Kuwait 1130 213 918 1256 209 10 47 n Cyprus 115 112 003 124 110 014 o Oman 1587 099 1488 1879 181 16 98 p Qatar 589 120 469 848 120 728 q KSA 6432 1485 4947 7331 1845 54 86

r UAE 3512 2681 831 4042 2957 10 85 s Yemen 424 110 314 556 196 360 t Africa 1663 7308 9324 1986 8531 1133 u Europe 7008 4136 2872 6831 3964 2867 v Latin America 2414 1217 1197 2613 1352 1261 w North America 4944 3501 1443 5363 3801 1562

Page 4: PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

270

Pakistanrsquos Potential as A Transit Trade Corridor

Indian Aspirations ndash Pakistan Sole Stumbling Block

Indian ldquoConnect Central Asiardquo Policy9 with objectives ofrebuilding Afghanistan into a trade hub closer military cooperationand a proactive diplomacy exploiting interactions at forums like SCOand Eurasian Economic Community aims at directing all efforts tobypass Pakistan making it irrelevant Alleged Indian involvement inperpetrated terrorism in Balochistan affirms the clash of interests

Indian potential transit trade of oil gas through Pakistan isestimated around USD 104 to 107 Bn10 thus making it economicallymost viable route for flow of energy especially from CARs as well asIndian trade with CARs Afghanistan Trade via Iran may not beeconomically as viable sustainable

Figure 3

Gwadar vs Chahbahar

Chahbahar port of Iran being built and promoted by India asan alternative to Gwadar appears to be at a relatively disadvantageousposition on three accounts (Figure 311) its close proximity to the chokepoint of Strait of Hormuz shallow waters land connectivity betweenPakistan and China contrary to India ndash Iran and possibility of accessto four CARs (except Turkmenistan) via Gwadar ndash CPEC (bypassingAfghanistan)

PAKISTAN BUSINESS REVIEW APRIL 2016271

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

CARs ndash Relevance of Pakistan

Pakistan offers shortest land route to CARs for access tothe Arabian Sea for their trade 2600 km via Afghanistan as comparedto Iran (4500 km) or Turkey (5000 km)12 Moreover CPEC furtherextended to Tajikistan Kyrgyzstan Kazakhstan and Uzbekistan offersyet another lucrative option bypassing Afghanistan the route isoperational since 2004 under a Quadrilateral Trade Agreement betweenChina Kyrgyzstan Tajikistan and Kazakhstan13

Actualization of energy projects like TAPI and TKPI forflow of gas to South Asia remains contingent upon peace and stabilityin Afghanistan TKPI (Termez Kabul Peshawar Islamabad) is analternative project of TAPI with a length of 750 km (nearly half ofTAPI 1700 km) to reach Islamabad14

Afghanistan

The bulk of Afghan trade including daily commodities essential food items is through Pakistan though mostly informalAfter withdrawal of international security forces Pakistanrsquos assistancefor the reconstruction rehabilitation phase would be inevitableNotwithstanding Indian investment or desire for alternatives likeChahbahar Port of Iran Pakistan virtually remains the most viableoption for regional connectivity with Afghanistan

Significance of Gwadar Deep Seaport

Gwadar deep seaport offers two way outlets to the marketsof east west and north south For China and Pakistan it isconvergence of overlapping shared key interests of long term mutualeconomic development regional economic integration developmentof mutually beneficial infrastructure and joint efforts to countercommon threats adversaries

In the global maritime picture Gwadar figures out prominentlyas an alternative to Dubai (outside choke point of Strait of Hormuz

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

272

Pakistanrsquos Potential as A Transit Trade Corridor

and shallow waters) proximity to Vital SLOCs and relevance to thenew great game as part of the so called String of Pearls

For China it provides diversity security and enhancementof energy supplies Currently oil tanker takes approximately 20 - 30days to reach from Gulf to Shanghai while through Gwadar it is likelyto take much lesser time (may be less than a week) and also avoidchoke points like Straits of Malacca etc In the strategic domain theport is likely to serve China more than Pakistan as it provides a landbased oil supply port under a trusted ally

Pakistan as a Consumer Market

Notwithstanding its significance for its near and distantneighbours Pakistan is a promising market of over 196 Million15 peopleOn the one hand it needs energy to meet its industrial growth (largestimports are oil related items) while on the other it produces top qualityfood items best fruits sports items medical instruments textile leathergoods cement etc just to name a few which are needed by the world atlarge

Opportunities

Pakistanrsquos geo-strategic relevance situated between energyresource rich and energy starved regions andneighbourhood of emerging centres of global economicactivity

Regional transit trade hub energy corridor Pakistanrsquosgateway to potentially Worldrsquos largest flow of commerce andtrade Economic integration with regional countries especiallyChina and India is inevitable for mutual economic growthProspects of trade link with Iran Afghanistan and CARs arealso significant

Increased consciousness among regional countries towardsenhancing regional connectivity and economic integration

PAKISTAN BUSINESS REVIEW APRIL 2016273

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

visible during summits of SAARC SCO and other regionalforums

Impacts of Investment on Transportation Sector

High density transportation infrastructures and networksare often related to the highest levels of economic activity development Efficient transport system ensures better access tomarket reduction in cost of production more job opportunities betterquality of life additional investments etc while inefficient systemresults in retarded economic growth reduced (often missed)opportunities rapid inflation and poor quality of life

The investment in transportation sector is likely to haveprofound impact on regional trade especially when viewed from theperspective of Pakistan as a transit trade hub energy corridor Someestimates are reproduced below to highlight the quantum of impact16-

Xinjiang region is responsible for 80 of Chinarsquos total tradewith Central Asia Sea route via Asia Pacific to Europe costsaround $167 per ton and takes around 45 days the Euroasianland bridge is likely to cut transport time by more than halfand would cost $110 per ton Travel distance would bereduced from around 26000 kms to 6379 kms

Indian trade with Europe Commonwealth of IndependentStates (CIS) Iran Afghanistan and Pakistan is likely to cross$ 500 Bn mark in next ten years If only 20 of Indian tradepasses through Pakistan it is likely to stager around $ 100Bn annually

Transportation ChallengesExisting Transportation System

Pakistan has a fairly developed road transportationinfrastructure in the form of intercity highways motorways managed

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

274

Pakistanrsquos Potential as A Transit Trade Corridor

by National Highway amp Motorway Authority (NHMA) but aconstantly deteriorating rail network Successive governmentsdeliberately shifted their focus to roads instead of improving railnetwork possibly due to vested interests of few transport giants mafia who managed this shift through their influence in the politicalpower structure Similar lack of focus is visible in the maritime and airtransportation domains

Challenges to Regional Economic Integration

Regional instability continues to inhabit regional connectivityand economic integration Impending disputes present aformidable challenge

Competing interests of global and regional players posedilemma for Pakistan Balancing relations in this competitiveenvironment is challenging as often competing economic political interests lead to covert hostility Quest for politicalspace in Afghanistan and Gwadar vs Chahbahar competitionhas added fuel to proxies in Khyber Pakhtoonkhwa Balochistan

Pakistanrsquos fragile internal security environment continues tohurt the state economically depriving us of emergingopportunities External meddling in domestic and regionalaffairs add complexity to the already intricate security matrix

Poor border management informal illegal trade run by mafias Inappropriate transport mix focus on road infrastructure than

rail network

Challenges ndash Road Network Poor quality inadequate road transport services Half of national highway network in low condition Poor road safety record Highly fragmented freight transport industry

PAKISTAN BUSINESS REVIEW APRIL 2016275

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Poor truck fleet ndash mostly obsolete underpowered pollutingand grossly overloaded

Slower truck speed 40 ndash 50 kmph for container traffic halfof that in Europe Freight takes 3 ndash 4 times longer thaninternational standards17

Table 2Progress ndash Road Development (2009 ndash March 2014) 18

Years Catego ry Total (km)

Low Type (km) High Type (km)

2009-10 79850 180910 260760 2010-11 78597 180866 259463 2011-12 79655 181940 261595 2012-13 80515 182900 263415 2013-14 79635 184120 263755

Challenges ndash Rail Network

Perpetual shortage of locomotives has been the primaryreason for decline in passenger and freight services over the yearsother factors include over aged infrastructure and rolling stock risein fuel prices and subsidized rail fare Some of the challenges19

confronting rail transportation network of Pakistan are summarizedbelow-

Productivity of PRrsquos freight service is about 18th of ChineseRailway 13rd of Indian Railway and half of Thai Railway (anetwork of comparable size)

PR continues to cross subsidize passenger services fromfreight services resulting in non-competitive freight ratesover road transport Chinese freight service is 2 ndash 3 timescheaper than road

PR has low stagnant share in transportation market ndash lessthan 10 of passenger and 5 of freight traffic

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

276

Pakistanrsquos Potential as A Transit Trade Corridor

Table 3 Earning of Pakistan Railway (2007 ndash March 2014)2 0

Years Earning (Rs in Mn) Change 2009-10 21886 -55 2010-11 18740 -144 2011-12 15444 -175 2012-13 18070 170

2013-14 (July ndash March) 17736 - Table 4 Passenger and Freight Traffic (201112 ndash 201213)2 1

Subject 2011-12 2012-13 Number of Passengers Carried (M) 411 42 Passenger Traffic (M kms) 16093 17388 Freight Carried Tonnes (M) 13 10 Freight Tonnes (M kms) 402 419

Challenges ndash Air Transportation Ever increasing competition in aviation industry Fleet constraints exacerbated by operational issues

management Passenger volumes are 110th of rail and 1100th of road

transport22 Lack of fiscal space retarding growth of PIA

Strict governmental control has prevented PIA from operating oncommercial lines thus often resulting in huge operating losses andconsequent negative growth

Challenges ndash Ports and Shipping

Cargo handling capacity of ports is constantly on the declinedue neglect at the policy level Some of the challenges confrontingmaritime shipping seaport cargo operations in Pakistan are summarizedbelow-

Port charges ndash not competitive still above internationalstandards

Implementation of Pakistan Customs Computerized System(PACCS) has substantially reduced the customs clearancetime from 4-5 days to less than 24 hours in KarachiInternational Container Terminal (KICT)23

PAKISTAN BUSINESS REVIEW APRIL 2016277

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Free storage period shortened from 7 to 4-5 dayscontainer dwell time 5-6 days on the average still aboveinternational standard of 3-5 days24 It reduces thecapacity of container terminal to less than its duepotential

Ports limited draft at 10 ndash 12 Ms keeps latest mostefficient ships from calling25

Performance of Port Operations ndash though improving butstill much short of international standards would not beable to handle anticipated transit trade in the event ofoperationalization of Economic CorridorTable 5 Cargo Handled by Karachi Port and Port Qasim (Million Tonnes) 26

Years Karachi Port Port Qasim Grand Total Exports Imports Total Exports Imports Total

2009-10 13528 27892 41420 6380 19226 25626 67046 2010-11 12843 28589 41432 6657 19511 26168 67600 2011-12 11674 26201 37875 5950 18075 24025 61900 2012-13 12150 26700 38850 7047 17754 24801 63651 2013-14 (July-

March)

8452 22225 30677 5887 13084 18971 49648

Some Common Challenges to Transportation Sector Long waiting hours and travelling time Ever rising high cost of travel Increased cost of doing business Reduced competitiveness of countryrsquos exports Constraints curtailing retarding Pakistanrsquos ability to integrate

into global supply chains which require just in time delivery Poor performance of transport sector costs around 5 of

GDP each year27

Way Forward

Future Initiatives ndash Regional Connectivity and Trade Facilitation

Projects like National Trade Corridor (NTC) and CPEC areindicative of growing recognition at the policy level of inescapablelinkage between efficient transportation system and sustainable

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

278

Pakistanrsquos Potential as A Transit Trade Corridor

economic growth GoP has set forth an ambitious development planfor transportation and logistics In PSDP ndash 201314 the share ofTransport and Logistics stands around 25 while the requirement is2-3 times more28 Draft National Transport Policy (NTP) has beenformulated by Ministry of Communication though yet to be formallyapproved and implemented

China ndash Pakistan Economic Corridor (CPEC)

CPEC connecting Kashgar Xinjiang (China) with Gwadar Karachi ports of Pakistan would serve two purposes internationally itwould be Worldrsquos pivotal trade route to scale down globaltransportation distances between continents while domestically itwould help in invigorating Pakistanrsquos stagnant economy This wouldprovide a link between long distance partners Russia China CARsand ME Europe India Iran and Afghanistan can also benefit throughlateral links with CPEC China is expected to spend USD 30 ndash 40 Bn ina span of next seven years29

Figure 4

China - Pakistan Economic Corridor30

CPEC would essentially have three tiers at the first tierKashgar and Gwadar would be connected through highways motorways while at the second tier through establishment of railnetwork and at third tier linked via energy pipeline and establishmentof an oil refinery at Gwadar Freight terminals planned along the corridorwill facilitate logistic industry trucks carrying freight while economic

PAKISTAN BUSINESS REVIEW APRIL 2016279

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

zones industrial parks would essentially target local products industry and services

Figure 5

Freight Rail Link31

Out of Chinarsquos annual container trade of 225 Bn containersaround 30 (70 Million containers) of this trade is with Europeannations and around 6 with Africa32 Even if Pakistan gets 10 share of container flow to European nations (70000 containersannually) Pakistanrsquos logistic industry and transport sector would geta huge boost

Diplomatic Maneuver

Maintain strategic balance in relations with US and China Capitalize on rapprochement with Russia and offer trade via

CPEC through a trilateral agreement between China ndash Russiandash Pakistan Capacity building of PR acquisition of heavymachinery revival of steel mill industry is suggested areasof mutual cooperation

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

280

Pakistanrsquos Potential as A Transit Trade Corridor

Build upon Quadrilateral Trade Agreement between China Kyrgyzstan Tajikistan and Kazakhstan (operational since2004) and expand mutual trade relations through exchangesbetween business communities of respective countries Offerfor transit trade and access to Arabian sea as well as Indiathrough Pakistan be extended to these countries

Efforts be made to formalize trade with Afghanistan tradefacilitation customs offices be established on all formalcrossings and trade through these points should beincentivized ndash subsidize the customs duty other taxes

Manage pending disputes with India till their resolution tocreate environment for mutual trade for the benefit of peopleon both sides India should be encouraged to trade withCARs Afghanistan through Pakistan and import energy fromCARs Middle East through Pakistan this will create herstakes in stability of Pakistan

Explore avenues with Iran ndash seek points of convergences Gwadar is not a military outpost of China misperceptions be

cleared loudly and squarely It is a mutual economiccooperation venture FDI from other countries like OmanUAE Turkey etc be encouraged as it would help in clearingmisperceptions as well as creating healthy competitiveenvironment

Transportation Sector

Undertake long term perspective planning for periods beyond10-15 years

Investment must focus on capacity building developmentof new transportation infrastructure enhancing operationalefficiency of transport system and extending access to distantmarkets domestically as well as regionally

Transportation projects must be analyzed critically andprioritized from the perspective of their urgency vis-agrave-visaffordability fiscal space these are often vulnerable to

PAKISTAN BUSINESS REVIEW APRIL 2016281

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

miscalculations and mal-investment Dead investments drivenby purely political considerations (bumper sticker projects) oftenturn out to be counterproductive ndash bridges to nowhere hencemust be discouraged ruthlessly

Speedy completion of CPEC be ensured for continuity inpolicy such mega initiatives must be given legal patronagethrough act of parliament

Capacity building of the transport sector services to handlethe potential transit trade from China and other neighbours beensured expected potential is around 70000 ndash 100000 containersannually if only 10 of Chinese trade with Europe is rootedthrough Pakistan

Develop intermodal transportation system on modern lines(Figure 6) gradually shift from age old fragmented logisticindustry to modern state of the art efficient fully integratedlogistic system bridge gaps and establish linkages withindifferent transportation modes Well reputed international firmscan be contracted ndash public-private partnership is perhaps thesolution to fill fiscal gaps

Curtail cost of travel to reduce the cost of doing businessthis will make countryrsquos exports competitive in internationalmarket

Figure 6

Intermodal Transportation Infrastructure33

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

282

Pakistanrsquos Potential as A Transit Trade Corridor

Enhance accessibility farm to market roads and warehousescold storage to save losses in agriculture sector ndash perishablegoods vegetables fruits

TOT based projects be preferred China Turkey Russia andJapan may be engaged for development of transportationsector especially rail network

Road Network

Improve the condition of national highway network througha prioritized and phased programme in line with the priorityset for National Trade Corridor CPEC

Revamp freight transportation industry on modern linesthrough public-private partnership large scale logisticenterprise with integral integrated transport services is needof the hour

Initiate program for progressive replacement of obsolete truckfleet offering loans and incentives Comparatively newerinventory of trucks will not only be environmental friendlybut will also reduce transportation times of freight closer tointernational standards

Rail Network

Enhance the quantity quality of locomotives to meet thedemand of passenger and freight services

Take steps to gradually phase out and replace over agedinfrastructure and rolling stock

The policy of cross subsidy from freight to passengerservices should be done away with to make freight ratesmore competitive with road transport PR should take majorinitiatives to make freight service commercially viable

PAKISTAN BUSINESS REVIEW APRIL 2016283

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Air Transportation PIA should either be privatized or allowed to operate on

commercial lines with minimum governmental control so that itcan compete in the aviation market It will not only be able tomeet its operating expenses but also earn and improve its fleetinstead of becoming a public sector liability

Management of PIA should be cut to size to reduce operationallosses

Ports and Shipping

Improve cargo handling capacity of Karachi port and PortQasim and create space by removing containers awaiting disposalbeyond100 days figures are fairly large

Make port charges competitive with international standards Reduce customs clearance time to less than 12 hours at all

terminals of Karachi Port Qasim and Gwadar

Gwadar Seaport

Speedy operationalization of Gwadar seaport and connectivitywith hinterland to exploit its full potential

Develop maritime industry prospects of industrial zone dedicatedto seafood be explored near Gwadar Karachi and other coastalareas The potential for export of value added seafood productsis phenomenal hither-to-fore untapped

Parallel work on pipeline project between Gwadar and Xinjiangincluding establishment of oil refinery at Gwadar be initiated

Efforts be made to expedite other energy pipeline projects ie IPIand TAPI TKPI

Miscellaneous Recommendations

Concerted efforts be made at all levels to defeat militancyand improve internal security through capacity building of law

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

284

Pakistanrsquos Potential as A Transit Trade Corridor

enforcement agencies ndash conducive environment is inevitable forpromotion of regional connectivity and economic integration

Initiate steps towards progressive development in restiveregions of Pakistan like FATA and Baluchistan to includeexploration of fossil fuels this economic activity will lead toprosperity and stability in these areas

Prudent fiscal management and stringent punitive measuresagainst corruption will ensure transparency ndash this will attract FDIand encourage international business community Pakistanidiaspora to invest in Pakistan

Capitalize on political awakening of middle class and youth bulgeSay NO to bumper sticker projects built at exorbitant prohibitive

costs ndash build consensus through debate between leadership

Conclusion

The paper has endeavored to underline Pakistanrsquos transittrade potential being a regional hub economic corridor and hassuggested few policy guidelines at various levels and for differentmodes of transportation Pakistan offers the most economic strategiclink between the resource affluent and the energy scarce regions inaddition to providing the shortest trade route In changed geo politicalcum strategic environment opportunities are knocking at our doorWith some peace retuning to the region the transit trade from ourimmediate as well as distant neighbors is likely to increase substantiallyPakistanrsquos present transportation system is however barely enoughto meet the demands of regional international transit trade

PAKISTAN BUSINESS REVIEW APRIL 2016285

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

References

Anwar Dr Zafar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo South Asian Studies Jan-Jun 2011Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20AnwarpdfldquoChabahar port vs Gwadar portrdquo Indian Defence Forum AccessedDecember 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtmlldquoChinarsquos Statistical Yearbook 2013 Accessed November 30 2014httpwwwstatsgovcntjsjndsj2013indexehhtmldquoDemographics of Pakistanrdquo Wikipedia Accessed November 302014 httpenwikipediaorgwikiDemographics_of_PakistanldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum CivilServices of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtmlHassan Mehmood ul ldquoPak-China Friendship New Dimensions andNew Opportunitiesrdquo Overseas Pakistani Friends March 252013Accessed December 11 2014 httpwwwopfblogcom13906pak-china-friendship-new-dimensions-and-new-opportunitiesHaq Shahram ldquoPakistan rank 71 in World Bank LogisticPerformance Indexrdquo Express Tribune July 22 2012 httptribunecompkstory411560pakistan-ranked-71-in-world-bank-logistics-performance-indexKhan Dr Shabir Ahmed ldquoGeo Economic Imperatives of GwadarSeaport and Kashgar Economic Zone for Pakistan and Chinardquo IPRIJournal XIII Summer 2013 Accessed December 8 2014 httpgreatgwadarcomvzpaneldocsGwadar20Sea20Port20amp20Kashgar20Economic20Zone20-20Pakistan20amp20ChinapdfKumar Rohit ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014 httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

286

Pakistanrsquos Potential as A Transit Trade Corridor

ldquoPakistan Economic Survey 2013-14rdquo Ministry of Finance GoPAccessed December 14 2014 httpfinancegovpksurveychapters_1413_Transport_and_comspdfldquoPak ndash China Economic Corridor to help setup new dry ports incountryrdquo Business Recorder November 25 2014 AccessedDecember 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-countryldquoPakistan Transport Sectorrdquo World Bank Accessed December 142014 httpwebworldbankorgWBSITEEXTERNALCOUNTRIESSOUTHASIAEXTEXTSARREGTOPTRANSPORT0contentMDK20699058~menuPK869060~pagePK34004173~piPK34003707~theSitePK57959800htmlPaton James and Aibing Guo ldquoRussia China add to $400 bn GasDeal with Accordrdquo Bloomberg November 10 2014 httpwwwbloombergcomnews2014-11-10russia-china-add-to-400-billion-gas-deal-with-accordhtmlSeethi K M ldquoIndiarsquos lsquoConnect Central Asiarsquo Policyrdquo DiplomatDecember 13 2013 Accessed December 7 2014 httpthediplomatcom201312indias-connect-central-asia-policySiddiqui Asim ldquoDeveloping the Pak ndash China Economic Corridor tofacilitate Sino ndash Europe Traderdquo presented at Intermodal Europe2014 held at Rotterdam (11-13 November 2014) Accessed December26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdfSiddiqui Asim ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdfldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp Reforms GoPAccessed December 14 2014 httpwwwpcgovpkannual20plans2012-13chapter-20_transport_and_logisticspdf

PAKISTAN BUSINESS REVIEW APRIL 2016287

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Notes4 Asim Siddiqui ldquoUnderstanding Economic benefits of Trade

corridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdf

5 Ibid

6 Ibid7 ldquoPak ndash China Economic Corridor to help setup new dry ports

in countryrdquo Business Recorder November 25 2014Accessed December 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-country

8 ldquoChinarsquos Statistical Yearbook 2013 Accessed November302014 httpwwwstatsgovcntjsjndsj2013indexehhtm

9 K M Seethi ldquoIndiarsquos lsquoConnect Central Asiarsquo PolicyrdquoDiplomat December 13 2013 Accessed December 7 2014http thediplomatcom201312indias-connect-central-asia-policy

10 Rohit Kumar ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

11 ldquoChabahar port vs Gwadar portrdquo Indian Defence ForumAccessed December 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtml

12 ldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum Civil Services of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtml

13 Dr Shabir Ahmed Khan ldquoGeo Economic Imperatives ofGwadar Seaport and Kashgar Economic Zone for Pakistanand Chinardquo IPRI Journal XIII Summer 2013 AccessedDecember 8 2014 httpgreatgwadarcomvzpaneldocs

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

288

Pakistanrsquos Potential as A Transit Trade Corridor

14 Dr Zafar Anwar ldquoDevelopment of Infrastructural linkagesbetween Pakistan and Central Asiardquo South Asian StudiesJan-Jun 2011 Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20Anwarpdf

15 ldquoDemographics of Pakistanrdquo Wikipedia AccessedNovember 30 2014 httpenwikipediaorgwikiDemographics_of_Pakistan

16 Anwar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo

17 ldquoPakistan Transport Sectorrdquo World Bank AccessedDecember 14 2014 httpwebworldbankorgWBSITEEXTERNALCOUN

18 Pakistan Economic Survey 2013-1419 ldquoPakistan Transport Sectorrdquo World Bank20 Pakistan Economic Survey 2013-14

21 Ibid22 ldquoPakistan Transport Sectorrdquo World Bank23 Ibid24 Ibid25 Ibid26 Pakistan Economic Survey 2013-1427 Ibid

28 ldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp ReformsGoP Accessed December 14 2014 httpwwwpcgovpk20_transport_and_logisticspdf

29 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

30 Siddiqui ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal Networkrdquo

31 Asim Siddiqui ldquoDeveloping the Pak ndash China EconomicCorridor to facilitate Sino ndash Europe Traderdquo presented atIntermodal Europe 2014 held at Rotterdam (11-13 November2014) Accessed December 26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdf

PAKISTAN BUSINESS REVIEW APRIL 2016289

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

32 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

Annexure A

CHINArsquoS TRADE WITH REGIONS COUNTRIES (USD BILLION)

Ser Region Country 2011 2012

Total Exports Imports Total Exports Imports a Afghanistan 0234 023 004 0469 0464 0005

b India 7391 5054 2337 6647 4768 18 80

c Pakistan 1056 844 212 1241 928 314

d Iran 451 1476 3034 3647 116 24 87 e Iraq 1427 382 1044 1757 491 12 66

f Israel 978 674 304 991 699 292

g Jordon 277 251 026 326 296 028

h Lebanon 148 146 0026 171 169 002

i Syria 245 242 0026 12 119 0011 j Turkey 1874 1561 312 1910 1558 351

k Palestine 0 049 0048 0001 0041 004 0001 l Bahrain 120 088 032 155 120 035

m Kuwait 1130 213 918 1256 209 10 47 n Cyprus 115 112 003 124 110 014 o Oman 1587 099 1488 1879 181 16 98 p Qatar 589 120 469 848 120 728 q KSA 6432 1485 4947 7331 1845 54 86

r UAE 3512 2681 831 4042 2957 10 85 s Yemen 424 110 314 556 196 360 t Africa 1663 7308 9324 1986 8531 1133 u Europe 7008 4136 2872 6831 3964 2867 v Latin America 2414 1217 1197 2613 1352 1261 w North America 4944 3501 1443 5363 3801 1562

Page 5: PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

PAKISTAN BUSINESS REVIEW APRIL 2016271

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

CARs ndash Relevance of Pakistan

Pakistan offers shortest land route to CARs for access tothe Arabian Sea for their trade 2600 km via Afghanistan as comparedto Iran (4500 km) or Turkey (5000 km)12 Moreover CPEC furtherextended to Tajikistan Kyrgyzstan Kazakhstan and Uzbekistan offersyet another lucrative option bypassing Afghanistan the route isoperational since 2004 under a Quadrilateral Trade Agreement betweenChina Kyrgyzstan Tajikistan and Kazakhstan13

Actualization of energy projects like TAPI and TKPI forflow of gas to South Asia remains contingent upon peace and stabilityin Afghanistan TKPI (Termez Kabul Peshawar Islamabad) is analternative project of TAPI with a length of 750 km (nearly half ofTAPI 1700 km) to reach Islamabad14

Afghanistan

The bulk of Afghan trade including daily commodities essential food items is through Pakistan though mostly informalAfter withdrawal of international security forces Pakistanrsquos assistancefor the reconstruction rehabilitation phase would be inevitableNotwithstanding Indian investment or desire for alternatives likeChahbahar Port of Iran Pakistan virtually remains the most viableoption for regional connectivity with Afghanistan

Significance of Gwadar Deep Seaport

Gwadar deep seaport offers two way outlets to the marketsof east west and north south For China and Pakistan it isconvergence of overlapping shared key interests of long term mutualeconomic development regional economic integration developmentof mutually beneficial infrastructure and joint efforts to countercommon threats adversaries

In the global maritime picture Gwadar figures out prominentlyas an alternative to Dubai (outside choke point of Strait of Hormuz

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

272

Pakistanrsquos Potential as A Transit Trade Corridor

and shallow waters) proximity to Vital SLOCs and relevance to thenew great game as part of the so called String of Pearls

For China it provides diversity security and enhancementof energy supplies Currently oil tanker takes approximately 20 - 30days to reach from Gulf to Shanghai while through Gwadar it is likelyto take much lesser time (may be less than a week) and also avoidchoke points like Straits of Malacca etc In the strategic domain theport is likely to serve China more than Pakistan as it provides a landbased oil supply port under a trusted ally

Pakistan as a Consumer Market

Notwithstanding its significance for its near and distantneighbours Pakistan is a promising market of over 196 Million15 peopleOn the one hand it needs energy to meet its industrial growth (largestimports are oil related items) while on the other it produces top qualityfood items best fruits sports items medical instruments textile leathergoods cement etc just to name a few which are needed by the world atlarge

Opportunities

Pakistanrsquos geo-strategic relevance situated between energyresource rich and energy starved regions andneighbourhood of emerging centres of global economicactivity

Regional transit trade hub energy corridor Pakistanrsquosgateway to potentially Worldrsquos largest flow of commerce andtrade Economic integration with regional countries especiallyChina and India is inevitable for mutual economic growthProspects of trade link with Iran Afghanistan and CARs arealso significant

Increased consciousness among regional countries towardsenhancing regional connectivity and economic integration

PAKISTAN BUSINESS REVIEW APRIL 2016273

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

visible during summits of SAARC SCO and other regionalforums

Impacts of Investment on Transportation Sector

High density transportation infrastructures and networksare often related to the highest levels of economic activity development Efficient transport system ensures better access tomarket reduction in cost of production more job opportunities betterquality of life additional investments etc while inefficient systemresults in retarded economic growth reduced (often missed)opportunities rapid inflation and poor quality of life

The investment in transportation sector is likely to haveprofound impact on regional trade especially when viewed from theperspective of Pakistan as a transit trade hub energy corridor Someestimates are reproduced below to highlight the quantum of impact16-

Xinjiang region is responsible for 80 of Chinarsquos total tradewith Central Asia Sea route via Asia Pacific to Europe costsaround $167 per ton and takes around 45 days the Euroasianland bridge is likely to cut transport time by more than halfand would cost $110 per ton Travel distance would bereduced from around 26000 kms to 6379 kms

Indian trade with Europe Commonwealth of IndependentStates (CIS) Iran Afghanistan and Pakistan is likely to cross$ 500 Bn mark in next ten years If only 20 of Indian tradepasses through Pakistan it is likely to stager around $ 100Bn annually

Transportation ChallengesExisting Transportation System

Pakistan has a fairly developed road transportationinfrastructure in the form of intercity highways motorways managed

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

274

Pakistanrsquos Potential as A Transit Trade Corridor

by National Highway amp Motorway Authority (NHMA) but aconstantly deteriorating rail network Successive governmentsdeliberately shifted their focus to roads instead of improving railnetwork possibly due to vested interests of few transport giants mafia who managed this shift through their influence in the politicalpower structure Similar lack of focus is visible in the maritime and airtransportation domains

Challenges to Regional Economic Integration

Regional instability continues to inhabit regional connectivityand economic integration Impending disputes present aformidable challenge

Competing interests of global and regional players posedilemma for Pakistan Balancing relations in this competitiveenvironment is challenging as often competing economic political interests lead to covert hostility Quest for politicalspace in Afghanistan and Gwadar vs Chahbahar competitionhas added fuel to proxies in Khyber Pakhtoonkhwa Balochistan

Pakistanrsquos fragile internal security environment continues tohurt the state economically depriving us of emergingopportunities External meddling in domestic and regionalaffairs add complexity to the already intricate security matrix

Poor border management informal illegal trade run by mafias Inappropriate transport mix focus on road infrastructure than

rail network

Challenges ndash Road Network Poor quality inadequate road transport services Half of national highway network in low condition Poor road safety record Highly fragmented freight transport industry

PAKISTAN BUSINESS REVIEW APRIL 2016275

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Poor truck fleet ndash mostly obsolete underpowered pollutingand grossly overloaded

Slower truck speed 40 ndash 50 kmph for container traffic halfof that in Europe Freight takes 3 ndash 4 times longer thaninternational standards17

Table 2Progress ndash Road Development (2009 ndash March 2014) 18

Years Catego ry Total (km)

Low Type (km) High Type (km)

2009-10 79850 180910 260760 2010-11 78597 180866 259463 2011-12 79655 181940 261595 2012-13 80515 182900 263415 2013-14 79635 184120 263755

Challenges ndash Rail Network

Perpetual shortage of locomotives has been the primaryreason for decline in passenger and freight services over the yearsother factors include over aged infrastructure and rolling stock risein fuel prices and subsidized rail fare Some of the challenges19

confronting rail transportation network of Pakistan are summarizedbelow-

Productivity of PRrsquos freight service is about 18th of ChineseRailway 13rd of Indian Railway and half of Thai Railway (anetwork of comparable size)

PR continues to cross subsidize passenger services fromfreight services resulting in non-competitive freight ratesover road transport Chinese freight service is 2 ndash 3 timescheaper than road

PR has low stagnant share in transportation market ndash lessthan 10 of passenger and 5 of freight traffic

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

276

Pakistanrsquos Potential as A Transit Trade Corridor

Table 3 Earning of Pakistan Railway (2007 ndash March 2014)2 0

Years Earning (Rs in Mn) Change 2009-10 21886 -55 2010-11 18740 -144 2011-12 15444 -175 2012-13 18070 170

2013-14 (July ndash March) 17736 - Table 4 Passenger and Freight Traffic (201112 ndash 201213)2 1

Subject 2011-12 2012-13 Number of Passengers Carried (M) 411 42 Passenger Traffic (M kms) 16093 17388 Freight Carried Tonnes (M) 13 10 Freight Tonnes (M kms) 402 419

Challenges ndash Air Transportation Ever increasing competition in aviation industry Fleet constraints exacerbated by operational issues

management Passenger volumes are 110th of rail and 1100th of road

transport22 Lack of fiscal space retarding growth of PIA

Strict governmental control has prevented PIA from operating oncommercial lines thus often resulting in huge operating losses andconsequent negative growth

Challenges ndash Ports and Shipping

Cargo handling capacity of ports is constantly on the declinedue neglect at the policy level Some of the challenges confrontingmaritime shipping seaport cargo operations in Pakistan are summarizedbelow-

Port charges ndash not competitive still above internationalstandards

Implementation of Pakistan Customs Computerized System(PACCS) has substantially reduced the customs clearancetime from 4-5 days to less than 24 hours in KarachiInternational Container Terminal (KICT)23

PAKISTAN BUSINESS REVIEW APRIL 2016277

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Free storage period shortened from 7 to 4-5 dayscontainer dwell time 5-6 days on the average still aboveinternational standard of 3-5 days24 It reduces thecapacity of container terminal to less than its duepotential

Ports limited draft at 10 ndash 12 Ms keeps latest mostefficient ships from calling25

Performance of Port Operations ndash though improving butstill much short of international standards would not beable to handle anticipated transit trade in the event ofoperationalization of Economic CorridorTable 5 Cargo Handled by Karachi Port and Port Qasim (Million Tonnes) 26

Years Karachi Port Port Qasim Grand Total Exports Imports Total Exports Imports Total

2009-10 13528 27892 41420 6380 19226 25626 67046 2010-11 12843 28589 41432 6657 19511 26168 67600 2011-12 11674 26201 37875 5950 18075 24025 61900 2012-13 12150 26700 38850 7047 17754 24801 63651 2013-14 (July-

March)

8452 22225 30677 5887 13084 18971 49648

Some Common Challenges to Transportation Sector Long waiting hours and travelling time Ever rising high cost of travel Increased cost of doing business Reduced competitiveness of countryrsquos exports Constraints curtailing retarding Pakistanrsquos ability to integrate

into global supply chains which require just in time delivery Poor performance of transport sector costs around 5 of

GDP each year27

Way Forward

Future Initiatives ndash Regional Connectivity and Trade Facilitation

Projects like National Trade Corridor (NTC) and CPEC areindicative of growing recognition at the policy level of inescapablelinkage between efficient transportation system and sustainable

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

278

Pakistanrsquos Potential as A Transit Trade Corridor

economic growth GoP has set forth an ambitious development planfor transportation and logistics In PSDP ndash 201314 the share ofTransport and Logistics stands around 25 while the requirement is2-3 times more28 Draft National Transport Policy (NTP) has beenformulated by Ministry of Communication though yet to be formallyapproved and implemented

China ndash Pakistan Economic Corridor (CPEC)

CPEC connecting Kashgar Xinjiang (China) with Gwadar Karachi ports of Pakistan would serve two purposes internationally itwould be Worldrsquos pivotal trade route to scale down globaltransportation distances between continents while domestically itwould help in invigorating Pakistanrsquos stagnant economy This wouldprovide a link between long distance partners Russia China CARsand ME Europe India Iran and Afghanistan can also benefit throughlateral links with CPEC China is expected to spend USD 30 ndash 40 Bn ina span of next seven years29

Figure 4

China - Pakistan Economic Corridor30

CPEC would essentially have three tiers at the first tierKashgar and Gwadar would be connected through highways motorways while at the second tier through establishment of railnetwork and at third tier linked via energy pipeline and establishmentof an oil refinery at Gwadar Freight terminals planned along the corridorwill facilitate logistic industry trucks carrying freight while economic

PAKISTAN BUSINESS REVIEW APRIL 2016279

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

zones industrial parks would essentially target local products industry and services

Figure 5

Freight Rail Link31

Out of Chinarsquos annual container trade of 225 Bn containersaround 30 (70 Million containers) of this trade is with Europeannations and around 6 with Africa32 Even if Pakistan gets 10 share of container flow to European nations (70000 containersannually) Pakistanrsquos logistic industry and transport sector would geta huge boost

Diplomatic Maneuver

Maintain strategic balance in relations with US and China Capitalize on rapprochement with Russia and offer trade via

CPEC through a trilateral agreement between China ndash Russiandash Pakistan Capacity building of PR acquisition of heavymachinery revival of steel mill industry is suggested areasof mutual cooperation

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

280

Pakistanrsquos Potential as A Transit Trade Corridor

Build upon Quadrilateral Trade Agreement between China Kyrgyzstan Tajikistan and Kazakhstan (operational since2004) and expand mutual trade relations through exchangesbetween business communities of respective countries Offerfor transit trade and access to Arabian sea as well as Indiathrough Pakistan be extended to these countries

Efforts be made to formalize trade with Afghanistan tradefacilitation customs offices be established on all formalcrossings and trade through these points should beincentivized ndash subsidize the customs duty other taxes

Manage pending disputes with India till their resolution tocreate environment for mutual trade for the benefit of peopleon both sides India should be encouraged to trade withCARs Afghanistan through Pakistan and import energy fromCARs Middle East through Pakistan this will create herstakes in stability of Pakistan

Explore avenues with Iran ndash seek points of convergences Gwadar is not a military outpost of China misperceptions be

cleared loudly and squarely It is a mutual economiccooperation venture FDI from other countries like OmanUAE Turkey etc be encouraged as it would help in clearingmisperceptions as well as creating healthy competitiveenvironment

Transportation Sector

Undertake long term perspective planning for periods beyond10-15 years

Investment must focus on capacity building developmentof new transportation infrastructure enhancing operationalefficiency of transport system and extending access to distantmarkets domestically as well as regionally

Transportation projects must be analyzed critically andprioritized from the perspective of their urgency vis-agrave-visaffordability fiscal space these are often vulnerable to

PAKISTAN BUSINESS REVIEW APRIL 2016281

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

miscalculations and mal-investment Dead investments drivenby purely political considerations (bumper sticker projects) oftenturn out to be counterproductive ndash bridges to nowhere hencemust be discouraged ruthlessly

Speedy completion of CPEC be ensured for continuity inpolicy such mega initiatives must be given legal patronagethrough act of parliament

Capacity building of the transport sector services to handlethe potential transit trade from China and other neighbours beensured expected potential is around 70000 ndash 100000 containersannually if only 10 of Chinese trade with Europe is rootedthrough Pakistan

Develop intermodal transportation system on modern lines(Figure 6) gradually shift from age old fragmented logisticindustry to modern state of the art efficient fully integratedlogistic system bridge gaps and establish linkages withindifferent transportation modes Well reputed international firmscan be contracted ndash public-private partnership is perhaps thesolution to fill fiscal gaps

Curtail cost of travel to reduce the cost of doing businessthis will make countryrsquos exports competitive in internationalmarket

Figure 6

Intermodal Transportation Infrastructure33

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

282

Pakistanrsquos Potential as A Transit Trade Corridor

Enhance accessibility farm to market roads and warehousescold storage to save losses in agriculture sector ndash perishablegoods vegetables fruits

TOT based projects be preferred China Turkey Russia andJapan may be engaged for development of transportationsector especially rail network

Road Network

Improve the condition of national highway network througha prioritized and phased programme in line with the priorityset for National Trade Corridor CPEC

Revamp freight transportation industry on modern linesthrough public-private partnership large scale logisticenterprise with integral integrated transport services is needof the hour

Initiate program for progressive replacement of obsolete truckfleet offering loans and incentives Comparatively newerinventory of trucks will not only be environmental friendlybut will also reduce transportation times of freight closer tointernational standards

Rail Network

Enhance the quantity quality of locomotives to meet thedemand of passenger and freight services

Take steps to gradually phase out and replace over agedinfrastructure and rolling stock

The policy of cross subsidy from freight to passengerservices should be done away with to make freight ratesmore competitive with road transport PR should take majorinitiatives to make freight service commercially viable

PAKISTAN BUSINESS REVIEW APRIL 2016283

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Air Transportation PIA should either be privatized or allowed to operate on

commercial lines with minimum governmental control so that itcan compete in the aviation market It will not only be able tomeet its operating expenses but also earn and improve its fleetinstead of becoming a public sector liability

Management of PIA should be cut to size to reduce operationallosses

Ports and Shipping

Improve cargo handling capacity of Karachi port and PortQasim and create space by removing containers awaiting disposalbeyond100 days figures are fairly large

Make port charges competitive with international standards Reduce customs clearance time to less than 12 hours at all

terminals of Karachi Port Qasim and Gwadar

Gwadar Seaport

Speedy operationalization of Gwadar seaport and connectivitywith hinterland to exploit its full potential

Develop maritime industry prospects of industrial zone dedicatedto seafood be explored near Gwadar Karachi and other coastalareas The potential for export of value added seafood productsis phenomenal hither-to-fore untapped

Parallel work on pipeline project between Gwadar and Xinjiangincluding establishment of oil refinery at Gwadar be initiated

Efforts be made to expedite other energy pipeline projects ie IPIand TAPI TKPI

Miscellaneous Recommendations

Concerted efforts be made at all levels to defeat militancyand improve internal security through capacity building of law

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

284

Pakistanrsquos Potential as A Transit Trade Corridor

enforcement agencies ndash conducive environment is inevitable forpromotion of regional connectivity and economic integration

Initiate steps towards progressive development in restiveregions of Pakistan like FATA and Baluchistan to includeexploration of fossil fuels this economic activity will lead toprosperity and stability in these areas

Prudent fiscal management and stringent punitive measuresagainst corruption will ensure transparency ndash this will attract FDIand encourage international business community Pakistanidiaspora to invest in Pakistan

Capitalize on political awakening of middle class and youth bulgeSay NO to bumper sticker projects built at exorbitant prohibitive

costs ndash build consensus through debate between leadership

Conclusion

The paper has endeavored to underline Pakistanrsquos transittrade potential being a regional hub economic corridor and hassuggested few policy guidelines at various levels and for differentmodes of transportation Pakistan offers the most economic strategiclink between the resource affluent and the energy scarce regions inaddition to providing the shortest trade route In changed geo politicalcum strategic environment opportunities are knocking at our doorWith some peace retuning to the region the transit trade from ourimmediate as well as distant neighbors is likely to increase substantiallyPakistanrsquos present transportation system is however barely enoughto meet the demands of regional international transit trade

PAKISTAN BUSINESS REVIEW APRIL 2016285

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

References

Anwar Dr Zafar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo South Asian Studies Jan-Jun 2011Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20AnwarpdfldquoChabahar port vs Gwadar portrdquo Indian Defence Forum AccessedDecember 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtmlldquoChinarsquos Statistical Yearbook 2013 Accessed November 30 2014httpwwwstatsgovcntjsjndsj2013indexehhtmldquoDemographics of Pakistanrdquo Wikipedia Accessed November 302014 httpenwikipediaorgwikiDemographics_of_PakistanldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum CivilServices of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtmlHassan Mehmood ul ldquoPak-China Friendship New Dimensions andNew Opportunitiesrdquo Overseas Pakistani Friends March 252013Accessed December 11 2014 httpwwwopfblogcom13906pak-china-friendship-new-dimensions-and-new-opportunitiesHaq Shahram ldquoPakistan rank 71 in World Bank LogisticPerformance Indexrdquo Express Tribune July 22 2012 httptribunecompkstory411560pakistan-ranked-71-in-world-bank-logistics-performance-indexKhan Dr Shabir Ahmed ldquoGeo Economic Imperatives of GwadarSeaport and Kashgar Economic Zone for Pakistan and Chinardquo IPRIJournal XIII Summer 2013 Accessed December 8 2014 httpgreatgwadarcomvzpaneldocsGwadar20Sea20Port20amp20Kashgar20Economic20Zone20-20Pakistan20amp20ChinapdfKumar Rohit ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014 httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

286

Pakistanrsquos Potential as A Transit Trade Corridor

ldquoPakistan Economic Survey 2013-14rdquo Ministry of Finance GoPAccessed December 14 2014 httpfinancegovpksurveychapters_1413_Transport_and_comspdfldquoPak ndash China Economic Corridor to help setup new dry ports incountryrdquo Business Recorder November 25 2014 AccessedDecember 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-countryldquoPakistan Transport Sectorrdquo World Bank Accessed December 142014 httpwebworldbankorgWBSITEEXTERNALCOUNTRIESSOUTHASIAEXTEXTSARREGTOPTRANSPORT0contentMDK20699058~menuPK869060~pagePK34004173~piPK34003707~theSitePK57959800htmlPaton James and Aibing Guo ldquoRussia China add to $400 bn GasDeal with Accordrdquo Bloomberg November 10 2014 httpwwwbloombergcomnews2014-11-10russia-china-add-to-400-billion-gas-deal-with-accordhtmlSeethi K M ldquoIndiarsquos lsquoConnect Central Asiarsquo Policyrdquo DiplomatDecember 13 2013 Accessed December 7 2014 httpthediplomatcom201312indias-connect-central-asia-policySiddiqui Asim ldquoDeveloping the Pak ndash China Economic Corridor tofacilitate Sino ndash Europe Traderdquo presented at Intermodal Europe2014 held at Rotterdam (11-13 November 2014) Accessed December26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdfSiddiqui Asim ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdfldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp Reforms GoPAccessed December 14 2014 httpwwwpcgovpkannual20plans2012-13chapter-20_transport_and_logisticspdf

PAKISTAN BUSINESS REVIEW APRIL 2016287

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Notes4 Asim Siddiqui ldquoUnderstanding Economic benefits of Trade

corridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdf

5 Ibid

6 Ibid7 ldquoPak ndash China Economic Corridor to help setup new dry ports

in countryrdquo Business Recorder November 25 2014Accessed December 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-country

8 ldquoChinarsquos Statistical Yearbook 2013 Accessed November302014 httpwwwstatsgovcntjsjndsj2013indexehhtm

9 K M Seethi ldquoIndiarsquos lsquoConnect Central Asiarsquo PolicyrdquoDiplomat December 13 2013 Accessed December 7 2014http thediplomatcom201312indias-connect-central-asia-policy

10 Rohit Kumar ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

11 ldquoChabahar port vs Gwadar portrdquo Indian Defence ForumAccessed December 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtml

12 ldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum Civil Services of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtml

13 Dr Shabir Ahmed Khan ldquoGeo Economic Imperatives ofGwadar Seaport and Kashgar Economic Zone for Pakistanand Chinardquo IPRI Journal XIII Summer 2013 AccessedDecember 8 2014 httpgreatgwadarcomvzpaneldocs

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

288

Pakistanrsquos Potential as A Transit Trade Corridor

14 Dr Zafar Anwar ldquoDevelopment of Infrastructural linkagesbetween Pakistan and Central Asiardquo South Asian StudiesJan-Jun 2011 Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20Anwarpdf

15 ldquoDemographics of Pakistanrdquo Wikipedia AccessedNovember 30 2014 httpenwikipediaorgwikiDemographics_of_Pakistan

16 Anwar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo

17 ldquoPakistan Transport Sectorrdquo World Bank AccessedDecember 14 2014 httpwebworldbankorgWBSITEEXTERNALCOUN

18 Pakistan Economic Survey 2013-1419 ldquoPakistan Transport Sectorrdquo World Bank20 Pakistan Economic Survey 2013-14

21 Ibid22 ldquoPakistan Transport Sectorrdquo World Bank23 Ibid24 Ibid25 Ibid26 Pakistan Economic Survey 2013-1427 Ibid

28 ldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp ReformsGoP Accessed December 14 2014 httpwwwpcgovpk20_transport_and_logisticspdf

29 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

30 Siddiqui ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal Networkrdquo

31 Asim Siddiqui ldquoDeveloping the Pak ndash China EconomicCorridor to facilitate Sino ndash Europe Traderdquo presented atIntermodal Europe 2014 held at Rotterdam (11-13 November2014) Accessed December 26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdf

PAKISTAN BUSINESS REVIEW APRIL 2016289

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

32 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

Annexure A

CHINArsquoS TRADE WITH REGIONS COUNTRIES (USD BILLION)

Ser Region Country 2011 2012

Total Exports Imports Total Exports Imports a Afghanistan 0234 023 004 0469 0464 0005

b India 7391 5054 2337 6647 4768 18 80

c Pakistan 1056 844 212 1241 928 314

d Iran 451 1476 3034 3647 116 24 87 e Iraq 1427 382 1044 1757 491 12 66

f Israel 978 674 304 991 699 292

g Jordon 277 251 026 326 296 028

h Lebanon 148 146 0026 171 169 002

i Syria 245 242 0026 12 119 0011 j Turkey 1874 1561 312 1910 1558 351

k Palestine 0 049 0048 0001 0041 004 0001 l Bahrain 120 088 032 155 120 035

m Kuwait 1130 213 918 1256 209 10 47 n Cyprus 115 112 003 124 110 014 o Oman 1587 099 1488 1879 181 16 98 p Qatar 589 120 469 848 120 728 q KSA 6432 1485 4947 7331 1845 54 86

r UAE 3512 2681 831 4042 2957 10 85 s Yemen 424 110 314 556 196 360 t Africa 1663 7308 9324 1986 8531 1133 u Europe 7008 4136 2872 6831 3964 2867 v Latin America 2414 1217 1197 2613 1352 1261 w North America 4944 3501 1443 5363 3801 1562

Page 6: PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

272

Pakistanrsquos Potential as A Transit Trade Corridor

and shallow waters) proximity to Vital SLOCs and relevance to thenew great game as part of the so called String of Pearls

For China it provides diversity security and enhancementof energy supplies Currently oil tanker takes approximately 20 - 30days to reach from Gulf to Shanghai while through Gwadar it is likelyto take much lesser time (may be less than a week) and also avoidchoke points like Straits of Malacca etc In the strategic domain theport is likely to serve China more than Pakistan as it provides a landbased oil supply port under a trusted ally

Pakistan as a Consumer Market

Notwithstanding its significance for its near and distantneighbours Pakistan is a promising market of over 196 Million15 peopleOn the one hand it needs energy to meet its industrial growth (largestimports are oil related items) while on the other it produces top qualityfood items best fruits sports items medical instruments textile leathergoods cement etc just to name a few which are needed by the world atlarge

Opportunities

Pakistanrsquos geo-strategic relevance situated between energyresource rich and energy starved regions andneighbourhood of emerging centres of global economicactivity

Regional transit trade hub energy corridor Pakistanrsquosgateway to potentially Worldrsquos largest flow of commerce andtrade Economic integration with regional countries especiallyChina and India is inevitable for mutual economic growthProspects of trade link with Iran Afghanistan and CARs arealso significant

Increased consciousness among regional countries towardsenhancing regional connectivity and economic integration

PAKISTAN BUSINESS REVIEW APRIL 2016273

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

visible during summits of SAARC SCO and other regionalforums

Impacts of Investment on Transportation Sector

High density transportation infrastructures and networksare often related to the highest levels of economic activity development Efficient transport system ensures better access tomarket reduction in cost of production more job opportunities betterquality of life additional investments etc while inefficient systemresults in retarded economic growth reduced (often missed)opportunities rapid inflation and poor quality of life

The investment in transportation sector is likely to haveprofound impact on regional trade especially when viewed from theperspective of Pakistan as a transit trade hub energy corridor Someestimates are reproduced below to highlight the quantum of impact16-

Xinjiang region is responsible for 80 of Chinarsquos total tradewith Central Asia Sea route via Asia Pacific to Europe costsaround $167 per ton and takes around 45 days the Euroasianland bridge is likely to cut transport time by more than halfand would cost $110 per ton Travel distance would bereduced from around 26000 kms to 6379 kms

Indian trade with Europe Commonwealth of IndependentStates (CIS) Iran Afghanistan and Pakistan is likely to cross$ 500 Bn mark in next ten years If only 20 of Indian tradepasses through Pakistan it is likely to stager around $ 100Bn annually

Transportation ChallengesExisting Transportation System

Pakistan has a fairly developed road transportationinfrastructure in the form of intercity highways motorways managed

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

274

Pakistanrsquos Potential as A Transit Trade Corridor

by National Highway amp Motorway Authority (NHMA) but aconstantly deteriorating rail network Successive governmentsdeliberately shifted their focus to roads instead of improving railnetwork possibly due to vested interests of few transport giants mafia who managed this shift through their influence in the politicalpower structure Similar lack of focus is visible in the maritime and airtransportation domains

Challenges to Regional Economic Integration

Regional instability continues to inhabit regional connectivityand economic integration Impending disputes present aformidable challenge

Competing interests of global and regional players posedilemma for Pakistan Balancing relations in this competitiveenvironment is challenging as often competing economic political interests lead to covert hostility Quest for politicalspace in Afghanistan and Gwadar vs Chahbahar competitionhas added fuel to proxies in Khyber Pakhtoonkhwa Balochistan

Pakistanrsquos fragile internal security environment continues tohurt the state economically depriving us of emergingopportunities External meddling in domestic and regionalaffairs add complexity to the already intricate security matrix

Poor border management informal illegal trade run by mafias Inappropriate transport mix focus on road infrastructure than

rail network

Challenges ndash Road Network Poor quality inadequate road transport services Half of national highway network in low condition Poor road safety record Highly fragmented freight transport industry

PAKISTAN BUSINESS REVIEW APRIL 2016275

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Poor truck fleet ndash mostly obsolete underpowered pollutingand grossly overloaded

Slower truck speed 40 ndash 50 kmph for container traffic halfof that in Europe Freight takes 3 ndash 4 times longer thaninternational standards17

Table 2Progress ndash Road Development (2009 ndash March 2014) 18

Years Catego ry Total (km)

Low Type (km) High Type (km)

2009-10 79850 180910 260760 2010-11 78597 180866 259463 2011-12 79655 181940 261595 2012-13 80515 182900 263415 2013-14 79635 184120 263755

Challenges ndash Rail Network

Perpetual shortage of locomotives has been the primaryreason for decline in passenger and freight services over the yearsother factors include over aged infrastructure and rolling stock risein fuel prices and subsidized rail fare Some of the challenges19

confronting rail transportation network of Pakistan are summarizedbelow-

Productivity of PRrsquos freight service is about 18th of ChineseRailway 13rd of Indian Railway and half of Thai Railway (anetwork of comparable size)

PR continues to cross subsidize passenger services fromfreight services resulting in non-competitive freight ratesover road transport Chinese freight service is 2 ndash 3 timescheaper than road

PR has low stagnant share in transportation market ndash lessthan 10 of passenger and 5 of freight traffic

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

276

Pakistanrsquos Potential as A Transit Trade Corridor

Table 3 Earning of Pakistan Railway (2007 ndash March 2014)2 0

Years Earning (Rs in Mn) Change 2009-10 21886 -55 2010-11 18740 -144 2011-12 15444 -175 2012-13 18070 170

2013-14 (July ndash March) 17736 - Table 4 Passenger and Freight Traffic (201112 ndash 201213)2 1

Subject 2011-12 2012-13 Number of Passengers Carried (M) 411 42 Passenger Traffic (M kms) 16093 17388 Freight Carried Tonnes (M) 13 10 Freight Tonnes (M kms) 402 419

Challenges ndash Air Transportation Ever increasing competition in aviation industry Fleet constraints exacerbated by operational issues

management Passenger volumes are 110th of rail and 1100th of road

transport22 Lack of fiscal space retarding growth of PIA

Strict governmental control has prevented PIA from operating oncommercial lines thus often resulting in huge operating losses andconsequent negative growth

Challenges ndash Ports and Shipping

Cargo handling capacity of ports is constantly on the declinedue neglect at the policy level Some of the challenges confrontingmaritime shipping seaport cargo operations in Pakistan are summarizedbelow-

Port charges ndash not competitive still above internationalstandards

Implementation of Pakistan Customs Computerized System(PACCS) has substantially reduced the customs clearancetime from 4-5 days to less than 24 hours in KarachiInternational Container Terminal (KICT)23

PAKISTAN BUSINESS REVIEW APRIL 2016277

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Free storage period shortened from 7 to 4-5 dayscontainer dwell time 5-6 days on the average still aboveinternational standard of 3-5 days24 It reduces thecapacity of container terminal to less than its duepotential

Ports limited draft at 10 ndash 12 Ms keeps latest mostefficient ships from calling25

Performance of Port Operations ndash though improving butstill much short of international standards would not beable to handle anticipated transit trade in the event ofoperationalization of Economic CorridorTable 5 Cargo Handled by Karachi Port and Port Qasim (Million Tonnes) 26

Years Karachi Port Port Qasim Grand Total Exports Imports Total Exports Imports Total

2009-10 13528 27892 41420 6380 19226 25626 67046 2010-11 12843 28589 41432 6657 19511 26168 67600 2011-12 11674 26201 37875 5950 18075 24025 61900 2012-13 12150 26700 38850 7047 17754 24801 63651 2013-14 (July-

March)

8452 22225 30677 5887 13084 18971 49648

Some Common Challenges to Transportation Sector Long waiting hours and travelling time Ever rising high cost of travel Increased cost of doing business Reduced competitiveness of countryrsquos exports Constraints curtailing retarding Pakistanrsquos ability to integrate

into global supply chains which require just in time delivery Poor performance of transport sector costs around 5 of

GDP each year27

Way Forward

Future Initiatives ndash Regional Connectivity and Trade Facilitation

Projects like National Trade Corridor (NTC) and CPEC areindicative of growing recognition at the policy level of inescapablelinkage between efficient transportation system and sustainable

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

278

Pakistanrsquos Potential as A Transit Trade Corridor

economic growth GoP has set forth an ambitious development planfor transportation and logistics In PSDP ndash 201314 the share ofTransport and Logistics stands around 25 while the requirement is2-3 times more28 Draft National Transport Policy (NTP) has beenformulated by Ministry of Communication though yet to be formallyapproved and implemented

China ndash Pakistan Economic Corridor (CPEC)

CPEC connecting Kashgar Xinjiang (China) with Gwadar Karachi ports of Pakistan would serve two purposes internationally itwould be Worldrsquos pivotal trade route to scale down globaltransportation distances between continents while domestically itwould help in invigorating Pakistanrsquos stagnant economy This wouldprovide a link between long distance partners Russia China CARsand ME Europe India Iran and Afghanistan can also benefit throughlateral links with CPEC China is expected to spend USD 30 ndash 40 Bn ina span of next seven years29

Figure 4

China - Pakistan Economic Corridor30

CPEC would essentially have three tiers at the first tierKashgar and Gwadar would be connected through highways motorways while at the second tier through establishment of railnetwork and at third tier linked via energy pipeline and establishmentof an oil refinery at Gwadar Freight terminals planned along the corridorwill facilitate logistic industry trucks carrying freight while economic

PAKISTAN BUSINESS REVIEW APRIL 2016279

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

zones industrial parks would essentially target local products industry and services

Figure 5

Freight Rail Link31

Out of Chinarsquos annual container trade of 225 Bn containersaround 30 (70 Million containers) of this trade is with Europeannations and around 6 with Africa32 Even if Pakistan gets 10 share of container flow to European nations (70000 containersannually) Pakistanrsquos logistic industry and transport sector would geta huge boost

Diplomatic Maneuver

Maintain strategic balance in relations with US and China Capitalize on rapprochement with Russia and offer trade via

CPEC through a trilateral agreement between China ndash Russiandash Pakistan Capacity building of PR acquisition of heavymachinery revival of steel mill industry is suggested areasof mutual cooperation

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

280

Pakistanrsquos Potential as A Transit Trade Corridor

Build upon Quadrilateral Trade Agreement between China Kyrgyzstan Tajikistan and Kazakhstan (operational since2004) and expand mutual trade relations through exchangesbetween business communities of respective countries Offerfor transit trade and access to Arabian sea as well as Indiathrough Pakistan be extended to these countries

Efforts be made to formalize trade with Afghanistan tradefacilitation customs offices be established on all formalcrossings and trade through these points should beincentivized ndash subsidize the customs duty other taxes

Manage pending disputes with India till their resolution tocreate environment for mutual trade for the benefit of peopleon both sides India should be encouraged to trade withCARs Afghanistan through Pakistan and import energy fromCARs Middle East through Pakistan this will create herstakes in stability of Pakistan

Explore avenues with Iran ndash seek points of convergences Gwadar is not a military outpost of China misperceptions be

cleared loudly and squarely It is a mutual economiccooperation venture FDI from other countries like OmanUAE Turkey etc be encouraged as it would help in clearingmisperceptions as well as creating healthy competitiveenvironment

Transportation Sector

Undertake long term perspective planning for periods beyond10-15 years

Investment must focus on capacity building developmentof new transportation infrastructure enhancing operationalefficiency of transport system and extending access to distantmarkets domestically as well as regionally

Transportation projects must be analyzed critically andprioritized from the perspective of their urgency vis-agrave-visaffordability fiscal space these are often vulnerable to

PAKISTAN BUSINESS REVIEW APRIL 2016281

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

miscalculations and mal-investment Dead investments drivenby purely political considerations (bumper sticker projects) oftenturn out to be counterproductive ndash bridges to nowhere hencemust be discouraged ruthlessly

Speedy completion of CPEC be ensured for continuity inpolicy such mega initiatives must be given legal patronagethrough act of parliament

Capacity building of the transport sector services to handlethe potential transit trade from China and other neighbours beensured expected potential is around 70000 ndash 100000 containersannually if only 10 of Chinese trade with Europe is rootedthrough Pakistan

Develop intermodal transportation system on modern lines(Figure 6) gradually shift from age old fragmented logisticindustry to modern state of the art efficient fully integratedlogistic system bridge gaps and establish linkages withindifferent transportation modes Well reputed international firmscan be contracted ndash public-private partnership is perhaps thesolution to fill fiscal gaps

Curtail cost of travel to reduce the cost of doing businessthis will make countryrsquos exports competitive in internationalmarket

Figure 6

Intermodal Transportation Infrastructure33

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

282

Pakistanrsquos Potential as A Transit Trade Corridor

Enhance accessibility farm to market roads and warehousescold storage to save losses in agriculture sector ndash perishablegoods vegetables fruits

TOT based projects be preferred China Turkey Russia andJapan may be engaged for development of transportationsector especially rail network

Road Network

Improve the condition of national highway network througha prioritized and phased programme in line with the priorityset for National Trade Corridor CPEC

Revamp freight transportation industry on modern linesthrough public-private partnership large scale logisticenterprise with integral integrated transport services is needof the hour

Initiate program for progressive replacement of obsolete truckfleet offering loans and incentives Comparatively newerinventory of trucks will not only be environmental friendlybut will also reduce transportation times of freight closer tointernational standards

Rail Network

Enhance the quantity quality of locomotives to meet thedemand of passenger and freight services

Take steps to gradually phase out and replace over agedinfrastructure and rolling stock

The policy of cross subsidy from freight to passengerservices should be done away with to make freight ratesmore competitive with road transport PR should take majorinitiatives to make freight service commercially viable

PAKISTAN BUSINESS REVIEW APRIL 2016283

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Air Transportation PIA should either be privatized or allowed to operate on

commercial lines with minimum governmental control so that itcan compete in the aviation market It will not only be able tomeet its operating expenses but also earn and improve its fleetinstead of becoming a public sector liability

Management of PIA should be cut to size to reduce operationallosses

Ports and Shipping

Improve cargo handling capacity of Karachi port and PortQasim and create space by removing containers awaiting disposalbeyond100 days figures are fairly large

Make port charges competitive with international standards Reduce customs clearance time to less than 12 hours at all

terminals of Karachi Port Qasim and Gwadar

Gwadar Seaport

Speedy operationalization of Gwadar seaport and connectivitywith hinterland to exploit its full potential

Develop maritime industry prospects of industrial zone dedicatedto seafood be explored near Gwadar Karachi and other coastalareas The potential for export of value added seafood productsis phenomenal hither-to-fore untapped

Parallel work on pipeline project between Gwadar and Xinjiangincluding establishment of oil refinery at Gwadar be initiated

Efforts be made to expedite other energy pipeline projects ie IPIand TAPI TKPI

Miscellaneous Recommendations

Concerted efforts be made at all levels to defeat militancyand improve internal security through capacity building of law

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

284

Pakistanrsquos Potential as A Transit Trade Corridor

enforcement agencies ndash conducive environment is inevitable forpromotion of regional connectivity and economic integration

Initiate steps towards progressive development in restiveregions of Pakistan like FATA and Baluchistan to includeexploration of fossil fuels this economic activity will lead toprosperity and stability in these areas

Prudent fiscal management and stringent punitive measuresagainst corruption will ensure transparency ndash this will attract FDIand encourage international business community Pakistanidiaspora to invest in Pakistan

Capitalize on political awakening of middle class and youth bulgeSay NO to bumper sticker projects built at exorbitant prohibitive

costs ndash build consensus through debate between leadership

Conclusion

The paper has endeavored to underline Pakistanrsquos transittrade potential being a regional hub economic corridor and hassuggested few policy guidelines at various levels and for differentmodes of transportation Pakistan offers the most economic strategiclink between the resource affluent and the energy scarce regions inaddition to providing the shortest trade route In changed geo politicalcum strategic environment opportunities are knocking at our doorWith some peace retuning to the region the transit trade from ourimmediate as well as distant neighbors is likely to increase substantiallyPakistanrsquos present transportation system is however barely enoughto meet the demands of regional international transit trade

PAKISTAN BUSINESS REVIEW APRIL 2016285

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

References

Anwar Dr Zafar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo South Asian Studies Jan-Jun 2011Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20AnwarpdfldquoChabahar port vs Gwadar portrdquo Indian Defence Forum AccessedDecember 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtmlldquoChinarsquos Statistical Yearbook 2013 Accessed November 30 2014httpwwwstatsgovcntjsjndsj2013indexehhtmldquoDemographics of Pakistanrdquo Wikipedia Accessed November 302014 httpenwikipediaorgwikiDemographics_of_PakistanldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum CivilServices of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtmlHassan Mehmood ul ldquoPak-China Friendship New Dimensions andNew Opportunitiesrdquo Overseas Pakistani Friends March 252013Accessed December 11 2014 httpwwwopfblogcom13906pak-china-friendship-new-dimensions-and-new-opportunitiesHaq Shahram ldquoPakistan rank 71 in World Bank LogisticPerformance Indexrdquo Express Tribune July 22 2012 httptribunecompkstory411560pakistan-ranked-71-in-world-bank-logistics-performance-indexKhan Dr Shabir Ahmed ldquoGeo Economic Imperatives of GwadarSeaport and Kashgar Economic Zone for Pakistan and Chinardquo IPRIJournal XIII Summer 2013 Accessed December 8 2014 httpgreatgwadarcomvzpaneldocsGwadar20Sea20Port20amp20Kashgar20Economic20Zone20-20Pakistan20amp20ChinapdfKumar Rohit ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014 httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

286

Pakistanrsquos Potential as A Transit Trade Corridor

ldquoPakistan Economic Survey 2013-14rdquo Ministry of Finance GoPAccessed December 14 2014 httpfinancegovpksurveychapters_1413_Transport_and_comspdfldquoPak ndash China Economic Corridor to help setup new dry ports incountryrdquo Business Recorder November 25 2014 AccessedDecember 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-countryldquoPakistan Transport Sectorrdquo World Bank Accessed December 142014 httpwebworldbankorgWBSITEEXTERNALCOUNTRIESSOUTHASIAEXTEXTSARREGTOPTRANSPORT0contentMDK20699058~menuPK869060~pagePK34004173~piPK34003707~theSitePK57959800htmlPaton James and Aibing Guo ldquoRussia China add to $400 bn GasDeal with Accordrdquo Bloomberg November 10 2014 httpwwwbloombergcomnews2014-11-10russia-china-add-to-400-billion-gas-deal-with-accordhtmlSeethi K M ldquoIndiarsquos lsquoConnect Central Asiarsquo Policyrdquo DiplomatDecember 13 2013 Accessed December 7 2014 httpthediplomatcom201312indias-connect-central-asia-policySiddiqui Asim ldquoDeveloping the Pak ndash China Economic Corridor tofacilitate Sino ndash Europe Traderdquo presented at Intermodal Europe2014 held at Rotterdam (11-13 November 2014) Accessed December26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdfSiddiqui Asim ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdfldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp Reforms GoPAccessed December 14 2014 httpwwwpcgovpkannual20plans2012-13chapter-20_transport_and_logisticspdf

PAKISTAN BUSINESS REVIEW APRIL 2016287

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Notes4 Asim Siddiqui ldquoUnderstanding Economic benefits of Trade

corridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdf

5 Ibid

6 Ibid7 ldquoPak ndash China Economic Corridor to help setup new dry ports

in countryrdquo Business Recorder November 25 2014Accessed December 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-country

8 ldquoChinarsquos Statistical Yearbook 2013 Accessed November302014 httpwwwstatsgovcntjsjndsj2013indexehhtm

9 K M Seethi ldquoIndiarsquos lsquoConnect Central Asiarsquo PolicyrdquoDiplomat December 13 2013 Accessed December 7 2014http thediplomatcom201312indias-connect-central-asia-policy

10 Rohit Kumar ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

11 ldquoChabahar port vs Gwadar portrdquo Indian Defence ForumAccessed December 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtml

12 ldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum Civil Services of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtml

13 Dr Shabir Ahmed Khan ldquoGeo Economic Imperatives ofGwadar Seaport and Kashgar Economic Zone for Pakistanand Chinardquo IPRI Journal XIII Summer 2013 AccessedDecember 8 2014 httpgreatgwadarcomvzpaneldocs

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

288

Pakistanrsquos Potential as A Transit Trade Corridor

14 Dr Zafar Anwar ldquoDevelopment of Infrastructural linkagesbetween Pakistan and Central Asiardquo South Asian StudiesJan-Jun 2011 Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20Anwarpdf

15 ldquoDemographics of Pakistanrdquo Wikipedia AccessedNovember 30 2014 httpenwikipediaorgwikiDemographics_of_Pakistan

16 Anwar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo

17 ldquoPakistan Transport Sectorrdquo World Bank AccessedDecember 14 2014 httpwebworldbankorgWBSITEEXTERNALCOUN

18 Pakistan Economic Survey 2013-1419 ldquoPakistan Transport Sectorrdquo World Bank20 Pakistan Economic Survey 2013-14

21 Ibid22 ldquoPakistan Transport Sectorrdquo World Bank23 Ibid24 Ibid25 Ibid26 Pakistan Economic Survey 2013-1427 Ibid

28 ldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp ReformsGoP Accessed December 14 2014 httpwwwpcgovpk20_transport_and_logisticspdf

29 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

30 Siddiqui ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal Networkrdquo

31 Asim Siddiqui ldquoDeveloping the Pak ndash China EconomicCorridor to facilitate Sino ndash Europe Traderdquo presented atIntermodal Europe 2014 held at Rotterdam (11-13 November2014) Accessed December 26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdf

PAKISTAN BUSINESS REVIEW APRIL 2016289

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

32 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

Annexure A

CHINArsquoS TRADE WITH REGIONS COUNTRIES (USD BILLION)

Ser Region Country 2011 2012

Total Exports Imports Total Exports Imports a Afghanistan 0234 023 004 0469 0464 0005

b India 7391 5054 2337 6647 4768 18 80

c Pakistan 1056 844 212 1241 928 314

d Iran 451 1476 3034 3647 116 24 87 e Iraq 1427 382 1044 1757 491 12 66

f Israel 978 674 304 991 699 292

g Jordon 277 251 026 326 296 028

h Lebanon 148 146 0026 171 169 002

i Syria 245 242 0026 12 119 0011 j Turkey 1874 1561 312 1910 1558 351

k Palestine 0 049 0048 0001 0041 004 0001 l Bahrain 120 088 032 155 120 035

m Kuwait 1130 213 918 1256 209 10 47 n Cyprus 115 112 003 124 110 014 o Oman 1587 099 1488 1879 181 16 98 p Qatar 589 120 469 848 120 728 q KSA 6432 1485 4947 7331 1845 54 86

r UAE 3512 2681 831 4042 2957 10 85 s Yemen 424 110 314 556 196 360 t Africa 1663 7308 9324 1986 8531 1133 u Europe 7008 4136 2872 6831 3964 2867 v Latin America 2414 1217 1197 2613 1352 1261 w North America 4944 3501 1443 5363 3801 1562

Page 7: PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

PAKISTAN BUSINESS REVIEW APRIL 2016273

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

visible during summits of SAARC SCO and other regionalforums

Impacts of Investment on Transportation Sector

High density transportation infrastructures and networksare often related to the highest levels of economic activity development Efficient transport system ensures better access tomarket reduction in cost of production more job opportunities betterquality of life additional investments etc while inefficient systemresults in retarded economic growth reduced (often missed)opportunities rapid inflation and poor quality of life

The investment in transportation sector is likely to haveprofound impact on regional trade especially when viewed from theperspective of Pakistan as a transit trade hub energy corridor Someestimates are reproduced below to highlight the quantum of impact16-

Xinjiang region is responsible for 80 of Chinarsquos total tradewith Central Asia Sea route via Asia Pacific to Europe costsaround $167 per ton and takes around 45 days the Euroasianland bridge is likely to cut transport time by more than halfand would cost $110 per ton Travel distance would bereduced from around 26000 kms to 6379 kms

Indian trade with Europe Commonwealth of IndependentStates (CIS) Iran Afghanistan and Pakistan is likely to cross$ 500 Bn mark in next ten years If only 20 of Indian tradepasses through Pakistan it is likely to stager around $ 100Bn annually

Transportation ChallengesExisting Transportation System

Pakistan has a fairly developed road transportationinfrastructure in the form of intercity highways motorways managed

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

274

Pakistanrsquos Potential as A Transit Trade Corridor

by National Highway amp Motorway Authority (NHMA) but aconstantly deteriorating rail network Successive governmentsdeliberately shifted their focus to roads instead of improving railnetwork possibly due to vested interests of few transport giants mafia who managed this shift through their influence in the politicalpower structure Similar lack of focus is visible in the maritime and airtransportation domains

Challenges to Regional Economic Integration

Regional instability continues to inhabit regional connectivityand economic integration Impending disputes present aformidable challenge

Competing interests of global and regional players posedilemma for Pakistan Balancing relations in this competitiveenvironment is challenging as often competing economic political interests lead to covert hostility Quest for politicalspace in Afghanistan and Gwadar vs Chahbahar competitionhas added fuel to proxies in Khyber Pakhtoonkhwa Balochistan

Pakistanrsquos fragile internal security environment continues tohurt the state economically depriving us of emergingopportunities External meddling in domestic and regionalaffairs add complexity to the already intricate security matrix

Poor border management informal illegal trade run by mafias Inappropriate transport mix focus on road infrastructure than

rail network

Challenges ndash Road Network Poor quality inadequate road transport services Half of national highway network in low condition Poor road safety record Highly fragmented freight transport industry

PAKISTAN BUSINESS REVIEW APRIL 2016275

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Poor truck fleet ndash mostly obsolete underpowered pollutingand grossly overloaded

Slower truck speed 40 ndash 50 kmph for container traffic halfof that in Europe Freight takes 3 ndash 4 times longer thaninternational standards17

Table 2Progress ndash Road Development (2009 ndash March 2014) 18

Years Catego ry Total (km)

Low Type (km) High Type (km)

2009-10 79850 180910 260760 2010-11 78597 180866 259463 2011-12 79655 181940 261595 2012-13 80515 182900 263415 2013-14 79635 184120 263755

Challenges ndash Rail Network

Perpetual shortage of locomotives has been the primaryreason for decline in passenger and freight services over the yearsother factors include over aged infrastructure and rolling stock risein fuel prices and subsidized rail fare Some of the challenges19

confronting rail transportation network of Pakistan are summarizedbelow-

Productivity of PRrsquos freight service is about 18th of ChineseRailway 13rd of Indian Railway and half of Thai Railway (anetwork of comparable size)

PR continues to cross subsidize passenger services fromfreight services resulting in non-competitive freight ratesover road transport Chinese freight service is 2 ndash 3 timescheaper than road

PR has low stagnant share in transportation market ndash lessthan 10 of passenger and 5 of freight traffic

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

276

Pakistanrsquos Potential as A Transit Trade Corridor

Table 3 Earning of Pakistan Railway (2007 ndash March 2014)2 0

Years Earning (Rs in Mn) Change 2009-10 21886 -55 2010-11 18740 -144 2011-12 15444 -175 2012-13 18070 170

2013-14 (July ndash March) 17736 - Table 4 Passenger and Freight Traffic (201112 ndash 201213)2 1

Subject 2011-12 2012-13 Number of Passengers Carried (M) 411 42 Passenger Traffic (M kms) 16093 17388 Freight Carried Tonnes (M) 13 10 Freight Tonnes (M kms) 402 419

Challenges ndash Air Transportation Ever increasing competition in aviation industry Fleet constraints exacerbated by operational issues

management Passenger volumes are 110th of rail and 1100th of road

transport22 Lack of fiscal space retarding growth of PIA

Strict governmental control has prevented PIA from operating oncommercial lines thus often resulting in huge operating losses andconsequent negative growth

Challenges ndash Ports and Shipping

Cargo handling capacity of ports is constantly on the declinedue neglect at the policy level Some of the challenges confrontingmaritime shipping seaport cargo operations in Pakistan are summarizedbelow-

Port charges ndash not competitive still above internationalstandards

Implementation of Pakistan Customs Computerized System(PACCS) has substantially reduced the customs clearancetime from 4-5 days to less than 24 hours in KarachiInternational Container Terminal (KICT)23

PAKISTAN BUSINESS REVIEW APRIL 2016277

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Free storage period shortened from 7 to 4-5 dayscontainer dwell time 5-6 days on the average still aboveinternational standard of 3-5 days24 It reduces thecapacity of container terminal to less than its duepotential

Ports limited draft at 10 ndash 12 Ms keeps latest mostefficient ships from calling25

Performance of Port Operations ndash though improving butstill much short of international standards would not beable to handle anticipated transit trade in the event ofoperationalization of Economic CorridorTable 5 Cargo Handled by Karachi Port and Port Qasim (Million Tonnes) 26

Years Karachi Port Port Qasim Grand Total Exports Imports Total Exports Imports Total

2009-10 13528 27892 41420 6380 19226 25626 67046 2010-11 12843 28589 41432 6657 19511 26168 67600 2011-12 11674 26201 37875 5950 18075 24025 61900 2012-13 12150 26700 38850 7047 17754 24801 63651 2013-14 (July-

March)

8452 22225 30677 5887 13084 18971 49648

Some Common Challenges to Transportation Sector Long waiting hours and travelling time Ever rising high cost of travel Increased cost of doing business Reduced competitiveness of countryrsquos exports Constraints curtailing retarding Pakistanrsquos ability to integrate

into global supply chains which require just in time delivery Poor performance of transport sector costs around 5 of

GDP each year27

Way Forward

Future Initiatives ndash Regional Connectivity and Trade Facilitation

Projects like National Trade Corridor (NTC) and CPEC areindicative of growing recognition at the policy level of inescapablelinkage between efficient transportation system and sustainable

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

278

Pakistanrsquos Potential as A Transit Trade Corridor

economic growth GoP has set forth an ambitious development planfor transportation and logistics In PSDP ndash 201314 the share ofTransport and Logistics stands around 25 while the requirement is2-3 times more28 Draft National Transport Policy (NTP) has beenformulated by Ministry of Communication though yet to be formallyapproved and implemented

China ndash Pakistan Economic Corridor (CPEC)

CPEC connecting Kashgar Xinjiang (China) with Gwadar Karachi ports of Pakistan would serve two purposes internationally itwould be Worldrsquos pivotal trade route to scale down globaltransportation distances between continents while domestically itwould help in invigorating Pakistanrsquos stagnant economy This wouldprovide a link between long distance partners Russia China CARsand ME Europe India Iran and Afghanistan can also benefit throughlateral links with CPEC China is expected to spend USD 30 ndash 40 Bn ina span of next seven years29

Figure 4

China - Pakistan Economic Corridor30

CPEC would essentially have three tiers at the first tierKashgar and Gwadar would be connected through highways motorways while at the second tier through establishment of railnetwork and at third tier linked via energy pipeline and establishmentof an oil refinery at Gwadar Freight terminals planned along the corridorwill facilitate logistic industry trucks carrying freight while economic

PAKISTAN BUSINESS REVIEW APRIL 2016279

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

zones industrial parks would essentially target local products industry and services

Figure 5

Freight Rail Link31

Out of Chinarsquos annual container trade of 225 Bn containersaround 30 (70 Million containers) of this trade is with Europeannations and around 6 with Africa32 Even if Pakistan gets 10 share of container flow to European nations (70000 containersannually) Pakistanrsquos logistic industry and transport sector would geta huge boost

Diplomatic Maneuver

Maintain strategic balance in relations with US and China Capitalize on rapprochement with Russia and offer trade via

CPEC through a trilateral agreement between China ndash Russiandash Pakistan Capacity building of PR acquisition of heavymachinery revival of steel mill industry is suggested areasof mutual cooperation

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

280

Pakistanrsquos Potential as A Transit Trade Corridor

Build upon Quadrilateral Trade Agreement between China Kyrgyzstan Tajikistan and Kazakhstan (operational since2004) and expand mutual trade relations through exchangesbetween business communities of respective countries Offerfor transit trade and access to Arabian sea as well as Indiathrough Pakistan be extended to these countries

Efforts be made to formalize trade with Afghanistan tradefacilitation customs offices be established on all formalcrossings and trade through these points should beincentivized ndash subsidize the customs duty other taxes

Manage pending disputes with India till their resolution tocreate environment for mutual trade for the benefit of peopleon both sides India should be encouraged to trade withCARs Afghanistan through Pakistan and import energy fromCARs Middle East through Pakistan this will create herstakes in stability of Pakistan

Explore avenues with Iran ndash seek points of convergences Gwadar is not a military outpost of China misperceptions be

cleared loudly and squarely It is a mutual economiccooperation venture FDI from other countries like OmanUAE Turkey etc be encouraged as it would help in clearingmisperceptions as well as creating healthy competitiveenvironment

Transportation Sector

Undertake long term perspective planning for periods beyond10-15 years

Investment must focus on capacity building developmentof new transportation infrastructure enhancing operationalefficiency of transport system and extending access to distantmarkets domestically as well as regionally

Transportation projects must be analyzed critically andprioritized from the perspective of their urgency vis-agrave-visaffordability fiscal space these are often vulnerable to

PAKISTAN BUSINESS REVIEW APRIL 2016281

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

miscalculations and mal-investment Dead investments drivenby purely political considerations (bumper sticker projects) oftenturn out to be counterproductive ndash bridges to nowhere hencemust be discouraged ruthlessly

Speedy completion of CPEC be ensured for continuity inpolicy such mega initiatives must be given legal patronagethrough act of parliament

Capacity building of the transport sector services to handlethe potential transit trade from China and other neighbours beensured expected potential is around 70000 ndash 100000 containersannually if only 10 of Chinese trade with Europe is rootedthrough Pakistan

Develop intermodal transportation system on modern lines(Figure 6) gradually shift from age old fragmented logisticindustry to modern state of the art efficient fully integratedlogistic system bridge gaps and establish linkages withindifferent transportation modes Well reputed international firmscan be contracted ndash public-private partnership is perhaps thesolution to fill fiscal gaps

Curtail cost of travel to reduce the cost of doing businessthis will make countryrsquos exports competitive in internationalmarket

Figure 6

Intermodal Transportation Infrastructure33

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

282

Pakistanrsquos Potential as A Transit Trade Corridor

Enhance accessibility farm to market roads and warehousescold storage to save losses in agriculture sector ndash perishablegoods vegetables fruits

TOT based projects be preferred China Turkey Russia andJapan may be engaged for development of transportationsector especially rail network

Road Network

Improve the condition of national highway network througha prioritized and phased programme in line with the priorityset for National Trade Corridor CPEC

Revamp freight transportation industry on modern linesthrough public-private partnership large scale logisticenterprise with integral integrated transport services is needof the hour

Initiate program for progressive replacement of obsolete truckfleet offering loans and incentives Comparatively newerinventory of trucks will not only be environmental friendlybut will also reduce transportation times of freight closer tointernational standards

Rail Network

Enhance the quantity quality of locomotives to meet thedemand of passenger and freight services

Take steps to gradually phase out and replace over agedinfrastructure and rolling stock

The policy of cross subsidy from freight to passengerservices should be done away with to make freight ratesmore competitive with road transport PR should take majorinitiatives to make freight service commercially viable

PAKISTAN BUSINESS REVIEW APRIL 2016283

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Air Transportation PIA should either be privatized or allowed to operate on

commercial lines with minimum governmental control so that itcan compete in the aviation market It will not only be able tomeet its operating expenses but also earn and improve its fleetinstead of becoming a public sector liability

Management of PIA should be cut to size to reduce operationallosses

Ports and Shipping

Improve cargo handling capacity of Karachi port and PortQasim and create space by removing containers awaiting disposalbeyond100 days figures are fairly large

Make port charges competitive with international standards Reduce customs clearance time to less than 12 hours at all

terminals of Karachi Port Qasim and Gwadar

Gwadar Seaport

Speedy operationalization of Gwadar seaport and connectivitywith hinterland to exploit its full potential

Develop maritime industry prospects of industrial zone dedicatedto seafood be explored near Gwadar Karachi and other coastalareas The potential for export of value added seafood productsis phenomenal hither-to-fore untapped

Parallel work on pipeline project between Gwadar and Xinjiangincluding establishment of oil refinery at Gwadar be initiated

Efforts be made to expedite other energy pipeline projects ie IPIand TAPI TKPI

Miscellaneous Recommendations

Concerted efforts be made at all levels to defeat militancyand improve internal security through capacity building of law

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

284

Pakistanrsquos Potential as A Transit Trade Corridor

enforcement agencies ndash conducive environment is inevitable forpromotion of regional connectivity and economic integration

Initiate steps towards progressive development in restiveregions of Pakistan like FATA and Baluchistan to includeexploration of fossil fuels this economic activity will lead toprosperity and stability in these areas

Prudent fiscal management and stringent punitive measuresagainst corruption will ensure transparency ndash this will attract FDIand encourage international business community Pakistanidiaspora to invest in Pakistan

Capitalize on political awakening of middle class and youth bulgeSay NO to bumper sticker projects built at exorbitant prohibitive

costs ndash build consensus through debate between leadership

Conclusion

The paper has endeavored to underline Pakistanrsquos transittrade potential being a regional hub economic corridor and hassuggested few policy guidelines at various levels and for differentmodes of transportation Pakistan offers the most economic strategiclink between the resource affluent and the energy scarce regions inaddition to providing the shortest trade route In changed geo politicalcum strategic environment opportunities are knocking at our doorWith some peace retuning to the region the transit trade from ourimmediate as well as distant neighbors is likely to increase substantiallyPakistanrsquos present transportation system is however barely enoughto meet the demands of regional international transit trade

PAKISTAN BUSINESS REVIEW APRIL 2016285

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

References

Anwar Dr Zafar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo South Asian Studies Jan-Jun 2011Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20AnwarpdfldquoChabahar port vs Gwadar portrdquo Indian Defence Forum AccessedDecember 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtmlldquoChinarsquos Statistical Yearbook 2013 Accessed November 30 2014httpwwwstatsgovcntjsjndsj2013indexehhtmldquoDemographics of Pakistanrdquo Wikipedia Accessed November 302014 httpenwikipediaorgwikiDemographics_of_PakistanldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum CivilServices of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtmlHassan Mehmood ul ldquoPak-China Friendship New Dimensions andNew Opportunitiesrdquo Overseas Pakistani Friends March 252013Accessed December 11 2014 httpwwwopfblogcom13906pak-china-friendship-new-dimensions-and-new-opportunitiesHaq Shahram ldquoPakistan rank 71 in World Bank LogisticPerformance Indexrdquo Express Tribune July 22 2012 httptribunecompkstory411560pakistan-ranked-71-in-world-bank-logistics-performance-indexKhan Dr Shabir Ahmed ldquoGeo Economic Imperatives of GwadarSeaport and Kashgar Economic Zone for Pakistan and Chinardquo IPRIJournal XIII Summer 2013 Accessed December 8 2014 httpgreatgwadarcomvzpaneldocsGwadar20Sea20Port20amp20Kashgar20Economic20Zone20-20Pakistan20amp20ChinapdfKumar Rohit ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014 httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

286

Pakistanrsquos Potential as A Transit Trade Corridor

ldquoPakistan Economic Survey 2013-14rdquo Ministry of Finance GoPAccessed December 14 2014 httpfinancegovpksurveychapters_1413_Transport_and_comspdfldquoPak ndash China Economic Corridor to help setup new dry ports incountryrdquo Business Recorder November 25 2014 AccessedDecember 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-countryldquoPakistan Transport Sectorrdquo World Bank Accessed December 142014 httpwebworldbankorgWBSITEEXTERNALCOUNTRIESSOUTHASIAEXTEXTSARREGTOPTRANSPORT0contentMDK20699058~menuPK869060~pagePK34004173~piPK34003707~theSitePK57959800htmlPaton James and Aibing Guo ldquoRussia China add to $400 bn GasDeal with Accordrdquo Bloomberg November 10 2014 httpwwwbloombergcomnews2014-11-10russia-china-add-to-400-billion-gas-deal-with-accordhtmlSeethi K M ldquoIndiarsquos lsquoConnect Central Asiarsquo Policyrdquo DiplomatDecember 13 2013 Accessed December 7 2014 httpthediplomatcom201312indias-connect-central-asia-policySiddiqui Asim ldquoDeveloping the Pak ndash China Economic Corridor tofacilitate Sino ndash Europe Traderdquo presented at Intermodal Europe2014 held at Rotterdam (11-13 November 2014) Accessed December26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdfSiddiqui Asim ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdfldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp Reforms GoPAccessed December 14 2014 httpwwwpcgovpkannual20plans2012-13chapter-20_transport_and_logisticspdf

PAKISTAN BUSINESS REVIEW APRIL 2016287

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Notes4 Asim Siddiqui ldquoUnderstanding Economic benefits of Trade

corridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdf

5 Ibid

6 Ibid7 ldquoPak ndash China Economic Corridor to help setup new dry ports

in countryrdquo Business Recorder November 25 2014Accessed December 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-country

8 ldquoChinarsquos Statistical Yearbook 2013 Accessed November302014 httpwwwstatsgovcntjsjndsj2013indexehhtm

9 K M Seethi ldquoIndiarsquos lsquoConnect Central Asiarsquo PolicyrdquoDiplomat December 13 2013 Accessed December 7 2014http thediplomatcom201312indias-connect-central-asia-policy

10 Rohit Kumar ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

11 ldquoChabahar port vs Gwadar portrdquo Indian Defence ForumAccessed December 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtml

12 ldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum Civil Services of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtml

13 Dr Shabir Ahmed Khan ldquoGeo Economic Imperatives ofGwadar Seaport and Kashgar Economic Zone for Pakistanand Chinardquo IPRI Journal XIII Summer 2013 AccessedDecember 8 2014 httpgreatgwadarcomvzpaneldocs

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

288

Pakistanrsquos Potential as A Transit Trade Corridor

14 Dr Zafar Anwar ldquoDevelopment of Infrastructural linkagesbetween Pakistan and Central Asiardquo South Asian StudiesJan-Jun 2011 Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20Anwarpdf

15 ldquoDemographics of Pakistanrdquo Wikipedia AccessedNovember 30 2014 httpenwikipediaorgwikiDemographics_of_Pakistan

16 Anwar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo

17 ldquoPakistan Transport Sectorrdquo World Bank AccessedDecember 14 2014 httpwebworldbankorgWBSITEEXTERNALCOUN

18 Pakistan Economic Survey 2013-1419 ldquoPakistan Transport Sectorrdquo World Bank20 Pakistan Economic Survey 2013-14

21 Ibid22 ldquoPakistan Transport Sectorrdquo World Bank23 Ibid24 Ibid25 Ibid26 Pakistan Economic Survey 2013-1427 Ibid

28 ldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp ReformsGoP Accessed December 14 2014 httpwwwpcgovpk20_transport_and_logisticspdf

29 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

30 Siddiqui ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal Networkrdquo

31 Asim Siddiqui ldquoDeveloping the Pak ndash China EconomicCorridor to facilitate Sino ndash Europe Traderdquo presented atIntermodal Europe 2014 held at Rotterdam (11-13 November2014) Accessed December 26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdf

PAKISTAN BUSINESS REVIEW APRIL 2016289

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

32 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

Annexure A

CHINArsquoS TRADE WITH REGIONS COUNTRIES (USD BILLION)

Ser Region Country 2011 2012

Total Exports Imports Total Exports Imports a Afghanistan 0234 023 004 0469 0464 0005

b India 7391 5054 2337 6647 4768 18 80

c Pakistan 1056 844 212 1241 928 314

d Iran 451 1476 3034 3647 116 24 87 e Iraq 1427 382 1044 1757 491 12 66

f Israel 978 674 304 991 699 292

g Jordon 277 251 026 326 296 028

h Lebanon 148 146 0026 171 169 002

i Syria 245 242 0026 12 119 0011 j Turkey 1874 1561 312 1910 1558 351

k Palestine 0 049 0048 0001 0041 004 0001 l Bahrain 120 088 032 155 120 035

m Kuwait 1130 213 918 1256 209 10 47 n Cyprus 115 112 003 124 110 014 o Oman 1587 099 1488 1879 181 16 98 p Qatar 589 120 469 848 120 728 q KSA 6432 1485 4947 7331 1845 54 86

r UAE 3512 2681 831 4042 2957 10 85 s Yemen 424 110 314 556 196 360 t Africa 1663 7308 9324 1986 8531 1133 u Europe 7008 4136 2872 6831 3964 2867 v Latin America 2414 1217 1197 2613 1352 1261 w North America 4944 3501 1443 5363 3801 1562

Page 8: PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

274

Pakistanrsquos Potential as A Transit Trade Corridor

by National Highway amp Motorway Authority (NHMA) but aconstantly deteriorating rail network Successive governmentsdeliberately shifted their focus to roads instead of improving railnetwork possibly due to vested interests of few transport giants mafia who managed this shift through their influence in the politicalpower structure Similar lack of focus is visible in the maritime and airtransportation domains

Challenges to Regional Economic Integration

Regional instability continues to inhabit regional connectivityand economic integration Impending disputes present aformidable challenge

Competing interests of global and regional players posedilemma for Pakistan Balancing relations in this competitiveenvironment is challenging as often competing economic political interests lead to covert hostility Quest for politicalspace in Afghanistan and Gwadar vs Chahbahar competitionhas added fuel to proxies in Khyber Pakhtoonkhwa Balochistan

Pakistanrsquos fragile internal security environment continues tohurt the state economically depriving us of emergingopportunities External meddling in domestic and regionalaffairs add complexity to the already intricate security matrix

Poor border management informal illegal trade run by mafias Inappropriate transport mix focus on road infrastructure than

rail network

Challenges ndash Road Network Poor quality inadequate road transport services Half of national highway network in low condition Poor road safety record Highly fragmented freight transport industry

PAKISTAN BUSINESS REVIEW APRIL 2016275

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Poor truck fleet ndash mostly obsolete underpowered pollutingand grossly overloaded

Slower truck speed 40 ndash 50 kmph for container traffic halfof that in Europe Freight takes 3 ndash 4 times longer thaninternational standards17

Table 2Progress ndash Road Development (2009 ndash March 2014) 18

Years Catego ry Total (km)

Low Type (km) High Type (km)

2009-10 79850 180910 260760 2010-11 78597 180866 259463 2011-12 79655 181940 261595 2012-13 80515 182900 263415 2013-14 79635 184120 263755

Challenges ndash Rail Network

Perpetual shortage of locomotives has been the primaryreason for decline in passenger and freight services over the yearsother factors include over aged infrastructure and rolling stock risein fuel prices and subsidized rail fare Some of the challenges19

confronting rail transportation network of Pakistan are summarizedbelow-

Productivity of PRrsquos freight service is about 18th of ChineseRailway 13rd of Indian Railway and half of Thai Railway (anetwork of comparable size)

PR continues to cross subsidize passenger services fromfreight services resulting in non-competitive freight ratesover road transport Chinese freight service is 2 ndash 3 timescheaper than road

PR has low stagnant share in transportation market ndash lessthan 10 of passenger and 5 of freight traffic

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

276

Pakistanrsquos Potential as A Transit Trade Corridor

Table 3 Earning of Pakistan Railway (2007 ndash March 2014)2 0

Years Earning (Rs in Mn) Change 2009-10 21886 -55 2010-11 18740 -144 2011-12 15444 -175 2012-13 18070 170

2013-14 (July ndash March) 17736 - Table 4 Passenger and Freight Traffic (201112 ndash 201213)2 1

Subject 2011-12 2012-13 Number of Passengers Carried (M) 411 42 Passenger Traffic (M kms) 16093 17388 Freight Carried Tonnes (M) 13 10 Freight Tonnes (M kms) 402 419

Challenges ndash Air Transportation Ever increasing competition in aviation industry Fleet constraints exacerbated by operational issues

management Passenger volumes are 110th of rail and 1100th of road

transport22 Lack of fiscal space retarding growth of PIA

Strict governmental control has prevented PIA from operating oncommercial lines thus often resulting in huge operating losses andconsequent negative growth

Challenges ndash Ports and Shipping

Cargo handling capacity of ports is constantly on the declinedue neglect at the policy level Some of the challenges confrontingmaritime shipping seaport cargo operations in Pakistan are summarizedbelow-

Port charges ndash not competitive still above internationalstandards

Implementation of Pakistan Customs Computerized System(PACCS) has substantially reduced the customs clearancetime from 4-5 days to less than 24 hours in KarachiInternational Container Terminal (KICT)23

PAKISTAN BUSINESS REVIEW APRIL 2016277

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Free storage period shortened from 7 to 4-5 dayscontainer dwell time 5-6 days on the average still aboveinternational standard of 3-5 days24 It reduces thecapacity of container terminal to less than its duepotential

Ports limited draft at 10 ndash 12 Ms keeps latest mostefficient ships from calling25

Performance of Port Operations ndash though improving butstill much short of international standards would not beable to handle anticipated transit trade in the event ofoperationalization of Economic CorridorTable 5 Cargo Handled by Karachi Port and Port Qasim (Million Tonnes) 26

Years Karachi Port Port Qasim Grand Total Exports Imports Total Exports Imports Total

2009-10 13528 27892 41420 6380 19226 25626 67046 2010-11 12843 28589 41432 6657 19511 26168 67600 2011-12 11674 26201 37875 5950 18075 24025 61900 2012-13 12150 26700 38850 7047 17754 24801 63651 2013-14 (July-

March)

8452 22225 30677 5887 13084 18971 49648

Some Common Challenges to Transportation Sector Long waiting hours and travelling time Ever rising high cost of travel Increased cost of doing business Reduced competitiveness of countryrsquos exports Constraints curtailing retarding Pakistanrsquos ability to integrate

into global supply chains which require just in time delivery Poor performance of transport sector costs around 5 of

GDP each year27

Way Forward

Future Initiatives ndash Regional Connectivity and Trade Facilitation

Projects like National Trade Corridor (NTC) and CPEC areindicative of growing recognition at the policy level of inescapablelinkage between efficient transportation system and sustainable

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

278

Pakistanrsquos Potential as A Transit Trade Corridor

economic growth GoP has set forth an ambitious development planfor transportation and logistics In PSDP ndash 201314 the share ofTransport and Logistics stands around 25 while the requirement is2-3 times more28 Draft National Transport Policy (NTP) has beenformulated by Ministry of Communication though yet to be formallyapproved and implemented

China ndash Pakistan Economic Corridor (CPEC)

CPEC connecting Kashgar Xinjiang (China) with Gwadar Karachi ports of Pakistan would serve two purposes internationally itwould be Worldrsquos pivotal trade route to scale down globaltransportation distances between continents while domestically itwould help in invigorating Pakistanrsquos stagnant economy This wouldprovide a link between long distance partners Russia China CARsand ME Europe India Iran and Afghanistan can also benefit throughlateral links with CPEC China is expected to spend USD 30 ndash 40 Bn ina span of next seven years29

Figure 4

China - Pakistan Economic Corridor30

CPEC would essentially have three tiers at the first tierKashgar and Gwadar would be connected through highways motorways while at the second tier through establishment of railnetwork and at third tier linked via energy pipeline and establishmentof an oil refinery at Gwadar Freight terminals planned along the corridorwill facilitate logistic industry trucks carrying freight while economic

PAKISTAN BUSINESS REVIEW APRIL 2016279

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

zones industrial parks would essentially target local products industry and services

Figure 5

Freight Rail Link31

Out of Chinarsquos annual container trade of 225 Bn containersaround 30 (70 Million containers) of this trade is with Europeannations and around 6 with Africa32 Even if Pakistan gets 10 share of container flow to European nations (70000 containersannually) Pakistanrsquos logistic industry and transport sector would geta huge boost

Diplomatic Maneuver

Maintain strategic balance in relations with US and China Capitalize on rapprochement with Russia and offer trade via

CPEC through a trilateral agreement between China ndash Russiandash Pakistan Capacity building of PR acquisition of heavymachinery revival of steel mill industry is suggested areasof mutual cooperation

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

280

Pakistanrsquos Potential as A Transit Trade Corridor

Build upon Quadrilateral Trade Agreement between China Kyrgyzstan Tajikistan and Kazakhstan (operational since2004) and expand mutual trade relations through exchangesbetween business communities of respective countries Offerfor transit trade and access to Arabian sea as well as Indiathrough Pakistan be extended to these countries

Efforts be made to formalize trade with Afghanistan tradefacilitation customs offices be established on all formalcrossings and trade through these points should beincentivized ndash subsidize the customs duty other taxes

Manage pending disputes with India till their resolution tocreate environment for mutual trade for the benefit of peopleon both sides India should be encouraged to trade withCARs Afghanistan through Pakistan and import energy fromCARs Middle East through Pakistan this will create herstakes in stability of Pakistan

Explore avenues with Iran ndash seek points of convergences Gwadar is not a military outpost of China misperceptions be

cleared loudly and squarely It is a mutual economiccooperation venture FDI from other countries like OmanUAE Turkey etc be encouraged as it would help in clearingmisperceptions as well as creating healthy competitiveenvironment

Transportation Sector

Undertake long term perspective planning for periods beyond10-15 years

Investment must focus on capacity building developmentof new transportation infrastructure enhancing operationalefficiency of transport system and extending access to distantmarkets domestically as well as regionally

Transportation projects must be analyzed critically andprioritized from the perspective of their urgency vis-agrave-visaffordability fiscal space these are often vulnerable to

PAKISTAN BUSINESS REVIEW APRIL 2016281

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

miscalculations and mal-investment Dead investments drivenby purely political considerations (bumper sticker projects) oftenturn out to be counterproductive ndash bridges to nowhere hencemust be discouraged ruthlessly

Speedy completion of CPEC be ensured for continuity inpolicy such mega initiatives must be given legal patronagethrough act of parliament

Capacity building of the transport sector services to handlethe potential transit trade from China and other neighbours beensured expected potential is around 70000 ndash 100000 containersannually if only 10 of Chinese trade with Europe is rootedthrough Pakistan

Develop intermodal transportation system on modern lines(Figure 6) gradually shift from age old fragmented logisticindustry to modern state of the art efficient fully integratedlogistic system bridge gaps and establish linkages withindifferent transportation modes Well reputed international firmscan be contracted ndash public-private partnership is perhaps thesolution to fill fiscal gaps

Curtail cost of travel to reduce the cost of doing businessthis will make countryrsquos exports competitive in internationalmarket

Figure 6

Intermodal Transportation Infrastructure33

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

282

Pakistanrsquos Potential as A Transit Trade Corridor

Enhance accessibility farm to market roads and warehousescold storage to save losses in agriculture sector ndash perishablegoods vegetables fruits

TOT based projects be preferred China Turkey Russia andJapan may be engaged for development of transportationsector especially rail network

Road Network

Improve the condition of national highway network througha prioritized and phased programme in line with the priorityset for National Trade Corridor CPEC

Revamp freight transportation industry on modern linesthrough public-private partnership large scale logisticenterprise with integral integrated transport services is needof the hour

Initiate program for progressive replacement of obsolete truckfleet offering loans and incentives Comparatively newerinventory of trucks will not only be environmental friendlybut will also reduce transportation times of freight closer tointernational standards

Rail Network

Enhance the quantity quality of locomotives to meet thedemand of passenger and freight services

Take steps to gradually phase out and replace over agedinfrastructure and rolling stock

The policy of cross subsidy from freight to passengerservices should be done away with to make freight ratesmore competitive with road transport PR should take majorinitiatives to make freight service commercially viable

PAKISTAN BUSINESS REVIEW APRIL 2016283

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Air Transportation PIA should either be privatized or allowed to operate on

commercial lines with minimum governmental control so that itcan compete in the aviation market It will not only be able tomeet its operating expenses but also earn and improve its fleetinstead of becoming a public sector liability

Management of PIA should be cut to size to reduce operationallosses

Ports and Shipping

Improve cargo handling capacity of Karachi port and PortQasim and create space by removing containers awaiting disposalbeyond100 days figures are fairly large

Make port charges competitive with international standards Reduce customs clearance time to less than 12 hours at all

terminals of Karachi Port Qasim and Gwadar

Gwadar Seaport

Speedy operationalization of Gwadar seaport and connectivitywith hinterland to exploit its full potential

Develop maritime industry prospects of industrial zone dedicatedto seafood be explored near Gwadar Karachi and other coastalareas The potential for export of value added seafood productsis phenomenal hither-to-fore untapped

Parallel work on pipeline project between Gwadar and Xinjiangincluding establishment of oil refinery at Gwadar be initiated

Efforts be made to expedite other energy pipeline projects ie IPIand TAPI TKPI

Miscellaneous Recommendations

Concerted efforts be made at all levels to defeat militancyand improve internal security through capacity building of law

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

284

Pakistanrsquos Potential as A Transit Trade Corridor

enforcement agencies ndash conducive environment is inevitable forpromotion of regional connectivity and economic integration

Initiate steps towards progressive development in restiveregions of Pakistan like FATA and Baluchistan to includeexploration of fossil fuels this economic activity will lead toprosperity and stability in these areas

Prudent fiscal management and stringent punitive measuresagainst corruption will ensure transparency ndash this will attract FDIand encourage international business community Pakistanidiaspora to invest in Pakistan

Capitalize on political awakening of middle class and youth bulgeSay NO to bumper sticker projects built at exorbitant prohibitive

costs ndash build consensus through debate between leadership

Conclusion

The paper has endeavored to underline Pakistanrsquos transittrade potential being a regional hub economic corridor and hassuggested few policy guidelines at various levels and for differentmodes of transportation Pakistan offers the most economic strategiclink between the resource affluent and the energy scarce regions inaddition to providing the shortest trade route In changed geo politicalcum strategic environment opportunities are knocking at our doorWith some peace retuning to the region the transit trade from ourimmediate as well as distant neighbors is likely to increase substantiallyPakistanrsquos present transportation system is however barely enoughto meet the demands of regional international transit trade

PAKISTAN BUSINESS REVIEW APRIL 2016285

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

References

Anwar Dr Zafar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo South Asian Studies Jan-Jun 2011Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20AnwarpdfldquoChabahar port vs Gwadar portrdquo Indian Defence Forum AccessedDecember 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtmlldquoChinarsquos Statistical Yearbook 2013 Accessed November 30 2014httpwwwstatsgovcntjsjndsj2013indexehhtmldquoDemographics of Pakistanrdquo Wikipedia Accessed November 302014 httpenwikipediaorgwikiDemographics_of_PakistanldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum CivilServices of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtmlHassan Mehmood ul ldquoPak-China Friendship New Dimensions andNew Opportunitiesrdquo Overseas Pakistani Friends March 252013Accessed December 11 2014 httpwwwopfblogcom13906pak-china-friendship-new-dimensions-and-new-opportunitiesHaq Shahram ldquoPakistan rank 71 in World Bank LogisticPerformance Indexrdquo Express Tribune July 22 2012 httptribunecompkstory411560pakistan-ranked-71-in-world-bank-logistics-performance-indexKhan Dr Shabir Ahmed ldquoGeo Economic Imperatives of GwadarSeaport and Kashgar Economic Zone for Pakistan and Chinardquo IPRIJournal XIII Summer 2013 Accessed December 8 2014 httpgreatgwadarcomvzpaneldocsGwadar20Sea20Port20amp20Kashgar20Economic20Zone20-20Pakistan20amp20ChinapdfKumar Rohit ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014 httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

286

Pakistanrsquos Potential as A Transit Trade Corridor

ldquoPakistan Economic Survey 2013-14rdquo Ministry of Finance GoPAccessed December 14 2014 httpfinancegovpksurveychapters_1413_Transport_and_comspdfldquoPak ndash China Economic Corridor to help setup new dry ports incountryrdquo Business Recorder November 25 2014 AccessedDecember 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-countryldquoPakistan Transport Sectorrdquo World Bank Accessed December 142014 httpwebworldbankorgWBSITEEXTERNALCOUNTRIESSOUTHASIAEXTEXTSARREGTOPTRANSPORT0contentMDK20699058~menuPK869060~pagePK34004173~piPK34003707~theSitePK57959800htmlPaton James and Aibing Guo ldquoRussia China add to $400 bn GasDeal with Accordrdquo Bloomberg November 10 2014 httpwwwbloombergcomnews2014-11-10russia-china-add-to-400-billion-gas-deal-with-accordhtmlSeethi K M ldquoIndiarsquos lsquoConnect Central Asiarsquo Policyrdquo DiplomatDecember 13 2013 Accessed December 7 2014 httpthediplomatcom201312indias-connect-central-asia-policySiddiqui Asim ldquoDeveloping the Pak ndash China Economic Corridor tofacilitate Sino ndash Europe Traderdquo presented at Intermodal Europe2014 held at Rotterdam (11-13 November 2014) Accessed December26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdfSiddiqui Asim ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdfldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp Reforms GoPAccessed December 14 2014 httpwwwpcgovpkannual20plans2012-13chapter-20_transport_and_logisticspdf

PAKISTAN BUSINESS REVIEW APRIL 2016287

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Notes4 Asim Siddiqui ldquoUnderstanding Economic benefits of Trade

corridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdf

5 Ibid

6 Ibid7 ldquoPak ndash China Economic Corridor to help setup new dry ports

in countryrdquo Business Recorder November 25 2014Accessed December 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-country

8 ldquoChinarsquos Statistical Yearbook 2013 Accessed November302014 httpwwwstatsgovcntjsjndsj2013indexehhtm

9 K M Seethi ldquoIndiarsquos lsquoConnect Central Asiarsquo PolicyrdquoDiplomat December 13 2013 Accessed December 7 2014http thediplomatcom201312indias-connect-central-asia-policy

10 Rohit Kumar ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

11 ldquoChabahar port vs Gwadar portrdquo Indian Defence ForumAccessed December 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtml

12 ldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum Civil Services of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtml

13 Dr Shabir Ahmed Khan ldquoGeo Economic Imperatives ofGwadar Seaport and Kashgar Economic Zone for Pakistanand Chinardquo IPRI Journal XIII Summer 2013 AccessedDecember 8 2014 httpgreatgwadarcomvzpaneldocs

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

288

Pakistanrsquos Potential as A Transit Trade Corridor

14 Dr Zafar Anwar ldquoDevelopment of Infrastructural linkagesbetween Pakistan and Central Asiardquo South Asian StudiesJan-Jun 2011 Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20Anwarpdf

15 ldquoDemographics of Pakistanrdquo Wikipedia AccessedNovember 30 2014 httpenwikipediaorgwikiDemographics_of_Pakistan

16 Anwar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo

17 ldquoPakistan Transport Sectorrdquo World Bank AccessedDecember 14 2014 httpwebworldbankorgWBSITEEXTERNALCOUN

18 Pakistan Economic Survey 2013-1419 ldquoPakistan Transport Sectorrdquo World Bank20 Pakistan Economic Survey 2013-14

21 Ibid22 ldquoPakistan Transport Sectorrdquo World Bank23 Ibid24 Ibid25 Ibid26 Pakistan Economic Survey 2013-1427 Ibid

28 ldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp ReformsGoP Accessed December 14 2014 httpwwwpcgovpk20_transport_and_logisticspdf

29 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

30 Siddiqui ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal Networkrdquo

31 Asim Siddiqui ldquoDeveloping the Pak ndash China EconomicCorridor to facilitate Sino ndash Europe Traderdquo presented atIntermodal Europe 2014 held at Rotterdam (11-13 November2014) Accessed December 26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdf

PAKISTAN BUSINESS REVIEW APRIL 2016289

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

32 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

Annexure A

CHINArsquoS TRADE WITH REGIONS COUNTRIES (USD BILLION)

Ser Region Country 2011 2012

Total Exports Imports Total Exports Imports a Afghanistan 0234 023 004 0469 0464 0005

b India 7391 5054 2337 6647 4768 18 80

c Pakistan 1056 844 212 1241 928 314

d Iran 451 1476 3034 3647 116 24 87 e Iraq 1427 382 1044 1757 491 12 66

f Israel 978 674 304 991 699 292

g Jordon 277 251 026 326 296 028

h Lebanon 148 146 0026 171 169 002

i Syria 245 242 0026 12 119 0011 j Turkey 1874 1561 312 1910 1558 351

k Palestine 0 049 0048 0001 0041 004 0001 l Bahrain 120 088 032 155 120 035

m Kuwait 1130 213 918 1256 209 10 47 n Cyprus 115 112 003 124 110 014 o Oman 1587 099 1488 1879 181 16 98 p Qatar 589 120 469 848 120 728 q KSA 6432 1485 4947 7331 1845 54 86

r UAE 3512 2681 831 4042 2957 10 85 s Yemen 424 110 314 556 196 360 t Africa 1663 7308 9324 1986 8531 1133 u Europe 7008 4136 2872 6831 3964 2867 v Latin America 2414 1217 1197 2613 1352 1261 w North America 4944 3501 1443 5363 3801 1562

Page 9: PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

PAKISTAN BUSINESS REVIEW APRIL 2016275

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Poor truck fleet ndash mostly obsolete underpowered pollutingand grossly overloaded

Slower truck speed 40 ndash 50 kmph for container traffic halfof that in Europe Freight takes 3 ndash 4 times longer thaninternational standards17

Table 2Progress ndash Road Development (2009 ndash March 2014) 18

Years Catego ry Total (km)

Low Type (km) High Type (km)

2009-10 79850 180910 260760 2010-11 78597 180866 259463 2011-12 79655 181940 261595 2012-13 80515 182900 263415 2013-14 79635 184120 263755

Challenges ndash Rail Network

Perpetual shortage of locomotives has been the primaryreason for decline in passenger and freight services over the yearsother factors include over aged infrastructure and rolling stock risein fuel prices and subsidized rail fare Some of the challenges19

confronting rail transportation network of Pakistan are summarizedbelow-

Productivity of PRrsquos freight service is about 18th of ChineseRailway 13rd of Indian Railway and half of Thai Railway (anetwork of comparable size)

PR continues to cross subsidize passenger services fromfreight services resulting in non-competitive freight ratesover road transport Chinese freight service is 2 ndash 3 timescheaper than road

PR has low stagnant share in transportation market ndash lessthan 10 of passenger and 5 of freight traffic

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

276

Pakistanrsquos Potential as A Transit Trade Corridor

Table 3 Earning of Pakistan Railway (2007 ndash March 2014)2 0

Years Earning (Rs in Mn) Change 2009-10 21886 -55 2010-11 18740 -144 2011-12 15444 -175 2012-13 18070 170

2013-14 (July ndash March) 17736 - Table 4 Passenger and Freight Traffic (201112 ndash 201213)2 1

Subject 2011-12 2012-13 Number of Passengers Carried (M) 411 42 Passenger Traffic (M kms) 16093 17388 Freight Carried Tonnes (M) 13 10 Freight Tonnes (M kms) 402 419

Challenges ndash Air Transportation Ever increasing competition in aviation industry Fleet constraints exacerbated by operational issues

management Passenger volumes are 110th of rail and 1100th of road

transport22 Lack of fiscal space retarding growth of PIA

Strict governmental control has prevented PIA from operating oncommercial lines thus often resulting in huge operating losses andconsequent negative growth

Challenges ndash Ports and Shipping

Cargo handling capacity of ports is constantly on the declinedue neglect at the policy level Some of the challenges confrontingmaritime shipping seaport cargo operations in Pakistan are summarizedbelow-

Port charges ndash not competitive still above internationalstandards

Implementation of Pakistan Customs Computerized System(PACCS) has substantially reduced the customs clearancetime from 4-5 days to less than 24 hours in KarachiInternational Container Terminal (KICT)23

PAKISTAN BUSINESS REVIEW APRIL 2016277

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Free storage period shortened from 7 to 4-5 dayscontainer dwell time 5-6 days on the average still aboveinternational standard of 3-5 days24 It reduces thecapacity of container terminal to less than its duepotential

Ports limited draft at 10 ndash 12 Ms keeps latest mostefficient ships from calling25

Performance of Port Operations ndash though improving butstill much short of international standards would not beable to handle anticipated transit trade in the event ofoperationalization of Economic CorridorTable 5 Cargo Handled by Karachi Port and Port Qasim (Million Tonnes) 26

Years Karachi Port Port Qasim Grand Total Exports Imports Total Exports Imports Total

2009-10 13528 27892 41420 6380 19226 25626 67046 2010-11 12843 28589 41432 6657 19511 26168 67600 2011-12 11674 26201 37875 5950 18075 24025 61900 2012-13 12150 26700 38850 7047 17754 24801 63651 2013-14 (July-

March)

8452 22225 30677 5887 13084 18971 49648

Some Common Challenges to Transportation Sector Long waiting hours and travelling time Ever rising high cost of travel Increased cost of doing business Reduced competitiveness of countryrsquos exports Constraints curtailing retarding Pakistanrsquos ability to integrate

into global supply chains which require just in time delivery Poor performance of transport sector costs around 5 of

GDP each year27

Way Forward

Future Initiatives ndash Regional Connectivity and Trade Facilitation

Projects like National Trade Corridor (NTC) and CPEC areindicative of growing recognition at the policy level of inescapablelinkage between efficient transportation system and sustainable

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

278

Pakistanrsquos Potential as A Transit Trade Corridor

economic growth GoP has set forth an ambitious development planfor transportation and logistics In PSDP ndash 201314 the share ofTransport and Logistics stands around 25 while the requirement is2-3 times more28 Draft National Transport Policy (NTP) has beenformulated by Ministry of Communication though yet to be formallyapproved and implemented

China ndash Pakistan Economic Corridor (CPEC)

CPEC connecting Kashgar Xinjiang (China) with Gwadar Karachi ports of Pakistan would serve two purposes internationally itwould be Worldrsquos pivotal trade route to scale down globaltransportation distances between continents while domestically itwould help in invigorating Pakistanrsquos stagnant economy This wouldprovide a link between long distance partners Russia China CARsand ME Europe India Iran and Afghanistan can also benefit throughlateral links with CPEC China is expected to spend USD 30 ndash 40 Bn ina span of next seven years29

Figure 4

China - Pakistan Economic Corridor30

CPEC would essentially have three tiers at the first tierKashgar and Gwadar would be connected through highways motorways while at the second tier through establishment of railnetwork and at third tier linked via energy pipeline and establishmentof an oil refinery at Gwadar Freight terminals planned along the corridorwill facilitate logistic industry trucks carrying freight while economic

PAKISTAN BUSINESS REVIEW APRIL 2016279

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

zones industrial parks would essentially target local products industry and services

Figure 5

Freight Rail Link31

Out of Chinarsquos annual container trade of 225 Bn containersaround 30 (70 Million containers) of this trade is with Europeannations and around 6 with Africa32 Even if Pakistan gets 10 share of container flow to European nations (70000 containersannually) Pakistanrsquos logistic industry and transport sector would geta huge boost

Diplomatic Maneuver

Maintain strategic balance in relations with US and China Capitalize on rapprochement with Russia and offer trade via

CPEC through a trilateral agreement between China ndash Russiandash Pakistan Capacity building of PR acquisition of heavymachinery revival of steel mill industry is suggested areasof mutual cooperation

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

280

Pakistanrsquos Potential as A Transit Trade Corridor

Build upon Quadrilateral Trade Agreement between China Kyrgyzstan Tajikistan and Kazakhstan (operational since2004) and expand mutual trade relations through exchangesbetween business communities of respective countries Offerfor transit trade and access to Arabian sea as well as Indiathrough Pakistan be extended to these countries

Efforts be made to formalize trade with Afghanistan tradefacilitation customs offices be established on all formalcrossings and trade through these points should beincentivized ndash subsidize the customs duty other taxes

Manage pending disputes with India till their resolution tocreate environment for mutual trade for the benefit of peopleon both sides India should be encouraged to trade withCARs Afghanistan through Pakistan and import energy fromCARs Middle East through Pakistan this will create herstakes in stability of Pakistan

Explore avenues with Iran ndash seek points of convergences Gwadar is not a military outpost of China misperceptions be

cleared loudly and squarely It is a mutual economiccooperation venture FDI from other countries like OmanUAE Turkey etc be encouraged as it would help in clearingmisperceptions as well as creating healthy competitiveenvironment

Transportation Sector

Undertake long term perspective planning for periods beyond10-15 years

Investment must focus on capacity building developmentof new transportation infrastructure enhancing operationalefficiency of transport system and extending access to distantmarkets domestically as well as regionally

Transportation projects must be analyzed critically andprioritized from the perspective of their urgency vis-agrave-visaffordability fiscal space these are often vulnerable to

PAKISTAN BUSINESS REVIEW APRIL 2016281

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

miscalculations and mal-investment Dead investments drivenby purely political considerations (bumper sticker projects) oftenturn out to be counterproductive ndash bridges to nowhere hencemust be discouraged ruthlessly

Speedy completion of CPEC be ensured for continuity inpolicy such mega initiatives must be given legal patronagethrough act of parliament

Capacity building of the transport sector services to handlethe potential transit trade from China and other neighbours beensured expected potential is around 70000 ndash 100000 containersannually if only 10 of Chinese trade with Europe is rootedthrough Pakistan

Develop intermodal transportation system on modern lines(Figure 6) gradually shift from age old fragmented logisticindustry to modern state of the art efficient fully integratedlogistic system bridge gaps and establish linkages withindifferent transportation modes Well reputed international firmscan be contracted ndash public-private partnership is perhaps thesolution to fill fiscal gaps

Curtail cost of travel to reduce the cost of doing businessthis will make countryrsquos exports competitive in internationalmarket

Figure 6

Intermodal Transportation Infrastructure33

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

282

Pakistanrsquos Potential as A Transit Trade Corridor

Enhance accessibility farm to market roads and warehousescold storage to save losses in agriculture sector ndash perishablegoods vegetables fruits

TOT based projects be preferred China Turkey Russia andJapan may be engaged for development of transportationsector especially rail network

Road Network

Improve the condition of national highway network througha prioritized and phased programme in line with the priorityset for National Trade Corridor CPEC

Revamp freight transportation industry on modern linesthrough public-private partnership large scale logisticenterprise with integral integrated transport services is needof the hour

Initiate program for progressive replacement of obsolete truckfleet offering loans and incentives Comparatively newerinventory of trucks will not only be environmental friendlybut will also reduce transportation times of freight closer tointernational standards

Rail Network

Enhance the quantity quality of locomotives to meet thedemand of passenger and freight services

Take steps to gradually phase out and replace over agedinfrastructure and rolling stock

The policy of cross subsidy from freight to passengerservices should be done away with to make freight ratesmore competitive with road transport PR should take majorinitiatives to make freight service commercially viable

PAKISTAN BUSINESS REVIEW APRIL 2016283

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Air Transportation PIA should either be privatized or allowed to operate on

commercial lines with minimum governmental control so that itcan compete in the aviation market It will not only be able tomeet its operating expenses but also earn and improve its fleetinstead of becoming a public sector liability

Management of PIA should be cut to size to reduce operationallosses

Ports and Shipping

Improve cargo handling capacity of Karachi port and PortQasim and create space by removing containers awaiting disposalbeyond100 days figures are fairly large

Make port charges competitive with international standards Reduce customs clearance time to less than 12 hours at all

terminals of Karachi Port Qasim and Gwadar

Gwadar Seaport

Speedy operationalization of Gwadar seaport and connectivitywith hinterland to exploit its full potential

Develop maritime industry prospects of industrial zone dedicatedto seafood be explored near Gwadar Karachi and other coastalareas The potential for export of value added seafood productsis phenomenal hither-to-fore untapped

Parallel work on pipeline project between Gwadar and Xinjiangincluding establishment of oil refinery at Gwadar be initiated

Efforts be made to expedite other energy pipeline projects ie IPIand TAPI TKPI

Miscellaneous Recommendations

Concerted efforts be made at all levels to defeat militancyand improve internal security through capacity building of law

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

284

Pakistanrsquos Potential as A Transit Trade Corridor

enforcement agencies ndash conducive environment is inevitable forpromotion of regional connectivity and economic integration

Initiate steps towards progressive development in restiveregions of Pakistan like FATA and Baluchistan to includeexploration of fossil fuels this economic activity will lead toprosperity and stability in these areas

Prudent fiscal management and stringent punitive measuresagainst corruption will ensure transparency ndash this will attract FDIand encourage international business community Pakistanidiaspora to invest in Pakistan

Capitalize on political awakening of middle class and youth bulgeSay NO to bumper sticker projects built at exorbitant prohibitive

costs ndash build consensus through debate between leadership

Conclusion

The paper has endeavored to underline Pakistanrsquos transittrade potential being a regional hub economic corridor and hassuggested few policy guidelines at various levels and for differentmodes of transportation Pakistan offers the most economic strategiclink between the resource affluent and the energy scarce regions inaddition to providing the shortest trade route In changed geo politicalcum strategic environment opportunities are knocking at our doorWith some peace retuning to the region the transit trade from ourimmediate as well as distant neighbors is likely to increase substantiallyPakistanrsquos present transportation system is however barely enoughto meet the demands of regional international transit trade

PAKISTAN BUSINESS REVIEW APRIL 2016285

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

References

Anwar Dr Zafar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo South Asian Studies Jan-Jun 2011Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20AnwarpdfldquoChabahar port vs Gwadar portrdquo Indian Defence Forum AccessedDecember 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtmlldquoChinarsquos Statistical Yearbook 2013 Accessed November 30 2014httpwwwstatsgovcntjsjndsj2013indexehhtmldquoDemographics of Pakistanrdquo Wikipedia Accessed November 302014 httpenwikipediaorgwikiDemographics_of_PakistanldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum CivilServices of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtmlHassan Mehmood ul ldquoPak-China Friendship New Dimensions andNew Opportunitiesrdquo Overseas Pakistani Friends March 252013Accessed December 11 2014 httpwwwopfblogcom13906pak-china-friendship-new-dimensions-and-new-opportunitiesHaq Shahram ldquoPakistan rank 71 in World Bank LogisticPerformance Indexrdquo Express Tribune July 22 2012 httptribunecompkstory411560pakistan-ranked-71-in-world-bank-logistics-performance-indexKhan Dr Shabir Ahmed ldquoGeo Economic Imperatives of GwadarSeaport and Kashgar Economic Zone for Pakistan and Chinardquo IPRIJournal XIII Summer 2013 Accessed December 8 2014 httpgreatgwadarcomvzpaneldocsGwadar20Sea20Port20amp20Kashgar20Economic20Zone20-20Pakistan20amp20ChinapdfKumar Rohit ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014 httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

286

Pakistanrsquos Potential as A Transit Trade Corridor

ldquoPakistan Economic Survey 2013-14rdquo Ministry of Finance GoPAccessed December 14 2014 httpfinancegovpksurveychapters_1413_Transport_and_comspdfldquoPak ndash China Economic Corridor to help setup new dry ports incountryrdquo Business Recorder November 25 2014 AccessedDecember 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-countryldquoPakistan Transport Sectorrdquo World Bank Accessed December 142014 httpwebworldbankorgWBSITEEXTERNALCOUNTRIESSOUTHASIAEXTEXTSARREGTOPTRANSPORT0contentMDK20699058~menuPK869060~pagePK34004173~piPK34003707~theSitePK57959800htmlPaton James and Aibing Guo ldquoRussia China add to $400 bn GasDeal with Accordrdquo Bloomberg November 10 2014 httpwwwbloombergcomnews2014-11-10russia-china-add-to-400-billion-gas-deal-with-accordhtmlSeethi K M ldquoIndiarsquos lsquoConnect Central Asiarsquo Policyrdquo DiplomatDecember 13 2013 Accessed December 7 2014 httpthediplomatcom201312indias-connect-central-asia-policySiddiqui Asim ldquoDeveloping the Pak ndash China Economic Corridor tofacilitate Sino ndash Europe Traderdquo presented at Intermodal Europe2014 held at Rotterdam (11-13 November 2014) Accessed December26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdfSiddiqui Asim ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdfldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp Reforms GoPAccessed December 14 2014 httpwwwpcgovpkannual20plans2012-13chapter-20_transport_and_logisticspdf

PAKISTAN BUSINESS REVIEW APRIL 2016287

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Notes4 Asim Siddiqui ldquoUnderstanding Economic benefits of Trade

corridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdf

5 Ibid

6 Ibid7 ldquoPak ndash China Economic Corridor to help setup new dry ports

in countryrdquo Business Recorder November 25 2014Accessed December 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-country

8 ldquoChinarsquos Statistical Yearbook 2013 Accessed November302014 httpwwwstatsgovcntjsjndsj2013indexehhtm

9 K M Seethi ldquoIndiarsquos lsquoConnect Central Asiarsquo PolicyrdquoDiplomat December 13 2013 Accessed December 7 2014http thediplomatcom201312indias-connect-central-asia-policy

10 Rohit Kumar ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

11 ldquoChabahar port vs Gwadar portrdquo Indian Defence ForumAccessed December 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtml

12 ldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum Civil Services of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtml

13 Dr Shabir Ahmed Khan ldquoGeo Economic Imperatives ofGwadar Seaport and Kashgar Economic Zone for Pakistanand Chinardquo IPRI Journal XIII Summer 2013 AccessedDecember 8 2014 httpgreatgwadarcomvzpaneldocs

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

288

Pakistanrsquos Potential as A Transit Trade Corridor

14 Dr Zafar Anwar ldquoDevelopment of Infrastructural linkagesbetween Pakistan and Central Asiardquo South Asian StudiesJan-Jun 2011 Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20Anwarpdf

15 ldquoDemographics of Pakistanrdquo Wikipedia AccessedNovember 30 2014 httpenwikipediaorgwikiDemographics_of_Pakistan

16 Anwar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo

17 ldquoPakistan Transport Sectorrdquo World Bank AccessedDecember 14 2014 httpwebworldbankorgWBSITEEXTERNALCOUN

18 Pakistan Economic Survey 2013-1419 ldquoPakistan Transport Sectorrdquo World Bank20 Pakistan Economic Survey 2013-14

21 Ibid22 ldquoPakistan Transport Sectorrdquo World Bank23 Ibid24 Ibid25 Ibid26 Pakistan Economic Survey 2013-1427 Ibid

28 ldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp ReformsGoP Accessed December 14 2014 httpwwwpcgovpk20_transport_and_logisticspdf

29 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

30 Siddiqui ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal Networkrdquo

31 Asim Siddiqui ldquoDeveloping the Pak ndash China EconomicCorridor to facilitate Sino ndash Europe Traderdquo presented atIntermodal Europe 2014 held at Rotterdam (11-13 November2014) Accessed December 26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdf

PAKISTAN BUSINESS REVIEW APRIL 2016289

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

32 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

Annexure A

CHINArsquoS TRADE WITH REGIONS COUNTRIES (USD BILLION)

Ser Region Country 2011 2012

Total Exports Imports Total Exports Imports a Afghanistan 0234 023 004 0469 0464 0005

b India 7391 5054 2337 6647 4768 18 80

c Pakistan 1056 844 212 1241 928 314

d Iran 451 1476 3034 3647 116 24 87 e Iraq 1427 382 1044 1757 491 12 66

f Israel 978 674 304 991 699 292

g Jordon 277 251 026 326 296 028

h Lebanon 148 146 0026 171 169 002

i Syria 245 242 0026 12 119 0011 j Turkey 1874 1561 312 1910 1558 351

k Palestine 0 049 0048 0001 0041 004 0001 l Bahrain 120 088 032 155 120 035

m Kuwait 1130 213 918 1256 209 10 47 n Cyprus 115 112 003 124 110 014 o Oman 1587 099 1488 1879 181 16 98 p Qatar 589 120 469 848 120 728 q KSA 6432 1485 4947 7331 1845 54 86

r UAE 3512 2681 831 4042 2957 10 85 s Yemen 424 110 314 556 196 360 t Africa 1663 7308 9324 1986 8531 1133 u Europe 7008 4136 2872 6831 3964 2867 v Latin America 2414 1217 1197 2613 1352 1261 w North America 4944 3501 1443 5363 3801 1562

Page 10: PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

276

Pakistanrsquos Potential as A Transit Trade Corridor

Table 3 Earning of Pakistan Railway (2007 ndash March 2014)2 0

Years Earning (Rs in Mn) Change 2009-10 21886 -55 2010-11 18740 -144 2011-12 15444 -175 2012-13 18070 170

2013-14 (July ndash March) 17736 - Table 4 Passenger and Freight Traffic (201112 ndash 201213)2 1

Subject 2011-12 2012-13 Number of Passengers Carried (M) 411 42 Passenger Traffic (M kms) 16093 17388 Freight Carried Tonnes (M) 13 10 Freight Tonnes (M kms) 402 419

Challenges ndash Air Transportation Ever increasing competition in aviation industry Fleet constraints exacerbated by operational issues

management Passenger volumes are 110th of rail and 1100th of road

transport22 Lack of fiscal space retarding growth of PIA

Strict governmental control has prevented PIA from operating oncommercial lines thus often resulting in huge operating losses andconsequent negative growth

Challenges ndash Ports and Shipping

Cargo handling capacity of ports is constantly on the declinedue neglect at the policy level Some of the challenges confrontingmaritime shipping seaport cargo operations in Pakistan are summarizedbelow-

Port charges ndash not competitive still above internationalstandards

Implementation of Pakistan Customs Computerized System(PACCS) has substantially reduced the customs clearancetime from 4-5 days to less than 24 hours in KarachiInternational Container Terminal (KICT)23

PAKISTAN BUSINESS REVIEW APRIL 2016277

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Free storage period shortened from 7 to 4-5 dayscontainer dwell time 5-6 days on the average still aboveinternational standard of 3-5 days24 It reduces thecapacity of container terminal to less than its duepotential

Ports limited draft at 10 ndash 12 Ms keeps latest mostefficient ships from calling25

Performance of Port Operations ndash though improving butstill much short of international standards would not beable to handle anticipated transit trade in the event ofoperationalization of Economic CorridorTable 5 Cargo Handled by Karachi Port and Port Qasim (Million Tonnes) 26

Years Karachi Port Port Qasim Grand Total Exports Imports Total Exports Imports Total

2009-10 13528 27892 41420 6380 19226 25626 67046 2010-11 12843 28589 41432 6657 19511 26168 67600 2011-12 11674 26201 37875 5950 18075 24025 61900 2012-13 12150 26700 38850 7047 17754 24801 63651 2013-14 (July-

March)

8452 22225 30677 5887 13084 18971 49648

Some Common Challenges to Transportation Sector Long waiting hours and travelling time Ever rising high cost of travel Increased cost of doing business Reduced competitiveness of countryrsquos exports Constraints curtailing retarding Pakistanrsquos ability to integrate

into global supply chains which require just in time delivery Poor performance of transport sector costs around 5 of

GDP each year27

Way Forward

Future Initiatives ndash Regional Connectivity and Trade Facilitation

Projects like National Trade Corridor (NTC) and CPEC areindicative of growing recognition at the policy level of inescapablelinkage between efficient transportation system and sustainable

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

278

Pakistanrsquos Potential as A Transit Trade Corridor

economic growth GoP has set forth an ambitious development planfor transportation and logistics In PSDP ndash 201314 the share ofTransport and Logistics stands around 25 while the requirement is2-3 times more28 Draft National Transport Policy (NTP) has beenformulated by Ministry of Communication though yet to be formallyapproved and implemented

China ndash Pakistan Economic Corridor (CPEC)

CPEC connecting Kashgar Xinjiang (China) with Gwadar Karachi ports of Pakistan would serve two purposes internationally itwould be Worldrsquos pivotal trade route to scale down globaltransportation distances between continents while domestically itwould help in invigorating Pakistanrsquos stagnant economy This wouldprovide a link between long distance partners Russia China CARsand ME Europe India Iran and Afghanistan can also benefit throughlateral links with CPEC China is expected to spend USD 30 ndash 40 Bn ina span of next seven years29

Figure 4

China - Pakistan Economic Corridor30

CPEC would essentially have three tiers at the first tierKashgar and Gwadar would be connected through highways motorways while at the second tier through establishment of railnetwork and at third tier linked via energy pipeline and establishmentof an oil refinery at Gwadar Freight terminals planned along the corridorwill facilitate logistic industry trucks carrying freight while economic

PAKISTAN BUSINESS REVIEW APRIL 2016279

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

zones industrial parks would essentially target local products industry and services

Figure 5

Freight Rail Link31

Out of Chinarsquos annual container trade of 225 Bn containersaround 30 (70 Million containers) of this trade is with Europeannations and around 6 with Africa32 Even if Pakistan gets 10 share of container flow to European nations (70000 containersannually) Pakistanrsquos logistic industry and transport sector would geta huge boost

Diplomatic Maneuver

Maintain strategic balance in relations with US and China Capitalize on rapprochement with Russia and offer trade via

CPEC through a trilateral agreement between China ndash Russiandash Pakistan Capacity building of PR acquisition of heavymachinery revival of steel mill industry is suggested areasof mutual cooperation

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

280

Pakistanrsquos Potential as A Transit Trade Corridor

Build upon Quadrilateral Trade Agreement between China Kyrgyzstan Tajikistan and Kazakhstan (operational since2004) and expand mutual trade relations through exchangesbetween business communities of respective countries Offerfor transit trade and access to Arabian sea as well as Indiathrough Pakistan be extended to these countries

Efforts be made to formalize trade with Afghanistan tradefacilitation customs offices be established on all formalcrossings and trade through these points should beincentivized ndash subsidize the customs duty other taxes

Manage pending disputes with India till their resolution tocreate environment for mutual trade for the benefit of peopleon both sides India should be encouraged to trade withCARs Afghanistan through Pakistan and import energy fromCARs Middle East through Pakistan this will create herstakes in stability of Pakistan

Explore avenues with Iran ndash seek points of convergences Gwadar is not a military outpost of China misperceptions be

cleared loudly and squarely It is a mutual economiccooperation venture FDI from other countries like OmanUAE Turkey etc be encouraged as it would help in clearingmisperceptions as well as creating healthy competitiveenvironment

Transportation Sector

Undertake long term perspective planning for periods beyond10-15 years

Investment must focus on capacity building developmentof new transportation infrastructure enhancing operationalefficiency of transport system and extending access to distantmarkets domestically as well as regionally

Transportation projects must be analyzed critically andprioritized from the perspective of their urgency vis-agrave-visaffordability fiscal space these are often vulnerable to

PAKISTAN BUSINESS REVIEW APRIL 2016281

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

miscalculations and mal-investment Dead investments drivenby purely political considerations (bumper sticker projects) oftenturn out to be counterproductive ndash bridges to nowhere hencemust be discouraged ruthlessly

Speedy completion of CPEC be ensured for continuity inpolicy such mega initiatives must be given legal patronagethrough act of parliament

Capacity building of the transport sector services to handlethe potential transit trade from China and other neighbours beensured expected potential is around 70000 ndash 100000 containersannually if only 10 of Chinese trade with Europe is rootedthrough Pakistan

Develop intermodal transportation system on modern lines(Figure 6) gradually shift from age old fragmented logisticindustry to modern state of the art efficient fully integratedlogistic system bridge gaps and establish linkages withindifferent transportation modes Well reputed international firmscan be contracted ndash public-private partnership is perhaps thesolution to fill fiscal gaps

Curtail cost of travel to reduce the cost of doing businessthis will make countryrsquos exports competitive in internationalmarket

Figure 6

Intermodal Transportation Infrastructure33

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

282

Pakistanrsquos Potential as A Transit Trade Corridor

Enhance accessibility farm to market roads and warehousescold storage to save losses in agriculture sector ndash perishablegoods vegetables fruits

TOT based projects be preferred China Turkey Russia andJapan may be engaged for development of transportationsector especially rail network

Road Network

Improve the condition of national highway network througha prioritized and phased programme in line with the priorityset for National Trade Corridor CPEC

Revamp freight transportation industry on modern linesthrough public-private partnership large scale logisticenterprise with integral integrated transport services is needof the hour

Initiate program for progressive replacement of obsolete truckfleet offering loans and incentives Comparatively newerinventory of trucks will not only be environmental friendlybut will also reduce transportation times of freight closer tointernational standards

Rail Network

Enhance the quantity quality of locomotives to meet thedemand of passenger and freight services

Take steps to gradually phase out and replace over agedinfrastructure and rolling stock

The policy of cross subsidy from freight to passengerservices should be done away with to make freight ratesmore competitive with road transport PR should take majorinitiatives to make freight service commercially viable

PAKISTAN BUSINESS REVIEW APRIL 2016283

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Air Transportation PIA should either be privatized or allowed to operate on

commercial lines with minimum governmental control so that itcan compete in the aviation market It will not only be able tomeet its operating expenses but also earn and improve its fleetinstead of becoming a public sector liability

Management of PIA should be cut to size to reduce operationallosses

Ports and Shipping

Improve cargo handling capacity of Karachi port and PortQasim and create space by removing containers awaiting disposalbeyond100 days figures are fairly large

Make port charges competitive with international standards Reduce customs clearance time to less than 12 hours at all

terminals of Karachi Port Qasim and Gwadar

Gwadar Seaport

Speedy operationalization of Gwadar seaport and connectivitywith hinterland to exploit its full potential

Develop maritime industry prospects of industrial zone dedicatedto seafood be explored near Gwadar Karachi and other coastalareas The potential for export of value added seafood productsis phenomenal hither-to-fore untapped

Parallel work on pipeline project between Gwadar and Xinjiangincluding establishment of oil refinery at Gwadar be initiated

Efforts be made to expedite other energy pipeline projects ie IPIand TAPI TKPI

Miscellaneous Recommendations

Concerted efforts be made at all levels to defeat militancyand improve internal security through capacity building of law

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

284

Pakistanrsquos Potential as A Transit Trade Corridor

enforcement agencies ndash conducive environment is inevitable forpromotion of regional connectivity and economic integration

Initiate steps towards progressive development in restiveregions of Pakistan like FATA and Baluchistan to includeexploration of fossil fuels this economic activity will lead toprosperity and stability in these areas

Prudent fiscal management and stringent punitive measuresagainst corruption will ensure transparency ndash this will attract FDIand encourage international business community Pakistanidiaspora to invest in Pakistan

Capitalize on political awakening of middle class and youth bulgeSay NO to bumper sticker projects built at exorbitant prohibitive

costs ndash build consensus through debate between leadership

Conclusion

The paper has endeavored to underline Pakistanrsquos transittrade potential being a regional hub economic corridor and hassuggested few policy guidelines at various levels and for differentmodes of transportation Pakistan offers the most economic strategiclink between the resource affluent and the energy scarce regions inaddition to providing the shortest trade route In changed geo politicalcum strategic environment opportunities are knocking at our doorWith some peace retuning to the region the transit trade from ourimmediate as well as distant neighbors is likely to increase substantiallyPakistanrsquos present transportation system is however barely enoughto meet the demands of regional international transit trade

PAKISTAN BUSINESS REVIEW APRIL 2016285

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

References

Anwar Dr Zafar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo South Asian Studies Jan-Jun 2011Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20AnwarpdfldquoChabahar port vs Gwadar portrdquo Indian Defence Forum AccessedDecember 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtmlldquoChinarsquos Statistical Yearbook 2013 Accessed November 30 2014httpwwwstatsgovcntjsjndsj2013indexehhtmldquoDemographics of Pakistanrdquo Wikipedia Accessed November 302014 httpenwikipediaorgwikiDemographics_of_PakistanldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum CivilServices of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtmlHassan Mehmood ul ldquoPak-China Friendship New Dimensions andNew Opportunitiesrdquo Overseas Pakistani Friends March 252013Accessed December 11 2014 httpwwwopfblogcom13906pak-china-friendship-new-dimensions-and-new-opportunitiesHaq Shahram ldquoPakistan rank 71 in World Bank LogisticPerformance Indexrdquo Express Tribune July 22 2012 httptribunecompkstory411560pakistan-ranked-71-in-world-bank-logistics-performance-indexKhan Dr Shabir Ahmed ldquoGeo Economic Imperatives of GwadarSeaport and Kashgar Economic Zone for Pakistan and Chinardquo IPRIJournal XIII Summer 2013 Accessed December 8 2014 httpgreatgwadarcomvzpaneldocsGwadar20Sea20Port20amp20Kashgar20Economic20Zone20-20Pakistan20amp20ChinapdfKumar Rohit ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014 httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

286

Pakistanrsquos Potential as A Transit Trade Corridor

ldquoPakistan Economic Survey 2013-14rdquo Ministry of Finance GoPAccessed December 14 2014 httpfinancegovpksurveychapters_1413_Transport_and_comspdfldquoPak ndash China Economic Corridor to help setup new dry ports incountryrdquo Business Recorder November 25 2014 AccessedDecember 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-countryldquoPakistan Transport Sectorrdquo World Bank Accessed December 142014 httpwebworldbankorgWBSITEEXTERNALCOUNTRIESSOUTHASIAEXTEXTSARREGTOPTRANSPORT0contentMDK20699058~menuPK869060~pagePK34004173~piPK34003707~theSitePK57959800htmlPaton James and Aibing Guo ldquoRussia China add to $400 bn GasDeal with Accordrdquo Bloomberg November 10 2014 httpwwwbloombergcomnews2014-11-10russia-china-add-to-400-billion-gas-deal-with-accordhtmlSeethi K M ldquoIndiarsquos lsquoConnect Central Asiarsquo Policyrdquo DiplomatDecember 13 2013 Accessed December 7 2014 httpthediplomatcom201312indias-connect-central-asia-policySiddiqui Asim ldquoDeveloping the Pak ndash China Economic Corridor tofacilitate Sino ndash Europe Traderdquo presented at Intermodal Europe2014 held at Rotterdam (11-13 November 2014) Accessed December26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdfSiddiqui Asim ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdfldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp Reforms GoPAccessed December 14 2014 httpwwwpcgovpkannual20plans2012-13chapter-20_transport_and_logisticspdf

PAKISTAN BUSINESS REVIEW APRIL 2016287

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Notes4 Asim Siddiqui ldquoUnderstanding Economic benefits of Trade

corridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdf

5 Ibid

6 Ibid7 ldquoPak ndash China Economic Corridor to help setup new dry ports

in countryrdquo Business Recorder November 25 2014Accessed December 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-country

8 ldquoChinarsquos Statistical Yearbook 2013 Accessed November302014 httpwwwstatsgovcntjsjndsj2013indexehhtm

9 K M Seethi ldquoIndiarsquos lsquoConnect Central Asiarsquo PolicyrdquoDiplomat December 13 2013 Accessed December 7 2014http thediplomatcom201312indias-connect-central-asia-policy

10 Rohit Kumar ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

11 ldquoChabahar port vs Gwadar portrdquo Indian Defence ForumAccessed December 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtml

12 ldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum Civil Services of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtml

13 Dr Shabir Ahmed Khan ldquoGeo Economic Imperatives ofGwadar Seaport and Kashgar Economic Zone for Pakistanand Chinardquo IPRI Journal XIII Summer 2013 AccessedDecember 8 2014 httpgreatgwadarcomvzpaneldocs

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

288

Pakistanrsquos Potential as A Transit Trade Corridor

14 Dr Zafar Anwar ldquoDevelopment of Infrastructural linkagesbetween Pakistan and Central Asiardquo South Asian StudiesJan-Jun 2011 Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20Anwarpdf

15 ldquoDemographics of Pakistanrdquo Wikipedia AccessedNovember 30 2014 httpenwikipediaorgwikiDemographics_of_Pakistan

16 Anwar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo

17 ldquoPakistan Transport Sectorrdquo World Bank AccessedDecember 14 2014 httpwebworldbankorgWBSITEEXTERNALCOUN

18 Pakistan Economic Survey 2013-1419 ldquoPakistan Transport Sectorrdquo World Bank20 Pakistan Economic Survey 2013-14

21 Ibid22 ldquoPakistan Transport Sectorrdquo World Bank23 Ibid24 Ibid25 Ibid26 Pakistan Economic Survey 2013-1427 Ibid

28 ldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp ReformsGoP Accessed December 14 2014 httpwwwpcgovpk20_transport_and_logisticspdf

29 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

30 Siddiqui ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal Networkrdquo

31 Asim Siddiqui ldquoDeveloping the Pak ndash China EconomicCorridor to facilitate Sino ndash Europe Traderdquo presented atIntermodal Europe 2014 held at Rotterdam (11-13 November2014) Accessed December 26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdf

PAKISTAN BUSINESS REVIEW APRIL 2016289

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

32 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

Annexure A

CHINArsquoS TRADE WITH REGIONS COUNTRIES (USD BILLION)

Ser Region Country 2011 2012

Total Exports Imports Total Exports Imports a Afghanistan 0234 023 004 0469 0464 0005

b India 7391 5054 2337 6647 4768 18 80

c Pakistan 1056 844 212 1241 928 314

d Iran 451 1476 3034 3647 116 24 87 e Iraq 1427 382 1044 1757 491 12 66

f Israel 978 674 304 991 699 292

g Jordon 277 251 026 326 296 028

h Lebanon 148 146 0026 171 169 002

i Syria 245 242 0026 12 119 0011 j Turkey 1874 1561 312 1910 1558 351

k Palestine 0 049 0048 0001 0041 004 0001 l Bahrain 120 088 032 155 120 035

m Kuwait 1130 213 918 1256 209 10 47 n Cyprus 115 112 003 124 110 014 o Oman 1587 099 1488 1879 181 16 98 p Qatar 589 120 469 848 120 728 q KSA 6432 1485 4947 7331 1845 54 86

r UAE 3512 2681 831 4042 2957 10 85 s Yemen 424 110 314 556 196 360 t Africa 1663 7308 9324 1986 8531 1133 u Europe 7008 4136 2872 6831 3964 2867 v Latin America 2414 1217 1197 2613 1352 1261 w North America 4944 3501 1443 5363 3801 1562

Page 11: PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

PAKISTAN BUSINESS REVIEW APRIL 2016277

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Free storage period shortened from 7 to 4-5 dayscontainer dwell time 5-6 days on the average still aboveinternational standard of 3-5 days24 It reduces thecapacity of container terminal to less than its duepotential

Ports limited draft at 10 ndash 12 Ms keeps latest mostefficient ships from calling25

Performance of Port Operations ndash though improving butstill much short of international standards would not beable to handle anticipated transit trade in the event ofoperationalization of Economic CorridorTable 5 Cargo Handled by Karachi Port and Port Qasim (Million Tonnes) 26

Years Karachi Port Port Qasim Grand Total Exports Imports Total Exports Imports Total

2009-10 13528 27892 41420 6380 19226 25626 67046 2010-11 12843 28589 41432 6657 19511 26168 67600 2011-12 11674 26201 37875 5950 18075 24025 61900 2012-13 12150 26700 38850 7047 17754 24801 63651 2013-14 (July-

March)

8452 22225 30677 5887 13084 18971 49648

Some Common Challenges to Transportation Sector Long waiting hours and travelling time Ever rising high cost of travel Increased cost of doing business Reduced competitiveness of countryrsquos exports Constraints curtailing retarding Pakistanrsquos ability to integrate

into global supply chains which require just in time delivery Poor performance of transport sector costs around 5 of

GDP each year27

Way Forward

Future Initiatives ndash Regional Connectivity and Trade Facilitation

Projects like National Trade Corridor (NTC) and CPEC areindicative of growing recognition at the policy level of inescapablelinkage between efficient transportation system and sustainable

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

278

Pakistanrsquos Potential as A Transit Trade Corridor

economic growth GoP has set forth an ambitious development planfor transportation and logistics In PSDP ndash 201314 the share ofTransport and Logistics stands around 25 while the requirement is2-3 times more28 Draft National Transport Policy (NTP) has beenformulated by Ministry of Communication though yet to be formallyapproved and implemented

China ndash Pakistan Economic Corridor (CPEC)

CPEC connecting Kashgar Xinjiang (China) with Gwadar Karachi ports of Pakistan would serve two purposes internationally itwould be Worldrsquos pivotal trade route to scale down globaltransportation distances between continents while domestically itwould help in invigorating Pakistanrsquos stagnant economy This wouldprovide a link between long distance partners Russia China CARsand ME Europe India Iran and Afghanistan can also benefit throughlateral links with CPEC China is expected to spend USD 30 ndash 40 Bn ina span of next seven years29

Figure 4

China - Pakistan Economic Corridor30

CPEC would essentially have three tiers at the first tierKashgar and Gwadar would be connected through highways motorways while at the second tier through establishment of railnetwork and at third tier linked via energy pipeline and establishmentof an oil refinery at Gwadar Freight terminals planned along the corridorwill facilitate logistic industry trucks carrying freight while economic

PAKISTAN BUSINESS REVIEW APRIL 2016279

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

zones industrial parks would essentially target local products industry and services

Figure 5

Freight Rail Link31

Out of Chinarsquos annual container trade of 225 Bn containersaround 30 (70 Million containers) of this trade is with Europeannations and around 6 with Africa32 Even if Pakistan gets 10 share of container flow to European nations (70000 containersannually) Pakistanrsquos logistic industry and transport sector would geta huge boost

Diplomatic Maneuver

Maintain strategic balance in relations with US and China Capitalize on rapprochement with Russia and offer trade via

CPEC through a trilateral agreement between China ndash Russiandash Pakistan Capacity building of PR acquisition of heavymachinery revival of steel mill industry is suggested areasof mutual cooperation

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

280

Pakistanrsquos Potential as A Transit Trade Corridor

Build upon Quadrilateral Trade Agreement between China Kyrgyzstan Tajikistan and Kazakhstan (operational since2004) and expand mutual trade relations through exchangesbetween business communities of respective countries Offerfor transit trade and access to Arabian sea as well as Indiathrough Pakistan be extended to these countries

Efforts be made to formalize trade with Afghanistan tradefacilitation customs offices be established on all formalcrossings and trade through these points should beincentivized ndash subsidize the customs duty other taxes

Manage pending disputes with India till their resolution tocreate environment for mutual trade for the benefit of peopleon both sides India should be encouraged to trade withCARs Afghanistan through Pakistan and import energy fromCARs Middle East through Pakistan this will create herstakes in stability of Pakistan

Explore avenues with Iran ndash seek points of convergences Gwadar is not a military outpost of China misperceptions be

cleared loudly and squarely It is a mutual economiccooperation venture FDI from other countries like OmanUAE Turkey etc be encouraged as it would help in clearingmisperceptions as well as creating healthy competitiveenvironment

Transportation Sector

Undertake long term perspective planning for periods beyond10-15 years

Investment must focus on capacity building developmentof new transportation infrastructure enhancing operationalefficiency of transport system and extending access to distantmarkets domestically as well as regionally

Transportation projects must be analyzed critically andprioritized from the perspective of their urgency vis-agrave-visaffordability fiscal space these are often vulnerable to

PAKISTAN BUSINESS REVIEW APRIL 2016281

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

miscalculations and mal-investment Dead investments drivenby purely political considerations (bumper sticker projects) oftenturn out to be counterproductive ndash bridges to nowhere hencemust be discouraged ruthlessly

Speedy completion of CPEC be ensured for continuity inpolicy such mega initiatives must be given legal patronagethrough act of parliament

Capacity building of the transport sector services to handlethe potential transit trade from China and other neighbours beensured expected potential is around 70000 ndash 100000 containersannually if only 10 of Chinese trade with Europe is rootedthrough Pakistan

Develop intermodal transportation system on modern lines(Figure 6) gradually shift from age old fragmented logisticindustry to modern state of the art efficient fully integratedlogistic system bridge gaps and establish linkages withindifferent transportation modes Well reputed international firmscan be contracted ndash public-private partnership is perhaps thesolution to fill fiscal gaps

Curtail cost of travel to reduce the cost of doing businessthis will make countryrsquos exports competitive in internationalmarket

Figure 6

Intermodal Transportation Infrastructure33

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

282

Pakistanrsquos Potential as A Transit Trade Corridor

Enhance accessibility farm to market roads and warehousescold storage to save losses in agriculture sector ndash perishablegoods vegetables fruits

TOT based projects be preferred China Turkey Russia andJapan may be engaged for development of transportationsector especially rail network

Road Network

Improve the condition of national highway network througha prioritized and phased programme in line with the priorityset for National Trade Corridor CPEC

Revamp freight transportation industry on modern linesthrough public-private partnership large scale logisticenterprise with integral integrated transport services is needof the hour

Initiate program for progressive replacement of obsolete truckfleet offering loans and incentives Comparatively newerinventory of trucks will not only be environmental friendlybut will also reduce transportation times of freight closer tointernational standards

Rail Network

Enhance the quantity quality of locomotives to meet thedemand of passenger and freight services

Take steps to gradually phase out and replace over agedinfrastructure and rolling stock

The policy of cross subsidy from freight to passengerservices should be done away with to make freight ratesmore competitive with road transport PR should take majorinitiatives to make freight service commercially viable

PAKISTAN BUSINESS REVIEW APRIL 2016283

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Air Transportation PIA should either be privatized or allowed to operate on

commercial lines with minimum governmental control so that itcan compete in the aviation market It will not only be able tomeet its operating expenses but also earn and improve its fleetinstead of becoming a public sector liability

Management of PIA should be cut to size to reduce operationallosses

Ports and Shipping

Improve cargo handling capacity of Karachi port and PortQasim and create space by removing containers awaiting disposalbeyond100 days figures are fairly large

Make port charges competitive with international standards Reduce customs clearance time to less than 12 hours at all

terminals of Karachi Port Qasim and Gwadar

Gwadar Seaport

Speedy operationalization of Gwadar seaport and connectivitywith hinterland to exploit its full potential

Develop maritime industry prospects of industrial zone dedicatedto seafood be explored near Gwadar Karachi and other coastalareas The potential for export of value added seafood productsis phenomenal hither-to-fore untapped

Parallel work on pipeline project between Gwadar and Xinjiangincluding establishment of oil refinery at Gwadar be initiated

Efforts be made to expedite other energy pipeline projects ie IPIand TAPI TKPI

Miscellaneous Recommendations

Concerted efforts be made at all levels to defeat militancyand improve internal security through capacity building of law

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

284

Pakistanrsquos Potential as A Transit Trade Corridor

enforcement agencies ndash conducive environment is inevitable forpromotion of regional connectivity and economic integration

Initiate steps towards progressive development in restiveregions of Pakistan like FATA and Baluchistan to includeexploration of fossil fuels this economic activity will lead toprosperity and stability in these areas

Prudent fiscal management and stringent punitive measuresagainst corruption will ensure transparency ndash this will attract FDIand encourage international business community Pakistanidiaspora to invest in Pakistan

Capitalize on political awakening of middle class and youth bulgeSay NO to bumper sticker projects built at exorbitant prohibitive

costs ndash build consensus through debate between leadership

Conclusion

The paper has endeavored to underline Pakistanrsquos transittrade potential being a regional hub economic corridor and hassuggested few policy guidelines at various levels and for differentmodes of transportation Pakistan offers the most economic strategiclink between the resource affluent and the energy scarce regions inaddition to providing the shortest trade route In changed geo politicalcum strategic environment opportunities are knocking at our doorWith some peace retuning to the region the transit trade from ourimmediate as well as distant neighbors is likely to increase substantiallyPakistanrsquos present transportation system is however barely enoughto meet the demands of regional international transit trade

PAKISTAN BUSINESS REVIEW APRIL 2016285

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

References

Anwar Dr Zafar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo South Asian Studies Jan-Jun 2011Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20AnwarpdfldquoChabahar port vs Gwadar portrdquo Indian Defence Forum AccessedDecember 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtmlldquoChinarsquos Statistical Yearbook 2013 Accessed November 30 2014httpwwwstatsgovcntjsjndsj2013indexehhtmldquoDemographics of Pakistanrdquo Wikipedia Accessed November 302014 httpenwikipediaorgwikiDemographics_of_PakistanldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum CivilServices of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtmlHassan Mehmood ul ldquoPak-China Friendship New Dimensions andNew Opportunitiesrdquo Overseas Pakistani Friends March 252013Accessed December 11 2014 httpwwwopfblogcom13906pak-china-friendship-new-dimensions-and-new-opportunitiesHaq Shahram ldquoPakistan rank 71 in World Bank LogisticPerformance Indexrdquo Express Tribune July 22 2012 httptribunecompkstory411560pakistan-ranked-71-in-world-bank-logistics-performance-indexKhan Dr Shabir Ahmed ldquoGeo Economic Imperatives of GwadarSeaport and Kashgar Economic Zone for Pakistan and Chinardquo IPRIJournal XIII Summer 2013 Accessed December 8 2014 httpgreatgwadarcomvzpaneldocsGwadar20Sea20Port20amp20Kashgar20Economic20Zone20-20Pakistan20amp20ChinapdfKumar Rohit ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014 httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

286

Pakistanrsquos Potential as A Transit Trade Corridor

ldquoPakistan Economic Survey 2013-14rdquo Ministry of Finance GoPAccessed December 14 2014 httpfinancegovpksurveychapters_1413_Transport_and_comspdfldquoPak ndash China Economic Corridor to help setup new dry ports incountryrdquo Business Recorder November 25 2014 AccessedDecember 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-countryldquoPakistan Transport Sectorrdquo World Bank Accessed December 142014 httpwebworldbankorgWBSITEEXTERNALCOUNTRIESSOUTHASIAEXTEXTSARREGTOPTRANSPORT0contentMDK20699058~menuPK869060~pagePK34004173~piPK34003707~theSitePK57959800htmlPaton James and Aibing Guo ldquoRussia China add to $400 bn GasDeal with Accordrdquo Bloomberg November 10 2014 httpwwwbloombergcomnews2014-11-10russia-china-add-to-400-billion-gas-deal-with-accordhtmlSeethi K M ldquoIndiarsquos lsquoConnect Central Asiarsquo Policyrdquo DiplomatDecember 13 2013 Accessed December 7 2014 httpthediplomatcom201312indias-connect-central-asia-policySiddiqui Asim ldquoDeveloping the Pak ndash China Economic Corridor tofacilitate Sino ndash Europe Traderdquo presented at Intermodal Europe2014 held at Rotterdam (11-13 November 2014) Accessed December26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdfSiddiqui Asim ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdfldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp Reforms GoPAccessed December 14 2014 httpwwwpcgovpkannual20plans2012-13chapter-20_transport_and_logisticspdf

PAKISTAN BUSINESS REVIEW APRIL 2016287

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Notes4 Asim Siddiqui ldquoUnderstanding Economic benefits of Trade

corridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdf

5 Ibid

6 Ibid7 ldquoPak ndash China Economic Corridor to help setup new dry ports

in countryrdquo Business Recorder November 25 2014Accessed December 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-country

8 ldquoChinarsquos Statistical Yearbook 2013 Accessed November302014 httpwwwstatsgovcntjsjndsj2013indexehhtm

9 K M Seethi ldquoIndiarsquos lsquoConnect Central Asiarsquo PolicyrdquoDiplomat December 13 2013 Accessed December 7 2014http thediplomatcom201312indias-connect-central-asia-policy

10 Rohit Kumar ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

11 ldquoChabahar port vs Gwadar portrdquo Indian Defence ForumAccessed December 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtml

12 ldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum Civil Services of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtml

13 Dr Shabir Ahmed Khan ldquoGeo Economic Imperatives ofGwadar Seaport and Kashgar Economic Zone for Pakistanand Chinardquo IPRI Journal XIII Summer 2013 AccessedDecember 8 2014 httpgreatgwadarcomvzpaneldocs

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

288

Pakistanrsquos Potential as A Transit Trade Corridor

14 Dr Zafar Anwar ldquoDevelopment of Infrastructural linkagesbetween Pakistan and Central Asiardquo South Asian StudiesJan-Jun 2011 Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20Anwarpdf

15 ldquoDemographics of Pakistanrdquo Wikipedia AccessedNovember 30 2014 httpenwikipediaorgwikiDemographics_of_Pakistan

16 Anwar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo

17 ldquoPakistan Transport Sectorrdquo World Bank AccessedDecember 14 2014 httpwebworldbankorgWBSITEEXTERNALCOUN

18 Pakistan Economic Survey 2013-1419 ldquoPakistan Transport Sectorrdquo World Bank20 Pakistan Economic Survey 2013-14

21 Ibid22 ldquoPakistan Transport Sectorrdquo World Bank23 Ibid24 Ibid25 Ibid26 Pakistan Economic Survey 2013-1427 Ibid

28 ldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp ReformsGoP Accessed December 14 2014 httpwwwpcgovpk20_transport_and_logisticspdf

29 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

30 Siddiqui ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal Networkrdquo

31 Asim Siddiqui ldquoDeveloping the Pak ndash China EconomicCorridor to facilitate Sino ndash Europe Traderdquo presented atIntermodal Europe 2014 held at Rotterdam (11-13 November2014) Accessed December 26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdf

PAKISTAN BUSINESS REVIEW APRIL 2016289

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

32 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

Annexure A

CHINArsquoS TRADE WITH REGIONS COUNTRIES (USD BILLION)

Ser Region Country 2011 2012

Total Exports Imports Total Exports Imports a Afghanistan 0234 023 004 0469 0464 0005

b India 7391 5054 2337 6647 4768 18 80

c Pakistan 1056 844 212 1241 928 314

d Iran 451 1476 3034 3647 116 24 87 e Iraq 1427 382 1044 1757 491 12 66

f Israel 978 674 304 991 699 292

g Jordon 277 251 026 326 296 028

h Lebanon 148 146 0026 171 169 002

i Syria 245 242 0026 12 119 0011 j Turkey 1874 1561 312 1910 1558 351

k Palestine 0 049 0048 0001 0041 004 0001 l Bahrain 120 088 032 155 120 035

m Kuwait 1130 213 918 1256 209 10 47 n Cyprus 115 112 003 124 110 014 o Oman 1587 099 1488 1879 181 16 98 p Qatar 589 120 469 848 120 728 q KSA 6432 1485 4947 7331 1845 54 86

r UAE 3512 2681 831 4042 2957 10 85 s Yemen 424 110 314 556 196 360 t Africa 1663 7308 9324 1986 8531 1133 u Europe 7008 4136 2872 6831 3964 2867 v Latin America 2414 1217 1197 2613 1352 1261 w North America 4944 3501 1443 5363 3801 1562

Page 12: PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

278

Pakistanrsquos Potential as A Transit Trade Corridor

economic growth GoP has set forth an ambitious development planfor transportation and logistics In PSDP ndash 201314 the share ofTransport and Logistics stands around 25 while the requirement is2-3 times more28 Draft National Transport Policy (NTP) has beenformulated by Ministry of Communication though yet to be formallyapproved and implemented

China ndash Pakistan Economic Corridor (CPEC)

CPEC connecting Kashgar Xinjiang (China) with Gwadar Karachi ports of Pakistan would serve two purposes internationally itwould be Worldrsquos pivotal trade route to scale down globaltransportation distances between continents while domestically itwould help in invigorating Pakistanrsquos stagnant economy This wouldprovide a link between long distance partners Russia China CARsand ME Europe India Iran and Afghanistan can also benefit throughlateral links with CPEC China is expected to spend USD 30 ndash 40 Bn ina span of next seven years29

Figure 4

China - Pakistan Economic Corridor30

CPEC would essentially have three tiers at the first tierKashgar and Gwadar would be connected through highways motorways while at the second tier through establishment of railnetwork and at third tier linked via energy pipeline and establishmentof an oil refinery at Gwadar Freight terminals planned along the corridorwill facilitate logistic industry trucks carrying freight while economic

PAKISTAN BUSINESS REVIEW APRIL 2016279

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

zones industrial parks would essentially target local products industry and services

Figure 5

Freight Rail Link31

Out of Chinarsquos annual container trade of 225 Bn containersaround 30 (70 Million containers) of this trade is with Europeannations and around 6 with Africa32 Even if Pakistan gets 10 share of container flow to European nations (70000 containersannually) Pakistanrsquos logistic industry and transport sector would geta huge boost

Diplomatic Maneuver

Maintain strategic balance in relations with US and China Capitalize on rapprochement with Russia and offer trade via

CPEC through a trilateral agreement between China ndash Russiandash Pakistan Capacity building of PR acquisition of heavymachinery revival of steel mill industry is suggested areasof mutual cooperation

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

280

Pakistanrsquos Potential as A Transit Trade Corridor

Build upon Quadrilateral Trade Agreement between China Kyrgyzstan Tajikistan and Kazakhstan (operational since2004) and expand mutual trade relations through exchangesbetween business communities of respective countries Offerfor transit trade and access to Arabian sea as well as Indiathrough Pakistan be extended to these countries

Efforts be made to formalize trade with Afghanistan tradefacilitation customs offices be established on all formalcrossings and trade through these points should beincentivized ndash subsidize the customs duty other taxes

Manage pending disputes with India till their resolution tocreate environment for mutual trade for the benefit of peopleon both sides India should be encouraged to trade withCARs Afghanistan through Pakistan and import energy fromCARs Middle East through Pakistan this will create herstakes in stability of Pakistan

Explore avenues with Iran ndash seek points of convergences Gwadar is not a military outpost of China misperceptions be

cleared loudly and squarely It is a mutual economiccooperation venture FDI from other countries like OmanUAE Turkey etc be encouraged as it would help in clearingmisperceptions as well as creating healthy competitiveenvironment

Transportation Sector

Undertake long term perspective planning for periods beyond10-15 years

Investment must focus on capacity building developmentof new transportation infrastructure enhancing operationalefficiency of transport system and extending access to distantmarkets domestically as well as regionally

Transportation projects must be analyzed critically andprioritized from the perspective of their urgency vis-agrave-visaffordability fiscal space these are often vulnerable to

PAKISTAN BUSINESS REVIEW APRIL 2016281

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

miscalculations and mal-investment Dead investments drivenby purely political considerations (bumper sticker projects) oftenturn out to be counterproductive ndash bridges to nowhere hencemust be discouraged ruthlessly

Speedy completion of CPEC be ensured for continuity inpolicy such mega initiatives must be given legal patronagethrough act of parliament

Capacity building of the transport sector services to handlethe potential transit trade from China and other neighbours beensured expected potential is around 70000 ndash 100000 containersannually if only 10 of Chinese trade with Europe is rootedthrough Pakistan

Develop intermodal transportation system on modern lines(Figure 6) gradually shift from age old fragmented logisticindustry to modern state of the art efficient fully integratedlogistic system bridge gaps and establish linkages withindifferent transportation modes Well reputed international firmscan be contracted ndash public-private partnership is perhaps thesolution to fill fiscal gaps

Curtail cost of travel to reduce the cost of doing businessthis will make countryrsquos exports competitive in internationalmarket

Figure 6

Intermodal Transportation Infrastructure33

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

282

Pakistanrsquos Potential as A Transit Trade Corridor

Enhance accessibility farm to market roads and warehousescold storage to save losses in agriculture sector ndash perishablegoods vegetables fruits

TOT based projects be preferred China Turkey Russia andJapan may be engaged for development of transportationsector especially rail network

Road Network

Improve the condition of national highway network througha prioritized and phased programme in line with the priorityset for National Trade Corridor CPEC

Revamp freight transportation industry on modern linesthrough public-private partnership large scale logisticenterprise with integral integrated transport services is needof the hour

Initiate program for progressive replacement of obsolete truckfleet offering loans and incentives Comparatively newerinventory of trucks will not only be environmental friendlybut will also reduce transportation times of freight closer tointernational standards

Rail Network

Enhance the quantity quality of locomotives to meet thedemand of passenger and freight services

Take steps to gradually phase out and replace over agedinfrastructure and rolling stock

The policy of cross subsidy from freight to passengerservices should be done away with to make freight ratesmore competitive with road transport PR should take majorinitiatives to make freight service commercially viable

PAKISTAN BUSINESS REVIEW APRIL 2016283

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Air Transportation PIA should either be privatized or allowed to operate on

commercial lines with minimum governmental control so that itcan compete in the aviation market It will not only be able tomeet its operating expenses but also earn and improve its fleetinstead of becoming a public sector liability

Management of PIA should be cut to size to reduce operationallosses

Ports and Shipping

Improve cargo handling capacity of Karachi port and PortQasim and create space by removing containers awaiting disposalbeyond100 days figures are fairly large

Make port charges competitive with international standards Reduce customs clearance time to less than 12 hours at all

terminals of Karachi Port Qasim and Gwadar

Gwadar Seaport

Speedy operationalization of Gwadar seaport and connectivitywith hinterland to exploit its full potential

Develop maritime industry prospects of industrial zone dedicatedto seafood be explored near Gwadar Karachi and other coastalareas The potential for export of value added seafood productsis phenomenal hither-to-fore untapped

Parallel work on pipeline project between Gwadar and Xinjiangincluding establishment of oil refinery at Gwadar be initiated

Efforts be made to expedite other energy pipeline projects ie IPIand TAPI TKPI

Miscellaneous Recommendations

Concerted efforts be made at all levels to defeat militancyand improve internal security through capacity building of law

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

284

Pakistanrsquos Potential as A Transit Trade Corridor

enforcement agencies ndash conducive environment is inevitable forpromotion of regional connectivity and economic integration

Initiate steps towards progressive development in restiveregions of Pakistan like FATA and Baluchistan to includeexploration of fossil fuels this economic activity will lead toprosperity and stability in these areas

Prudent fiscal management and stringent punitive measuresagainst corruption will ensure transparency ndash this will attract FDIand encourage international business community Pakistanidiaspora to invest in Pakistan

Capitalize on political awakening of middle class and youth bulgeSay NO to bumper sticker projects built at exorbitant prohibitive

costs ndash build consensus through debate between leadership

Conclusion

The paper has endeavored to underline Pakistanrsquos transittrade potential being a regional hub economic corridor and hassuggested few policy guidelines at various levels and for differentmodes of transportation Pakistan offers the most economic strategiclink between the resource affluent and the energy scarce regions inaddition to providing the shortest trade route In changed geo politicalcum strategic environment opportunities are knocking at our doorWith some peace retuning to the region the transit trade from ourimmediate as well as distant neighbors is likely to increase substantiallyPakistanrsquos present transportation system is however barely enoughto meet the demands of regional international transit trade

PAKISTAN BUSINESS REVIEW APRIL 2016285

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

References

Anwar Dr Zafar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo South Asian Studies Jan-Jun 2011Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20AnwarpdfldquoChabahar port vs Gwadar portrdquo Indian Defence Forum AccessedDecember 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtmlldquoChinarsquos Statistical Yearbook 2013 Accessed November 30 2014httpwwwstatsgovcntjsjndsj2013indexehhtmldquoDemographics of Pakistanrdquo Wikipedia Accessed November 302014 httpenwikipediaorgwikiDemographics_of_PakistanldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum CivilServices of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtmlHassan Mehmood ul ldquoPak-China Friendship New Dimensions andNew Opportunitiesrdquo Overseas Pakistani Friends March 252013Accessed December 11 2014 httpwwwopfblogcom13906pak-china-friendship-new-dimensions-and-new-opportunitiesHaq Shahram ldquoPakistan rank 71 in World Bank LogisticPerformance Indexrdquo Express Tribune July 22 2012 httptribunecompkstory411560pakistan-ranked-71-in-world-bank-logistics-performance-indexKhan Dr Shabir Ahmed ldquoGeo Economic Imperatives of GwadarSeaport and Kashgar Economic Zone for Pakistan and Chinardquo IPRIJournal XIII Summer 2013 Accessed December 8 2014 httpgreatgwadarcomvzpaneldocsGwadar20Sea20Port20amp20Kashgar20Economic20Zone20-20Pakistan20amp20ChinapdfKumar Rohit ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014 httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

286

Pakistanrsquos Potential as A Transit Trade Corridor

ldquoPakistan Economic Survey 2013-14rdquo Ministry of Finance GoPAccessed December 14 2014 httpfinancegovpksurveychapters_1413_Transport_and_comspdfldquoPak ndash China Economic Corridor to help setup new dry ports incountryrdquo Business Recorder November 25 2014 AccessedDecember 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-countryldquoPakistan Transport Sectorrdquo World Bank Accessed December 142014 httpwebworldbankorgWBSITEEXTERNALCOUNTRIESSOUTHASIAEXTEXTSARREGTOPTRANSPORT0contentMDK20699058~menuPK869060~pagePK34004173~piPK34003707~theSitePK57959800htmlPaton James and Aibing Guo ldquoRussia China add to $400 bn GasDeal with Accordrdquo Bloomberg November 10 2014 httpwwwbloombergcomnews2014-11-10russia-china-add-to-400-billion-gas-deal-with-accordhtmlSeethi K M ldquoIndiarsquos lsquoConnect Central Asiarsquo Policyrdquo DiplomatDecember 13 2013 Accessed December 7 2014 httpthediplomatcom201312indias-connect-central-asia-policySiddiqui Asim ldquoDeveloping the Pak ndash China Economic Corridor tofacilitate Sino ndash Europe Traderdquo presented at Intermodal Europe2014 held at Rotterdam (11-13 November 2014) Accessed December26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdfSiddiqui Asim ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdfldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp Reforms GoPAccessed December 14 2014 httpwwwpcgovpkannual20plans2012-13chapter-20_transport_and_logisticspdf

PAKISTAN BUSINESS REVIEW APRIL 2016287

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Notes4 Asim Siddiqui ldquoUnderstanding Economic benefits of Trade

corridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdf

5 Ibid

6 Ibid7 ldquoPak ndash China Economic Corridor to help setup new dry ports

in countryrdquo Business Recorder November 25 2014Accessed December 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-country

8 ldquoChinarsquos Statistical Yearbook 2013 Accessed November302014 httpwwwstatsgovcntjsjndsj2013indexehhtm

9 K M Seethi ldquoIndiarsquos lsquoConnect Central Asiarsquo PolicyrdquoDiplomat December 13 2013 Accessed December 7 2014http thediplomatcom201312indias-connect-central-asia-policy

10 Rohit Kumar ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

11 ldquoChabahar port vs Gwadar portrdquo Indian Defence ForumAccessed December 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtml

12 ldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum Civil Services of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtml

13 Dr Shabir Ahmed Khan ldquoGeo Economic Imperatives ofGwadar Seaport and Kashgar Economic Zone for Pakistanand Chinardquo IPRI Journal XIII Summer 2013 AccessedDecember 8 2014 httpgreatgwadarcomvzpaneldocs

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

288

Pakistanrsquos Potential as A Transit Trade Corridor

14 Dr Zafar Anwar ldquoDevelopment of Infrastructural linkagesbetween Pakistan and Central Asiardquo South Asian StudiesJan-Jun 2011 Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20Anwarpdf

15 ldquoDemographics of Pakistanrdquo Wikipedia AccessedNovember 30 2014 httpenwikipediaorgwikiDemographics_of_Pakistan

16 Anwar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo

17 ldquoPakistan Transport Sectorrdquo World Bank AccessedDecember 14 2014 httpwebworldbankorgWBSITEEXTERNALCOUN

18 Pakistan Economic Survey 2013-1419 ldquoPakistan Transport Sectorrdquo World Bank20 Pakistan Economic Survey 2013-14

21 Ibid22 ldquoPakistan Transport Sectorrdquo World Bank23 Ibid24 Ibid25 Ibid26 Pakistan Economic Survey 2013-1427 Ibid

28 ldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp ReformsGoP Accessed December 14 2014 httpwwwpcgovpk20_transport_and_logisticspdf

29 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

30 Siddiqui ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal Networkrdquo

31 Asim Siddiqui ldquoDeveloping the Pak ndash China EconomicCorridor to facilitate Sino ndash Europe Traderdquo presented atIntermodal Europe 2014 held at Rotterdam (11-13 November2014) Accessed December 26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdf

PAKISTAN BUSINESS REVIEW APRIL 2016289

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

32 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

Annexure A

CHINArsquoS TRADE WITH REGIONS COUNTRIES (USD BILLION)

Ser Region Country 2011 2012

Total Exports Imports Total Exports Imports a Afghanistan 0234 023 004 0469 0464 0005

b India 7391 5054 2337 6647 4768 18 80

c Pakistan 1056 844 212 1241 928 314

d Iran 451 1476 3034 3647 116 24 87 e Iraq 1427 382 1044 1757 491 12 66

f Israel 978 674 304 991 699 292

g Jordon 277 251 026 326 296 028

h Lebanon 148 146 0026 171 169 002

i Syria 245 242 0026 12 119 0011 j Turkey 1874 1561 312 1910 1558 351

k Palestine 0 049 0048 0001 0041 004 0001 l Bahrain 120 088 032 155 120 035

m Kuwait 1130 213 918 1256 209 10 47 n Cyprus 115 112 003 124 110 014 o Oman 1587 099 1488 1879 181 16 98 p Qatar 589 120 469 848 120 728 q KSA 6432 1485 4947 7331 1845 54 86

r UAE 3512 2681 831 4042 2957 10 85 s Yemen 424 110 314 556 196 360 t Africa 1663 7308 9324 1986 8531 1133 u Europe 7008 4136 2872 6831 3964 2867 v Latin America 2414 1217 1197 2613 1352 1261 w North America 4944 3501 1443 5363 3801 1562

Page 13: PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

PAKISTAN BUSINESS REVIEW APRIL 2016279

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

zones industrial parks would essentially target local products industry and services

Figure 5

Freight Rail Link31

Out of Chinarsquos annual container trade of 225 Bn containersaround 30 (70 Million containers) of this trade is with Europeannations and around 6 with Africa32 Even if Pakistan gets 10 share of container flow to European nations (70000 containersannually) Pakistanrsquos logistic industry and transport sector would geta huge boost

Diplomatic Maneuver

Maintain strategic balance in relations with US and China Capitalize on rapprochement with Russia and offer trade via

CPEC through a trilateral agreement between China ndash Russiandash Pakistan Capacity building of PR acquisition of heavymachinery revival of steel mill industry is suggested areasof mutual cooperation

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

280

Pakistanrsquos Potential as A Transit Trade Corridor

Build upon Quadrilateral Trade Agreement between China Kyrgyzstan Tajikistan and Kazakhstan (operational since2004) and expand mutual trade relations through exchangesbetween business communities of respective countries Offerfor transit trade and access to Arabian sea as well as Indiathrough Pakistan be extended to these countries

Efforts be made to formalize trade with Afghanistan tradefacilitation customs offices be established on all formalcrossings and trade through these points should beincentivized ndash subsidize the customs duty other taxes

Manage pending disputes with India till their resolution tocreate environment for mutual trade for the benefit of peopleon both sides India should be encouraged to trade withCARs Afghanistan through Pakistan and import energy fromCARs Middle East through Pakistan this will create herstakes in stability of Pakistan

Explore avenues with Iran ndash seek points of convergences Gwadar is not a military outpost of China misperceptions be

cleared loudly and squarely It is a mutual economiccooperation venture FDI from other countries like OmanUAE Turkey etc be encouraged as it would help in clearingmisperceptions as well as creating healthy competitiveenvironment

Transportation Sector

Undertake long term perspective planning for periods beyond10-15 years

Investment must focus on capacity building developmentof new transportation infrastructure enhancing operationalefficiency of transport system and extending access to distantmarkets domestically as well as regionally

Transportation projects must be analyzed critically andprioritized from the perspective of their urgency vis-agrave-visaffordability fiscal space these are often vulnerable to

PAKISTAN BUSINESS REVIEW APRIL 2016281

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

miscalculations and mal-investment Dead investments drivenby purely political considerations (bumper sticker projects) oftenturn out to be counterproductive ndash bridges to nowhere hencemust be discouraged ruthlessly

Speedy completion of CPEC be ensured for continuity inpolicy such mega initiatives must be given legal patronagethrough act of parliament

Capacity building of the transport sector services to handlethe potential transit trade from China and other neighbours beensured expected potential is around 70000 ndash 100000 containersannually if only 10 of Chinese trade with Europe is rootedthrough Pakistan

Develop intermodal transportation system on modern lines(Figure 6) gradually shift from age old fragmented logisticindustry to modern state of the art efficient fully integratedlogistic system bridge gaps and establish linkages withindifferent transportation modes Well reputed international firmscan be contracted ndash public-private partnership is perhaps thesolution to fill fiscal gaps

Curtail cost of travel to reduce the cost of doing businessthis will make countryrsquos exports competitive in internationalmarket

Figure 6

Intermodal Transportation Infrastructure33

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

282

Pakistanrsquos Potential as A Transit Trade Corridor

Enhance accessibility farm to market roads and warehousescold storage to save losses in agriculture sector ndash perishablegoods vegetables fruits

TOT based projects be preferred China Turkey Russia andJapan may be engaged for development of transportationsector especially rail network

Road Network

Improve the condition of national highway network througha prioritized and phased programme in line with the priorityset for National Trade Corridor CPEC

Revamp freight transportation industry on modern linesthrough public-private partnership large scale logisticenterprise with integral integrated transport services is needof the hour

Initiate program for progressive replacement of obsolete truckfleet offering loans and incentives Comparatively newerinventory of trucks will not only be environmental friendlybut will also reduce transportation times of freight closer tointernational standards

Rail Network

Enhance the quantity quality of locomotives to meet thedemand of passenger and freight services

Take steps to gradually phase out and replace over agedinfrastructure and rolling stock

The policy of cross subsidy from freight to passengerservices should be done away with to make freight ratesmore competitive with road transport PR should take majorinitiatives to make freight service commercially viable

PAKISTAN BUSINESS REVIEW APRIL 2016283

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Air Transportation PIA should either be privatized or allowed to operate on

commercial lines with minimum governmental control so that itcan compete in the aviation market It will not only be able tomeet its operating expenses but also earn and improve its fleetinstead of becoming a public sector liability

Management of PIA should be cut to size to reduce operationallosses

Ports and Shipping

Improve cargo handling capacity of Karachi port and PortQasim and create space by removing containers awaiting disposalbeyond100 days figures are fairly large

Make port charges competitive with international standards Reduce customs clearance time to less than 12 hours at all

terminals of Karachi Port Qasim and Gwadar

Gwadar Seaport

Speedy operationalization of Gwadar seaport and connectivitywith hinterland to exploit its full potential

Develop maritime industry prospects of industrial zone dedicatedto seafood be explored near Gwadar Karachi and other coastalareas The potential for export of value added seafood productsis phenomenal hither-to-fore untapped

Parallel work on pipeline project between Gwadar and Xinjiangincluding establishment of oil refinery at Gwadar be initiated

Efforts be made to expedite other energy pipeline projects ie IPIand TAPI TKPI

Miscellaneous Recommendations

Concerted efforts be made at all levels to defeat militancyand improve internal security through capacity building of law

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

284

Pakistanrsquos Potential as A Transit Trade Corridor

enforcement agencies ndash conducive environment is inevitable forpromotion of regional connectivity and economic integration

Initiate steps towards progressive development in restiveregions of Pakistan like FATA and Baluchistan to includeexploration of fossil fuels this economic activity will lead toprosperity and stability in these areas

Prudent fiscal management and stringent punitive measuresagainst corruption will ensure transparency ndash this will attract FDIand encourage international business community Pakistanidiaspora to invest in Pakistan

Capitalize on political awakening of middle class and youth bulgeSay NO to bumper sticker projects built at exorbitant prohibitive

costs ndash build consensus through debate between leadership

Conclusion

The paper has endeavored to underline Pakistanrsquos transittrade potential being a regional hub economic corridor and hassuggested few policy guidelines at various levels and for differentmodes of transportation Pakistan offers the most economic strategiclink between the resource affluent and the energy scarce regions inaddition to providing the shortest trade route In changed geo politicalcum strategic environment opportunities are knocking at our doorWith some peace retuning to the region the transit trade from ourimmediate as well as distant neighbors is likely to increase substantiallyPakistanrsquos present transportation system is however barely enoughto meet the demands of regional international transit trade

PAKISTAN BUSINESS REVIEW APRIL 2016285

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

References

Anwar Dr Zafar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo South Asian Studies Jan-Jun 2011Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20AnwarpdfldquoChabahar port vs Gwadar portrdquo Indian Defence Forum AccessedDecember 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtmlldquoChinarsquos Statistical Yearbook 2013 Accessed November 30 2014httpwwwstatsgovcntjsjndsj2013indexehhtmldquoDemographics of Pakistanrdquo Wikipedia Accessed November 302014 httpenwikipediaorgwikiDemographics_of_PakistanldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum CivilServices of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtmlHassan Mehmood ul ldquoPak-China Friendship New Dimensions andNew Opportunitiesrdquo Overseas Pakistani Friends March 252013Accessed December 11 2014 httpwwwopfblogcom13906pak-china-friendship-new-dimensions-and-new-opportunitiesHaq Shahram ldquoPakistan rank 71 in World Bank LogisticPerformance Indexrdquo Express Tribune July 22 2012 httptribunecompkstory411560pakistan-ranked-71-in-world-bank-logistics-performance-indexKhan Dr Shabir Ahmed ldquoGeo Economic Imperatives of GwadarSeaport and Kashgar Economic Zone for Pakistan and Chinardquo IPRIJournal XIII Summer 2013 Accessed December 8 2014 httpgreatgwadarcomvzpaneldocsGwadar20Sea20Port20amp20Kashgar20Economic20Zone20-20Pakistan20amp20ChinapdfKumar Rohit ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014 httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

286

Pakistanrsquos Potential as A Transit Trade Corridor

ldquoPakistan Economic Survey 2013-14rdquo Ministry of Finance GoPAccessed December 14 2014 httpfinancegovpksurveychapters_1413_Transport_and_comspdfldquoPak ndash China Economic Corridor to help setup new dry ports incountryrdquo Business Recorder November 25 2014 AccessedDecember 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-countryldquoPakistan Transport Sectorrdquo World Bank Accessed December 142014 httpwebworldbankorgWBSITEEXTERNALCOUNTRIESSOUTHASIAEXTEXTSARREGTOPTRANSPORT0contentMDK20699058~menuPK869060~pagePK34004173~piPK34003707~theSitePK57959800htmlPaton James and Aibing Guo ldquoRussia China add to $400 bn GasDeal with Accordrdquo Bloomberg November 10 2014 httpwwwbloombergcomnews2014-11-10russia-china-add-to-400-billion-gas-deal-with-accordhtmlSeethi K M ldquoIndiarsquos lsquoConnect Central Asiarsquo Policyrdquo DiplomatDecember 13 2013 Accessed December 7 2014 httpthediplomatcom201312indias-connect-central-asia-policySiddiqui Asim ldquoDeveloping the Pak ndash China Economic Corridor tofacilitate Sino ndash Europe Traderdquo presented at Intermodal Europe2014 held at Rotterdam (11-13 November 2014) Accessed December26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdfSiddiqui Asim ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdfldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp Reforms GoPAccessed December 14 2014 httpwwwpcgovpkannual20plans2012-13chapter-20_transport_and_logisticspdf

PAKISTAN BUSINESS REVIEW APRIL 2016287

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Notes4 Asim Siddiqui ldquoUnderstanding Economic benefits of Trade

corridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdf

5 Ibid

6 Ibid7 ldquoPak ndash China Economic Corridor to help setup new dry ports

in countryrdquo Business Recorder November 25 2014Accessed December 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-country

8 ldquoChinarsquos Statistical Yearbook 2013 Accessed November302014 httpwwwstatsgovcntjsjndsj2013indexehhtm

9 K M Seethi ldquoIndiarsquos lsquoConnect Central Asiarsquo PolicyrdquoDiplomat December 13 2013 Accessed December 7 2014http thediplomatcom201312indias-connect-central-asia-policy

10 Rohit Kumar ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

11 ldquoChabahar port vs Gwadar portrdquo Indian Defence ForumAccessed December 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtml

12 ldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum Civil Services of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtml

13 Dr Shabir Ahmed Khan ldquoGeo Economic Imperatives ofGwadar Seaport and Kashgar Economic Zone for Pakistanand Chinardquo IPRI Journal XIII Summer 2013 AccessedDecember 8 2014 httpgreatgwadarcomvzpaneldocs

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

288

Pakistanrsquos Potential as A Transit Trade Corridor

14 Dr Zafar Anwar ldquoDevelopment of Infrastructural linkagesbetween Pakistan and Central Asiardquo South Asian StudiesJan-Jun 2011 Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20Anwarpdf

15 ldquoDemographics of Pakistanrdquo Wikipedia AccessedNovember 30 2014 httpenwikipediaorgwikiDemographics_of_Pakistan

16 Anwar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo

17 ldquoPakistan Transport Sectorrdquo World Bank AccessedDecember 14 2014 httpwebworldbankorgWBSITEEXTERNALCOUN

18 Pakistan Economic Survey 2013-1419 ldquoPakistan Transport Sectorrdquo World Bank20 Pakistan Economic Survey 2013-14

21 Ibid22 ldquoPakistan Transport Sectorrdquo World Bank23 Ibid24 Ibid25 Ibid26 Pakistan Economic Survey 2013-1427 Ibid

28 ldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp ReformsGoP Accessed December 14 2014 httpwwwpcgovpk20_transport_and_logisticspdf

29 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

30 Siddiqui ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal Networkrdquo

31 Asim Siddiqui ldquoDeveloping the Pak ndash China EconomicCorridor to facilitate Sino ndash Europe Traderdquo presented atIntermodal Europe 2014 held at Rotterdam (11-13 November2014) Accessed December 26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdf

PAKISTAN BUSINESS REVIEW APRIL 2016289

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

32 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

Annexure A

CHINArsquoS TRADE WITH REGIONS COUNTRIES (USD BILLION)

Ser Region Country 2011 2012

Total Exports Imports Total Exports Imports a Afghanistan 0234 023 004 0469 0464 0005

b India 7391 5054 2337 6647 4768 18 80

c Pakistan 1056 844 212 1241 928 314

d Iran 451 1476 3034 3647 116 24 87 e Iraq 1427 382 1044 1757 491 12 66

f Israel 978 674 304 991 699 292

g Jordon 277 251 026 326 296 028

h Lebanon 148 146 0026 171 169 002

i Syria 245 242 0026 12 119 0011 j Turkey 1874 1561 312 1910 1558 351

k Palestine 0 049 0048 0001 0041 004 0001 l Bahrain 120 088 032 155 120 035

m Kuwait 1130 213 918 1256 209 10 47 n Cyprus 115 112 003 124 110 014 o Oman 1587 099 1488 1879 181 16 98 p Qatar 589 120 469 848 120 728 q KSA 6432 1485 4947 7331 1845 54 86

r UAE 3512 2681 831 4042 2957 10 85 s Yemen 424 110 314 556 196 360 t Africa 1663 7308 9324 1986 8531 1133 u Europe 7008 4136 2872 6831 3964 2867 v Latin America 2414 1217 1197 2613 1352 1261 w North America 4944 3501 1443 5363 3801 1562

Page 14: PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

280

Pakistanrsquos Potential as A Transit Trade Corridor

Build upon Quadrilateral Trade Agreement between China Kyrgyzstan Tajikistan and Kazakhstan (operational since2004) and expand mutual trade relations through exchangesbetween business communities of respective countries Offerfor transit trade and access to Arabian sea as well as Indiathrough Pakistan be extended to these countries

Efforts be made to formalize trade with Afghanistan tradefacilitation customs offices be established on all formalcrossings and trade through these points should beincentivized ndash subsidize the customs duty other taxes

Manage pending disputes with India till their resolution tocreate environment for mutual trade for the benefit of peopleon both sides India should be encouraged to trade withCARs Afghanistan through Pakistan and import energy fromCARs Middle East through Pakistan this will create herstakes in stability of Pakistan

Explore avenues with Iran ndash seek points of convergences Gwadar is not a military outpost of China misperceptions be

cleared loudly and squarely It is a mutual economiccooperation venture FDI from other countries like OmanUAE Turkey etc be encouraged as it would help in clearingmisperceptions as well as creating healthy competitiveenvironment

Transportation Sector

Undertake long term perspective planning for periods beyond10-15 years

Investment must focus on capacity building developmentof new transportation infrastructure enhancing operationalefficiency of transport system and extending access to distantmarkets domestically as well as regionally

Transportation projects must be analyzed critically andprioritized from the perspective of their urgency vis-agrave-visaffordability fiscal space these are often vulnerable to

PAKISTAN BUSINESS REVIEW APRIL 2016281

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

miscalculations and mal-investment Dead investments drivenby purely political considerations (bumper sticker projects) oftenturn out to be counterproductive ndash bridges to nowhere hencemust be discouraged ruthlessly

Speedy completion of CPEC be ensured for continuity inpolicy such mega initiatives must be given legal patronagethrough act of parliament

Capacity building of the transport sector services to handlethe potential transit trade from China and other neighbours beensured expected potential is around 70000 ndash 100000 containersannually if only 10 of Chinese trade with Europe is rootedthrough Pakistan

Develop intermodal transportation system on modern lines(Figure 6) gradually shift from age old fragmented logisticindustry to modern state of the art efficient fully integratedlogistic system bridge gaps and establish linkages withindifferent transportation modes Well reputed international firmscan be contracted ndash public-private partnership is perhaps thesolution to fill fiscal gaps

Curtail cost of travel to reduce the cost of doing businessthis will make countryrsquos exports competitive in internationalmarket

Figure 6

Intermodal Transportation Infrastructure33

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

282

Pakistanrsquos Potential as A Transit Trade Corridor

Enhance accessibility farm to market roads and warehousescold storage to save losses in agriculture sector ndash perishablegoods vegetables fruits

TOT based projects be preferred China Turkey Russia andJapan may be engaged for development of transportationsector especially rail network

Road Network

Improve the condition of national highway network througha prioritized and phased programme in line with the priorityset for National Trade Corridor CPEC

Revamp freight transportation industry on modern linesthrough public-private partnership large scale logisticenterprise with integral integrated transport services is needof the hour

Initiate program for progressive replacement of obsolete truckfleet offering loans and incentives Comparatively newerinventory of trucks will not only be environmental friendlybut will also reduce transportation times of freight closer tointernational standards

Rail Network

Enhance the quantity quality of locomotives to meet thedemand of passenger and freight services

Take steps to gradually phase out and replace over agedinfrastructure and rolling stock

The policy of cross subsidy from freight to passengerservices should be done away with to make freight ratesmore competitive with road transport PR should take majorinitiatives to make freight service commercially viable

PAKISTAN BUSINESS REVIEW APRIL 2016283

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Air Transportation PIA should either be privatized or allowed to operate on

commercial lines with minimum governmental control so that itcan compete in the aviation market It will not only be able tomeet its operating expenses but also earn and improve its fleetinstead of becoming a public sector liability

Management of PIA should be cut to size to reduce operationallosses

Ports and Shipping

Improve cargo handling capacity of Karachi port and PortQasim and create space by removing containers awaiting disposalbeyond100 days figures are fairly large

Make port charges competitive with international standards Reduce customs clearance time to less than 12 hours at all

terminals of Karachi Port Qasim and Gwadar

Gwadar Seaport

Speedy operationalization of Gwadar seaport and connectivitywith hinterland to exploit its full potential

Develop maritime industry prospects of industrial zone dedicatedto seafood be explored near Gwadar Karachi and other coastalareas The potential for export of value added seafood productsis phenomenal hither-to-fore untapped

Parallel work on pipeline project between Gwadar and Xinjiangincluding establishment of oil refinery at Gwadar be initiated

Efforts be made to expedite other energy pipeline projects ie IPIand TAPI TKPI

Miscellaneous Recommendations

Concerted efforts be made at all levels to defeat militancyand improve internal security through capacity building of law

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

284

Pakistanrsquos Potential as A Transit Trade Corridor

enforcement agencies ndash conducive environment is inevitable forpromotion of regional connectivity and economic integration

Initiate steps towards progressive development in restiveregions of Pakistan like FATA and Baluchistan to includeexploration of fossil fuels this economic activity will lead toprosperity and stability in these areas

Prudent fiscal management and stringent punitive measuresagainst corruption will ensure transparency ndash this will attract FDIand encourage international business community Pakistanidiaspora to invest in Pakistan

Capitalize on political awakening of middle class and youth bulgeSay NO to bumper sticker projects built at exorbitant prohibitive

costs ndash build consensus through debate between leadership

Conclusion

The paper has endeavored to underline Pakistanrsquos transittrade potential being a regional hub economic corridor and hassuggested few policy guidelines at various levels and for differentmodes of transportation Pakistan offers the most economic strategiclink between the resource affluent and the energy scarce regions inaddition to providing the shortest trade route In changed geo politicalcum strategic environment opportunities are knocking at our doorWith some peace retuning to the region the transit trade from ourimmediate as well as distant neighbors is likely to increase substantiallyPakistanrsquos present transportation system is however barely enoughto meet the demands of regional international transit trade

PAKISTAN BUSINESS REVIEW APRIL 2016285

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

References

Anwar Dr Zafar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo South Asian Studies Jan-Jun 2011Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20AnwarpdfldquoChabahar port vs Gwadar portrdquo Indian Defence Forum AccessedDecember 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtmlldquoChinarsquos Statistical Yearbook 2013 Accessed November 30 2014httpwwwstatsgovcntjsjndsj2013indexehhtmldquoDemographics of Pakistanrdquo Wikipedia Accessed November 302014 httpenwikipediaorgwikiDemographics_of_PakistanldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum CivilServices of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtmlHassan Mehmood ul ldquoPak-China Friendship New Dimensions andNew Opportunitiesrdquo Overseas Pakistani Friends March 252013Accessed December 11 2014 httpwwwopfblogcom13906pak-china-friendship-new-dimensions-and-new-opportunitiesHaq Shahram ldquoPakistan rank 71 in World Bank LogisticPerformance Indexrdquo Express Tribune July 22 2012 httptribunecompkstory411560pakistan-ranked-71-in-world-bank-logistics-performance-indexKhan Dr Shabir Ahmed ldquoGeo Economic Imperatives of GwadarSeaport and Kashgar Economic Zone for Pakistan and Chinardquo IPRIJournal XIII Summer 2013 Accessed December 8 2014 httpgreatgwadarcomvzpaneldocsGwadar20Sea20Port20amp20Kashgar20Economic20Zone20-20Pakistan20amp20ChinapdfKumar Rohit ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014 httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

286

Pakistanrsquos Potential as A Transit Trade Corridor

ldquoPakistan Economic Survey 2013-14rdquo Ministry of Finance GoPAccessed December 14 2014 httpfinancegovpksurveychapters_1413_Transport_and_comspdfldquoPak ndash China Economic Corridor to help setup new dry ports incountryrdquo Business Recorder November 25 2014 AccessedDecember 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-countryldquoPakistan Transport Sectorrdquo World Bank Accessed December 142014 httpwebworldbankorgWBSITEEXTERNALCOUNTRIESSOUTHASIAEXTEXTSARREGTOPTRANSPORT0contentMDK20699058~menuPK869060~pagePK34004173~piPK34003707~theSitePK57959800htmlPaton James and Aibing Guo ldquoRussia China add to $400 bn GasDeal with Accordrdquo Bloomberg November 10 2014 httpwwwbloombergcomnews2014-11-10russia-china-add-to-400-billion-gas-deal-with-accordhtmlSeethi K M ldquoIndiarsquos lsquoConnect Central Asiarsquo Policyrdquo DiplomatDecember 13 2013 Accessed December 7 2014 httpthediplomatcom201312indias-connect-central-asia-policySiddiqui Asim ldquoDeveloping the Pak ndash China Economic Corridor tofacilitate Sino ndash Europe Traderdquo presented at Intermodal Europe2014 held at Rotterdam (11-13 November 2014) Accessed December26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdfSiddiqui Asim ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdfldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp Reforms GoPAccessed December 14 2014 httpwwwpcgovpkannual20plans2012-13chapter-20_transport_and_logisticspdf

PAKISTAN BUSINESS REVIEW APRIL 2016287

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Notes4 Asim Siddiqui ldquoUnderstanding Economic benefits of Trade

corridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdf

5 Ibid

6 Ibid7 ldquoPak ndash China Economic Corridor to help setup new dry ports

in countryrdquo Business Recorder November 25 2014Accessed December 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-country

8 ldquoChinarsquos Statistical Yearbook 2013 Accessed November302014 httpwwwstatsgovcntjsjndsj2013indexehhtm

9 K M Seethi ldquoIndiarsquos lsquoConnect Central Asiarsquo PolicyrdquoDiplomat December 13 2013 Accessed December 7 2014http thediplomatcom201312indias-connect-central-asia-policy

10 Rohit Kumar ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

11 ldquoChabahar port vs Gwadar portrdquo Indian Defence ForumAccessed December 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtml

12 ldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum Civil Services of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtml

13 Dr Shabir Ahmed Khan ldquoGeo Economic Imperatives ofGwadar Seaport and Kashgar Economic Zone for Pakistanand Chinardquo IPRI Journal XIII Summer 2013 AccessedDecember 8 2014 httpgreatgwadarcomvzpaneldocs

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

288

Pakistanrsquos Potential as A Transit Trade Corridor

14 Dr Zafar Anwar ldquoDevelopment of Infrastructural linkagesbetween Pakistan and Central Asiardquo South Asian StudiesJan-Jun 2011 Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20Anwarpdf

15 ldquoDemographics of Pakistanrdquo Wikipedia AccessedNovember 30 2014 httpenwikipediaorgwikiDemographics_of_Pakistan

16 Anwar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo

17 ldquoPakistan Transport Sectorrdquo World Bank AccessedDecember 14 2014 httpwebworldbankorgWBSITEEXTERNALCOUN

18 Pakistan Economic Survey 2013-1419 ldquoPakistan Transport Sectorrdquo World Bank20 Pakistan Economic Survey 2013-14

21 Ibid22 ldquoPakistan Transport Sectorrdquo World Bank23 Ibid24 Ibid25 Ibid26 Pakistan Economic Survey 2013-1427 Ibid

28 ldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp ReformsGoP Accessed December 14 2014 httpwwwpcgovpk20_transport_and_logisticspdf

29 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

30 Siddiqui ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal Networkrdquo

31 Asim Siddiqui ldquoDeveloping the Pak ndash China EconomicCorridor to facilitate Sino ndash Europe Traderdquo presented atIntermodal Europe 2014 held at Rotterdam (11-13 November2014) Accessed December 26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdf

PAKISTAN BUSINESS REVIEW APRIL 2016289

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

32 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

Annexure A

CHINArsquoS TRADE WITH REGIONS COUNTRIES (USD BILLION)

Ser Region Country 2011 2012

Total Exports Imports Total Exports Imports a Afghanistan 0234 023 004 0469 0464 0005

b India 7391 5054 2337 6647 4768 18 80

c Pakistan 1056 844 212 1241 928 314

d Iran 451 1476 3034 3647 116 24 87 e Iraq 1427 382 1044 1757 491 12 66

f Israel 978 674 304 991 699 292

g Jordon 277 251 026 326 296 028

h Lebanon 148 146 0026 171 169 002

i Syria 245 242 0026 12 119 0011 j Turkey 1874 1561 312 1910 1558 351

k Palestine 0 049 0048 0001 0041 004 0001 l Bahrain 120 088 032 155 120 035

m Kuwait 1130 213 918 1256 209 10 47 n Cyprus 115 112 003 124 110 014 o Oman 1587 099 1488 1879 181 16 98 p Qatar 589 120 469 848 120 728 q KSA 6432 1485 4947 7331 1845 54 86

r UAE 3512 2681 831 4042 2957 10 85 s Yemen 424 110 314 556 196 360 t Africa 1663 7308 9324 1986 8531 1133 u Europe 7008 4136 2872 6831 3964 2867 v Latin America 2414 1217 1197 2613 1352 1261 w North America 4944 3501 1443 5363 3801 1562

Page 15: PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

PAKISTAN BUSINESS REVIEW APRIL 2016281

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

miscalculations and mal-investment Dead investments drivenby purely political considerations (bumper sticker projects) oftenturn out to be counterproductive ndash bridges to nowhere hencemust be discouraged ruthlessly

Speedy completion of CPEC be ensured for continuity inpolicy such mega initiatives must be given legal patronagethrough act of parliament

Capacity building of the transport sector services to handlethe potential transit trade from China and other neighbours beensured expected potential is around 70000 ndash 100000 containersannually if only 10 of Chinese trade with Europe is rootedthrough Pakistan

Develop intermodal transportation system on modern lines(Figure 6) gradually shift from age old fragmented logisticindustry to modern state of the art efficient fully integratedlogistic system bridge gaps and establish linkages withindifferent transportation modes Well reputed international firmscan be contracted ndash public-private partnership is perhaps thesolution to fill fiscal gaps

Curtail cost of travel to reduce the cost of doing businessthis will make countryrsquos exports competitive in internationalmarket

Figure 6

Intermodal Transportation Infrastructure33

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

282

Pakistanrsquos Potential as A Transit Trade Corridor

Enhance accessibility farm to market roads and warehousescold storage to save losses in agriculture sector ndash perishablegoods vegetables fruits

TOT based projects be preferred China Turkey Russia andJapan may be engaged for development of transportationsector especially rail network

Road Network

Improve the condition of national highway network througha prioritized and phased programme in line with the priorityset for National Trade Corridor CPEC

Revamp freight transportation industry on modern linesthrough public-private partnership large scale logisticenterprise with integral integrated transport services is needof the hour

Initiate program for progressive replacement of obsolete truckfleet offering loans and incentives Comparatively newerinventory of trucks will not only be environmental friendlybut will also reduce transportation times of freight closer tointernational standards

Rail Network

Enhance the quantity quality of locomotives to meet thedemand of passenger and freight services

Take steps to gradually phase out and replace over agedinfrastructure and rolling stock

The policy of cross subsidy from freight to passengerservices should be done away with to make freight ratesmore competitive with road transport PR should take majorinitiatives to make freight service commercially viable

PAKISTAN BUSINESS REVIEW APRIL 2016283

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Air Transportation PIA should either be privatized or allowed to operate on

commercial lines with minimum governmental control so that itcan compete in the aviation market It will not only be able tomeet its operating expenses but also earn and improve its fleetinstead of becoming a public sector liability

Management of PIA should be cut to size to reduce operationallosses

Ports and Shipping

Improve cargo handling capacity of Karachi port and PortQasim and create space by removing containers awaiting disposalbeyond100 days figures are fairly large

Make port charges competitive with international standards Reduce customs clearance time to less than 12 hours at all

terminals of Karachi Port Qasim and Gwadar

Gwadar Seaport

Speedy operationalization of Gwadar seaport and connectivitywith hinterland to exploit its full potential

Develop maritime industry prospects of industrial zone dedicatedto seafood be explored near Gwadar Karachi and other coastalareas The potential for export of value added seafood productsis phenomenal hither-to-fore untapped

Parallel work on pipeline project between Gwadar and Xinjiangincluding establishment of oil refinery at Gwadar be initiated

Efforts be made to expedite other energy pipeline projects ie IPIand TAPI TKPI

Miscellaneous Recommendations

Concerted efforts be made at all levels to defeat militancyand improve internal security through capacity building of law

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

284

Pakistanrsquos Potential as A Transit Trade Corridor

enforcement agencies ndash conducive environment is inevitable forpromotion of regional connectivity and economic integration

Initiate steps towards progressive development in restiveregions of Pakistan like FATA and Baluchistan to includeexploration of fossil fuels this economic activity will lead toprosperity and stability in these areas

Prudent fiscal management and stringent punitive measuresagainst corruption will ensure transparency ndash this will attract FDIand encourage international business community Pakistanidiaspora to invest in Pakistan

Capitalize on political awakening of middle class and youth bulgeSay NO to bumper sticker projects built at exorbitant prohibitive

costs ndash build consensus through debate between leadership

Conclusion

The paper has endeavored to underline Pakistanrsquos transittrade potential being a regional hub economic corridor and hassuggested few policy guidelines at various levels and for differentmodes of transportation Pakistan offers the most economic strategiclink between the resource affluent and the energy scarce regions inaddition to providing the shortest trade route In changed geo politicalcum strategic environment opportunities are knocking at our doorWith some peace retuning to the region the transit trade from ourimmediate as well as distant neighbors is likely to increase substantiallyPakistanrsquos present transportation system is however barely enoughto meet the demands of regional international transit trade

PAKISTAN BUSINESS REVIEW APRIL 2016285

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

References

Anwar Dr Zafar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo South Asian Studies Jan-Jun 2011Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20AnwarpdfldquoChabahar port vs Gwadar portrdquo Indian Defence Forum AccessedDecember 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtmlldquoChinarsquos Statistical Yearbook 2013 Accessed November 30 2014httpwwwstatsgovcntjsjndsj2013indexehhtmldquoDemographics of Pakistanrdquo Wikipedia Accessed November 302014 httpenwikipediaorgwikiDemographics_of_PakistanldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum CivilServices of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtmlHassan Mehmood ul ldquoPak-China Friendship New Dimensions andNew Opportunitiesrdquo Overseas Pakistani Friends March 252013Accessed December 11 2014 httpwwwopfblogcom13906pak-china-friendship-new-dimensions-and-new-opportunitiesHaq Shahram ldquoPakistan rank 71 in World Bank LogisticPerformance Indexrdquo Express Tribune July 22 2012 httptribunecompkstory411560pakistan-ranked-71-in-world-bank-logistics-performance-indexKhan Dr Shabir Ahmed ldquoGeo Economic Imperatives of GwadarSeaport and Kashgar Economic Zone for Pakistan and Chinardquo IPRIJournal XIII Summer 2013 Accessed December 8 2014 httpgreatgwadarcomvzpaneldocsGwadar20Sea20Port20amp20Kashgar20Economic20Zone20-20Pakistan20amp20ChinapdfKumar Rohit ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014 httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

286

Pakistanrsquos Potential as A Transit Trade Corridor

ldquoPakistan Economic Survey 2013-14rdquo Ministry of Finance GoPAccessed December 14 2014 httpfinancegovpksurveychapters_1413_Transport_and_comspdfldquoPak ndash China Economic Corridor to help setup new dry ports incountryrdquo Business Recorder November 25 2014 AccessedDecember 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-countryldquoPakistan Transport Sectorrdquo World Bank Accessed December 142014 httpwebworldbankorgWBSITEEXTERNALCOUNTRIESSOUTHASIAEXTEXTSARREGTOPTRANSPORT0contentMDK20699058~menuPK869060~pagePK34004173~piPK34003707~theSitePK57959800htmlPaton James and Aibing Guo ldquoRussia China add to $400 bn GasDeal with Accordrdquo Bloomberg November 10 2014 httpwwwbloombergcomnews2014-11-10russia-china-add-to-400-billion-gas-deal-with-accordhtmlSeethi K M ldquoIndiarsquos lsquoConnect Central Asiarsquo Policyrdquo DiplomatDecember 13 2013 Accessed December 7 2014 httpthediplomatcom201312indias-connect-central-asia-policySiddiqui Asim ldquoDeveloping the Pak ndash China Economic Corridor tofacilitate Sino ndash Europe Traderdquo presented at Intermodal Europe2014 held at Rotterdam (11-13 November 2014) Accessed December26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdfSiddiqui Asim ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdfldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp Reforms GoPAccessed December 14 2014 httpwwwpcgovpkannual20plans2012-13chapter-20_transport_and_logisticspdf

PAKISTAN BUSINESS REVIEW APRIL 2016287

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Notes4 Asim Siddiqui ldquoUnderstanding Economic benefits of Trade

corridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdf

5 Ibid

6 Ibid7 ldquoPak ndash China Economic Corridor to help setup new dry ports

in countryrdquo Business Recorder November 25 2014Accessed December 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-country

8 ldquoChinarsquos Statistical Yearbook 2013 Accessed November302014 httpwwwstatsgovcntjsjndsj2013indexehhtm

9 K M Seethi ldquoIndiarsquos lsquoConnect Central Asiarsquo PolicyrdquoDiplomat December 13 2013 Accessed December 7 2014http thediplomatcom201312indias-connect-central-asia-policy

10 Rohit Kumar ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

11 ldquoChabahar port vs Gwadar portrdquo Indian Defence ForumAccessed December 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtml

12 ldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum Civil Services of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtml

13 Dr Shabir Ahmed Khan ldquoGeo Economic Imperatives ofGwadar Seaport and Kashgar Economic Zone for Pakistanand Chinardquo IPRI Journal XIII Summer 2013 AccessedDecember 8 2014 httpgreatgwadarcomvzpaneldocs

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

288

Pakistanrsquos Potential as A Transit Trade Corridor

14 Dr Zafar Anwar ldquoDevelopment of Infrastructural linkagesbetween Pakistan and Central Asiardquo South Asian StudiesJan-Jun 2011 Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20Anwarpdf

15 ldquoDemographics of Pakistanrdquo Wikipedia AccessedNovember 30 2014 httpenwikipediaorgwikiDemographics_of_Pakistan

16 Anwar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo

17 ldquoPakistan Transport Sectorrdquo World Bank AccessedDecember 14 2014 httpwebworldbankorgWBSITEEXTERNALCOUN

18 Pakistan Economic Survey 2013-1419 ldquoPakistan Transport Sectorrdquo World Bank20 Pakistan Economic Survey 2013-14

21 Ibid22 ldquoPakistan Transport Sectorrdquo World Bank23 Ibid24 Ibid25 Ibid26 Pakistan Economic Survey 2013-1427 Ibid

28 ldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp ReformsGoP Accessed December 14 2014 httpwwwpcgovpk20_transport_and_logisticspdf

29 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

30 Siddiqui ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal Networkrdquo

31 Asim Siddiqui ldquoDeveloping the Pak ndash China EconomicCorridor to facilitate Sino ndash Europe Traderdquo presented atIntermodal Europe 2014 held at Rotterdam (11-13 November2014) Accessed December 26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdf

PAKISTAN BUSINESS REVIEW APRIL 2016289

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

32 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

Annexure A

CHINArsquoS TRADE WITH REGIONS COUNTRIES (USD BILLION)

Ser Region Country 2011 2012

Total Exports Imports Total Exports Imports a Afghanistan 0234 023 004 0469 0464 0005

b India 7391 5054 2337 6647 4768 18 80

c Pakistan 1056 844 212 1241 928 314

d Iran 451 1476 3034 3647 116 24 87 e Iraq 1427 382 1044 1757 491 12 66

f Israel 978 674 304 991 699 292

g Jordon 277 251 026 326 296 028

h Lebanon 148 146 0026 171 169 002

i Syria 245 242 0026 12 119 0011 j Turkey 1874 1561 312 1910 1558 351

k Palestine 0 049 0048 0001 0041 004 0001 l Bahrain 120 088 032 155 120 035

m Kuwait 1130 213 918 1256 209 10 47 n Cyprus 115 112 003 124 110 014 o Oman 1587 099 1488 1879 181 16 98 p Qatar 589 120 469 848 120 728 q KSA 6432 1485 4947 7331 1845 54 86

r UAE 3512 2681 831 4042 2957 10 85 s Yemen 424 110 314 556 196 360 t Africa 1663 7308 9324 1986 8531 1133 u Europe 7008 4136 2872 6831 3964 2867 v Latin America 2414 1217 1197 2613 1352 1261 w North America 4944 3501 1443 5363 3801 1562

Page 16: PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

282

Pakistanrsquos Potential as A Transit Trade Corridor

Enhance accessibility farm to market roads and warehousescold storage to save losses in agriculture sector ndash perishablegoods vegetables fruits

TOT based projects be preferred China Turkey Russia andJapan may be engaged for development of transportationsector especially rail network

Road Network

Improve the condition of national highway network througha prioritized and phased programme in line with the priorityset for National Trade Corridor CPEC

Revamp freight transportation industry on modern linesthrough public-private partnership large scale logisticenterprise with integral integrated transport services is needof the hour

Initiate program for progressive replacement of obsolete truckfleet offering loans and incentives Comparatively newerinventory of trucks will not only be environmental friendlybut will also reduce transportation times of freight closer tointernational standards

Rail Network

Enhance the quantity quality of locomotives to meet thedemand of passenger and freight services

Take steps to gradually phase out and replace over agedinfrastructure and rolling stock

The policy of cross subsidy from freight to passengerservices should be done away with to make freight ratesmore competitive with road transport PR should take majorinitiatives to make freight service commercially viable

PAKISTAN BUSINESS REVIEW APRIL 2016283

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Air Transportation PIA should either be privatized or allowed to operate on

commercial lines with minimum governmental control so that itcan compete in the aviation market It will not only be able tomeet its operating expenses but also earn and improve its fleetinstead of becoming a public sector liability

Management of PIA should be cut to size to reduce operationallosses

Ports and Shipping

Improve cargo handling capacity of Karachi port and PortQasim and create space by removing containers awaiting disposalbeyond100 days figures are fairly large

Make port charges competitive with international standards Reduce customs clearance time to less than 12 hours at all

terminals of Karachi Port Qasim and Gwadar

Gwadar Seaport

Speedy operationalization of Gwadar seaport and connectivitywith hinterland to exploit its full potential

Develop maritime industry prospects of industrial zone dedicatedto seafood be explored near Gwadar Karachi and other coastalareas The potential for export of value added seafood productsis phenomenal hither-to-fore untapped

Parallel work on pipeline project between Gwadar and Xinjiangincluding establishment of oil refinery at Gwadar be initiated

Efforts be made to expedite other energy pipeline projects ie IPIand TAPI TKPI

Miscellaneous Recommendations

Concerted efforts be made at all levels to defeat militancyand improve internal security through capacity building of law

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

284

Pakistanrsquos Potential as A Transit Trade Corridor

enforcement agencies ndash conducive environment is inevitable forpromotion of regional connectivity and economic integration

Initiate steps towards progressive development in restiveregions of Pakistan like FATA and Baluchistan to includeexploration of fossil fuels this economic activity will lead toprosperity and stability in these areas

Prudent fiscal management and stringent punitive measuresagainst corruption will ensure transparency ndash this will attract FDIand encourage international business community Pakistanidiaspora to invest in Pakistan

Capitalize on political awakening of middle class and youth bulgeSay NO to bumper sticker projects built at exorbitant prohibitive

costs ndash build consensus through debate between leadership

Conclusion

The paper has endeavored to underline Pakistanrsquos transittrade potential being a regional hub economic corridor and hassuggested few policy guidelines at various levels and for differentmodes of transportation Pakistan offers the most economic strategiclink between the resource affluent and the energy scarce regions inaddition to providing the shortest trade route In changed geo politicalcum strategic environment opportunities are knocking at our doorWith some peace retuning to the region the transit trade from ourimmediate as well as distant neighbors is likely to increase substantiallyPakistanrsquos present transportation system is however barely enoughto meet the demands of regional international transit trade

PAKISTAN BUSINESS REVIEW APRIL 2016285

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

References

Anwar Dr Zafar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo South Asian Studies Jan-Jun 2011Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20AnwarpdfldquoChabahar port vs Gwadar portrdquo Indian Defence Forum AccessedDecember 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtmlldquoChinarsquos Statistical Yearbook 2013 Accessed November 30 2014httpwwwstatsgovcntjsjndsj2013indexehhtmldquoDemographics of Pakistanrdquo Wikipedia Accessed November 302014 httpenwikipediaorgwikiDemographics_of_PakistanldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum CivilServices of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtmlHassan Mehmood ul ldquoPak-China Friendship New Dimensions andNew Opportunitiesrdquo Overseas Pakistani Friends March 252013Accessed December 11 2014 httpwwwopfblogcom13906pak-china-friendship-new-dimensions-and-new-opportunitiesHaq Shahram ldquoPakistan rank 71 in World Bank LogisticPerformance Indexrdquo Express Tribune July 22 2012 httptribunecompkstory411560pakistan-ranked-71-in-world-bank-logistics-performance-indexKhan Dr Shabir Ahmed ldquoGeo Economic Imperatives of GwadarSeaport and Kashgar Economic Zone for Pakistan and Chinardquo IPRIJournal XIII Summer 2013 Accessed December 8 2014 httpgreatgwadarcomvzpaneldocsGwadar20Sea20Port20amp20Kashgar20Economic20Zone20-20Pakistan20amp20ChinapdfKumar Rohit ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014 httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

286

Pakistanrsquos Potential as A Transit Trade Corridor

ldquoPakistan Economic Survey 2013-14rdquo Ministry of Finance GoPAccessed December 14 2014 httpfinancegovpksurveychapters_1413_Transport_and_comspdfldquoPak ndash China Economic Corridor to help setup new dry ports incountryrdquo Business Recorder November 25 2014 AccessedDecember 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-countryldquoPakistan Transport Sectorrdquo World Bank Accessed December 142014 httpwebworldbankorgWBSITEEXTERNALCOUNTRIESSOUTHASIAEXTEXTSARREGTOPTRANSPORT0contentMDK20699058~menuPK869060~pagePK34004173~piPK34003707~theSitePK57959800htmlPaton James and Aibing Guo ldquoRussia China add to $400 bn GasDeal with Accordrdquo Bloomberg November 10 2014 httpwwwbloombergcomnews2014-11-10russia-china-add-to-400-billion-gas-deal-with-accordhtmlSeethi K M ldquoIndiarsquos lsquoConnect Central Asiarsquo Policyrdquo DiplomatDecember 13 2013 Accessed December 7 2014 httpthediplomatcom201312indias-connect-central-asia-policySiddiqui Asim ldquoDeveloping the Pak ndash China Economic Corridor tofacilitate Sino ndash Europe Traderdquo presented at Intermodal Europe2014 held at Rotterdam (11-13 November 2014) Accessed December26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdfSiddiqui Asim ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdfldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp Reforms GoPAccessed December 14 2014 httpwwwpcgovpkannual20plans2012-13chapter-20_transport_and_logisticspdf

PAKISTAN BUSINESS REVIEW APRIL 2016287

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Notes4 Asim Siddiqui ldquoUnderstanding Economic benefits of Trade

corridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdf

5 Ibid

6 Ibid7 ldquoPak ndash China Economic Corridor to help setup new dry ports

in countryrdquo Business Recorder November 25 2014Accessed December 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-country

8 ldquoChinarsquos Statistical Yearbook 2013 Accessed November302014 httpwwwstatsgovcntjsjndsj2013indexehhtm

9 K M Seethi ldquoIndiarsquos lsquoConnect Central Asiarsquo PolicyrdquoDiplomat December 13 2013 Accessed December 7 2014http thediplomatcom201312indias-connect-central-asia-policy

10 Rohit Kumar ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

11 ldquoChabahar port vs Gwadar portrdquo Indian Defence ForumAccessed December 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtml

12 ldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum Civil Services of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtml

13 Dr Shabir Ahmed Khan ldquoGeo Economic Imperatives ofGwadar Seaport and Kashgar Economic Zone for Pakistanand Chinardquo IPRI Journal XIII Summer 2013 AccessedDecember 8 2014 httpgreatgwadarcomvzpaneldocs

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

288

Pakistanrsquos Potential as A Transit Trade Corridor

14 Dr Zafar Anwar ldquoDevelopment of Infrastructural linkagesbetween Pakistan and Central Asiardquo South Asian StudiesJan-Jun 2011 Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20Anwarpdf

15 ldquoDemographics of Pakistanrdquo Wikipedia AccessedNovember 30 2014 httpenwikipediaorgwikiDemographics_of_Pakistan

16 Anwar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo

17 ldquoPakistan Transport Sectorrdquo World Bank AccessedDecember 14 2014 httpwebworldbankorgWBSITEEXTERNALCOUN

18 Pakistan Economic Survey 2013-1419 ldquoPakistan Transport Sectorrdquo World Bank20 Pakistan Economic Survey 2013-14

21 Ibid22 ldquoPakistan Transport Sectorrdquo World Bank23 Ibid24 Ibid25 Ibid26 Pakistan Economic Survey 2013-1427 Ibid

28 ldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp ReformsGoP Accessed December 14 2014 httpwwwpcgovpk20_transport_and_logisticspdf

29 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

30 Siddiqui ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal Networkrdquo

31 Asim Siddiqui ldquoDeveloping the Pak ndash China EconomicCorridor to facilitate Sino ndash Europe Traderdquo presented atIntermodal Europe 2014 held at Rotterdam (11-13 November2014) Accessed December 26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdf

PAKISTAN BUSINESS REVIEW APRIL 2016289

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

32 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

Annexure A

CHINArsquoS TRADE WITH REGIONS COUNTRIES (USD BILLION)

Ser Region Country 2011 2012

Total Exports Imports Total Exports Imports a Afghanistan 0234 023 004 0469 0464 0005

b India 7391 5054 2337 6647 4768 18 80

c Pakistan 1056 844 212 1241 928 314

d Iran 451 1476 3034 3647 116 24 87 e Iraq 1427 382 1044 1757 491 12 66

f Israel 978 674 304 991 699 292

g Jordon 277 251 026 326 296 028

h Lebanon 148 146 0026 171 169 002

i Syria 245 242 0026 12 119 0011 j Turkey 1874 1561 312 1910 1558 351

k Palestine 0 049 0048 0001 0041 004 0001 l Bahrain 120 088 032 155 120 035

m Kuwait 1130 213 918 1256 209 10 47 n Cyprus 115 112 003 124 110 014 o Oman 1587 099 1488 1879 181 16 98 p Qatar 589 120 469 848 120 728 q KSA 6432 1485 4947 7331 1845 54 86

r UAE 3512 2681 831 4042 2957 10 85 s Yemen 424 110 314 556 196 360 t Africa 1663 7308 9324 1986 8531 1133 u Europe 7008 4136 2872 6831 3964 2867 v Latin America 2414 1217 1197 2613 1352 1261 w North America 4944 3501 1443 5363 3801 1562

Page 17: PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

PAKISTAN BUSINESS REVIEW APRIL 2016283

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Air Transportation PIA should either be privatized or allowed to operate on

commercial lines with minimum governmental control so that itcan compete in the aviation market It will not only be able tomeet its operating expenses but also earn and improve its fleetinstead of becoming a public sector liability

Management of PIA should be cut to size to reduce operationallosses

Ports and Shipping

Improve cargo handling capacity of Karachi port and PortQasim and create space by removing containers awaiting disposalbeyond100 days figures are fairly large

Make port charges competitive with international standards Reduce customs clearance time to less than 12 hours at all

terminals of Karachi Port Qasim and Gwadar

Gwadar Seaport

Speedy operationalization of Gwadar seaport and connectivitywith hinterland to exploit its full potential

Develop maritime industry prospects of industrial zone dedicatedto seafood be explored near Gwadar Karachi and other coastalareas The potential for export of value added seafood productsis phenomenal hither-to-fore untapped

Parallel work on pipeline project between Gwadar and Xinjiangincluding establishment of oil refinery at Gwadar be initiated

Efforts be made to expedite other energy pipeline projects ie IPIand TAPI TKPI

Miscellaneous Recommendations

Concerted efforts be made at all levels to defeat militancyand improve internal security through capacity building of law

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

284

Pakistanrsquos Potential as A Transit Trade Corridor

enforcement agencies ndash conducive environment is inevitable forpromotion of regional connectivity and economic integration

Initiate steps towards progressive development in restiveregions of Pakistan like FATA and Baluchistan to includeexploration of fossil fuels this economic activity will lead toprosperity and stability in these areas

Prudent fiscal management and stringent punitive measuresagainst corruption will ensure transparency ndash this will attract FDIand encourage international business community Pakistanidiaspora to invest in Pakistan

Capitalize on political awakening of middle class and youth bulgeSay NO to bumper sticker projects built at exorbitant prohibitive

costs ndash build consensus through debate between leadership

Conclusion

The paper has endeavored to underline Pakistanrsquos transittrade potential being a regional hub economic corridor and hassuggested few policy guidelines at various levels and for differentmodes of transportation Pakistan offers the most economic strategiclink between the resource affluent and the energy scarce regions inaddition to providing the shortest trade route In changed geo politicalcum strategic environment opportunities are knocking at our doorWith some peace retuning to the region the transit trade from ourimmediate as well as distant neighbors is likely to increase substantiallyPakistanrsquos present transportation system is however barely enoughto meet the demands of regional international transit trade

PAKISTAN BUSINESS REVIEW APRIL 2016285

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

References

Anwar Dr Zafar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo South Asian Studies Jan-Jun 2011Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20AnwarpdfldquoChabahar port vs Gwadar portrdquo Indian Defence Forum AccessedDecember 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtmlldquoChinarsquos Statistical Yearbook 2013 Accessed November 30 2014httpwwwstatsgovcntjsjndsj2013indexehhtmldquoDemographics of Pakistanrdquo Wikipedia Accessed November 302014 httpenwikipediaorgwikiDemographics_of_PakistanldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum CivilServices of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtmlHassan Mehmood ul ldquoPak-China Friendship New Dimensions andNew Opportunitiesrdquo Overseas Pakistani Friends March 252013Accessed December 11 2014 httpwwwopfblogcom13906pak-china-friendship-new-dimensions-and-new-opportunitiesHaq Shahram ldquoPakistan rank 71 in World Bank LogisticPerformance Indexrdquo Express Tribune July 22 2012 httptribunecompkstory411560pakistan-ranked-71-in-world-bank-logistics-performance-indexKhan Dr Shabir Ahmed ldquoGeo Economic Imperatives of GwadarSeaport and Kashgar Economic Zone for Pakistan and Chinardquo IPRIJournal XIII Summer 2013 Accessed December 8 2014 httpgreatgwadarcomvzpaneldocsGwadar20Sea20Port20amp20Kashgar20Economic20Zone20-20Pakistan20amp20ChinapdfKumar Rohit ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014 httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

286

Pakistanrsquos Potential as A Transit Trade Corridor

ldquoPakistan Economic Survey 2013-14rdquo Ministry of Finance GoPAccessed December 14 2014 httpfinancegovpksurveychapters_1413_Transport_and_comspdfldquoPak ndash China Economic Corridor to help setup new dry ports incountryrdquo Business Recorder November 25 2014 AccessedDecember 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-countryldquoPakistan Transport Sectorrdquo World Bank Accessed December 142014 httpwebworldbankorgWBSITEEXTERNALCOUNTRIESSOUTHASIAEXTEXTSARREGTOPTRANSPORT0contentMDK20699058~menuPK869060~pagePK34004173~piPK34003707~theSitePK57959800htmlPaton James and Aibing Guo ldquoRussia China add to $400 bn GasDeal with Accordrdquo Bloomberg November 10 2014 httpwwwbloombergcomnews2014-11-10russia-china-add-to-400-billion-gas-deal-with-accordhtmlSeethi K M ldquoIndiarsquos lsquoConnect Central Asiarsquo Policyrdquo DiplomatDecember 13 2013 Accessed December 7 2014 httpthediplomatcom201312indias-connect-central-asia-policySiddiqui Asim ldquoDeveloping the Pak ndash China Economic Corridor tofacilitate Sino ndash Europe Traderdquo presented at Intermodal Europe2014 held at Rotterdam (11-13 November 2014) Accessed December26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdfSiddiqui Asim ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdfldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp Reforms GoPAccessed December 14 2014 httpwwwpcgovpkannual20plans2012-13chapter-20_transport_and_logisticspdf

PAKISTAN BUSINESS REVIEW APRIL 2016287

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Notes4 Asim Siddiqui ldquoUnderstanding Economic benefits of Trade

corridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdf

5 Ibid

6 Ibid7 ldquoPak ndash China Economic Corridor to help setup new dry ports

in countryrdquo Business Recorder November 25 2014Accessed December 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-country

8 ldquoChinarsquos Statistical Yearbook 2013 Accessed November302014 httpwwwstatsgovcntjsjndsj2013indexehhtm

9 K M Seethi ldquoIndiarsquos lsquoConnect Central Asiarsquo PolicyrdquoDiplomat December 13 2013 Accessed December 7 2014http thediplomatcom201312indias-connect-central-asia-policy

10 Rohit Kumar ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

11 ldquoChabahar port vs Gwadar portrdquo Indian Defence ForumAccessed December 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtml

12 ldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum Civil Services of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtml

13 Dr Shabir Ahmed Khan ldquoGeo Economic Imperatives ofGwadar Seaport and Kashgar Economic Zone for Pakistanand Chinardquo IPRI Journal XIII Summer 2013 AccessedDecember 8 2014 httpgreatgwadarcomvzpaneldocs

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

288

Pakistanrsquos Potential as A Transit Trade Corridor

14 Dr Zafar Anwar ldquoDevelopment of Infrastructural linkagesbetween Pakistan and Central Asiardquo South Asian StudiesJan-Jun 2011 Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20Anwarpdf

15 ldquoDemographics of Pakistanrdquo Wikipedia AccessedNovember 30 2014 httpenwikipediaorgwikiDemographics_of_Pakistan

16 Anwar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo

17 ldquoPakistan Transport Sectorrdquo World Bank AccessedDecember 14 2014 httpwebworldbankorgWBSITEEXTERNALCOUN

18 Pakistan Economic Survey 2013-1419 ldquoPakistan Transport Sectorrdquo World Bank20 Pakistan Economic Survey 2013-14

21 Ibid22 ldquoPakistan Transport Sectorrdquo World Bank23 Ibid24 Ibid25 Ibid26 Pakistan Economic Survey 2013-1427 Ibid

28 ldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp ReformsGoP Accessed December 14 2014 httpwwwpcgovpk20_transport_and_logisticspdf

29 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

30 Siddiqui ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal Networkrdquo

31 Asim Siddiqui ldquoDeveloping the Pak ndash China EconomicCorridor to facilitate Sino ndash Europe Traderdquo presented atIntermodal Europe 2014 held at Rotterdam (11-13 November2014) Accessed December 26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdf

PAKISTAN BUSINESS REVIEW APRIL 2016289

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

32 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

Annexure A

CHINArsquoS TRADE WITH REGIONS COUNTRIES (USD BILLION)

Ser Region Country 2011 2012

Total Exports Imports Total Exports Imports a Afghanistan 0234 023 004 0469 0464 0005

b India 7391 5054 2337 6647 4768 18 80

c Pakistan 1056 844 212 1241 928 314

d Iran 451 1476 3034 3647 116 24 87 e Iraq 1427 382 1044 1757 491 12 66

f Israel 978 674 304 991 699 292

g Jordon 277 251 026 326 296 028

h Lebanon 148 146 0026 171 169 002

i Syria 245 242 0026 12 119 0011 j Turkey 1874 1561 312 1910 1558 351

k Palestine 0 049 0048 0001 0041 004 0001 l Bahrain 120 088 032 155 120 035

m Kuwait 1130 213 918 1256 209 10 47 n Cyprus 115 112 003 124 110 014 o Oman 1587 099 1488 1879 181 16 98 p Qatar 589 120 469 848 120 728 q KSA 6432 1485 4947 7331 1845 54 86

r UAE 3512 2681 831 4042 2957 10 85 s Yemen 424 110 314 556 196 360 t Africa 1663 7308 9324 1986 8531 1133 u Europe 7008 4136 2872 6831 3964 2867 v Latin America 2414 1217 1197 2613 1352 1261 w North America 4944 3501 1443 5363 3801 1562

Page 18: PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

284

Pakistanrsquos Potential as A Transit Trade Corridor

enforcement agencies ndash conducive environment is inevitable forpromotion of regional connectivity and economic integration

Initiate steps towards progressive development in restiveregions of Pakistan like FATA and Baluchistan to includeexploration of fossil fuels this economic activity will lead toprosperity and stability in these areas

Prudent fiscal management and stringent punitive measuresagainst corruption will ensure transparency ndash this will attract FDIand encourage international business community Pakistanidiaspora to invest in Pakistan

Capitalize on political awakening of middle class and youth bulgeSay NO to bumper sticker projects built at exorbitant prohibitive

costs ndash build consensus through debate between leadership

Conclusion

The paper has endeavored to underline Pakistanrsquos transittrade potential being a regional hub economic corridor and hassuggested few policy guidelines at various levels and for differentmodes of transportation Pakistan offers the most economic strategiclink between the resource affluent and the energy scarce regions inaddition to providing the shortest trade route In changed geo politicalcum strategic environment opportunities are knocking at our doorWith some peace retuning to the region the transit trade from ourimmediate as well as distant neighbors is likely to increase substantiallyPakistanrsquos present transportation system is however barely enoughto meet the demands of regional international transit trade

PAKISTAN BUSINESS REVIEW APRIL 2016285

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

References

Anwar Dr Zafar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo South Asian Studies Jan-Jun 2011Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20AnwarpdfldquoChabahar port vs Gwadar portrdquo Indian Defence Forum AccessedDecember 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtmlldquoChinarsquos Statistical Yearbook 2013 Accessed November 30 2014httpwwwstatsgovcntjsjndsj2013indexehhtmldquoDemographics of Pakistanrdquo Wikipedia Accessed November 302014 httpenwikipediaorgwikiDemographics_of_PakistanldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum CivilServices of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtmlHassan Mehmood ul ldquoPak-China Friendship New Dimensions andNew Opportunitiesrdquo Overseas Pakistani Friends March 252013Accessed December 11 2014 httpwwwopfblogcom13906pak-china-friendship-new-dimensions-and-new-opportunitiesHaq Shahram ldquoPakistan rank 71 in World Bank LogisticPerformance Indexrdquo Express Tribune July 22 2012 httptribunecompkstory411560pakistan-ranked-71-in-world-bank-logistics-performance-indexKhan Dr Shabir Ahmed ldquoGeo Economic Imperatives of GwadarSeaport and Kashgar Economic Zone for Pakistan and Chinardquo IPRIJournal XIII Summer 2013 Accessed December 8 2014 httpgreatgwadarcomvzpaneldocsGwadar20Sea20Port20amp20Kashgar20Economic20Zone20-20Pakistan20amp20ChinapdfKumar Rohit ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014 httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

286

Pakistanrsquos Potential as A Transit Trade Corridor

ldquoPakistan Economic Survey 2013-14rdquo Ministry of Finance GoPAccessed December 14 2014 httpfinancegovpksurveychapters_1413_Transport_and_comspdfldquoPak ndash China Economic Corridor to help setup new dry ports incountryrdquo Business Recorder November 25 2014 AccessedDecember 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-countryldquoPakistan Transport Sectorrdquo World Bank Accessed December 142014 httpwebworldbankorgWBSITEEXTERNALCOUNTRIESSOUTHASIAEXTEXTSARREGTOPTRANSPORT0contentMDK20699058~menuPK869060~pagePK34004173~piPK34003707~theSitePK57959800htmlPaton James and Aibing Guo ldquoRussia China add to $400 bn GasDeal with Accordrdquo Bloomberg November 10 2014 httpwwwbloombergcomnews2014-11-10russia-china-add-to-400-billion-gas-deal-with-accordhtmlSeethi K M ldquoIndiarsquos lsquoConnect Central Asiarsquo Policyrdquo DiplomatDecember 13 2013 Accessed December 7 2014 httpthediplomatcom201312indias-connect-central-asia-policySiddiqui Asim ldquoDeveloping the Pak ndash China Economic Corridor tofacilitate Sino ndash Europe Traderdquo presented at Intermodal Europe2014 held at Rotterdam (11-13 November 2014) Accessed December26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdfSiddiqui Asim ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdfldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp Reforms GoPAccessed December 14 2014 httpwwwpcgovpkannual20plans2012-13chapter-20_transport_and_logisticspdf

PAKISTAN BUSINESS REVIEW APRIL 2016287

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Notes4 Asim Siddiqui ldquoUnderstanding Economic benefits of Trade

corridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdf

5 Ibid

6 Ibid7 ldquoPak ndash China Economic Corridor to help setup new dry ports

in countryrdquo Business Recorder November 25 2014Accessed December 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-country

8 ldquoChinarsquos Statistical Yearbook 2013 Accessed November302014 httpwwwstatsgovcntjsjndsj2013indexehhtm

9 K M Seethi ldquoIndiarsquos lsquoConnect Central Asiarsquo PolicyrdquoDiplomat December 13 2013 Accessed December 7 2014http thediplomatcom201312indias-connect-central-asia-policy

10 Rohit Kumar ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

11 ldquoChabahar port vs Gwadar portrdquo Indian Defence ForumAccessed December 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtml

12 ldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum Civil Services of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtml

13 Dr Shabir Ahmed Khan ldquoGeo Economic Imperatives ofGwadar Seaport and Kashgar Economic Zone for Pakistanand Chinardquo IPRI Journal XIII Summer 2013 AccessedDecember 8 2014 httpgreatgwadarcomvzpaneldocs

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

288

Pakistanrsquos Potential as A Transit Trade Corridor

14 Dr Zafar Anwar ldquoDevelopment of Infrastructural linkagesbetween Pakistan and Central Asiardquo South Asian StudiesJan-Jun 2011 Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20Anwarpdf

15 ldquoDemographics of Pakistanrdquo Wikipedia AccessedNovember 30 2014 httpenwikipediaorgwikiDemographics_of_Pakistan

16 Anwar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo

17 ldquoPakistan Transport Sectorrdquo World Bank AccessedDecember 14 2014 httpwebworldbankorgWBSITEEXTERNALCOUN

18 Pakistan Economic Survey 2013-1419 ldquoPakistan Transport Sectorrdquo World Bank20 Pakistan Economic Survey 2013-14

21 Ibid22 ldquoPakistan Transport Sectorrdquo World Bank23 Ibid24 Ibid25 Ibid26 Pakistan Economic Survey 2013-1427 Ibid

28 ldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp ReformsGoP Accessed December 14 2014 httpwwwpcgovpk20_transport_and_logisticspdf

29 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

30 Siddiqui ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal Networkrdquo

31 Asim Siddiqui ldquoDeveloping the Pak ndash China EconomicCorridor to facilitate Sino ndash Europe Traderdquo presented atIntermodal Europe 2014 held at Rotterdam (11-13 November2014) Accessed December 26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdf

PAKISTAN BUSINESS REVIEW APRIL 2016289

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

32 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

Annexure A

CHINArsquoS TRADE WITH REGIONS COUNTRIES (USD BILLION)

Ser Region Country 2011 2012

Total Exports Imports Total Exports Imports a Afghanistan 0234 023 004 0469 0464 0005

b India 7391 5054 2337 6647 4768 18 80

c Pakistan 1056 844 212 1241 928 314

d Iran 451 1476 3034 3647 116 24 87 e Iraq 1427 382 1044 1757 491 12 66

f Israel 978 674 304 991 699 292

g Jordon 277 251 026 326 296 028

h Lebanon 148 146 0026 171 169 002

i Syria 245 242 0026 12 119 0011 j Turkey 1874 1561 312 1910 1558 351

k Palestine 0 049 0048 0001 0041 004 0001 l Bahrain 120 088 032 155 120 035

m Kuwait 1130 213 918 1256 209 10 47 n Cyprus 115 112 003 124 110 014 o Oman 1587 099 1488 1879 181 16 98 p Qatar 589 120 469 848 120 728 q KSA 6432 1485 4947 7331 1845 54 86

r UAE 3512 2681 831 4042 2957 10 85 s Yemen 424 110 314 556 196 360 t Africa 1663 7308 9324 1986 8531 1133 u Europe 7008 4136 2872 6831 3964 2867 v Latin America 2414 1217 1197 2613 1352 1261 w North America 4944 3501 1443 5363 3801 1562

Page 19: PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

PAKISTAN BUSINESS REVIEW APRIL 2016285

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

References

Anwar Dr Zafar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo South Asian Studies Jan-Jun 2011Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20AnwarpdfldquoChabahar port vs Gwadar portrdquo Indian Defence Forum AccessedDecember 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtmlldquoChinarsquos Statistical Yearbook 2013 Accessed November 30 2014httpwwwstatsgovcntjsjndsj2013indexehhtmldquoDemographics of Pakistanrdquo Wikipedia Accessed November 302014 httpenwikipediaorgwikiDemographics_of_PakistanldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum CivilServices of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtmlHassan Mehmood ul ldquoPak-China Friendship New Dimensions andNew Opportunitiesrdquo Overseas Pakistani Friends March 252013Accessed December 11 2014 httpwwwopfblogcom13906pak-china-friendship-new-dimensions-and-new-opportunitiesHaq Shahram ldquoPakistan rank 71 in World Bank LogisticPerformance Indexrdquo Express Tribune July 22 2012 httptribunecompkstory411560pakistan-ranked-71-in-world-bank-logistics-performance-indexKhan Dr Shabir Ahmed ldquoGeo Economic Imperatives of GwadarSeaport and Kashgar Economic Zone for Pakistan and Chinardquo IPRIJournal XIII Summer 2013 Accessed December 8 2014 httpgreatgwadarcomvzpaneldocsGwadar20Sea20Port20amp20Kashgar20Economic20Zone20-20Pakistan20amp20ChinapdfKumar Rohit ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014 httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

286

Pakistanrsquos Potential as A Transit Trade Corridor

ldquoPakistan Economic Survey 2013-14rdquo Ministry of Finance GoPAccessed December 14 2014 httpfinancegovpksurveychapters_1413_Transport_and_comspdfldquoPak ndash China Economic Corridor to help setup new dry ports incountryrdquo Business Recorder November 25 2014 AccessedDecember 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-countryldquoPakistan Transport Sectorrdquo World Bank Accessed December 142014 httpwebworldbankorgWBSITEEXTERNALCOUNTRIESSOUTHASIAEXTEXTSARREGTOPTRANSPORT0contentMDK20699058~menuPK869060~pagePK34004173~piPK34003707~theSitePK57959800htmlPaton James and Aibing Guo ldquoRussia China add to $400 bn GasDeal with Accordrdquo Bloomberg November 10 2014 httpwwwbloombergcomnews2014-11-10russia-china-add-to-400-billion-gas-deal-with-accordhtmlSeethi K M ldquoIndiarsquos lsquoConnect Central Asiarsquo Policyrdquo DiplomatDecember 13 2013 Accessed December 7 2014 httpthediplomatcom201312indias-connect-central-asia-policySiddiqui Asim ldquoDeveloping the Pak ndash China Economic Corridor tofacilitate Sino ndash Europe Traderdquo presented at Intermodal Europe2014 held at Rotterdam (11-13 November 2014) Accessed December26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdfSiddiqui Asim ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdfldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp Reforms GoPAccessed December 14 2014 httpwwwpcgovpkannual20plans2012-13chapter-20_transport_and_logisticspdf

PAKISTAN BUSINESS REVIEW APRIL 2016287

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Notes4 Asim Siddiqui ldquoUnderstanding Economic benefits of Trade

corridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdf

5 Ibid

6 Ibid7 ldquoPak ndash China Economic Corridor to help setup new dry ports

in countryrdquo Business Recorder November 25 2014Accessed December 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-country

8 ldquoChinarsquos Statistical Yearbook 2013 Accessed November302014 httpwwwstatsgovcntjsjndsj2013indexehhtm

9 K M Seethi ldquoIndiarsquos lsquoConnect Central Asiarsquo PolicyrdquoDiplomat December 13 2013 Accessed December 7 2014http thediplomatcom201312indias-connect-central-asia-policy

10 Rohit Kumar ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

11 ldquoChabahar port vs Gwadar portrdquo Indian Defence ForumAccessed December 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtml

12 ldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum Civil Services of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtml

13 Dr Shabir Ahmed Khan ldquoGeo Economic Imperatives ofGwadar Seaport and Kashgar Economic Zone for Pakistanand Chinardquo IPRI Journal XIII Summer 2013 AccessedDecember 8 2014 httpgreatgwadarcomvzpaneldocs

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

288

Pakistanrsquos Potential as A Transit Trade Corridor

14 Dr Zafar Anwar ldquoDevelopment of Infrastructural linkagesbetween Pakistan and Central Asiardquo South Asian StudiesJan-Jun 2011 Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20Anwarpdf

15 ldquoDemographics of Pakistanrdquo Wikipedia AccessedNovember 30 2014 httpenwikipediaorgwikiDemographics_of_Pakistan

16 Anwar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo

17 ldquoPakistan Transport Sectorrdquo World Bank AccessedDecember 14 2014 httpwebworldbankorgWBSITEEXTERNALCOUN

18 Pakistan Economic Survey 2013-1419 ldquoPakistan Transport Sectorrdquo World Bank20 Pakistan Economic Survey 2013-14

21 Ibid22 ldquoPakistan Transport Sectorrdquo World Bank23 Ibid24 Ibid25 Ibid26 Pakistan Economic Survey 2013-1427 Ibid

28 ldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp ReformsGoP Accessed December 14 2014 httpwwwpcgovpk20_transport_and_logisticspdf

29 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

30 Siddiqui ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal Networkrdquo

31 Asim Siddiqui ldquoDeveloping the Pak ndash China EconomicCorridor to facilitate Sino ndash Europe Traderdquo presented atIntermodal Europe 2014 held at Rotterdam (11-13 November2014) Accessed December 26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdf

PAKISTAN BUSINESS REVIEW APRIL 2016289

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

32 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

Annexure A

CHINArsquoS TRADE WITH REGIONS COUNTRIES (USD BILLION)

Ser Region Country 2011 2012

Total Exports Imports Total Exports Imports a Afghanistan 0234 023 004 0469 0464 0005

b India 7391 5054 2337 6647 4768 18 80

c Pakistan 1056 844 212 1241 928 314

d Iran 451 1476 3034 3647 116 24 87 e Iraq 1427 382 1044 1757 491 12 66

f Israel 978 674 304 991 699 292

g Jordon 277 251 026 326 296 028

h Lebanon 148 146 0026 171 169 002

i Syria 245 242 0026 12 119 0011 j Turkey 1874 1561 312 1910 1558 351

k Palestine 0 049 0048 0001 0041 004 0001 l Bahrain 120 088 032 155 120 035

m Kuwait 1130 213 918 1256 209 10 47 n Cyprus 115 112 003 124 110 014 o Oman 1587 099 1488 1879 181 16 98 p Qatar 589 120 469 848 120 728 q KSA 6432 1485 4947 7331 1845 54 86

r UAE 3512 2681 831 4042 2957 10 85 s Yemen 424 110 314 556 196 360 t Africa 1663 7308 9324 1986 8531 1133 u Europe 7008 4136 2872 6831 3964 2867 v Latin America 2414 1217 1197 2613 1352 1261 w North America 4944 3501 1443 5363 3801 1562

Page 20: PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

286

Pakistanrsquos Potential as A Transit Trade Corridor

ldquoPakistan Economic Survey 2013-14rdquo Ministry of Finance GoPAccessed December 14 2014 httpfinancegovpksurveychapters_1413_Transport_and_comspdfldquoPak ndash China Economic Corridor to help setup new dry ports incountryrdquo Business Recorder November 25 2014 AccessedDecember 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-countryldquoPakistan Transport Sectorrdquo World Bank Accessed December 142014 httpwebworldbankorgWBSITEEXTERNALCOUNTRIESSOUTHASIAEXTEXTSARREGTOPTRANSPORT0contentMDK20699058~menuPK869060~pagePK34004173~piPK34003707~theSitePK57959800htmlPaton James and Aibing Guo ldquoRussia China add to $400 bn GasDeal with Accordrdquo Bloomberg November 10 2014 httpwwwbloombergcomnews2014-11-10russia-china-add-to-400-billion-gas-deal-with-accordhtmlSeethi K M ldquoIndiarsquos lsquoConnect Central Asiarsquo Policyrdquo DiplomatDecember 13 2013 Accessed December 7 2014 httpthediplomatcom201312indias-connect-central-asia-policySiddiqui Asim ldquoDeveloping the Pak ndash China Economic Corridor tofacilitate Sino ndash Europe Traderdquo presented at Intermodal Europe2014 held at Rotterdam (11-13 November 2014) Accessed December26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdfSiddiqui Asim ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdfldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp Reforms GoPAccessed December 14 2014 httpwwwpcgovpkannual20plans2012-13chapter-20_transport_and_logisticspdf

PAKISTAN BUSINESS REVIEW APRIL 2016287

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Notes4 Asim Siddiqui ldquoUnderstanding Economic benefits of Trade

corridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdf

5 Ibid

6 Ibid7 ldquoPak ndash China Economic Corridor to help setup new dry ports

in countryrdquo Business Recorder November 25 2014Accessed December 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-country

8 ldquoChinarsquos Statistical Yearbook 2013 Accessed November302014 httpwwwstatsgovcntjsjndsj2013indexehhtm

9 K M Seethi ldquoIndiarsquos lsquoConnect Central Asiarsquo PolicyrdquoDiplomat December 13 2013 Accessed December 7 2014http thediplomatcom201312indias-connect-central-asia-policy

10 Rohit Kumar ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

11 ldquoChabahar port vs Gwadar portrdquo Indian Defence ForumAccessed December 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtml

12 ldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum Civil Services of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtml

13 Dr Shabir Ahmed Khan ldquoGeo Economic Imperatives ofGwadar Seaport and Kashgar Economic Zone for Pakistanand Chinardquo IPRI Journal XIII Summer 2013 AccessedDecember 8 2014 httpgreatgwadarcomvzpaneldocs

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

288

Pakistanrsquos Potential as A Transit Trade Corridor

14 Dr Zafar Anwar ldquoDevelopment of Infrastructural linkagesbetween Pakistan and Central Asiardquo South Asian StudiesJan-Jun 2011 Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20Anwarpdf

15 ldquoDemographics of Pakistanrdquo Wikipedia AccessedNovember 30 2014 httpenwikipediaorgwikiDemographics_of_Pakistan

16 Anwar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo

17 ldquoPakistan Transport Sectorrdquo World Bank AccessedDecember 14 2014 httpwebworldbankorgWBSITEEXTERNALCOUN

18 Pakistan Economic Survey 2013-1419 ldquoPakistan Transport Sectorrdquo World Bank20 Pakistan Economic Survey 2013-14

21 Ibid22 ldquoPakistan Transport Sectorrdquo World Bank23 Ibid24 Ibid25 Ibid26 Pakistan Economic Survey 2013-1427 Ibid

28 ldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp ReformsGoP Accessed December 14 2014 httpwwwpcgovpk20_transport_and_logisticspdf

29 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

30 Siddiqui ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal Networkrdquo

31 Asim Siddiqui ldquoDeveloping the Pak ndash China EconomicCorridor to facilitate Sino ndash Europe Traderdquo presented atIntermodal Europe 2014 held at Rotterdam (11-13 November2014) Accessed December 26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdf

PAKISTAN BUSINESS REVIEW APRIL 2016289

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

32 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

Annexure A

CHINArsquoS TRADE WITH REGIONS COUNTRIES (USD BILLION)

Ser Region Country 2011 2012

Total Exports Imports Total Exports Imports a Afghanistan 0234 023 004 0469 0464 0005

b India 7391 5054 2337 6647 4768 18 80

c Pakistan 1056 844 212 1241 928 314

d Iran 451 1476 3034 3647 116 24 87 e Iraq 1427 382 1044 1757 491 12 66

f Israel 978 674 304 991 699 292

g Jordon 277 251 026 326 296 028

h Lebanon 148 146 0026 171 169 002

i Syria 245 242 0026 12 119 0011 j Turkey 1874 1561 312 1910 1558 351

k Palestine 0 049 0048 0001 0041 004 0001 l Bahrain 120 088 032 155 120 035

m Kuwait 1130 213 918 1256 209 10 47 n Cyprus 115 112 003 124 110 014 o Oman 1587 099 1488 1879 181 16 98 p Qatar 589 120 469 848 120 728 q KSA 6432 1485 4947 7331 1845 54 86

r UAE 3512 2681 831 4042 2957 10 85 s Yemen 424 110 314 556 196 360 t Africa 1663 7308 9324 1986 8531 1133 u Europe 7008 4136 2872 6831 3964 2867 v Latin America 2414 1217 1197 2613 1352 1261 w North America 4944 3501 1443 5363 3801 1562

Page 21: PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

PAKISTAN BUSINESS REVIEW APRIL 2016287

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

Notes4 Asim Siddiqui ldquoUnderstanding Economic benefits of Trade

corridor between Gwadar ndash Kashgar Intermodal NetworkrdquoAccessed November 30 2014 httpwwwintermodal-asiacomfilesaasim_siddiqui__apsapdf

5 Ibid

6 Ibid7 ldquoPak ndash China Economic Corridor to help setup new dry ports

in countryrdquo Business Recorder November 25 2014Accessed December 10 2014 httpwwwbrecordercombusiness-and-economy189pakistan1245377pak-china-economic-corridor-to-help-set-up-new-dry-ports-in-country

8 ldquoChinarsquos Statistical Yearbook 2013 Accessed November302014 httpwwwstatsgovcntjsjndsj2013indexehhtm

9 K M Seethi ldquoIndiarsquos lsquoConnect Central Asiarsquo PolicyrdquoDiplomat December 13 2013 Accessed December 7 2014http thediplomatcom201312indias-connect-central-asia-policy

10 Rohit Kumar ldquoIndia Pakistan Trade Relations Current andPotentialrdquo Jinnah Institute Accessed December 7 2014httpjinnah-instituteorgindia-pakistan-trade-relations-current-and-potential

11 ldquoChabahar port vs Gwadar portrdquo Indian Defence ForumAccessed December 26 2014 httpdefenceforumindiacomforumsubcontinent-central-asia5536-chabahar-port-vs-gwadar-porthtml

12 ldquoGeo-Strategic Significance of Pakistanrdquo CSS Forum Civil Services of Pakistan Accessed July 24 2013 httpwwwcssforumcompkcss-compulsory-subjectscurrent-affairs44753-kips-geo-strategic-importance-pakistan-ms-word-formathtml

13 Dr Shabir Ahmed Khan ldquoGeo Economic Imperatives ofGwadar Seaport and Kashgar Economic Zone for Pakistanand Chinardquo IPRI Journal XIII Summer 2013 AccessedDecember 8 2014 httpgreatgwadarcomvzpaneldocs

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

288

Pakistanrsquos Potential as A Transit Trade Corridor

14 Dr Zafar Anwar ldquoDevelopment of Infrastructural linkagesbetween Pakistan and Central Asiardquo South Asian StudiesJan-Jun 2011 Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20Anwarpdf

15 ldquoDemographics of Pakistanrdquo Wikipedia AccessedNovember 30 2014 httpenwikipediaorgwikiDemographics_of_Pakistan

16 Anwar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo

17 ldquoPakistan Transport Sectorrdquo World Bank AccessedDecember 14 2014 httpwebworldbankorgWBSITEEXTERNALCOUN

18 Pakistan Economic Survey 2013-1419 ldquoPakistan Transport Sectorrdquo World Bank20 Pakistan Economic Survey 2013-14

21 Ibid22 ldquoPakistan Transport Sectorrdquo World Bank23 Ibid24 Ibid25 Ibid26 Pakistan Economic Survey 2013-1427 Ibid

28 ldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp ReformsGoP Accessed December 14 2014 httpwwwpcgovpk20_transport_and_logisticspdf

29 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

30 Siddiqui ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal Networkrdquo

31 Asim Siddiqui ldquoDeveloping the Pak ndash China EconomicCorridor to facilitate Sino ndash Europe Traderdquo presented atIntermodal Europe 2014 held at Rotterdam (11-13 November2014) Accessed December 26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdf

PAKISTAN BUSINESS REVIEW APRIL 2016289

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

32 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

Annexure A

CHINArsquoS TRADE WITH REGIONS COUNTRIES (USD BILLION)

Ser Region Country 2011 2012

Total Exports Imports Total Exports Imports a Afghanistan 0234 023 004 0469 0464 0005

b India 7391 5054 2337 6647 4768 18 80

c Pakistan 1056 844 212 1241 928 314

d Iran 451 1476 3034 3647 116 24 87 e Iraq 1427 382 1044 1757 491 12 66

f Israel 978 674 304 991 699 292

g Jordon 277 251 026 326 296 028

h Lebanon 148 146 0026 171 169 002

i Syria 245 242 0026 12 119 0011 j Turkey 1874 1561 312 1910 1558 351

k Palestine 0 049 0048 0001 0041 004 0001 l Bahrain 120 088 032 155 120 035

m Kuwait 1130 213 918 1256 209 10 47 n Cyprus 115 112 003 124 110 014 o Oman 1587 099 1488 1879 181 16 98 p Qatar 589 120 469 848 120 728 q KSA 6432 1485 4947 7331 1845 54 86

r UAE 3512 2681 831 4042 2957 10 85 s Yemen 424 110 314 556 196 360 t Africa 1663 7308 9324 1986 8531 1133 u Europe 7008 4136 2872 6831 3964 2867 v Latin America 2414 1217 1197 2613 1352 1261 w North America 4944 3501 1443 5363 3801 1562

Page 22: PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

PAKISTAN BUSINESS REVIEW APRIL 2016

Discussion

288

Pakistanrsquos Potential as A Transit Trade Corridor

14 Dr Zafar Anwar ldquoDevelopment of Infrastructural linkagesbetween Pakistan and Central Asiardquo South Asian StudiesJan-Jun 2011 Accessed December 7 2014 httppuedupkimagesjournalcsasPDF7-Dr20Zahid20Anwarpdf

15 ldquoDemographics of Pakistanrdquo Wikipedia AccessedNovember 30 2014 httpenwikipediaorgwikiDemographics_of_Pakistan

16 Anwar ldquoDevelopment of Infrastructural linkages betweenPakistan and Central Asiardquo

17 ldquoPakistan Transport Sectorrdquo World Bank AccessedDecember 14 2014 httpwebworldbankorgWBSITEEXTERNALCOUN

18 Pakistan Economic Survey 2013-1419 ldquoPakistan Transport Sectorrdquo World Bank20 Pakistan Economic Survey 2013-14

21 Ibid22 ldquoPakistan Transport Sectorrdquo World Bank23 Ibid24 Ibid25 Ibid26 Pakistan Economic Survey 2013-1427 Ibid

28 ldquoTransport and Logisticsrdquo Annual Plan 2012-13 PlanningCommission Ministry of Planning Development amp ReformsGoP Accessed December 14 2014 httpwwwpcgovpk20_transport_and_logisticspdf

29 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

30 Siddiqui ldquoUnderstanding Economic benefits of Tradecorridor between Gwadar ndash Kashgar Intermodal Networkrdquo

31 Asim Siddiqui ldquoDeveloping the Pak ndash China EconomicCorridor to facilitate Sino ndash Europe Traderdquo presented atIntermodal Europe 2014 held at Rotterdam (11-13 November2014) Accessed December 26 2014 httpwwwintermodal-eventscomfilesaasim_siddiquipdf

PAKISTAN BUSINESS REVIEW APRIL 2016289

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

32 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

Annexure A

CHINArsquoS TRADE WITH REGIONS COUNTRIES (USD BILLION)

Ser Region Country 2011 2012

Total Exports Imports Total Exports Imports a Afghanistan 0234 023 004 0469 0464 0005

b India 7391 5054 2337 6647 4768 18 80

c Pakistan 1056 844 212 1241 928 314

d Iran 451 1476 3034 3647 116 24 87 e Iraq 1427 382 1044 1757 491 12 66

f Israel 978 674 304 991 699 292

g Jordon 277 251 026 326 296 028

h Lebanon 148 146 0026 171 169 002

i Syria 245 242 0026 12 119 0011 j Turkey 1874 1561 312 1910 1558 351

k Palestine 0 049 0048 0001 0041 004 0001 l Bahrain 120 088 032 155 120 035

m Kuwait 1130 213 918 1256 209 10 47 n Cyprus 115 112 003 124 110 014 o Oman 1587 099 1488 1879 181 16 98 p Qatar 589 120 469 848 120 728 q KSA 6432 1485 4947 7331 1845 54 86

r UAE 3512 2681 831 4042 2957 10 85 s Yemen 424 110 314 556 196 360 t Africa 1663 7308 9324 1986 8531 1133 u Europe 7008 4136 2872 6831 3964 2867 v Latin America 2414 1217 1197 2613 1352 1261 w North America 4944 3501 1443 5363 3801 1562

Page 23: PAKISTAN’S POTENTIAL AS A TRANSIT TRADE CORRIDOR AND ...

PAKISTAN BUSINESS REVIEW APRIL 2016289

Discussion Pakistanrsquos Potential as A Transit Trade Corridor

32 ldquoPak ndash China Economic Corridor to help setup new dry portsin countryrdquo Business Recorder

Annexure A

CHINArsquoS TRADE WITH REGIONS COUNTRIES (USD BILLION)

Ser Region Country 2011 2012

Total Exports Imports Total Exports Imports a Afghanistan 0234 023 004 0469 0464 0005

b India 7391 5054 2337 6647 4768 18 80

c Pakistan 1056 844 212 1241 928 314

d Iran 451 1476 3034 3647 116 24 87 e Iraq 1427 382 1044 1757 491 12 66

f Israel 978 674 304 991 699 292

g Jordon 277 251 026 326 296 028

h Lebanon 148 146 0026 171 169 002

i Syria 245 242 0026 12 119 0011 j Turkey 1874 1561 312 1910 1558 351

k Palestine 0 049 0048 0001 0041 004 0001 l Bahrain 120 088 032 155 120 035

m Kuwait 1130 213 918 1256 209 10 47 n Cyprus 115 112 003 124 110 014 o Oman 1587 099 1488 1879 181 16 98 p Qatar 589 120 469 848 120 728 q KSA 6432 1485 4947 7331 1845 54 86

r UAE 3512 2681 831 4042 2957 10 85 s Yemen 424 110 314 556 196 360 t Africa 1663 7308 9324 1986 8531 1133 u Europe 7008 4136 2872 6831 3964 2867 v Latin America 2414 1217 1197 2613 1352 1261 w North America 4944 3501 1443 5363 3801 1562