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
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Estimated Savings: Rs200-250bil/yr (>2% of GDP)—including Rs115145bil/yr in Highways, Trucking, and Railways; Rs27bil/yr in Ports; and, Rs75bil/yr Trade Logistics
NTCIP covers the wide trade-supportinglogistics domain..…. Aviation Trucking/Road Freight Industry
Ports and Shipping
Highways
Railways
NTC Energy Logistics
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
NHA
M/o S&T.
NADRA M/o Comm. Truck & Bus Owners Assoc.
M/s Hino Pak M/s Ghandhara Nissan
MVRDE
M/o Defense
RFI
Local Manufacturers
CBR
Old & Used parts Dealers Association
M/o Commerce
M/s Ghandhara Industries Masters Motors M/s Adam Motors
NLC
Environment Protection Agency (EPA)
Truck Body Builders Associations Provincial Governments
M/s Afzal Motors Sind Engg.
MVE
PACO (Yasoob)
Enforcement
BOI
Planning Commission
Salvage Sale of Bedford Trucks
…..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 gains…. Read private sector 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)
Warehousing Procurement Production Planning
Transport Shipping
Capital Cost Inventory
Adminstration
USD mil
4
5
1
980
1
1
785
3
392
5 1
Sales Order Processing Receiving
1
Warehouse
15
Production
1
Pick & Pack
5
98 1
2
2
1,868
1
1
392
1
589
Shipment and Export (see above) Procedures, Management & Quality (total) loss
TOTAL
Savings
470 4
1
2
4
1,083 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 gearup 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! NTCIP Business Plan =
Transport Policy
Agriculture Policy
STRATEGIC PLAN FOR TRADE SUPPORTING INFRASTRUCTURE & SERVICES
Industrial Policy
Trade Policy
Energy Policy
ICT Policy
Education Policy
And all this has to be achieved through appropriately designed and delivered Public –Private Partnerships
….if the private sector can handle this, NTCIP offers a range of opportunities for PPP……….. s m sto rds R u C nda MV d Sta VT, es an I, M odi ions V M e B lat ce d egu rvi ts a r e en . T R S r Ai greem …… ing A …… Trad s …… onic orm tr latf c e El P
Logitics Demand
Direct Contract
Logistics Broker Logistics Supply
Logistic Contract Operators Contract
Logistics Agents
Market Structure
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 Basic Price Transport Costs Transport risk costs Duty Inventory capital costs Inventory costs Obsolete costs Delay costs Sub-total I Mark-up Wholesaler Sub-total II VAT Sales price to retailer Retailer mark up Sales price excl. VAT VAT Consumer price
Pakistan 85 89 89 89 100 102 110 116 116 156 156 181 181 391 391 453 453
Turkey 111 112 112 112 121 123 136 138 138 187 187 217 217 467 467 542 542
Inida 98 102 102 102 112 114 125 129 129 173 173 201 201 434 434 503 503
China 64 70 70 72 83 85 99 102 102 138 138 160 160 344 344 399 399
Italy 140 141 141 141 143 143 144 145 145 196 196 227 227 489 489 568 568
Leather Products to Denmark
LEATHER PRODUCTS TO DENMARK Accumulated Cost Index Basic Price Transport Costs Transport risk costs Duty Inventory capital costs Inventory costs Obsolete costs Delay costs Sub-total I Mark-up Wholesaler Sub-total II VAT Sales price to retailer Retailer mark up Sales price excl. VAT VAT Consumer price
Pakistan 88 89 90 93 107 109 137 14 141 190 190 238 238 447 447 558 558
Turkey 114 115 115 115 124 125 139 141 141 191 191 238 238 448 448 560 560
India 101 103 103 107 118 120 131 135 135 182 182 227 227 427 427 534 534
China 66 68 69 71 82 84 98 101 101 136 136 170 170 320 320 399 399
Italy 132 132 132 132 134 134 135 136 136 184 184 229 229 431 431 539 539
