National Trade Corridor:

PPP Opportunities

Public Private Partnerships in Transport & Logistics

Day 2, Session - 1, Jun 26, 2007

Amer Z. Durrani
South Asia Sustainable Development Unit
The World Bank
NTCIP and PPP in Transport & Logistics: a
challenge or an opportunity?

” By definition a L&T initiative

” Huge Financing Needs—therefore imperative that PPP
” GOP a demonstrated willing partner—port terminals, current civil
aviation policy
” Many options to choose from both in terms of range and type of
PPP—outright ring-fenced services operation concessions, tricky
infra BOT, even trickier ICT services concessions for public
revenue collection
” Beyond the ‘comfort zone’ but many unconventional PPP fruits
there for the picking—e.g., PACCS
” Provides a programmatic reform cover to within-NTCIP PPP
transactions
NTCIP has private-enterprise mindset—
cutting cost and gaining efficiencies
Reduce overall trade-related transport and logistics costs
thereby
” decreasing the cost of doing business
” lowering the indirect losses being incurred
resulting in
trade competitiveness and industrialization

[ Estimated Savings: Rs200-250bil/yr (>2% of GDP)—including Rs115-

145bil/yr in Highways, Trucking, and Railways; Rs27bil/yr in Ports; and,
Rs75bil/yr Trade Logistics
NTCIP covers the wide trade-supporting-
logistics domain..….

Aviation

Ports and Shipping Trucking/Road Freight

Industry

NTC
Highways
Energy Logistics

Railways
Customs and overall
Trade Processes
NTCIP players as numerous as links in the
trade-logistics-services-chain…..
 ……just look at the Road Freight Industry
alone!
EDB
PSQCA
M/o IP&SI

M/o Petroleum M/o S&T. NHA

NADRA
NLC
M/o Comm.
Truck & Bus Owners MVRDE
Assoc.
Salvage Sale of
M/o Defense Bedford Trucks
M/s Hino Pak
Local Manufacturers RFI
M/s Ghandhara
CBR
Old & Used parts
Nissan
Dealers Association
M/o Commerce
M/s Ghandhara
Industries
Truck Body Builders Environment
Masters Motors Associations Protection Agency
(EPA)
M/s Adam Motors BOI
Provincial Governments
Planning
M/s Afzal Motors Commission

Sind Engg. MVE

PACO (Yasoob) Enforcement

…..but broader coverage also means layers
and layers of issues and distortions…sort of
like peeling an onion

Adapted from Finnroads’ Pakistan WCM Study 2005

…and, early measures make clear the need for
trade-internal reforms for competitiveness
Read private sector gains….
FACT I:
Government-trade logistics contracts (the G2T markets) being
made more efficient by NTCIP but trade-trade contracts (the
T2T markets) not improved improving
FACT II:
Pakistan’s image as a poor supplier and processor are a
combination of production and supply problems—extra
pressures on logistics are expected to compensate for
delay in production and poor quality control

Resultantly Pakistan has a poor ‘Adds-on Index’ which implies fewer

opportunities for Pakistan when buyers make
‘where to buy decisions’
 T2T holds the key to USD 6.7 bil in savings vs.
the USD 0.5 bil through improved G2T…
Distribution of Savings due to In-House Logitics*
Potential Change in Index (division of savings per activity group) Savings
Transport - Capital Cost
Warehousing Shipping Inventory Adminstration USD mil
Procurement 4 5 1 980
Production Planning 5 1 1 785
Sales Order Processing 1 3 392
Receiving 1 98
Warehouse 15 2 2 1,868
Production 1 1 1 1 392
Pick & Pack 5 1 589
Shipment and Export (see
above) 470

Procedures, Management
& Quality (total) loss 4 1 2 4 1,083
TOTAL 6,657
 Basically, through the 90s GOP was
catching-up, to understand the trade….
Read private sector
 Read private sector

…now picture reversed—trade has to gear-

up to take advantage of the NTCIP efforts…

Pak
Government

Pak
Business
 …need new T2T and T2G partnership for
reducing T&L costs from 29 % to 9% by 2012!

STRATEGIC PLAN FOR

NTCIP Business Plan = TRADE SUPPORTING INFRASTRUCTURE & SERVICES

Transport Industrial Policy

Policy And all this has
to be achieved
Trade Policy
ICT Policy through
Agriculture Policy appropriately
designed and
delivered Public
Energy Policy Education Policy –Private
Partnerships
….if the private sector can handle this, NTCIP
offers a range of opportunities for PPP………..
ms Logitics

usto rds R Demand

C nda MV d
Sta VT, es an Logistics
I, M odi ions
Direct Contract Agents
V
M e B lat ce
ra d egu rvi ts Logistics
T R S e en . Broker
Ai greem …… ing
r
A …… Trad Logistics
s
…… onic orm
Supply

ctr latf
e
El P

Logistic
Contract
Operators Market Structure
Contract
 Pakistan’s Maritime and Ports’ sector offer an
established track-record in PPP……

◙ Terminal Concessions—KICT, QICT, PICT, …and others

emerging including green-field ones such as Kemari
◙ Cargo handling companies
◙ Development of port facilities including modal-exchange
terminals
◙ Maintenance of port facilities—dredging, piloting and tugs,
shipyards
◙ New Shipping Policy for re-emergence of Pakistan based private
Merchant Fleet
 …the Aviation sector’s opening and
progressive consolidation is imminent……

◙ PAX Air services already been through first cycle (Shaheen,

Aero-Asia, Bhoja, Safe Air, Air Blue)—despite PIA and a poorly
structured CAA (infra and ground services + ATC + regulator)
◙ Private owning of airfields allowed
◙ SIAL experience—learning and not failure
◙ Ground services and handling progressively outsourced
◙ Medium size A/Ps’ development an emerging PPP opportunity
◙ …leading to local capacity for operational concessions of already
developed larger A/P facilities
◙ Scores of other opportunities…including peripheral infrastructure
and services for both airports and air-services
 …track access is only the beginning in
Pakistan Railways (Corporation)……

◙ First PR Business plan approved-in-principle puts a public owned

but privately operated policy at its center
◙ PR already playing with ‘wooden’ concessions using PRACs—
experience gained here will create a better regulator
◙ PR off-dock terminals, PAX and freight stations
◙ Port-Rail-Road vertical integration in freight operations
◙ Just see results of first EOI on track access—British Model best
suited
◙ PR land-management and development
…..it’s no longer just ‘toll roads’ but something
to fit everybody—take trucking and
customs……
◙ New Trucking Policy on the Anvil:
◙ Transit Freight Stations
◙ Out-sourcing MVT and MVE
◙ National Vehicle Registration Database and VR Operations
◙ Improved regulation of totally de-regulated freight sector

◙ Pakistan Automated Customs Community System (PACCS)

◙ Customs
◙ Finance and Insurance
◙ Logistics………………………..
…..where PACCS is leading the way for
PPP……
 …but, what’s missing is the awareness and
transaction development……

◙ Not traditional target of PPP crowd in Pakistan

◙ Little experience in such transaction—and hence little
appetite—in the private financial services sector
◙ GOP increasing NTCIP’s visibility
◙ ‘Demanding’ PS to step-up and partner…..and partner
better
◙ An eventuality whose time has come!.......THANK YOU.
 Sports Goods to Germany
SPORT GOODS TO GERMANY

Accumulated Cost Index Pakistan Turkey Inida China Italy

Basic Price 85 111 98 64 140
Transport Costs 89 112 102 70 141
Transport risk costs 89 112 102 70 141
Duty 89 112 102 72 141
Inventory capital costs 100 121 112 83 143
Inventory costs 102 123 114 85 143
Obsolete costs 110 136 125 99 144
Delay costs 116 138 129 102 145
Sub-total I 116 138 129 102 145
Mark-up Wholesaler 156 187 173 138 196
Sub-total II 156 187 173 138 196
VAT 181 217 201 160 227
Sales price to retailer 181 217 201 160 227
Retailer mark up 391 467 434 344 489
Sales price excl. VAT 391 467 434 344 489
VAT 453 542 503 399 568
Consumer price 453 542 503 399 568
 Leather Products to Denmark
LEATHER PRODUCTS TO DENMARK

Accumulated Cost Index Pakistan Turkey India China Italy

Basic Price 88 114 101 66 132
Transport Costs 89 115 103 68 132
Transport risk costs 90 115 103 69 132
Duty 93 115 107 71 132
Inventory capital costs 107 124 118 82 134
Inventory costs 109 125 120 84 134
Obsolete costs 137 139 131 98 135
Delay costs 14 141 135 101 136
Sub-total I 141 141 135 101 136
Mark-up Wholesaler 190 191 182 136 184
Sub-total II 190 191 182 136 184
VAT 238 238 227 170 229
Sales price to retailer 238 238 227 170 229
Retailer mark up 447 448 427 320 431
Sales price excl. VAT 447 448 427 320 431
VAT 558 560 534 399 539
Consumer price 558 560 534 399 539