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While the Indian logistics sector is soaring high on the back of policy reforms, infrastructure developments, and favourable businesses conditions, India’s neighbour – Pakistan – is seeing its logistics companies grapple with low margins, high taxes, and an unfavourable business environment, thereby hindering their ability to contribute to the overall economic growth of their country.
India’s neighbouring nation is in the midst of an economic meltdown and has seen margins plummeting from 3% to 3.5% to a mere 1% to 1.25% in recent years. This drop, along with high expenses, poses considerable difficulties for companies, especially when competing with their global counterparts.
It is to be noted that, where on one hand the Sri Lankan logistics companies like EFL have established offices worldwide and India is welcoming MNCs like Apple to set up operations in the nation, Pakistan has failed to expand its local companies internationally, or even facilitate the entry of global companies into the nation.
Despite about 2000-3000 registered and non-registered logistics companies, the Pakistani logistics industry is witness to a substantial disparity in margins when compared to its global logistics counterparts. While global companies generate around 3.5% of their revenues, local companies typically generate less than 2.5%. And, this is at a time when Pakistan’s export is enjoying the positive effects of the devaluation of the Pakistani currency.
Currently, the export of commodities like rice, steel, pipes, and cement from Pakistan is enjoying an increased demand, however, it has not yet reached pre-pandemic levels. Now while the nation holds a positive outlook for the demand to rise further, supply chain challenges in the nation persist.
Unlike other nations, the companies in Pakistan have to pay higher interest rates, deal with inadequate investment and taxation systems, and deal with bureaucratic hurdles – all of which make it challenging for businesses to invest and grow both domestically and internationally.
The country lacks policy reforms that support local companies and enable them to compete globally.
Also, Pakistan still operates on traditional trucking fleets and has limited trade with neighboring countries.
To see itself at par with global counterparts, the nation needs to address the hurdles through policy reforms, system investments, and improvements in the overall ecosystem. In World Bank’s Logistics Performance Index for 2018, Pakistan ranked 122nd, and the 2023 Index does not list the country at all.
Logistics Insider Magazine July Issue 2023