Pakistan Road Logistic Sector

The logistics sector is a cornerstone of economic growth, productivity, and export competitiveness. Globally, it contributes to employment generation, resource allocation, and economic value addition. Logistics costs typically comprise 12–15% of GDP in developing countries, and 18–20% in developed ones. Efficient logistics systems promote industrialization and export diversification by reducing trade costs and increasing market access.

For Pakistan, logistics is particularly critical. While tariff reductions have limited impact on trade costs, logistics, such as transport infrastructure and customs efficiency, play a far greater role. Sectors like agriculture, mining, and heavy industry, which are highly logistics-intensive, stand to benefit significantly. However, transport effectiveness in Pakistan has been declining, posing a major hurdle to competitiveness.

The logistics sector contributes over 10.5% to Pakistan’s GDP and employs 5.4% of the workforce. However, performance of the sector is declining. High volatility and a sharp reduction in private sector investment indicate structural fragility. Roads dominate the sector, with a 501,169 km network overshadowing the 7,791 km of rail. Yet, Pakistan has only 300,649 registered trucks, vastly fewer than regional peers like India with 12.5 million trucks, highlighting critical infrastructure gaps. Currently, 94% of freight is moved by road, creating supply chain inefficiencies, congestion, and elevated costs.

Warehousing and cold-chain logistics are weak, with over 40% of perishables lost due to inadequate storage. Airports and railway stations lack cold storage, undermining the handling of temperature-sensitive goods. Institutionally, the sector is fragmented and governed by outdated laws, despite progressive policy frameworks like the National Transport Policy and the National Freight & Logistics Policy. Implementation however, remains sluggish.

The road logistics market is fragmented and dominated by small owner-operators, who constitute 85% of providers but hold less than 5% market share. These operators face challenges including outdated vehicles, lack of access to finance, and minimal professional training. Technology adoption is low, and many vehicles lack insurance and do not meet international standards, increasing operational risks. Overloading is a persistent issue, damaging infrastructure and increasing maintenance costs, while inefficient spatial planning increases costs for export industries dependent on imported inputs.

Traffic on Pakistan’s roads is expected to rise 40% over the next decade, worsening congestion and emissions. The road sector already consumes nearly three times as much fuel as rail, straining resources and accelerating environmental degradation.

While CPEC and CAREC have improved segments of the road network, investment in public transportation and industrial growth policy remains limited. The trucking industry lacks fuel-efficient, low-emission vehicles. With increasing emphasis on global green trade standards, such as the EU Green Deal, Pakistan risks export exclusion if emissions are not reduced. The Export Logistics Performance Index benchmark shows Pakistan scoring 2.3/5, representing a 54% underperformance compared to regional peers. The Logistics Performance Index (LPI) also declined from 2.42 in 2018 to 2.3. The main gaps are in sustainable logistics, supply chain efficiency, and cost. Sustainable road logistics show a 138% underperformance, primarily due to old trucks and weak environmental regulations. Outdated customs processes and informal vehicles prevent Pakistan from accessing key markets like China. Informal trucks evade regulations, increasing systemic costs and hampering access to premium trade routes.

Governance is fragmented, with multiple agencies managing roads, ports, and customs, resulting in siloed decision-making and poor coordination. The absence of a dedicated Ministry of Transport and Logistics has hindered past reform efforts like the National Trade Corridor Improvement Program. This results in selective enforcement of axle load rules and incoherent regulatory practices.

The state-run National Logistics Cell (NLC) dominates the sector, moving nearly 60% of the country’s crude oil. Despite its strategic role, NLC’s privileged position discourages private sector participation and innovation, leading to a monopolistic market structure.

Infrastructure deficits further hinder logistics efficiency. Dilapidated roads, inadequate warehousing, and the absence of modern vehicle support systems delay delivery and raise costs. Fleet renewal is constrained by high leasing costs and poor access to credit, locking operators into outdated practices. The segmentation of logistics into formal, informal, and quasi-governmental actors raises costs for compliant operators and fosters inefficiency. Pakistan needs a strategic reset through structural reforms, institutional strengthening, and targeted investments.

The prioritized recommendations include:

Institutional Governance and Financial Enablement

• Industry Status Notification: Officially designate trucking as an industry to unlock access to structured financing and leasing facilities for fleet modernization.
• Dedicated Ministry or Focal Body: Establish a unified authority to oversee multimodal logistics development and strategic coordination.
• Green Financing Access: Create concessional financing options for Euro 5-compliant, fuel-efficient trucks through public and private banking partnerships.
• Inclusive Financial Support: Develop financing schemes that enable small operators and new entrants to access credit, including through partnerships with NLC for training and onboarding.

Infrastructure Development

• National Highway Upgrades: Prioritize completion of key corridors like the Hyderabad–Sukkur Motorway and enhance highway security and maintenance.
• Port and Inland Warehousing: Develop advanced warehousing at ports and along main trade corridors, guided by a national master plan.
• Farm-to-Market Connectivity: Invest in critical missing road links to connect producers to export hubs, with a focus on rural areas.
• Digital Network Connectivity: Expand network coverage on key road corridors via the Universal Service Fund (USF) to support digital logistics systems.

Technology Adoption and Innovation

• Annual Awareness Forums: Introduce private sector stakeholders to global trends in logistics and digital platforms through annual national events.
• E-Governance for Permits: Launch an integrated online freight permit system to improve transparency and efficiency.
• Digital Tolling and Weighing: Establish centralized, tamper-proof weighing systems to reduce corruption and ensure regulatory compliance.

Capacity Building and Human Resource Development

• Driver Training Institutes: Create certified institutions to train drivers on safety, cross-border protocols, and international freight standards.
• Regulatory Workshops: Offer regular training for logistics managers and operators on leveraging government reforms and financial tools.
• Gender Inclusion: Pilot initiatives to train women drivers and set quotas for female participation, building on successful private sector models like Engro.

 

The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 100+) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about the PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk

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