ISLAMABAD – Asian Development Bank (ADB) has pointed out major impedimentsin Pakistan’s competitiveness in cross-border trade, i.e time taken toclear the border, transportation cost, and cost incurred at borderclearance.

In its latest report titled “CAREC Corridor Performance Measurement andMonitoring Annual Report 2018″ ADB recommended reducing container dwelltime in seaports. The long dwell time at ports of Gwadar, Karachi, andQasim should be shortened to avoid losing competitiveness to nearbyseaports such as Chabahar.

Average crossing times at border-crossing point (BCPs) with Afghanistan(Chaman and Peshawar) are lengthy but have reverted to pre-2017 trends,showing improvement.

Corridor Performance Measurement and Monitoring (CPMM) data for 2018identified major inefficiencies, including a long dwell time at Karachiseaport, long delays at BCPs due to customs clearance, and relatively hightransport costs.

The report has recommended that domestic carriers, fleet operators,stevedores, integrated logistics service providers, and freight forwardersshould be included as active stakeholders in this process for acomprehensive private sector perspective.

It further recommended initiating a truck renewal program. The road sectoris dominant in Pakistan and road freight costs are high, leading toperennial problems of lack of access to capital and the trucking industry’slow profitability.

Despite the Ministry of Commerce recognizing in 2005 that freight andlogistics is an industry, little benefit was accrued to industry players,including access to low-interest financing enjoyed by other recognizedindustries. Domestic truckers also compete on price and resort tooverloading because of thin profit margins. As a result, truckers areunwilling or unable to renew and modernize their fleets: a policy-levelexamination of financing options and competition issues can address thisproblem.

The ADB also recommended reducing container dwell time in seaports.Seaports are Pakistan’s main gateway to global trade, with the ports ofGwadar, Karachi, and Qasim playing very important roles. Seaports also havea systematic impact on the time and cost of shipments, and addressingseaport-related issues could yield significant and immediate benefits.

The CPMM samples for 2018 showed that customs procedures in the Karachiseaport took 4-5 days, affecting throughput and resulting in long dwelltime, as well as creating other problems such as demurrage.

The ADB recommended examining the potential to increase Central Asiancountries’ international transit through seaports. The CPMM observed thattransit trade occurred mainly through the Iran-Turkmenistan-Uzbekistanroute, where goods then moved to Kazakhstan, the Kyrgyz Republic, andTajikistan.

However, there were no 2018 CPMM samples of similar movements acrossKarachi seaport. Policymakers should consider formalizing regional andinternational agreements, such as the Afghanistan-Pakistan Transit TradeAgreement (APTTA), the Quadrilateral Agreement on Transit Trade, andcompleting accession to international conventions such as the Contract forthe International Carriage of Goods by road.

The current shipment of agricultural products from Pakistan to Tajikistanis cumbersome, requiring different trucks in Afghanistan, Pakistan, andTajikistan due to a lack of transit agreements among the countries. It isalso important to develop PRC-Tajikistan-Afghanistan trade routes, whichwill facilitate transit from East Asia to South Asia.

Over time, Uzbekistan can attract trade and transit, such as shipments fromAfghanistan and Pakistan to Kazakhstan, which may, in turn, lead to tradediversion from sub-corridors. Policies and strategies to improve thecompetitiveness of the sub-corridor should be considered.

The report states that Afghanistan with its main transit trade gatewaysthrough BCPs with Pakistan is still facing serious delays. The bordercrossing at the Torkham and Spin Buldak BCPs, despite showing improvementcompared to 2017, remains time-consuming and costly.

Corridor 5 connects the PRC to the ports of Pakistan, traversingAfghanistan, the Kyrgyz Republic, and Tajikistan. A corridor of strategicpotential for connecting East Asia, Central Asia, and South Asia, progressis difficult due to geopolitical tensions, high altitude, andunderdeveloped infrastructure. All three sub-corridors move in north-southorientation and link to blue water seaports in Pakistan (Karachi andGwadar).

Corridor 5 is a time-consuming and costly passageway for cross-bordertransit. One main problem is that Afghanistan and Pakistan restrict accessto each other’s trucks, partly due to the stalled Afghanistan-PakistanTransit Trade Agreement 2010, which ended in 2015.

In addition, Afghan and Pakistani trucks can’t easily enter Central Asianrepublics due to security concerns and the lack of harmonized vehicle andtransit trade practices – factors that ultimately necessitate a change oftrucks at the borders.

The long dwell time of containers at Karachi seaport is also pertinent tothese delays: shipments from Karachi to Jalalabad average 10-14 days, withhalf of this time spent in Karachi seaports due to complicated customsclearance and port congestion.

Afghanistan has traditionally relied on Pakistan for imports and exports,using Karachi as the main gateway. However, there are two problems withthis approach: containers are not cleared quickly and typically take 5-7days to complete customs controls, and border crossing at Peshawar-Torkham(PAK-AFG) and Chaman-Spin Buldak (PAK-AFG) is time-consuming and costly.

Afghanistan has been actively diversifying trade routes such as viaChabahar, Iran to move goods to India due to these problems.