Pakistan Freight Transport Report 2007

Pakistan is planning major upgrades to its ports, roads and pipelines as it seeks to become a regional hub for energy shipments, Pakistani Prime Minister Shaukat Aziz said in July. The government's vision is that it can develop key transport corridors running through the country, feeding the energy needs of China and India, as well as meeting its own growing requirements. In our newly released Pakistan Freight Transport report, BMI concludes that this vision may materialise, at least in part. To take one indicator, we forecast that pipeline throughput, measured in million-tonnes kilometres (mntkm), will increase by an annual average of 8.8% 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 6.6% is predicted for 2007- 2011) 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 (particularly in Baluchistan, site of Gwadar deep-sea port), 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. We have trimmed our airfreight forecast at the margins, reflecting the current financial difficulties at PIA, the country's flag carrier. Taking all these factors into account, our forecast for growth in freight carried across all modes, in mntkm, stands at an annual average of 10.0% in the 2007-2011 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 2011 According to our latest estimates, the total value of transport and communications will rise to US$28.55bn in nominal terms by 2011, representing 13.2% of Pakistan's GDP.