Speaking in October 2007, Prime Minister Shaukat Aziz told a delegation of visitors from Central Asia
that Pakistan was seeking to improve transport and logistics links with China, Kyrgyzstan and
Kazakhstan. Under the National Trade Corridor (NTC) initiative, his government was seeking to overhaul
the entire logistics chain, physical connectivity and infrastructure, including expressways, railways,
shipping, ports, and airports to bring them up to international standards. Development of the trade
corridor through the new port of Gwadar and upcountry into China and Central Asia would help turn
Pakistan into a transport hub for the region. A ‘quadrilateral agreement’ between Pakistan, China,
Kyrgyzstan and Kazakhstan allowed the landlocked Central Asian states and Western China to have
direct access to China’s ports. In our newly-released Pakistan Freight Transport Report 2008, BMI
concludes that this will boost the freight sector. To take one indicator, we forecast that pipeline
throughput, measured in million-tonnes kilometres (mntkm), will increase by an annual average of 8.1%
in the next five years, up from 6.1% in the preceding half-decade.
The interplay of various factors, both positive and negative, underpin this forecast. Among the positives
are Pakistan’s expected strong rate of GDP expansion (an annual average of 6.8% is predicted for 2008-
2012) and rising energy needs, particularly for gas. Also important are the country’s strategic location
(between China and the energy sources of Iran and the Middle East), and the fact that important new
projects, such as the US$7bn Iran-Pakistan-India (IPI) gas pipeline, are in a relatively advanced state of
planning. Among the negatives are political unrest and uncertainty, freight congestion, under-investment
and a poor operating environment. Opposition from the US, tensions with India and disagreements with
Iran over gas prices could hold up the IPI project.
Looking at the freight industry across all modes, our forecast assumes that the country’s ports -
susceptible to bottlenecks and infrastructural delays - are able to cope with increased demand. On the
land transport side, we expect that the market share attributed to the railways is likely to diminish, as
there is no evidence of major investment in Pakistan Railway (such as network extensions). If it is to
regain a share of around 4% of the overall transport sector, the rail network will need to be rehabilitated
and maintained at a higher level than at present. Despite a general government pledge to look at
privatisation of the rail sector, BMI does not foresee significant progress along this route in the early part
of the forecast period. Road transport will remain the largest sector, accounting for approximately 85% of
all freight movements by the end of the forecast period. Taking all these factors into account, our forecast
for growth in freight carried across all modes, in mntkm, stands at an annual average of 10.2% during the
2008-2012 period.
Pakistan’s business environment reflects an economy that is currently expanding strongly, developing
closer ties with neighbouring India and opening up additional routes for the flow of people and goods,
and a global economy experiencing a relatively durable upswing. At the same time, Pakistan is a high-risk
environment, with weak transport infrastructure attempting to support the requirements of a population
that is still largely rural. Previous lack of investment in the transport system has left much infrastructure
in need of repair and accidents are relatively common. Pakistan scores below average for the Asia and
Pacific region. It scores well in terms of broad economic factors, its actual and forecast growth rate for
foreign trade and its forecast growth in freight transport through to 2012. According to our latest
estimates, the total value of transport and communications will rise to US$28.58bn in nominal terms by
2011, representing 13.2% of Pakistan’s GDP.
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