Pakistan’s cargo industry in despair due to rising fuel prices and suspension of large-scale international flights
Pakistan’s shipping and cargo industry has faced turmoil since the outbreak of COVID-19, but the large-scale suspension of international flights and soaring fuel prices have further exacerbated the industry’s suffering. Although the National Transport Policy 2018 and the National Freight and Logistics Policy (NFLP) 2021 set out clear guidelines for stakeholders, the Pakistan International Freight Forwarders Association (PIFFA) has flagged the economic difficulties of around 600 companies freight and logistics, Dawn reported.
The shipping and freight industry is the driving force of the international economy. According to the United Nations Conference on Trade and Development, 80% of the volume of world trade is handled by sea. The transport of technological paraphernalia, foodstuffs, raw materials and general goods is impossible without the appropriate facilitation of the transport network.
But Pakistan’s freight transport industry has been facing turmoil since 2019. According to the latest World Bank statistics for 160 countries, Pakistan ranks 122nd in terms of Logistics Performance Indicators (LPIs), lower even in Sudan and Congo, which are a little higher. LPI scores, Dawn reported.
The LPI mechanism largely depends on six decisive parameters: the efficiency of customs clearance, the uprightness of trade infrastructure, the fair pricing of shipments, the quality of logistics services, the guarantee of shipment tracking, and the standards of shipment delivery. The performance of Pakistan Trade Development Authority carries a big question mark as trade promotion is subject to infrastructural developments.
Second, Pakistan Customs seems responsible for not simplifying customs clearance procedures. Unnecessarily long customs clearance procedures discourage importers. Third, very few freight forwarding companies in the country have operational shipment tracking systems in place. Finally, the non-existence of the shipping price determination system coupled with soaring fuel prices is pushing the industry towards regression.
The difficulties faced by the freight sector have increased, particularly in the wake of Covid-19. The large-scale suspension of international flights has upended traders’ aspirations, The Dawn reported.
According to the PIFFA survey in this regard, 71% of participating freight companies reported no benefit from the incentives and relief measures offered by the government. A massive loss of income was revealed by 96% of participants. Similarly, 70% of freight companies have either compressed or suspended their operations in 2020-21. Additionally, approximately 77% of freight companies experienced reductions in overall sales volume. It left cargo shipping units with little cash, leaving no room for a quick recovery of the industry.
The involvement of a large number of parties in the logistics sector poses yet another challenge. Freight forwarders seek centralized control over the system, from booking shipments to delivering to the correct destination. There is no established mechanism for freight companies to trust sub-agents, traders, carriers, warehouse managers and cargo inspectors. Anything could happen with the goods en route, the Dawn reported.
Meanwhile, in the current economic situation, acquiring Letter of Credit (LC) facilities from international banks has harassed Pakistani importers. Foreign banks ask for one hundred percent cash margins for opening LC. This shows that the volume of imports will further tighten, which will reduce the revenue of freight forwarders in the future. (ANI)
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