The World Bank has identified poor infrastructure as a greater growth constraint for the country than the severe power crisis.

In its study, ‘Greening growth in Pakistan through transport sector reforms,’ the World Bank has said “present patterns in transport and trade logistics generate inefficiencies that are costing Pakistan’s economy roughly 4-6 per cent of GDP per year,” — a major constraint. The crippling energy crisis is retarding growth by 3-4 per cent.

With the transition to a new political administration, “trade and transport are likely to play a more significant role in the country’s economy, with its renewed desire to foster greater regional integration,” said the World Bank.

Prime Minister Nawaz Sharif is pushing his infrastructure development agenda. His mega projects are the Kashghar-Gwadar trade corridor with China; rail and road links with Afghanistan that go up to Central Asia, and the extending of railway tracks with Iran up to Turkey.

The transport sector constitutes 10 per cent of Pakistan’sgross domestic product and provides six per cent of the employment in the country. It plays an important role as an enabler of other sectors in the economy via facilitating agglomerations, domestic and international trade, and spatial transformation.

Pakistan’s performance on most logistical indicators, including the quality of trade and transport infrastructure, is worse than that of other Asian countries. The transport supply chain system is not providing the value-added services that have become the hallmark of modern logistics, such as multimodal systems that combine the strengths of different transport modes into one integrated system.

While the transport sector is functional, it suffers from low quality, long travelling times and poor reliability, particularly rail transport.

In addition, increased motorisation and poor urban planning have resulted in significant pollution and traffic congestion in urban areas, which reduces the competitiveness of exports, increases the cost of doing business, and constrains Pakistan’s capability to integrate into the global supply chain.

Geography has endowed Pakistan with the potential to reap huge economic gains from becoming a hub for regional trade. Central Asia, China, India and Iran are among the dynamic economies that Pakistan could connect to, but the government’s policy decision will be crucial to capitalise on this opportunity.

For example, the World Bank argues that granting of the most-favoured nation (MFN) status to India needs to be followed up with practical steps for an efficient payment system; a sensible trade policy that avoids excessive and unfair injury to Pakistan’s industry; trade facilitating government services; a sensible visa regime, and transport networks.

The trucking sector carries 96 per cent of the total freight traffic and is characterised by small fleet owners with generally less than five vehicles. The bulk of the trucking companies are centred in the port city of Karachi, where trucking tends to be concentrated within an ethnic community.

Meanwhile, over the last 20 years, revenues per kilometre have decreased in real terms by 1.4 per cent on average every year. Many trucks operate long hours and carry excessive loads, while travelling at low speeds of 20-25 kilometres per hour (kph), compared with 80-90 kph in Europe. Road freight takes an average of 3-4 days between ports and the north of the country, which is twice what it takes to cover the same distance in some other Asian and European countries.

Railways used to be the predominant mode of transportation in Pakistan, which, at its peak in the 1950s and 60s, handled 73 per cent of the freight traffic, compared to less than four per cent by 2011. Total freight and passengers carried decreased from 5,709 to 3,925 million tonnes (31 per cent) and from 84.9 to 58.9 million (31 per cent) respectively.

Currently, it takes 21-28 days for Pakistan Railways (PR) to deliver from port to upcountry, which is comparatively four to seven times slower than that in the United States and China respectively. PR’s main focus is on serving passengers rather than providing high-quality freight services, though it is more profitable.

Shipping lines in Pakistan handle speeds of 55-60 containers per ship-hour for the two ports, which is far below speeds of up to 100 containers per ship-hour in the region. Post-customs delays and lack of rail services and logistical facilities to take containers out of the port are major constraints. And while ship-shore container-handling speeds are up to the international levels, on-shore container processing time is more than twice as long as those at efficient international ports.

The World Bank argued that economic analysis using computable general equilibrium (CGE) model suggested a 10 per cent increase in total factor productivity (TFP) in transport would increase income of all households. Rural agricultural labourers and the urban non-poor can realise the largest benefits of such an increase, with their incomes rising by 1.4 and 1.2 per cent respectively.

However, an increase in the TFP in rail and road reveals that non-farm households and the urban poor can potentially be made worse off. Overall, the CGE estimates that improvements in total factor productivity in transport could adversely affect approximately 40,000 households in the rural non-farm non-poor sector, 12,500 households in the rural non-farm poor category, and 42,000 households in the urban poor category.

Efficient rail and road sections can increase both imports and exports, thus playing a critical role in increasing revenues from indirect taxes. A 10 per cent increase in the TFP of road and rail transport has a positive impact on economic indicators. In addition, economic simulations reveal that improvements in the TFP of the transport sector and its respective sub-sectors (rail, road, air and ports) have a positive impact on sectoral values and households.

However, the Bank pointed out that the scale and the sectors concerned with reforms in freight transport can have an impact on social tensions as well. In the case of ports and shipping, ethnic tensions have already arisen from the perception that recent recruitments favoured one ethnic group from communities in and around Karachi to the detriment of others.

In the case of the trucking industry, an ethnic group from southern Khyber Pakhtunkhwa (KP) owns, manages and works as employees in this industry, even in areas outside the province, making it the main group concerned by the reforms.

In the case of reforms in the port, shipping and trucking sectors, there is a risk that the youth could be affected either through direct retrenchment or indirect loss of jobs. Such reforms can also influence migration flux, patterns and composition at the national, regional and international levels by facilitating connectivity.