Let’s start with the good news. The trucking sector is in for a huge boost; its demand to be driven by the massive infrastructural development the country will see in the next five and so years due to CPEC. Greater income levels and expanding middle class with propel housing and construction demand which all together will push demand for logistics and transportation needs.
In terms of production of trucks, the market has floated toward competitiveness, going from just four players—Hinopak with Hino Trucks leading the pack, Ghandhara Nissan, Master Motors and Isuzu—to as many as eight players with more vying to enter the demand-led market. FAW of China in collaboration with Al-Hajj entered the scene a few years ago using the concessions offered under the last auto development policy launched in 2007. FAW has a production capacity of 15,000, now expanding to 20,000 in anticipation of demand. FAW has also signed an agreement with South Korean Hyundai brand just last month to assemble those trucks at its Port Qasim facility.

In terms of production of trucks, the market has floated toward competitiveness, going from just four players—Hinopak with Hino Trucks leading the pack, Ghandhara Nissan, Master Motors and Isuzu—to as many as eight players with more vying to enter the demand-led market. FAW of China in collaboration with Al-Hajj entered the scene a few years ago using the concessions offered under the last auto development policy launched in 2007. FAW has a production capacity of 15,000, now expanding to 20,000 in anticipation of demand. FAW has also signed an agreement with South Korean Hyundai brand just last month to assemble those trucks at its Port Qasim facility.

Other players such as Ghandhara’s Dongfeng, Dysin’s Sinotruk are also manufacturing trucks. Chinese Foton group that has a contract with Master Motors to produce 3-ton trucks has also expressed interest in bringing new investments into the sector. Meanwhile, Dewan Motors announced in September it would be bringing Shahzore trucks partnering with KOLAO Group based in South Korea.

Unlike the once concentrated market of car producers—though that might be changing soon—the truck manufacturing sector has been a lot less concentrated and new investments are sure to bring higher quality trucks at competitive prices.

The flip side of the picture is the massive freight traffic that roads are not equipped to manage; the largely unregulated logistics and road freight sector and the lack of a trucking policy; which is vital now more than ever.
In FY16, as many as 263,000 trucks were on the road; along with 12,000 oil tankers and
1900 water tankers across the country. Sales using official data from PAMA and adding numbers from other brands would stand at 7000 trucks for FY16. Some estimations say as many as 20,000 trucks will be in transit—at one time—on the CPEC roads. On motorways, highways and cities too, trucks will at least double. And Pakistan is not nearly as prepared for this traffic as it should be.

The logistics sector is fraught with inefficiency down to the nitty-gritty. The last trucking policy produced by the Engineering Development Board (EDB) was in 2007 and it was never implemented. The biggest fleet operator in Pakistan is still the state-owned National logistics Cell (NLC) that gets bulk of the large contracts leading to a thriving anti competition environment; while a fragmentation of several small players that do not have an incentive to be efficient constitute 80 percent of truck owners; that are informal, unregistered and unregulated.
The persistence of informality means that trucks used do not have any upkeep; second hand shoddy materials is used to replenish old trucks and are resold. These informally enhanced trucks are harmful to the environment, consume more fuel and damage road infrastructure. Since these trucks are sold and resold many times over; they are significantly cheaper but also clinch a share of the market that should go to new quality controlled trucks.

Preferential treatment and tax breaks for a state-owned company largely restricts opportunities for private logistic companies. This forms the biggest barrier to growth of the private sector in this sector, since there are no barriers to entry. NLC was the authorized carrier of goods for Afghan Transit Trade, and most government and army contracts. This domination makes investment in new trucks for private players not viable, plus lack of regulation ensures business as usual.

The trucking policy recognized that the two and three axel vehicles dominating the trucking market were assembled in backstreet operations with no minimum quality standards and an aim of the policy was to institutionalize the industrial estates for truck assembly in an effort to check truck body making in the informal sector. That never happened.

The policy also identified the need for in-transit parking and waiting areas, absence of which has choked and cluttered major cities specially Karachi while long roads in the city have been informally converted to truck queuing. The policy document also chides: “a slum-like emergence of unlicensed workshops, service facilities and spare parts outlets takes place. The situation appears worse because this uncontrolled and continuously evolving expanse of truck waiting areas and workshops emerges and
grows in the shape of parallel ribbon developments, i.e. along the roads and highways”.

Since 2007 when these issues were first highlighted in the policy document, trucks on roads have increased by 52 percent not counting oil and water tankers. Once the traffic doubles, also counting for the fact that there will be ever more cars on the roads in the next few years, how is the implementation and revitalization of a trucking policy not a priority for the government at this point? Within CPEC, Peshawar-Karachi Motorway will be built connecting Sindh and Punjab; road between KP and Gilgit-Baltistan will be expanded while Karachi-Lahore Peshawar railway track is in the works. A dry port with cargo handling facilities will be built at Havelian. These are much needed infrastructure projects but these can facilitate cargo so much. In absence of a regulatory environment and planning, these new roads and rail networks will also get bogged down by inefficiency and congestion.

Some trans-freight stations exist but the highways and motorways, not to mention roads in inner cities still get congested due to cargo. As suggested by a TRTA study, more strategic freight stations at various locations for cargo between China and Pakistan are required that would bring port services closer to shippers. Motor Vehicle Examination as well registration of vehicles should be introduced and enforced as a priority. There are no proper testing facilities and workshops which provinces should invest in. Lastly, the regulation and documentation of the fleet network is crucial for modernization and quality control; and it would also help in more private investments coming into the logistics and truck manufacturing sectors. Most importantly, inefficient low-quality trucks will have to leave the roads for new trucks to enter.

For all government based contracts, tenders should be issued and awarded through open bidding so that the private sector, especially in the informal zone has an incentive to register and replenish their fleet

The implementation of a trucking policy targeting regulation, documentation, access to finance features, import concessions, trans-freight services, proper planning to ensure decongesting of cargo, all the while ensuring competition and level playing field should be a major agenda for the government. Let’s hope those celebrating the burgeoning demand, calling CPEC a game-changer wakes up to this challenge.