The State of Domestic Commerce in Pakistan Study 7 - An Overview of the Transport Sector

THE STATE OF DOMESTIC COMMERCE IN
PAKISTAN
STUDY 7
AN OVERVIEW OF THE TRANSPORT SECTOR
For
The Ministry of Commerce
Government of Pakistan
November 2007
By
Innovative Development Strategies (Pvt.) Ltd.
House No. 2, Street 44, F-8/1, Islamabad.

Table of Contents
List of Abbreviations ............................................................................................................... i
Glossary of terms .................................................................................................................. v
Acknowledgments ............................................................................................................... vii
Executive Summary ........................................................................................................... 3
Section 1: Introduction .................................................................................................. 7
Section 2: Methodology ................................................................................................ 9
2.1 Road ...................................................................................................................... 9
2.2 Data Reliability ........................................................................................................ 11
2.3 Rail, Aviation, and Ports .......................................................................................... 11
Section 3: Transport Indices ....................................................................................... 13
3.1 Output index ............................................................................................................ 13
3.2 Weights for value added index ................................................................................ 16
3.3 Weights for price index ............................................................................................ 16
3.4 Tackling scarcity of data in future attempts .............................................................. 17
Section 4: Road transport ........................................................................................... 18
4.1 Output 18
4.2 Price, Cost, and profit margin estimates .................................................................. 18
4.2.1 Freight services ........................................................................................... 18
4.2.2 Passengers .................................................................................................. 20
4.3 Time estimates ........................................................................................................ 21
4.4 Characteristics of the Road Sub-sector ................................................................... 22
4.4.1 Road Network and Administration ................................................................ 22
4.4.2. Structure of the Road Sub-sector ................................................................ 23
4.4.3 Composition of the Freight Market ............................................................... 25
4.4.4. Financing and Contractual Arrangements .................................................... 27
4.5 Determinants of Growth in the Road Sector ............................................................ 28
4.5.1 Infrastructure Issues .................................................................................... 29
4.5.2 Competition .................................................................................................. 33
4.5.3 Regulatory Framework ................................................................................. 33
4.5.4 Governance Issues ...................................................................................... 35
4.5.5 Access to finance ......................................................................................... 36
4.5.6 Travel restrictions due to zoning and law and order situation ....................... 37
4.5.7 Owners’ Prior Experience & Skill Level ........................................................ 37
4.6 Enhancing efficiency of road transport ..................................................................... 39
Section 5: Railways ..................................................................................................... 41
5.1 The PR network ....................................................................................................... 41
5.2 Share in the market ................................................................................................. 42
5.2.1 Value added in the rail sub-sector ................................................................ 44
5.2.3 Commodities carried .................................................................................... 44
5.3 Constraints to growth ............................................................................................... 46
5.3.1 The governance of PR freight ...................................................................... 47
5.3.2 Lack of a competitive environment ............................................................... 48

5.4 Building on the strengths to enhance competitiveness ............................................ 48
Section 6: Aviation ...................................................................................................... 51
6.1 Aviation Network and Administration ....................................................................... 51
6.2 Freight and passenger handling .............................................................................. 52
6.3 The way forward ...................................................................................................... 55
Section 7: Ports ........................................................................................................... 56
7.1 Port administration, makeup and network ................................................................ 56
7.2 Costs 57
7.3 Port Clearance times ............................................................................................... 58
7.3.1 Customs clearance: ..................................................................................... 59
7.4 Potential avenues for improvement ......................................................................... 61
Section 8: Major Government Initiatives .................................................................... 62
Section 9: Conclusion ................................................................................................. 65
Annex 1 ................................................................................................................... 69
Annex 2 ................................................................................................................... 72

List of Boxes
Box 1: Relative weights to compute output index ................................................. 14
Box 2: Relative weights for value added index ..................................................... 16
Box 3: Relative weights for price index ................................................................. 17
Box 4: Interaction of road carriers with public sector representatives ................... 35
Box 5: Major constraints at land borders ............................................................. 60

List of Tables
Table 2.1: Sampling details ............................................................................................ 9
Table 2.2: Interview details for rail, aviation, and ports sub-sectors .............................. 12
Table 3.1 Total, freight, and passenger indices............................................................ 14
Table 3.2: Annual growth rates of transport output index and national GDP ................. 15
Table 4.1: Total passenger and freight output for road.................................................. 18
Table 4.2: Freight prices for major routes ..................................................................... 19
Table 4.3: Freight transporter costs for major routes .................................................... 19
Table 4.4: Profit margins estimates for freight carriers (PKR) ....................................... 20
Table 4.5: Passenger fares for major routes (PKR) ...................................................... 21
Table 4.6: Passenger transport cost and profit margin estimates (PKR) ....................... 21
Table 4.7: Estimates of times taken for transportation .................................................. 22
Table 4.8: Transport density estimates (2005) .............................................................. 22
Table 4.9: Type of workers in the transport industry (%) ............................................... 24
Table 4.10: Gap between business services required and used ..................................... 25
Table 4.11: Mode of payment of transport deals ............................................................. 27
Table 4.12: Average time to have credit cleared? ........................................................... 28
Table 4.13: Respondent views on Various Contractual Statements ................................ 28
Table 4.14: Cross-country comparison of rural accessibility ........................................... 30
Table 4.15: Transport Access and Service Availability in Rural Pakistan. ....................... 30
Table 4.16: Selected Human Development Indicators and Road Access (%) ................. 31
Table 4.17: Start-up capital requirements for road transport enterprises ......................... 36
Table 4.18: Major Problems in accessing credit (% of respondents) ............................... 36
Table 4.19: Reasons for acquiring informal loan ............................................................. 36
Table 4.20: Medium of learning management and technical skills .................................. 38
Table 4.21: Level of education of enterprise owners ....................................................... 38
Table 5.1: Classification of PR lines (2004-05) ............................................................. 41
Table 5.2: Pakistan Railways: Core and Non-Commercial Networks ............................ 42
Table 5.3: Passenger volume revenue and fare............................................................ 42
Table 5.4: Pakistan Railways: Freight Data .................................................................. 43
Table 5.5: Pakistan Railways: Network Costs FY2004 (PKR million) ............................ 44
Table 5.6: Pakistan Railways’ Basic Rate Scale for Freight Transport .......................... 44
Table 5.7: Commodity Volume Carried ......................................................................... 45
Table 6.1: Domestic Air Traffic of Passengers and Freight of Pakistan International Airlines ......................................................................................................... 51
Table 6.2: Aircraft Landing Charges at Various Airports in Pakistan ............................. 54
Table 6.3: Aircraft Housing Charges at Various Airports in Pakistan ............................. 54
Table 7.1: Cargo handled at Karachi Port and Port Qasim ........................................... 57
Table 7.2: Port Tariffs at KPT and Port Qasim .............................................................. 57
Table 7.3: Free storage periods at KPT and Port Qasim ............................................... 60
Table 7.4: Estimates of informal costs associated with custom clearance ..................... 61

List of Figures
Figure 1: Plot of GDP growth against transport output index growth (%) ..................... 15
Figure 2: Forecast for output index movement ............................................................ 16
Figure 3: Fuel costs relative to total cost (%) .............................................................. 20
Figure 4: Type of Ownership in the truck industry ....................................................... 23
Figure 5: Relative size of firms in the road industry ..................................................... 24
Figure 6: Share of road freight trips by commodity type (%) ........................................ 26
Figure 7: Reasons for Damage to Perishable items .................................................... 26
Figure 8: Preference among available dispute settlement mechanisms ...................... 27
Figure 9: Key Constraints to Growth ........................................................................... 29
Figure 10: Perception of state of the road network (% of respondents) ......................... 32
Figure 11: Average time lost due to condition of roads (hours/trip)................................ 32
Figure 12: Reasons for not registering a transport enterprise (% of respondents) ......... 34
Figure 13: Relative importance of constraints due to lack of education (% of respondents) ................................................................................................ 38

Innovative Development Strategies (Pvt) i
List of Abbreviations
ABAD Association of Builders and Developers
ADB Asian Development Bank
ADBI Asian Development Bank Institute
APCA All Pakistan Contractors Association
ATT Afghan Trade Transit
BAF Bank AlFalah
BCI Business Competitiveness Index
BOR Board of Revenue
CAA Civil Aviation Authority
CBM Cubic meter
CBR Central Board of Revenue
CDA Capital Development Authority
CIB Credit information bureau
CMR Contract for the International Carriage of Goods by Road
CPI Corruption Perceptions Index
CPIA Country Policy and Institutional Assessment
DFID Department for International Development
DHA Defense Housing authority
EDF Export Development Fund
EIU Economist Intelligence Unit
EOS Executive Opinion Survey
EPB Export Promotion Bureau
ESCAP Economic and Social Development in Asia and the Pacific
FBS Federal Bureau of Statistics
FCL Full Container Load
FDI Foreign Direct Investment
FIAS Foreign Investment Advisory Service
Ft Foot
FY Fiscal Year
GCI Global Competitiveness Index
GCR Global Competitiveness Report
GD Goods Declaration
GDP Gross Domestic Product
GoP Government of Pakistan
GOR Government Officials Residences
GRT Gross Register Tonnage
GST General Sales Tax
HBFC Housing Building Finance Corporation
HBL Habib Bank Limited
HDR Human Development Report
HFIs Housing Finance Institutions
IFC International Finance Corporation
IFS International Financial Statistics
IMF International Monetary Fund
ISAL Informal Subdivision of Agricultural Land
ISO International Standards Organization
IT Information Technology
ITU International Telecommunications Union

Survey Report on Domestic Commerce
Innovative Development Strategies (Pvt) ii
KBCA Karachi Building Control Authority
KDA Karachi Development Authority
KESC Karachi Electric Supply Corporation
KM(s) Kilometer(s)
KPT Karachi Port Trust
KSE Karachi Stock Exchange
LCL Less Than Container Load
LOA Length Overall
MCB Muslim Commercial Bank
MENA Middle East and North Africa
MOC Ministry of Commerce
MOD Ministry of Defense
MTDF Medium Term Development Framework
NBP National Bank of Pakistan
NCS National Conservation Strategy
NER Net Primary School Enrollment Rate
NHA National Highway Authority
NIE Newly industrialized economy
NIT National Institute of Transport
NLC National Logistics Cell
NTN National Tax Number
NTRC National Transportation Research Center
NTTFC National Trade and Transport Facilitation Committee
NWFP North West Frontier Province
PASSCO Pakistan Agricultural Storage and Services Corporation
PEC Pakistan Engineering Council
PHDEB Pakistan Horticulture Development and Export Board
PIAC Pakistan International Airlines Corporation
PIDE Pakistan Institute Of Development Economists
PIHS Pakistan Integrated Household Survey
PKR Pakistani Rupee
PQA Port Qasim Authority
PR Pakistan Railways
PREF Pakistan Real Estate Federation
PSDP Public Sector Development Program
R&D Research and Development
REER Real Effective Exchange Rate
REITs Real Estate Investment Trusts
RICS Royal Institute of Chartered Surveyors
SAI Social Accountability International
SBP State Bank of Pakistan
SKAA Sindh Katchi Abadis Authority
SME Small and Medium Enterprises
SPS Sanitary and Phytosanitary
SRO Statutory Regulation Order
Std Standard
TEP Total Factor Productivity
TEU Twenty-Foot Equivalent Units
TI Transparency International
TOR Terms of Reference

Innovative Development Strategies (Pvt) iii
TSDI Transport Sector Development Initiative
TTFP Trade and Transportation Facilitation Program
UK United Kingdom
UNDP United Nations Development Program
US United States
USA United States of America
USC Utility Stores Corporation
USD United States Dollars
WAPDA Water and Power Development Authority
WDI World Development Indicators
WEF World Economic Forum
WGI Worldwide Governance Indicators
WTO World Trade Organization

Innovative Development Strategies (Pvt) v
Glossary of terms
Aadaa Transport hub/station
Bilty Local term for receipt given to the shipper upon booking any transport consignment
Maal gari Pakistan Railway’s dedicated freight wagon
Passenger-km Standard unit for measuring passenger output; it is calculated as the product of the total number of kilometers traveled and the number of passengers traveling the total distance
Ton-km Standard unit for measuring freight output; it is calculated as the product of the total number of tons carried and kilometers traveled

Innovative Development Strategies (Pvt) vii
Acknowledgment
The IDS team owes a debt of gratitude to the officers of the Ministry of Commerce for their guidance, assistance and feedback during the course of this study. Our special thanks go out, in particular, to Syed Asif Ali Shah, Secretary; Mr. Naseem Qureshi and Mr. Ashraf Khan, Additional Secretaries; Mr. Abrar Hussian, Joint Secretary; Syed Irtiqa Zaidi, Consultant and Mr. Qaseem Subhani, Section Officer, for sparing their precious time and efforts for the study.
We feel a deep sense of gratitude for the Minister for Commerce. Mr. Humayun Akhtar Khan, who took out considerable time from his busy schedule to guide us. It was his sincere and deep conviction which enabled us to conduct and compile this detailed and comprehensive study on Domestic Commerce of our country. His apt guidance and keen analytical oversight were extremely helpful in finalizing the study and formulating the policy recommendations.
This study has benefited from comments received from the following:
1. State Bank of Pakistan, Karachi.
2. Federal Board of Revenue, Government of Pakistan, Islamabad.
3. Planning and Development Division, Government of Pakistan, Islamabad.
4. Trade Development Authority, Government of Pakistan, Karachi.
5. (Management Consultants) Establishment Division, Government of Pakistan, Islamabad.
6. Finance Division, Government of Pakistan, Islamabad.
7. Pakistan Institute of Development Economics, Islamabad.
8. NTTFC, Karachi.
9. FPCCI, Karachi.
10. Planning and Development Board, Government of Punjab, Lahore.
11. Planning and Development Board, Government of NWFP, Peshawar.
12. Planning and Development Board, Government of Sindh, Karachi.
13. Planning and Development Board, Government of Balochistan, Quetta.
14. Investment and Commerce Department, Government of Punjab, Lahore.
15. Ministry of Communications, Government of Pakistan, Islamabad.
16. Industries, Production & Supplies Initiatives, Government of Pakistan, Islamabad.
17. Statistics Division, Government of Pakistan, Islamabad.

1
AN OVERVIEW OF THE TRANSPORT SECTOR*
by
MOEED YUSUF
For detailed survey results, please see separate volume entitled “Basic Statistics of the Sample Survey Data”.

Innovative Development Strategies (Pvt) 3
Executive Summary
1. The transport sector plays a pivotal role in Pakistan’s economy, both in enhancing the global competitiveness of an economy as well as in ensuring efficient functioning of the domestic commerce supply chain. It accounts for about 11 percent of the country’s Gross Domestic Product (GDP), 17 percent of Gross Capital Formation, and 6 percent of employment. However, much of the economic gains from efficient transport services are lost in Pakistan’s case due to the overall poor performance of the sector. According to some estimates, the economy suffers a loss of 8.5 percent of GDP annually. Such a grave situation necessitates the need to analyze various facets of the transport sector to identify the key constraints causing efficiency losses. The need for such an analysis is further underscored by the fact that demand for transport is expected to double by 2015, thus requiring significantly higher levels of service.
Methodology
2. The analysis benefits from a review of existing literature and information gathered through primary sources. Findings from literature have been used to complement primary information. Therefore, rather than reporting existing literature and findings from primary data separately, the report combines the analysis to present a holistic overview of each sub- sector.
Transport Indices
3. The Laspeyres fixed-weighted index has been used to derive the results. Three separate indices have been generated: the total transport output index, the passenger output index, and the freight output index. Relative weights for the index have been computed using operating revenue estimates for passenger and freight services. No value added index could be created owing to the lack of time series data on operating revenues and costs for the transport sub-sectors. However, utilizing the sample data, relative weights have been computed for the road sub-sector, using 2004-05 as the base year. Only weights for the road sub-sector are generated to allow computation of a price index in the future. Reasons to exclude rail and road, and for not being able to create an actual index are the same as those stated in the discussion on value added weights.
Road transport
4. The annual growth in output rates for road transport closely approximate the increase in the total transport index, pointing to the overbearing importance of road transport for the sector as a whole. The mean prices of freight services for the major transport routes highlight the substantial difference between inward and outward rates at the port city of Karachi. Goods transported to other border towns do not experience such variations in transport charges.
5. Transporter costs for goods per route are fairly low. The gross profit margins on inward routes are relatively high. Passenger fares (prices) are fixed and do not vary between inward and outward traffic. Longer routes have substantially higher per passenger profit margins. The mean times taken for any given route are much lower for passenger vehicles than for commercial goods carriers.
6. Large numbers of individual owners providing ‘for hire and reward’ services dominate the trucking industry. Survey results depict that the vast majority of businesses are

organized as sole proprietorships. Majority of the businesses are small, employing less than 10 employees on average. Yet, vast majority of firms employ full-time paid staff. Only 8 percent of businesses surveyed had hired part-time personnel. None of these were large firms.
7. Firms in the road sub-sector have yet to fully embrace automation in their day-to-day functioning. The make-up of the road industry does not incentivize automated services in any way. There is a significant gap between business services required by a firm and the actual services being used. Engineering, legal, marketing and insurance services were cited as being highly sought after. While enterprises largely fulfill their engineering and to an extent, legal needs, marketing, insurance and accounting requirements largely go unentertained. Word of mouth is by far the most predominant marketing tool used by the transporters. Only a few businesses use marketing agents. There is no organized database through which particular transporters can be accessed.
8. The role of the local transport associations was greater than expected. Almost three- fourths of the firms included in the survey were found to be members of transport associations. There is a lack of standardization in the quality of road transportation services. Clients in general receive a level of service commensurate with the amount they are willing to pay. Shippers of low-value goods are more price sensitive and depend on the less reliable services of the spot market.
9. In the freight market the private sector is the dominant player and handles 95 percent of the total freight. Ballast, gravel, stone, cement, fruit, fertilizers and wheat are the most important commodities in terms of tons transported by trucks . The transport volume of fruit is the highest in terms of ton-kms. The country’s true potential to trade fresh foods is severely undermined due to the lack of an adequate temperature controlled transport system. According to survey findings, the incidence of loss or damage to perishable items is fairly high. Lack of prevalence of insurance practices exacerbates the problems of transport related losses in general. Cash is the predominant mode of payment in the road transport industry. Only 33 percent of the enterprises buy their inputs on credit.
10. Various forms of contractual modes are functional in the industry as arrangements to transport goods. Companies based in Punjab typically engage in contract arrangements more often Sindh based enterprises. Almost 50 percent of contracts are simply statements written on plain paper and signed by both parties.
11. According to the survey results, 96 percent of transport enterprises observed an expansion/improvement in their business over the last year. A greater proportion of passenger services reported to have expanded. Infrastructure development and a competitive environment are key drivers of growth. The most important constraints of growth according to the survey include the taxation and regulation system (licensing, permits, etc), law and order, lack of access to finance, quality of public services (electricity, communications), and corruption. Others that are obvious from literature are the low education/skill levels of enterprise managers and miscellaneous governance concerns.
12. Given the road sub-sector’s overwhelming importance in the transport industry, policy measures that manage to correct current constraints would impact the overall economy tremendously.
Railways
13. Pakistan Railways (PR) is a subordinate department of the Ministry of Railways. It is governed by the Railway Act of 1890. Rail accounts for less than 10 percent of the total passenger traffic in the country. In the freight business, rail has an even lower and stagnant market share. Out of the total transport output of approximately 123 billion ton-kms in the country’s transport sector, rail accounts for a mere 5 billion ton-kms.

Domestic Commerce In Pakistan: An Overview Of The Transport Sector
Innovative Development Srategies (Pvt) 5
14. Major commodities carried by Pakistan Railways include petroleum and other non- dangerous hydrocarbon oils (18.1 percent), chemical manures (9.9 percent) and railway materials and stores (17.4 percent). A major reason for the steep decline in rail’s importance as a freight carrier is the loss of oil transport as a major commodity. The growth in ATT activity, which provided significant business to PR, has slowed down. This is partly due to trade flows being diverted to Iranian facilities due to cumbersome procedures at Karachi but more so because of a shift from rail to road as the preferred mode of transport of ATT goods. The NLC now gets priority on this front. The railway plays an unimportant role in transporting agricultural produce, it does not have any specialized containers to carry agricultural goods and given the frequent delays, clients often prefer road to carry such goods despite the lack of temperature-controlled road transport.
15. There are many constraints to growth. The organization’s management culture is non- commercial and thus functional efficiency has always been a low priority. Like most other mega-organizations in Pakistan’s public sector, PR suffers from tremendous political interference both in deployment of personnel and in day-to-day management. Lack of a principal focus on commercial viability has meant that PR has primarily remained a passenger railway services. PR’s infrastructure and rolling stock have become aged and decrepit. The PR is a monopoly. Being the only rail service in the country, no competition is faced from within the sector. Lack of any compulsion to orient the service with market realities is thus obvious. A direct outcome of these shortcomings and perhaps the most significant constraint for PR is the inability to provide guarantees in terms of time needed for consignments to arrive at the destination.
Aviation
16. The aviation industry is unique in that the pace of transportation offered by it cannot be matched by any other sub-sector. It constitutes a miniscule share of the transport sector. In 2004-05, 6.94 million passengers traveled domestically by air out of which 0.08 million were transit passengers. A total of 1.76 billion passenger-kms were flown. In addition, a mere 116,202 tons of cargo and 10,412 tons of mail were hauled. A total of 36.94 million ton-kms were performed. These low volumes are despite the steady increase in air cargo traffic over the years, save a minor decline during the 1990s.
17. Most of the aviation industry’s shortcomings stem from a highly bureaucratic and discretionary regulatory authority, which has discouraged the industry from developing into a truly competitive one. There is a need to allow civil aviation experts to take up key decision- making positions in CAA, and to depute experts in MOD to deal with civil aviation in the country. Such a development may allow better use of the existing liberal policy to allow new passenger and cargo operators to enter the market.
Ports
18. It is impossible to reflect upon the transport sector’s impact on commerce without dealing with the entry (for imports) and exit points (for exports) for the country’s external trade. Efficiency of trade flows and that of the transport sector are complementary. Pakistan’s 1,100 km long coastline opens to the Arabian Sea. Karachi Port and Port Qasim are the two major international ports. Other ports are relatively insignificant.
19. Port Qasim is operating as a landlord port, primarily serving the steel, petroleum, and chemical industries. Karachi Port Trust (KPT) is also making progress towards converting itself into a landlord port. The total cargo volume handled by the two ports in 2003-04 was 43.26 million tons. At the Karachi port, the total port traffic increased from 20.5 million tons

in 1991-1992 to 27.5 million tons in 2003-04. The total port traffic at Port Qasim rapidly increased from 7.2 million tons in 1991-92 to 15.6 million tons in 2003-04, representing an annual growth rate of 6.7.
20. Both the KPT as well as Port Qasim Authority (PQA) run on excessive profits. PQA, for example, accumulated a net financial surplus amounting to PKR 1.08 billion at the end of FY 2003-04. Port entry costs on average are 5-9 times higher than other countries in the region. However Port entry costs on average are 5-9 times higher than other countries in the region. The high costs are despite the fact that there is significant private sector involvement at the ports.
21. Private sector involvement has ensured that the ship-shore handling speeds at Karachi are in line with those at efficient international ports for all categories of cargo—containers, bulk cargoes and general cargo. Despite the efficient ship-shore handling, overall container dwell times in ports stand at 11 days on average. The major factor behind excessive times is the tardy customs clearance process, which suffers from tremendous operational bottlenecks.
22. The main need with regard to port management is to instill a more commercial approach in management and operations decisions. The ports have made progress in modernizing internal procedures, at least at the ship-shore handling level. Now there is a need to work towards creating robust down-stream linkages to integrate the entire commerce supply chain.
Major Government Initiatives
23. The government remains cognizant of the multifaceted problems confronting the transport sector. The irony is that majority of macro level initiatives undertaken by the government often end up remaining mere visions. The lack of on ground impact is clear from the fact that as many as 80 percent of our survey respondents said they were not aware of any major public sector initiatives to improve the functioning of the transport sector.
Conclusion
24. It needs to be understood that while the road, rail and aviation industries are competitors, maximum gains will be realized not by altering the market share of one sub- sector vis-à-vis the other, but by ensuring that each sub-sector attains the primary market share in commodities it is most efficient at transporting. Ideally, policy makers ought to focus on devising incentives for each service to capitalize on its respective comparative advantage.
25. This report concludes that there are three major factors that determine the degree of efficiency in each sub-sector. The biggest constraint afflicting the rail and aviation sectors is the perverse governance protocols. The second major determinant of performance is the degree of competition in the sub-sector. Finally, the transport sector is no exception to the all- pervasive problem of the policy-implementation disconnect across Pakistan. The presence of up-to-date and dynamic legislation is a necessity. The transport sector suffers from highly dated legislations, which have little meaning under the present scenario. The interplay of the three factors: bureaucratic governance, degree of competition and implementation performance end up determining the output of the transport sub-sectors.

Section 1
Introduction
1. Pakistan attributes its recent macro economic success to its export-led model of economic growth. The transport sector plays a pivotal role, both in enhancing the global competitiveness of an economy as well as in ensuring efficient functioning of the domestic commerce supply chain. Literature on global trade and domestic commerce highlights the multifaceted links between a country’s economic growth and the performance of the transport sector1. This study is part of a combination of eight sectoral studies covering the entire ambit of commerce activity in Pakistan. The objective of these undertakings is to understand the dynamics of each of the major sectors impacting commerce as well as to analyze the interplay between various components of the commerce supply chain. The study focuses on the transport sector in the country, covering the road, rail, aviation and ports sub-sectors.
2. Pakistan’s transport sector already plays a major role in the national economy. It accounts for about 11 percent of the country’s Gross Domestic Product (GDP), 17 percent of Gross Capital Formation, and 6 percent of employment2. It also receives 12 to 15 percent of the annual Federal Sector Development Program allocations3. Notwithstanding, much of the economic gains from efficient transport services are lost in Pakistan’s case due to the overall poor performance of the sector. According to some estimates, the economy suffers a loss of 8.5 percent of GDP annually.4 Such a grave situation necessitates the need to analyze various facets of the transport sector to identify the key constraints causing efficiency losses. The need for such an analysis is further underscored by the fact that demand for transport is expected to double by 2015, thus requiring significantly higher levels of service.
3. In this report, we have conducted an analysis of the road, rail, aviation, and ports sub- sectors, identifying each one’s relative importance and major weaknesses and strengths. We develop indicators of the sector’s growth, outline the structure and make-up of each sub-sector, identify the various institutional and governance concerns relevant to the functioning of the sector, and emphasize factors that are constraining or driving its growth. Much of the discussion in the report is focused on the road sub-sector, which is warranted, given that road transport constitutes an overwhelming majority of the sector’s output.
4. Section 2 presents the methodology for the analysis. In section 3, an output index is developed for the transport sector. Sections 4, 5, 6, and 7 are devoted to an analysis of the road,
1 C. Carnemark,. “Some Economic, Social and Technical Aspects of Rural Roads”, ESCAP workshop on rural roads, Dhaka, 10-23 January, 1979.
2 World Bank, “Pakistan Transport Sector: Overview”, <http://web.worldbank.org/WEBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/EXTSARREGTOPTRANSPORT/0,,contentMDK:20694261~pagePK:34004173~piPK:34003707~theSitePK:579598,00.html> (accessed on 30 November, 2006).
3 Government of Pakistan, Pakistan Economic Survey 2005-06 (Islamabad: Finance Division, Economic Advisor’s Wing, 2006).
4 Government of Pakistan, Annual Plan 2006-07 (Islamabad: Planning Commission, 2006).

rail, aviation, and ports sub-sectors. Section 8 highlights major macro level transport related initiatives undertaken by the government in the recent past.

Section 2
Methodology
5. The analysis benefits from a review of existing literature and information gathered through primary sources. Findings from literature have been used to complement primary information. Therefore, rather than reporting existing literature and findings from primary data separately, we have combined the analysis to present a holistic overview of each sub-sector. Qualitative information was readily available on the road (freight) and rail (passengers and freight) sub-sectors, but was scant on aviation and ports. To the contrary, sufficient quantitative data to conduct the required statistical analysis was only available for rail. Virtually no detailed data sets existed for road transport, a fact that necessitated undertaking an extensive survey exercise. Our report has ended up adding tremendous value to previous knowledge. This is especially true with regard to institutional and governance dynamics of the entire transport sector, and quantitative estimates of price, margin growth, and other relevant indicators for road services. Below, we detail our methodology for each sub-sector:
2.1 Road
6. A detailed structured questionnaire was prepared and a survey conducted in 14 locations across Pakistan. Our sample size was 100, divided among freight and passenger carriers. The sample size and locations were determined with the help of national level industry data acquired from the Federal Bureau of Statistics (FBS). The final sample was both representative and significant at the national level.
Table 2.1: Sampling details
Location
No. of structured questionnaires
Freight services
Passenger services
Punjab
Faisalabad
8
5
Lahore
15
Multan
3
2
Okara
4
3
Rawalpindi
4
5
Gujrawala
2
4
Sindh
Karachi
5
10
Hyderabad
4
2
Nawabshah
3
2
Sukkur
4
2
Continued…

Location
No. of structured questionnaires
Freight services
Passenger services
NWFP
Peshawar
4
3
Abbotabad
4
2
Balochistan
Quetta
4
3
Federal area
Islamabad
4
1
Total
68
44
Sigma total
1125
Source: Primary data analysis
7. A staged sampling procedure was implemented. To begin with, FBS estimates were used to identify the proportion of respondents coming from freight and passenger services. The higher number of respondents from the freight industry is an indication of its greater relevance to commerce activity in the country. The FBS also identified the specific cities/towns for the survey. Within each identified location, respondents were selected using the snowballing technique, keeping in mind the need to conduct the exercise in multiple markets within a selected city as well as to ensure variation among the size of the firms interviewed. A random sampling technique was not feasible, as no ‘universe’ for the transport sector exists for any of these locations. Moreover, the diversity of the selected locations and the transient nature of most transporters (especially those without any physical hub) would have made mapping a cost-prohibitive exercise.
8. Information requested from the respondents covered all aspects of the stipulated terms of reference for the report. Specifically, we tracked information on the following:
 Skill and education level
 Structure of the firms
 Ownership details
 Size of the firms
 Type of vehicles
 Level of automation
 Employment details
 Firm expansion
 Estimates of price, cost, profit margin, and volume for both passenger and freight services
 Time estimates
 Share of revenue from various services
 Regulatory framework
 Competition in the industry
 Asset information
 Availability of capital and financing
 Use of credit
 Investments
 Banking and accounting procedures
 Constraints and drivers of growth
 Road infrastructure
 Role of the government
 Zoning restrictions
 Rent control
 Contractual arrangements
 Payment arrangements
 Property rights
 Law and order
 Losses and dispute resolution
9. The quality of the data obtained from the above exercise was fairly weak. This is common for most transport surveys of this nature in Pakistan. The fact that an overwhelming majority of the road transport sector forms part of the informal economy prompts transporters to avoid providing insights into information relating to prices, costs, and revenues. While we managed to obtain enough information on governance and institutional concerns to conduct a
5 The sigma total is higher than the sample size since 12 respondents dealt both with passenger and freight services.

robust statistical analysis, the survey revealed little on the volume, costs, profit margins, and revenues of individual enterprises. Since this information was critical for our analysis, we ended up using an existing primary data set collected from transporters of coniferous timber for 2004-05 and 2005-06. The data contains variables dealing with price, costs, and profit margins for the major timber routes in the country. The sample size for the data set was 62, which was representative of the timber industry in Pakistan. A total of 5 hubs of timber trade in the country were surveyed. As with the data set collected specifically for the domestic commerce exercise, respondents for the timber survey were selected through snowballing.
10. A statistical analysis was conducted on the primary data using the SPSS software. Basic descriptive statistics for all variables included in the survey questionnaire and cross- tabulations for several indicators were generated. The entire data set was treated at various levels of aggregation. We used three base variables: passenger services, freight services carrying agricultural goods, and freight services carrying all other (non-agricultural) commodities.6 Analysis was conducted for the aggregated national data, as well as at the provincial level (for Punjab and Sindh only). These statistics have formed the basis for the discussion of the road sub-sector in this document. We have tried to highlight variations among our base variables and/or among provinces where appropriate.
2.2 Data Reliability
11. The actual response ratio is much lower than expected. A number of ‘sensitive’ fields in the questionnaires were left unanswered. Out of the total sample, NWFP and Balochistan only contributed 9 and 6 responses respectively. While these results are included in the aggregated data at the national level, provincial data generated to capture inter-province variation was limited to Sindh and Punjab, where the respective number of observations were 34 and 50 respectively. Neither of the domestic commerce survey, nor the timber industry data set distinguishes between various types of vehicles, a shortcoming that impacts most of the quantitative estimations. Moreover, data on passengers does not generate any information on for-hire and rental transport. The entire road passenger analysis is thus confined to commercial services. Also, no information regarding tax regimes was obtained. In fact, we had to drop tax related variables after the pre-test.
12. Data on prices, costs, and profit margins is always to be interpreted cautiously, given the propensity of respondents to exaggerate costs and underestimate profits. Indeed, we have recorded a number of instances of net losses, which clearly are a result of false responses. Moreover, while we collected information for a total of 204 transport routes though the domestic commerce survey, the number of observations and the extent of data for minor routes were weak. We ended up dropping information for these routes. In the final analysis, we have only included the major transport routes for commercial goods and passenger traffic in the country. The final selection of routes is entirely a function of the extent of information available for each one of the major routes.
2.3 Rail, Aviation, and Ports
13. Sections on the rail, aviation and ports sub-sectors primarily draw on secondary literature. Information from key informant interviews was only utilized to substantiate existing information and fill any gaps. Owing to the small number of interview respondents, information from secondary literature was treated as sacrosanct wherever the two sources of information tended to contradict each other. Interview respondents were selected purposively,
6 Any enterprise found to be carrying agricultural goods majority of times was considered an ‘agricultural transporter’.

using relevance of respondents to the required information as the selection criteria. The table below details the number of interviews conducted for each sub-sector.
Table 2.2: Interview details for rail, aviation, and ports sub-sectors
# of interviews
Location
Rail
8
Lahore, Islamabad
Aviation
3
Karachi
Ports
11
Karachi, Lahore

Section 3
Transport Indices
14. Before this study, no indices of the transport sector existed in Pakistan. This is largely
a result of lack of required data to develop such indices. While overall output figures exist,
the per unit prices, operating revenues and expenditures, and value added figures are missing
for one or the other sub-sector. Data on road transport, which is the mainstay of the sector, is
the most scant. In some cases, while data exists, it is not disaggregated to the necessary level.
While we have managed to prepare an output index, only weights have been computed for the
value added and price indices since no time series data for value added and prices for
previous years is available.
3.1 Output index
15. We have used the Laspeyres fixed-weighted index to derive our results7. Three
separate indices have been generated: the total transport output index, the passenger output
index, and the freight output index. Relative weights for the index have been computed using
operating revenue estimates for passenger and freight services. Data was available for rail,
but had to be computed for road. The aviation sector has not been factored into the index.
While data on the operating revenue of the air sub-sector is available, but it does not
differentiate between domestic and international output. Data on price per unit, the other
necessary variable to calculate relative weights (in the absence of revenue information) is
altogether missing. Nonetheless, since aviation’s total share in the transport sector is less than
one percent, its omission should have no significant impact the final index.
16. To compute the weights for road, we calculated the price per passenger-km and ton-km
for passengers and freight services respectively from the primary data. Mean values for
number of passengers and tons were used to calculate the per unit price wherever such entries
were missing in the primary data. Then, using published output figures for each of the two
services, we arrived at their respective operating revenues (see annex 1 for an illustration of
the methodology used to compute per unit price estimates).
The formula for the Laspeyres index is as follows:
X
Q P
Q P
Q P
I i 0i
0 0
1 0 




=   1 01 2 02 3 03
1
Q P Q P Q P
X
 
7 The Lapeyres index is frequently used for intermediate sectors of the economy. Pakistan’s CPI is also
calculated using this index.

= 3
03
2
02
1
01 Q
X
P
Q
X
P
Q
X
P






 





 





=   1 1 2 2 3 3 W Q W Q W Q
where,
I= Index
P0= Base year price
Q0= Base year output
Q1, Q2, Q3= Outputs in other years
W1,, W2, W3= relative weights in the respective years
The relative weights computed for each sub-sector are provided below:
Box 1: Relative weights to compute output index
Road
Passenger 0.5101
Freight 0.4146
Rail
Passenger 0.0452
Freight 0.0301
Total 1.00
17. Using time series data on passenger and freight output for the road and rail sectors,
the following indices were generated. The base year was taken to be 2004-058.
Table 3.1 Total, freight, and passenger indices
18. The transport output index has grown steadily
over the past decade. The total, freight and passenger indices track extremely closely with
each other. This points to the similar growth patterns of the passenger and freight services.
Overall growth rates for transport were consistently high in the late 1990s. The year 2000-01
saw a drastic decline. Since then, growth has picked up gradually. Yet, the rate of increase in
the transport index since 2000-01 is much lower than average growth in the late 1990s.
8 While it is not usual to consider the last year computed in an index as a base year, we did not have the
required data for any of the previous years.
Years Total
Output
Index
Passenger
Output
Index
Freight
Output
Index
1995-96 67.28 66.67 68.77
1996-97 71.16 70.60 72.55
1997-98 75.49 74.90 76.97
1998-99 80.36 79.76 81.84
1999-00 85.30 84.64 86.98
2000-01 90.33 89.66 92.02
2001-02 91.10 90.14 93.51
2002-03 93.45 92.96 94.68
2003-04 96.59 95.94 98.20
2004-05 100.00 100.00 100.00
60
65
70
75
80
85
90
95
100
1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05
Total Transportation Index Passenger Transportation Freight Transportation Index

19. A very interesting relationship is witnessed between the output index and national
GDP growth. In the late 1990s, when GDP growth rates
had plummeted, the transport sector’s output growth was at
its peak. The situation has reversed completely since 2000-
01, where GDP growth rates have accelerated but increases
in the transport index have slowed down. The relationship
points to a lag in the movement of the transport index in
comparison with GDP growth. An analysis of the GDP
growth trends since the late 1980s suggests an average lag
of 3-5 years. Two complete cycles can be identified in the
past two decades. Relatively high growth rates in the mid
to late- 1980s and early 1990s were reflected in the
transport index post-1993-94 (not shown in the index). The
slump in GDP growth from 1996-97 to 2000-01 does not
impact the transport index till 2001-02. Also interesting is
the fact that the duration of an economic upturn or downturn in the past two cycles has been
approximately the same as that of the upward and downward movements of transport output.
Figure 1: Plot of GDP growth against transport output index growth (%)
0
1
2
3
4
5
6
7
8
9
10
1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05
Growth Rate GDP Growth
20. The trend in the increase in the output index can be used to predict future growth
patterns. We conduct a simple forecasting exercise for the transport sector’s output index till
2009-10. Two estimates are provided, the first without considering the lag, and the second
with the lag factored in. Forecasts are made separately for the total, passenger and freight
indices. While a static average of the last three years has been taken to forecast growth of the
total and passenger indices (without lag), for the freight index, a moving average of the last
four years has been used to compensate for the fluctuation in the past trend. Our forecasts
suggest that passenger services are likely to grow at a faster pace than freight services. Such a
trend is already underway, as confirmed by our survey results. The majority of the enterprises
transporting both goods and passengers have witnessed an increased share of revenues
flowing from passenger services in the past three years. Owing to minor difference in per unit
prices between freight and passenger carriers (see discussion on prices in section 3), this
could reasonably be expected to be a result of increased passenger volumes.
21. The dotted line in the chart below represents the potential change in the forecasted
growth trends were the lag element factored in. It has only been depicted for the total
transport index. The higher forecast comes from our expectation of an upturn in the transport
sector within the next two years. This is borne out of the fact that national GDP growth rate
Table 3.2: Annual growth rates
of transport output index and
national GDP
(%)
Year
Output
Index
growth
GDP
growth
1996-97 5.8 1.7
1997-98 6.0 3.5
1998-99 6.4 4.2
1999-00 6.2 3.9
2000-01 5.9 2.0
2001-02 0.8 3.1
2002-03 2.6 4.7
2003-04 3.4 7.5
2004-05 3.5 8.6

have been remarkably high since 2002-03. Given the average lag of 3-5 years, one should
witness an accelerated positive movement in the output index in the near future. The lagged
line has been included in the chart simply to indicate the higher growth trend. It has not been
calculated precisely. Time series data stretching back at least 5-6 complete economic cycles
is required to conduct such an analysis.
Figure 2: Forecast for output index movement
60
70
80
90
100
110
120
130
1995/96
1996/97
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
Total Transportation Index Passenger Transportation Index Freight Transportation Index
3.2 Weights for value added index
22. No value added index could be created owing to the lack of time series data on
operating revenues and costs for the transport sub-sectors. However, utilizing our sample
data, we have computed relative weights for the road sub-sector, using 2004-05 as the base
year. Both rail and aviation have been eliminated since cost estimates disaggregated by
passenger and freight services were not available. For road, total per annum revenue and
equivalent costs were calculated using per trip revenue and cost estimates and adjusting for
the number of trips conducted in a given year per route. The revenue and cost estimates (on a
per-km basis) were used to derive relative weights. These are provided in the table below:
Box 2: Relative weights for value added index
Road
Passenger 0.5285
Freight 0.4715
Total 1.00
23. As for the output index, the relative weight for passenger services comes out to be higher
than that for freight. However, the difference is quite small, suggesting comparable value added
potential of freight and passenger services.
3.3 Weights for price index
24. Only weights for the road sub-sector are generated to allow computation of a price index
in the future. Reasons to exclude rail and road, and for not being able to create an actual index are

the same as those stated in the discussion on value added weights. For the price index, the per km price for passenger and freight services is calculated using the sigma total of the price and distance traveled in our sample. The variation in tonnage and passenger volumes has not been considered owing to the lack of variation in our sample (with respect to unit passenger and freight volume). Weights for the price index are reported below:
Box 3: Relative weights for price index
Road
Passenger 0.5379
Freight 0.4621
Total 1.00
25. The weights are higher for passenger services in this case as well. However, the difference is even smaller than for the value added index. This is consistent with our per unit price estimates for freight and passengers generated from the sample data (see section 3). These have turned out to be similar.
3.4 Tackling scarcity of data in future attempts
26. The indices computed should be interpreted cautiously. Data sets have been combined, and in places mean values have been used to fill missing data. Lack of variation in the load factors of timber carriers (price and cost data has come from the timber industry data set) would have also skewed the weights slightly, although the impact is likely to be small. Moreover, the lack of accuracy of data on loaded weights, number of passengers, and the operating hours, might also have raised the error percentage marginally.
27. Since the domestic commerce survey is planned to be an annual exercise, there is a need to ensure that all relevant information is gathered annually. Nationally representative figures for revenues, costs, per unit prices, tonnage, average number of passengers by vehicle type, and other such variables needed for computing indices must be collected. A much larger data set should be gathered, with a proportionate mix not only between freight and passenger services, but also among the various sub-sectors within each service. It would be highly interesting to have a detailed index that distinguishes among agricultural, industrial and other commodity carriers. Passenger services could also be divided into inter-city and intra-city transport. Other such disaggregations could be thought of. Collecting such information will allow for the formulation of comprehensive time series data set over the years. Such data could also be used to generate other indices such as tonnage, among others.
28. Data on rail and aviation is also incomplete. Aviation data must be differentiated by domestic and international services. Currently, no such data exists for operating revenue and costs. In fact, only Pakistan International Airlines Corporation’s (PIAC) statistics are readily available, but those too are at an aggregated level. Moreover, there are no estimates for the per- unit price for domestic aviation services in the country. The same is true for rail, although rail services do provide operating revenues, prices and total output figures that are disaggregated for freight and passengers. No information is available for equivalent disaggregated costs however.

Innovative Development Strategies (Pvt)
18
Section 4
Road transport
4.1 Output
29. Road transport constitutes the backbone of Pakistan’s transport system. The road sub- sector comprises 96 percent of the total freight services and 90 percent of the total commercial passenger services in the country9. The following table provides the overall ton-kms and passenger-kms traveled by road over the past decade. The annual growth in output rates closely approximate the increase in the total transport index discussed earlier, thus pointing to the overbearing importance of road transport for the sector as a whole. The similar pattern of growth for passenger and freight industries over the stated period is also obvious.
Table 4.1: Total passenger and freight output for road
Year
Passenger traffic (Million Passenger-km)
% change
Freight
(Million Ton-km)
% change
1995-96
154,566
5.8
79,900
5.5
1996-97
163,751
5.9
84,345
5.6
1997-98
173,857
6.2
89,527
6.1
1998-99
185,236
6.5
95,246
6.4
1999-00
196,692
6.2
101,261
6.3
2000-01
208,370
5.9
107,085
5.7
2001-02
209,381
0.5
108,818
0.2
2002-03
215,872
3.1
110,172
1.2
2003-04
222,779
3.2
114,244
3.7
2004-05
232,191
4.2
116,327
1.8
Source: Government of Pakistan, Pakistan Economic Survey 2005-06.
4.2 Price, Cost, and profit margin estimates
4.2.1 Freight services
30. An analysis of the price statistics on commercial goods transport shows some interesting features. The mean prices for the major transport routes highlight two facts worth noting. First, there is a substantial difference between inward and outward rates. For example, the inward movement from Karachi to Lahore costs PKR 57,000, while the mean outward charge for the same route is PKR 27,500, an amount less than half of the inward costs. Second, such a difference is only applicable to the port city of Karachi. Goods transported to other border towns like Quetta, from where part of the trade between Pakistan and Afghanistan and the Afghan Transit Trade (ATT) facility flows, does not experience such variations in transport charges. The mean charges for Quetta-Lahore and Lahore-Quetta for instance, are almost the same. In absolute terms, the per ton per km prices in Pakistan turn out to be extremely low.
9 Government of Pakistan, Pakistan Economic Survey 2005, 2006.

Table 4.2: Freight prices for major routes
PKR
Routes
Mean price
Price/ton/km
Peshawar to Rawalpindi
7000.00
1.14
Peshawar to Lahore
8945.00
0.57
Peshawar to Karachi
18666.67
0.30
Peshawar to Quetta
22666.67
0.38
Lahore to Karachi
27500.00
0.58
Karachi to Lahore
57000.00
1.19
Lahore to Quetta
40000.00
0.90
Quetta to Lahore
41000.00
0.92
Karachi to Rawalpindi
58000.00
1.38
31. It is important to mention that our results are somewhat lower than existing estimates. To some extent, the difference could be attributed to our data set being specific to softwood transport, where load factors on average are higher than other industries. Still, our estimates are realistic for two-axle and three-axle rigid trucks, which constitute two thirds of the entire truck industry. In order to confirm the accuracy of our findings, we conducted a simple verification exercise in Rawalpindi, Lahore, and Jehlum, and found out estimates to be fairly precise for trucks carrying weights between 35 and 50 tons.10
32. Transporter costs for goods per route are fairly low as well. What is interesting to note is that even in the case of costs, there is a marked difference between inward and outward traffic from and to Karachi. While counterintuitive, such a scenario is largely a result of the additional costs associated with heavily-loaded vehicles traveling inward. As the majority of the outward traffic moves with lower load factors, bribe costs, permit fees, overloading fines, and fuel costs are lowered substantially. Among the various costs incurred on all routes mentioned, data suggests that on average, fuel costs constitute a staggering 63.49% of the total costs incurred per trip. This proportion has increased in recent years owing to the hike in fuel prices.
Table 4.3: Freight transporter costs for major routes11
PKR
Routes
Mean cost
Cost/ton/km
Peshawar to Rawalpindi
4500.00
0.73
Peshawar to Lahore
6990.00
0.43
Peshawar to Karachi
16000.00
0.25
Peshawar to Quetta
18333.33
0.30
Karachi to Lahore
43333.33
0.91
Quetta to Lahore
18000.00
0.40
Karachi to Rawalpindi
40000.00
0.69
10 We simply contacted a handful of transport services in the three cities to get price quotes for the routes included in this analysis. The cities were not selected through any sampling procedure since our objective was only to roughly confirm our estimates.
11 The routes mentioned here are less than those mentioned in table 4.2 (prices) since we could not acquire complete information for all routes.

Figure 3: Fuel costs relative to total cost (%)
0%
10%
20%
30%
40%
50%
60%
70%
Fuel costs Other costs
33. Naturally, the gross profit margin reflects the trends in the prices and costs of freight
transport. Consequently, the profit margins on inward routes are relatively high. Margins on
relatively shorter routes such as Peshawar-Rawalpindi, and outward routes are substantially
lower. The profit/ton/km for outward routes is minimal. On the Peshawar-Karachi (outward)
route, the profit/ton/km is lower than the profit margin for the Karachi- Rawalpindi (inward)
route by a factor of 17.
Table 4.4: Profit margins estimates for freight carriers (PKR)
Routes Mean profit margin Profit/ton/km
Peshawar to Rawalpindi 2500.00 0.40
Peshawar to Lahore 1955.00 0.12
Peshawar to Karachi 2666.67 0.04
Peshawar to Quetta 4333.33 0.07
Karachi to Lahore 13666.67 0.29
Quetta to Lahore 23000 0.52
Karachi to Rawalpindi 18000 0.31
4.2.2 Passengers
34. Passenger fares (prices) are fixed and do not vary between inward and outward traffic.
The per passenger fares reflected here are mean values for a variety of transport vehicles12.
However, as the data shows only buses with seating capacity of more than 30 were captured
in the sample. This is because most of the routes we have considered are above 400 kms in
distance and thus involved larger vehicles. The price/passenger/km estimates fall within the
lower and upper bounds of the price/ton/km for freight for the same routes. However, there is
less variation in per unit passenger fare estimates across routes than was witnessed for
freight.
12 While ideally one would have liked to see these differentiated by seating capacity of vehicles, we have not
managed to obtain information at such a disaggregated level.

Table 4.5: Passenger fares for major routes (PKR)
Routes
Mean
Price/Passenger
Mean
Price/Passenger/Km
Karachi To Rawalpindi
1000
0.64
Karachi To Muzafarabad
1000
0.59
Peshawar To Lahore
250
0.57
Quetta To Karachi
500
0.70
Rawalpindi To Lahore
220
0.80
Rawlapindi To Peshawar
75
0.45
35. Our cost estimates have clearly suffered from respondent bias, as at least two routes are showing a net operating loss. The only reasonable estimates available are those for Karachi-Rawalpindi, Karachi-Muzaffarabad, and Rawalpindi-Lahore. Per passenger costs incurred by transporters as a percentage of the per passenger fares charged are much lower for longer routes. Consequently, the longer routes have substantially higher per passenger profit margins. This is reflected in the figures for profit margins/passenger/km.
Table 4.6: Passenger transport cost and profit margin estimates (PKR)
Costs
Profit Margins
Routes
Mean
Cost/Passenger
Cost/Passenger/Km
Mean
Profit /Passenger
Profit Margin/Passenger/Km
515.83
0.33
484.127
0.31
571.43
0.03
428.57
0.25
Peshawar To Lahore
273.81
0.63
-23.81
-0.05
Quetta To Karachi
714.29
1.00
-214.29
-0.30
150.79
0.55
69.21
0.25
Rawalpindi To Peshawar
70.71
0.42
4.285714
0.03
4.3 Time estimates
36. As is to be expected, the mean times taken for any given route are much lower for passenger vehicles than for commercial goods carriers. The former is higher by a factor of 1.5-2 for most routes. The average speeds of passenger vehicles fall in the range of 55-71 km/h, although the estimate for the Karachi-Rawalpindi route seems somewhat exaggerated given the poor condition of the roads in Sindh. Speeds of freight carriers average between 28 and 40 km/h. In absolute terms, these are extremely low. Our findings conform with existing estimates which point to Pakistan’s transportation times over long distances to be twice as long as the equivalent times in Europe or East Asia13. Average speeds for freight carriers in Pakistan are lower by a factor of 2 to3 than in Europe, where speeds approximate 80-90 km/h14. The Karachi-Rawalpindi route registers the highest average speeds for goods transport as well. This is despite the fact that traffic density on the N-5, the major transport
13 World Bank, “Unlocking Pakistan’s Potential”, Presentation on the Indus Trade Corridor, 2005.
14 World Bank, “Pakistan Transport Sector: Overview”, <http://web.worldbank.org/WEBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/EXTSARREGTOPTRANSPORT/0,,contentMDK:20699058~menuPK:869060~pagePK:34004173~piPK:34003707~theSitePK:579598,00.html> (accessed on 16 August, 2006).

link between Punjab and Sindh, is one of the highest in the country15. This anomaly begs further investigation.
Table 4.7: Estimates of times taken for transportation
Passenger
Goods
Routes
Distance
Mean time/route (hours)
Average speed (km/h)
Mean time /route
(hours)
Average speed (km/h)
1567
22
71.23
38.67
40.53
1709
27
63.30
275
5
55.00
Rawalpindi To Peshawar
167
3
55.67
5.75
29.04
Peshawar To Lahore
436
7.5
58.13
Lahore to Karachi
1292
45
28.71
Lahore to Peshawar
436
11.25
38.76
4.4 Characteristics of the Road Sub-sector
4.4.1 Road Network and Administration
37. Currently, Pakistan’s road network is 258,340 km in length. Approximately 165,762 km are of the high-type variety and the remaining 92, 578 km are of low-type variety16. Nearly 60 percent of the network is paved17. There are 14 National Highways (8,600 km), 5 motorways (767 km), and 2 Strategic Roads (207 km)18. The motorways and highways comprise only 3 percent of the total road network. However, 80 percent of the commercial traffic is dependent on them19. The 1,760 km Karachi-Lahore-Peshawar (M9/N5) serves as the main domestic artery.20 With regard to inter-city transport, the road section between Rawalpindi and Lahore along N-5 has the heaviest traffic.
Table 4.8: Transport density estimates (2005)
National Highway Code Road Section
Traffic volume
(No. of Vehicles)
Increase
2005/1995 (%)
Composition (%)
Car
Bus
Truck
N-5
Peshawar-Rawalpindi
12,827
1.31
39.1
25.2
35.7
Rawalpindi-Lahore
17,287
1.56
47.7
17.9
37.4
Lahore-Multan
8,080
1.01
28.6
16.1
55.3
Multan-Sukkur
6,814
0.75
9.8
9.6
80.6
Sukkur-Hyderabad
7,332
N.A.
19.6
12.0
68.4
N-25
Hub-Khuzdar
1,733
1.17
16.1
21.2
62.7
Khuzdar-Quetta
3,813
1.32
21.3
26.3
52.4
Continued…
15 Japan International Cooperation Agency (JICA), National Transport Research Centre and Ministry of Communications Government of Pakistan, “Pakistan Transport Plan Study in the Islamic Republic of Pakistan. Final Report”, Nippon Koei Co., Ltd. Almec Corporation, 2006.
16 Government of Pakistan, Pakistan Economic Survey 2005-06.
17 Japan International Cooperation Agency, 2006.
18 Ibid.
19 Government of Pakistan, Pakistan Economic Survey 2005-06.
20 Asian Development Bank, “Proposed Multitranche Financing Facility and Loan to Islamic Republic of Pakistan: National Highway Development Sector Investment Program”, Report and recommendations of the President to the Board of Directors, Project No. 37559.

National Highway Code Road
Section
Traffic volume
(No. of
Vehicles)
Increase
2005/1995
(%)
Composition (%)
Car Bus Truck
N-35
Hasanabdal-Abbotabad 8,112 1.46 44.7 34.0 21.3
N-40
Lakpass-Noshki 916 1.66 18.7 27.0 54.4
N-50
D.I.Khan-Zhob 238 6.46 22.7 23.9 53.4
N-65
Hacobabad-Sibi 2,997 1.03 14.7 21.1 64.2
N-70
D.G. Khan-Loralai 1,392 1.31 11.7 17.8 70.4
N-55
Peshawar-D.G.Khan 7,452 1.36 33.4 31.7 34.9
D.G. Khan- Jacobabad 1,924 1.09 11.7 23.5 64.8
Jacobabad-Hyderabad 1,353 0.49 30.6 39.5 29.9
Source: Japan International Cooperation Agency, 2006.
4.4.2. Structure of the Road Sub-sector
38. Large numbers of individual owners providing ‘for hire and reward’ services
dominate the trucking industry. Survey results depict that the vast majority of businesses are
organized as sole proprietorships. Partnerships, while less prevalent, are a more favored mode
of organization, especially of enterprises that transport non-agriculture commodities. Most
partnerships consist of enterprises being run by two individuals with a few businesses having
as many as four to five partners. Modalities for sharing of profits vary between distributing
profits according to size of investment of each partner and dividing gains equally. Majority of
the firms opt for the former. The mean percentage share of the biggest partner comes out to
be 32 percent. Property rights do not appear to be a problem. Ninety-three percent of the
respondents stated that the ownership of their vehicles was clearly defined.
Figure 4: Type of Ownership in the truck industry
85%
1%
11%
2%1%
Proprietorship(sole/one owner) 1 Partner 2 Partners 4 Partners 5 Partners
Source: Primary data analysis.

39. Majority of the businesses are small,21 employing less than 10 employees on average.
Yet, vast majority of firms employ full-time paid staff. Only 8 percent of businesses surveyed
had hired part-time personnel. None of these were large firms. An interesting revelation is the
relatively low number of family workers in transport enterprises, a highly unusual situation
for an industry that is predominantly informal in nature. The few family workers that are
present are crowded in small enterprises transporting freight. Passenger services tend not to
have family workers.
Figure 5: Relative size of firms in the road industry
0%
10%
20%
30%
40%
50%
60%
70%
Small Medium Large
Table 4.9: Type of workers in the transport industry (%)
Small Medium Large
Full Time 51.1 90.5 100.0
Part Time 7.6 9.5
Full time family workers 30.5
Part time family workers 10.7
Total 100.0 100.0 100.0
40. Firms in the road sub-sector have yet to fully embrace automation in their day-to-day
functioning. Hardly any enterprises currently use either a website or e-mail to interact with clients
and suppliers. A very small proportion of the firms use a computer regularly as part of their work.
This is interesting given the relatively high level of education of transport owners (see section on
“owners’ previous experience and skill level). It points to the fact that the make-up of the road
industry does not incentivize automated services in any way. Arguably efficiency gains are
comprised due to lack of automation.
41. There is also a significant gap between business services required by a firm and the actual
services being used. Engineering, legal, marketing and insurance services were cited as being
highly sought after. While enterprises largely fulfill their engineering and to an extent, legal
needs, marketing, insurance and accounting requirements largely go unentertained. Less than a
quarter of the firms develop an annual financial statement to summarize the operations of the
establishment. Companies engaged in transporting passengers are relatively more particular in
preparing financial statements. Punjab based enterprises turn out to be more organized than firms
in Sindh, as the per firm usage of such services is much higher in the province.
21 Small=<10 employees; Medium= >10<25employees; Large= >25 employees

Table 4.10: Gap between business services required and used Needed (% of respondents saying yes) Used (% of respondents saying yes) Engineering Services 63.4% 61.5 Legal Services 51.2% 41.0 Marketing Services 43.9% 26.8 Insurance Services 43.9% 20.5 Accounting Services 22.0% 5.1 Management consultants 19.5% 12.8 Information Technology Services 2.4% 0
42. Most transporters have no marketing mechanism to speak of. Word of mouth is by far the most predominant marketing tool used by the transporters. Only a few businesses use marketing agents. Majority of these are passenger services. As for the clients, most of them usually end up contacting the concerned transporter directly. Use of agents or transport ‘addas’(hubs) is not as common. This could be a result of a client being more comfortable with a previously tried transporter, or a way to avoid the small fee transport agents change for acting as middlemen. Responses were categorical in pointing to the absence of any organized database through which particular transporters could be accessed. However, many respondents maintained that large companies have an advantage due to a greater human and financial capacity. On an optimistic note, most enterprises are conscious of the need to streamline the communication modalities by developing standard operating procedures for the industry.
43. Interestingly, the role of the local transport associations turns out to be greater than expected. Almost three-fourths of the firms included in the survey were found to be members of transport associations. A higher proportion of Punjab based enterprises tend to be members of transport associations than their counterparts in Sindh. Transporters of agricultural commodities are more active in associations in their area of operation as compared with transporters of non- agricultural goods and passenger services.
44. The largely traditional patterns of organization of the transport industry are obvious from the above discussion. Such an industrial structure results in the lack of standardization of the quality of road transportation services. Existing literature suggests that clients in general receive a level of service commensurate with the amount they are willing to pay. Shippers of low-value goods are more price sensitive and depend on the less reliable services of the spot market. Clients shipping higher value goods usually tend to have formal arrangements22.
4.4.3 Composition of the Freight Market
45. As mentioned, road transport caters to 96 percent of freight traffic. The private sector is the dominant player and handles 95 percent of the total freight23. Ballast, gravel, stone, cement, fruit, fertilizers and wheat are the most important commodities in terms of tons transported by trucks24. The transport volume of fruit is the highest in terms of ton-kms25. The importance of basic manufactures and general merchandise has steadily increased over the years.
22 World Bank, “Pakistan-Transport Competitiveness in Pakistan: Analytical Underpinning for National Trade Corridor Improvement Program”, Energy and Infrastructure Operations Unit, South Asia Region, 2006.
23 Asian Development Bank, “Proposed Multitranche”, 2005.
25 Ibid.

Figure 6: Share of road freight trips by commodity type (%)
0
5
10
15
20
25
30
35
40
Agriculture, Food
& Animal
Mining &
Quarrying
Raw Materials &
Bulk
Manufactures
Fuel & Lubricants Basic
Manufactures &
General
Merchandise
1982 (NTRC-65) 1990 (NTRC-155) 1998 (NHA-1998)
Source: World Bank, “Transport Competitiveness”, 2006.
46. Despite the limited availability of refrigerated vehicles, perishable goods such as
fruits, vegetables, meat, eggs, and milk, among others are transported over long distances by
road26. Yet, the country’s true potential to trade fresh foods is severely undermined due to the
lack of an adequate temperature controlled transport system. The existence of specialized
haulage, customized to meet specific market requirements, while existent, only caters to a
miniscule percentage of consignments at the very high-end of the value ladder27. According
to survey findings, the incidence of loss or damage to perishable items is fairly high. The
majority of respondents declared that 10 percent of their consignments ended up having such
problems. Key reasons cited for the losses, in order of importance, were long travel times due
to poor transport infrastructure, poor packaging, unhygienic carrying conditions, and
inadequate facilities (temperature control, etc.). The concern about packaging is exaggerated
in the case of Punjab, as compared with Sindh.
Figure 7: Reasons for Damage to Perishable items
10%
17%
34%
39%
Inadequate infrastructure Unhygienic conditions
Long travel times due to poor transport Poor packaging
47. Lack of prevalence of insurance practices exacerbates the problems of transport
related losses in general. The industry lacks both cargo insurance and consequential third
27 World Bank, “Transport Competitiveness”, 2006.

party liability insurance28. Our survey points to a mere 10 percent of clients who have some
form of insurance coverage. Coverage is normally obtained through brokers or freight
forwarders. The option of holding the trucker responsible for damage/loss does not exist.
Consequently, shippers push for the need for freight transport operators to be registered as it
would assist in allowing carrier responsibility for cargo loss/damage and render them less
dependent on the brokers29. Interestingly, we found that in cases where insurance coverage
was obtained and a claim filed, no major problems in settling claims were experienced. In the
event of a dispute, the vast majority of enterprises utilize an informal resolution mechanism
or look towards the dispute resolution mechanism of the local transport associations. Only 12
percent of companies considered lawsuits as a viable means of settling their disputes.
Figure 8: Preference among available dispute settlement mechanisms
12%
41%
47%
Law suit Transport association has dispute
An informal mechanism is operational
4.4.4. Financing and Contractual Arrangements
48. Cash is the predominant mode of payment in the road transport industry. Only 33
percent of the enterprises buy their inputs on credit. The majority of transporters even buy
vehicles either solely on cash payment or through some combination of cash and credit. Very
few companies were found to have purchased vehicles solely on credit. Companies based in
Sindh typically purchase more of their inputs on credit as compared with Punjab based
businesses. Likewise, companies that transport passengers purchase significantly more of
their inputs on credit compared with enterprises transporting commercial goods. As for the
payment modalities related to transporting consignments, the use of cash is equally
predominant. Nearly 85 percent of the respondents suggested that transport deals are paid for
in cash. A number of enterprises, which do conclude transport deals on credit, reported
problems with clearing credit dues. Majority of businesses usually have to wait for an
extended period of time to clear credit accounts.
Table 4.11: Mode of payment of transport deals
Percent
Cash 86.6
Credit 11.3
Other 2.1
28 Ibid.
29 Ibid.

Table 4.12: Average time to have credit cleared? # of Days Percent 1 thru 8 40.0 10 thru 18 22.2 20 thru 30 26.7 45 thru 60 11.1 Total 100.0
49. As for arrangements to transport goods, various forms of contractual modes are functional in the industry.30 Companies based in Punjab typically engage in contract arrangements more often Sindh based enterprises. Almost 50 percent of contracts are simply statements written on plain paper and signed by both parties. Other contract forms include receipts, arrangements written on stamp papers and signed by both parties, witnesses included in the contract, ‘bilty’, and verbal agreements in the presence of witnesses. In addition, a small minority of firms still operate without any contract arrangements what so ever. The latter is usually confined to arrangements between clients and transporters with an established professional relationship. In cases where no contract exists, the transaction is certified by paying in advance, or based on a system of honor where a mutual verbal understanding holds sacrosanct status.
50. Most transporters are enthusiastic about the ability of contracts to protect them from being cheated or to allow them to challenge any dispute through the legal system. Other risk mitigating factors focus mostly on informal social linkages between actors within the sector. These include obtaining references before trading with a client and holding agents responsible for ensuring payments. Transporters tend to rely heavily on the reputation of clients.
Table 4.13: Respondent views on Various Contractual Statements Strongly agree Agree Disagree Strongly Disagree Must rely on the reputation of those I enter into agreement with 49.5% 40.7% 9.9% A contract will protect me from being cheated 24.2% 56.0% 19.8% The legal system will uphold my contract and property rights in business disputes 12.1% 58.2% 27.5% 2.2% People from other community/biradari groups are more likely to cheat me 6.6% 31.9% 52.7% 8.8% People from other cities are more likely to cheat me. 8.9% 26.7% 54.4% 10.0%
4.5 Determinants of Growth in the Road Sector
51. According to the survey results, 96 percent of transport enterprises observed an expansion/improvement in their business over the last year. A greater proportion of passenger services reported to have expanded. Forty-four percent of the large enterprises in the transport industry have branches in more than one location with most operating in either the same town/city or in a different town/city of the same province. Within the past twelve months, 26 percent of enterprises invested in their companies, a reasonably high figure for a largely
30 Responses received on survey questions relating to contractual arrangements focused on freight only. Passenger services are thus not addressed in this discussion.

disorganized sector. The confidence in the sector and the potential for further growth is
reflected in the fact that 70 percent of enterprises are operating at full capacity. Clearly, a
number of ‘push factors’ must be at play to ensure the remarkable growth in the road sub-sector.
Our analysis points to infrastructure development and a competitive environment as
key drivers of growth. Certain aspects of these drivers however, can also act as constraints in
some cases.
52. Quite to the contrary, empirical results also point to the presence of several constraints
that have prevented the sector from reaching its full potential. All respondents pointed to the
presence of major hindrances to growth in the sector. The most important constraints
highlighted include the taxation and regulation system (licensing, permits, etc), law and
order, lack of access to finance, quality of public services (electricity, communications), and
corruption. Others that are obvious from literature are the low education/skill levels of
enterprise managers and miscellaneous governance concerns. In the discussion below, we
discuss the positive and negative determinants of growth, and the role each one plays in the
road sub-sector. We only focus on factors for which information was either generated through
the domestic commerce survey or sufficient knowledge could be borrowed from existing
literature.
Figure 9: Key Constraints to Growth
0%
5%
10%
15%
20%
25%
Taxation and
regulation
systems
Quality of
public
services
Lack of
access to
finance
Lack of clear
regulations
for property
rights
Corruption Law and
order
situation
4.5.1 Infrastructure Issues
53. Pakistan’s road infrastructure development has been remarkable in some ways. The ever
expanding road network and the relatively better infrastructural conditions, as compared with rail
have played a significant role in the rapid increase of road traffic. Pakistan’s Normalized Road
Index31 of 415 is amongst the highest in the world32. One positive major development has been
the dualization of a significant proportion of the national highway network, which has facilitated
freight movement tremendously.
31 The Normalized Road Index attempts to gauge the adequacy of the stock of paved roads in a country at a
given level of development. Normalizing variables consist of population, population density, per capita
income, urbanization and regional characteristics. The Index has been developed by the World Bank and is
reported in the World Development Indicators.
32 World Bank, “Pakistan Transport Sector Assistance Strategy Note”, Report No. 24354-PAK, Energy and
Infrastructure Unit, 2002.

54. Road infrastructure in the rural areas, which is key to ensuring farm-to-market access, has improved significantly as well. In absolute terms, rural road expansion, averaging over 2,000 km annually in the last two decades, depicts that Pakistan has made significant progress in connecting rural areas with the rest of the country33. A cross-country comparison of rural roads accessibility ranks Pakistan favorably.
Table 4.14: Cross-country comparison of rural accessibility
Country
Rural Access Indicator (%)
Year
Bangladesh
37
2000
Ethiopia
27
1998
India
69
2001
Indonesia
94
2003
Nepal
14
1995
Pakistan
80
2002
Vietnam
73
1997
Yemen
50
1998
Source: Essakali, 2005.
Note: A higher percentage reflects greater rural accessibility
55. The 2001-02 Pakistan Integrated Household Survey (PIHS) shows that 85 percent of the rural population has access to all-weather motorable roads, while 91 percent of the population has motorable access.34 Paved access however, is only available to one third of rural population. Out of the four provinces, Punjab has the highest access rate35. Seasonal inaccessibility is not a significant constraint for most parts of Pakistan either. The extreme roughness of driving over rocky terrain and the challenges of driving through sand however, raise inaccessibility and add to time and cost estimates. One other concern is that provincial disparities notwithstanding, the nearest transport service, on average, lies 8.2 km away from a village36.
Table 4.15: Transport Access and Service Availability in Rural Pakistan.
Proportion of
rural population
with all-weather
motorable
access
(%)
Proportion of
rural
population
with
motorable
access
(%)
Proportion of
rural
population
with paved
access
(%)
Proportion of
rural population
with bus/wagon
stop within
village
(%)
Average distance to
bus/wagon stop for
rural population
without stops within
village
(km)
Punjab
91 (92)
95 (95)
76 (78)
66 (66)
3.8
Sindh
84 (85)
86 (86)
63 (63)
83 (83)
4.1
NWFP
80 (82)
86 (88)
68 (70)
62 (63)
5.7
Balochistan
72 (64)
86 (84)
27 (23)
74 (69)
30.9
Other regions
57 (58)
84 (80)
31 (29)
69 (73)
4.9
Pakistan
85 (81)
91 (89)
68 (62)
69 (70)
8.2
Source. Federal Bureau of Statistics, PIHS 2001-02. Numbers in () show data for communities or villages instead of population.
56. Despite the reasonably optimistic outlook, one cannot be oblivious to the need to further enhance rural-urban connectivity. The overbearing importance of adequate rural transport infrastructure is evident from its correlation with access to health and education services.
33 M.D. Essakali, “Rural Access and Mobility in Pakistan: A Policy Note”, Transport Note No. TRN-28, The World Bank, Washington, DC, 2005.
34 Federal Bureau of Statistics, Government of Pakistan, “Pakistan Integrated Household Survey 2001-02”, Statistics Division, 2002.
35 Ibid.
36 Ibid.

Table 4.16: Selected Human Development Indicators and Road Access (%)
Indicator
Villages with all-weather
motorable roads
Villages without all-
weather motorable roads
Girls Net Primary School Enrollment Rate (NER)
41
27
Bovs Net Primarv School Enrollment Rate (NER)
56
49
Females Literacy Rate (10 years and above)
23
13
Males Literacy Rate (10 years and above)
53
44
Immunization Coveraqe
54
46
Contraceptive Prevalence Rate
19
12
Pre-natal consultation
28
14
Births assisted by skilled attendant
58
39
Births at home
85
91
Post-natal consultation
7
5
Source: Essakali, 2005.
57. While quantitative expansion is being undertaken aggressively, the added liabilities stemming out of increased maintenance requirements have not kept up with the rate of expansion. Several highway projects have been undertaken without a corresponding rise in maintenance expenditures. As a result, significant backlog of maintenance work has caused a loss of highway assets and has necessitated major rehabilitation or new construction. It is estimated that 50 percent of the National Highway Authority’s current network requires major rehabilitation, a task that will cost PKR 35 billion37. A welcome development in this regard is the recent shift in the focus of the road development strategy from increasing the network to expanding the capacity and enhancing the quality of the current network.
58. Lack of adequate maintenance of road infrastructure causes tremendous losses in terms of time and monetary costs. Interestingly, our empirical findings suggest that freight carriers view the state of road infrastructure more favorably than passenger carriers, with most goods carriers terming the road infrastructure as ‘good’ or fair. The relatively negative perception of the passengers could be attributed to the respondents who manage intra-town travel services only. They have rightly pointed to the poorer conditions of intra-town infrastructure as compared with inter-city highways. Poorer conditions are accentuated within small rural towns. Notwithstanding, almost all respondents (both freight and passengers) suggested that maintenance problems did add to the carrying cost for enterprises. Average time lost for non-agriculture goods carriers is highest at 4.7 hours per trip. The equivalent time losses for agricultural goods and passenger services are 4.2 and 3 hours per trip respectively. These figures do not reveal much except to establish significant time losses since ‘trips’ are not specified in length. Given the relatively high mean loss times however, one could safely assume that these represent long-range distances.
37 World Bank, “Highways Rehabilitation Project,” Project Appraisal Document, Report No. 27281-PAK Energy and Infrastructure Sector Unit, 2005.

Figure 10: Perception of state of the road network (% of respondents)
0
5
10
15
20
25
30
35
40
45
50
Excellent Good Fair Poor
Passenger Non-Agriculture Agriculture
Figure 11: Average time lost due to condition of roads (hours/trip)
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
Passenger Non-Agriculture Agriculture
59. Losses in terms of time and costs are exacerbated by the aging trucking fleet in the
country. The restrictive industrial and import policies relevant to the road transport sector
have impeded the modernization of the trucking industry. Although local production benefits
have accrued from such restrictions, they have ended up undermining the potential for
transfer of new technology and modernization of the fleet.38 Currently, load capacities of
trucks are increased multifold by modifying truck bodies and axle weights in factories in
Pakistan. Moreover, a common complaint of shippers is the periodic shortages in the
availability of trucks, which is partly a result of increased demand, but partly of the
frequently breakdown of vehicles. The import of used trucks, even 2-axle and 3-axle trucks,
albeit with age and/or other restrictions, is an urgent need.39 Interestingly, the situation is
quite the opposite with regard to passenger services, where the bus fleet, especially that
hauling longer distances has been modernized in the past few years.
38 World Bank, “Transport Competitiveness”, 2006.
39 Ibid.

The State of Domestic Commerce in Pakistan Study 7 - An Overview of the Transport Sector

The State of Domestic Commerce in Pakistan Study 7 - An Overview of the Transport Sector

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to The State of Domestic Commerce in Pakistan Study 7 - An Overview of the Transport Sector

Similar to The State of Domestic Commerce in Pakistan Study 7 - An Overview of the Transport Sector (20)

More from idspak

More from idspak (20)

Recently uploaded

Recently uploaded (20)

The State of Domestic Commerce in Pakistan Study 7 - An Overview of the Transport Sector