CPEC, Pakistan Agriculture News

Pakistan needs to update regulatory framework of trucking industry under CPEC

With the initial phase projects of CPEC coming online in the energy and infrastructure sectors, it has become imperative to keep a track of developments in the logistics aspect of CPEC as well, where a consistent picture has begun to form amongst industry players. In order to prepare for an anticipated boom in the trucking industry there has been a consensus amongst private sector operators that conformity of compliance and standards in the industry are essential if we are to prepare ourselves to benefit from an unprecedented influx of opportunities. With no Ministry of Transport in Pakistan, it is essential that the government takes measures to update the regulatory framework of the trucking industry if we are not to be swept away by a deluge of Chinese, Iranian and perhaps even Afghan truckers.

An improved regulatory framework for the trucking industry for governing the conduct of Pakistani truckers will improve performance of its adherents in the long term, because laws to protect Pakistani companies getting CPEC contracts will be in place, for example. Some shipping laws date back to the 19th century and still govern conduct within that mode of transportation.

With a majority of trucking firms operating informally, it should be noted that overloading is a threat to the long term prospects of the industry because additional weight plied on trucks ends up causing damage to roads which constitute the infrastructure upon which the industry operates in the first place.

Similarly, there is no database for drivers which may have had their services terminated, which results in them finding ready employment at another trucking company. A database of such drivers would not only create disciplinary standards but can also provide impetus for compliance of professional ones.

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The objective is to have an industry wide platform that makes Pakistani trucking firms formally regulated so as to ensure minimal compliance standards which will make them more competitive and hence ready for the deluge of opportunities that will result from CPEC. If Pakistani logistics firms operate along these higher standards they will be able to compete for lucrative contracts that will come about because, if not, they will risk losing them to foreign operators who will then be the only companies able to fulfill them.

If the Government of Pakistan is going to protect Pakistani firms and ensure they get the CPEC contracts, then it also has to ensure that their standard is raised so that a protected industry is also a competitive one. Compliant firms should not feel that their adherence to international standards is putting them at a financial disadvantage to non-compliant firms who take advantage of the non-enforcement of laws.

One avenue for growth under CPEC could be Pakistan’s accession to the TIR Convention that was signed in August 2015. It is a multilateral treaty that simplifies and harmonizes the administrative formalities of international road transport. After joining this treaty (full name – the Convention on International Transport of Goods under Cover of TIR Carnets) Pakistan will have access through multimodal transportation to China, Central Asia and beyond, hence opening a vertical corridor that would benefit regional and global trade and economies.

On the customs side new rules have been created and Pakistan Customs have upgraded their technological platform WeBoc for clearance of transit cargo under the TIR Convention which would allow for the transit of goods into Pakistan under TIR Carnet through Karachi, Gwadar, Taftan, Chaman, Sust and Torkham, all of which are registered by Pakistan Customs for handling of transit trade under the TIR Convention.

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In addition it should be noted that in January 2017 a guarantee agreement was signed bringing operation for the global transit system ever closer for Pakistan, demonstrating the required level of understanding reached by the main TIR players in the country paving the way for the system to start moving goods across Pakistan’s borders.
Having said so it should be noted that there are caveats to this convention, and unless proper rules are formed to guard national interests the industry could face difficulty. There could be a major influx of Iranian trucking companies, a leader in TIR usage, and other foreign competitors could create a seriously competitive situation in the market for cross border trade.

In addition to this the truckers will have to be very clear about their unique selling point. Currently there is a lack of a solid manufacturing base in Xinjiang province, the development of which will increase the amount of goods flowing out of Gwadar. Rail freight from eastern China till Kashgar is subsidized by the government hence there is currently limited scope for trucking along that corridor, meaning that the Kashgar-Gwadar corridor assumes prime importance.

Here however pricing will be important because sea freight from Shanghai to Karachi has similar pricing as road freight from Lahore to Karachi. As such the road transportation industry competition would be with sea freight rather than amongst road transporters themselves. It is essential therefore that the opportunities are understood well and our industry develops capability and capacity that offers them a seat at the table.Amongst Pakistani truckers it should be noted that the National Logistics Cell (NLC) has taken a lead in terms of lobbying for reform and promoting the national interest for the Pakistani trucking industry.

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It is looked up to within our industry as a market leader and as a division of the armed forces is ideally placed to sculpt our country’s future in road transportation.

In view of this NLC hosted the CPEC Logistics Conference at the Pak-China Friendship Center in Islamabad from July 12th to 13th this year, an event this author had the privilege to attend.

In addition to setting up manufacturing partnerships with European truckers such as MAN, NLC has also assisted private sector operators in their lobbying with key ministries for the promotion of aforementioned reform.
Indeed, it is a three way dialogue between government ministries, private sector and the armed forces that can ensure Pakistani truckers are prepared for the challenges and opportunities that will come our way through an influx of Chinese interest in our transportation infrastructure.

By Qasim Awan—The writer is a graduate of York University (Toronto) and holds a Master’s degree from Cass Business School at City University London. He is a part of the Supply Chain Advisory and E-Commerce Innovations teams at TCS, and is a keen observer of global and regional supply chain issues. Qasim is a certified Director from the Pakistan Institute of Corporate Governance and has also built the Ecom Solutions division at TCS.

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