The Gaps in Logistics Infrastructure and their effect on Competitiveness in Trade

By: Muhammad Ali Akbar Popalzai

In the contemporary world of a rapidly changing globalized economy, it is not only the production level that determines the competitiveness of a country in the global trade, but also the ease of movement of goods. The foundation of trade involves roads, ports, railways, warehouses and border facilities. When such logistics infrastructure is poor or disjointed, even competitive industries find it hard to cope in the global markets.

The gaps in logistics infrastructure make the cost of doing business more expensive. Inadequate road networks reduce the speed of cargo transportation, waste more fuel, and destroy motor vehicles. Port congestion contributes to increased waiting time, increased demurrage fees and shipping schedules. Poor connectivity by rail means that too much has to be carried by road with the result that logistics expenses are even higher. Consequently, the exporters incur more costs that render their products to be unappealing in price-sensitive markets around the globe.

Another severe outcome is delays. In global trade, time is money. The customers require prompt deliveries, particularly in the areas of textiles, electronics, and perishables. The missed deadlines and losses of quality are a common occurrence due to weak cold-chain systems, old-fashioned cargo handling facilities, and slow custom clearance. In the long run, this destroys the confidence of buyers and drives foreign companies to turn to nations where the logistics systems are more reliable.

There are also infrastructure gaps that restrict the involvement in global value chains. The current production depends on the just-in-time production, in which raw materials and parts should be supplied just in time. The transport networks are not reliable which compels firms to hold larger inventories raising working capital requirement and decreasing efficiency. This disadvantages domestic industries in the face of other competitors who may be in countries with a free flow of the logistics system.

It is most acutely experienced in the rural and underdeveloped areas. The availability of proper roads, storage facilities, and transport services is not usually available to farmers and small producers. This limits their access to the markets, income potential and worsens the inequalities in the regions. Trade growth is in a restricted number of urban centers without the inclusion of logistics development.

Digital solutions (e-documentation and shipment tracking) may enhance transparency, but they are not able to substitute physical infrastructure. Technology should be aided by modern ports, efficient highways, integrated freight corridors, and well-furnished border terminals.

Long term investment and planning is needed to bridge the gaps in the logistics infrastructure. Governments need to focus on transport and trade facilitation initiatives, promote involvement of the private sector and enhance connectivity. The important role can be played by public-private partnerships which will upgrade ports, warehouses and logistics parks as well as regional cooperation which can be reduced to cross-border trade obstacles.

With speed, reliability and cost efficiency becoming the hallmarks of competitiveness in an age, logistics infrastructure has ceased to be an option, rather it is a strategic matter. The ones that do not fill these gaps stand at risk of being left out in the global trade whereas those who invest wisely are enabled to unlock growth, attract investment as well as occupy a better standing in the international markets.