the state of domestic commerce in pakistan study 10- synthesis report

THE STATE OF DOMESTIC COMMERCE IN PAKISTAN

STUDY 10

SYNTHESIS REPORT

For

The Ministry of Commerce Government of Pakistan

November 2007

By

Innovative Development Strategies (Pvt.) Ltd. House No. 2, Street 44, F-8/1, Islamabad

Table of Contents

List of Abbreviations ............................................................................................................. i Acknowledgments .............................................................................................................. iv Executive Summary ............................................................................................................ 3 Introduction …………………………………………. ............................................................... 7 Section 1: Sample Size, Data Collection Methodology and Sector Characteristics .. 8 1.1: Survey ...................................................................................................................... 8 1.2: Areas of Inquiry ......................................................................................................... 9 1.3: Sampling Technique by Sector .................................................................................. 9

1.3.1 Retail and Wholesale Markets...................................................................... 10 1.3.2. Storage and Warehousing .......................................................................... 11 1.3.3 Real Estate ................................................................................................. 13 1.3.4 Transport .................................................................................................... 13

Section 2: Firm Level Characteristics ........................................................................ 16 2.1 Firm Size ................................................................................................................. 16 2.2 Registration Status .................................................................................................. 17 2.3 Employment Patterns .............................................................................................. 18 2.4 Human Capital ......................................................................................................... 19 2.5 Access to Financial Services ................................................................................... 20 2.6 Use of Other market Services .................................................................................. 23 Section 3: Competitiveness and Efficiency of the Domestic Commerce Sector ..... 24 3.1. Market Competition ................................................................................................. 24 3.2. Barriers to Entry ...................................................................................................... 25 3.3. Value Addition and Profitability ................................................................................ 26 3.4 Infrastructure: Bottlenecks ....................................................................................... 29 3.5 Constraints to Growth .............................................................................................. 29 Section 4: Governance ................................................................................................ 31 4.1. Contract Enforcement .............................................................................................. 31 4.2. Corruption & Law and Order .................................................................................... 32 4.3. Regulation ............................................................................................................... 32 4.4. Taxation .................................................................................................................. 35 4.5. Associations and Collective Action .......................................................................... 35 Section 5: Conclusion and Areas of Policy Focus .................................................... 36

Appendix 1 .............................................................................................................. 39 Appendix 2 .............................................................................................................. 42 Appendix 3 .............................................................................................................. 44 Appendix 4 .............................................................................................................. 46 Bibliography ............................................................................................................ 48

List of Tables Table 1.1: Sector-wise break up of the sample ............................................................... 8 Table 1.2: Representativeness: Error Margins at the 90% Confidence Level* ................ 8 Table 1.3: Areas of Inquiry .............................................................................................. 9 Table 1.4: The distribution of the samples within cities ................................................... 9 Table 1.5: The retail markets covered in each city ........................................................ 10 Table 1.6: Province- and city-wise division of wholesale establishments covered by the

survey .......................................................................................................... 11 Table 1.7: Types of Storages ........................................................................................ 12 Table 1.8: Province- and city-wise break-up of the sample ........................................... 12 Table 1.9: Province- and city-wise division of the sample ............................................. 13 Table 1.10: Province- and city-wise division of the sample ............................................. 14 Table 1.11: Details of interviews conducted for each sub-sector ..................................... 15 Table 2.1: Quantum of Start up Capital (Rs.) ................................................................ 16 Table 2.2: Registration Levels ...................................................................................... 18 Table 2.3: Employment Levels ...................................................................................... 18 Table 2.5: Employee’s Education Levels ...................................................................... 20 Table 2.6: Details the sources of loans taken across sector......................................... 21 Table 3.1: Competition Within a Given Radius .............................................................. 24 Table 3.2: Relative weights to compute output index .................................................... 26 Table 3.3: Total, Freight and passenger indices ........................................................... 27 Table 3.4: Relative weights for value added index ........................................................ 27 Table 3.5: Cost of Infrastructure as a Proportion of Total Cost (%). .............................. 29 Appendixes Table 1.1: Retail Sample (divided across four provinces) and margin for error (e) ........ 39 Table 1.2: Wholesale sample (divided across four provinces) and margin for error (e) . 40 Table 1.3: Storage Sample (divided across four provinces) and margin for error (e) ..... 40 Table 1.4: Real Estate Sample (divided across four provinces) and margin for error (e)40 Table 1.5: Transport sample (divided across four provinces) and margin for error (e) .. 41 Table 1.7: Annual growth rates of transport output index and national GDP ................. 43 Table 1.8: Retail: Average Monthly Revenue ................................................................ 43 Table 1.9: Wholesale: Average Monthly Revenue ........................................................ 43 Table 1.10: Business Services ........................................................................................ 44

List of Figures Figure 1: Firm Age/Start-up Capital Groups .................................................................... 17 Figure 2: Loans from Commercial Banks in Retail and Wholesale. ................................. 21 Figure 3: Loans from Commercial Banks in Storage and Transport. ............................... 22

Innovative Development Strategies (Pvt) i

List of Abbreviations

ABAD Association of Builders and Developers

ADB Asian Development Bank

ADBI Asian Development Bank Institute

APCA All Pakistan Contractors Association

ATT Afghan Trade Transit

BAF Bank AlFalah

BCI Business Competitiveness Index

BOR Board of Revenue

CAA Civil Aviation Authority

CBM Cubic meter

CBR Central Board of Revenue

CDA Capital Development Authority

CIB Credit information bureau

CMR Contract for the International Carriage of Goods by Road

CPI Corruption Perceptions Index

CPIA Country Policy and Institutional Assessment

DFID Department for International Development

DHA Defense Housing authority

EDF Export Development Fund

EIU Economist Intelligence Unit

EOS Executive Opinion Survey

EPB Export Promotion Bureau

ESCAP Economic and Social Development in Asia and the Pacific

FBS Federal Bureau of Statistics

FCL Full Container Load

FDI Foreign Direct Investment

FIAS Foreign Investment Advisory Service

Ft Foot

FY Fiscal Year

GCI Global Competitiveness Index

GCR Global Competitiveness Report

GD Goods Declaration

GDP Gross Domestic Product

GoP Government of Pakistan

GOR Government Officials Residences

GRT Gross Register Tonnage

GST General Sales Tax

HBFC Housing Building Finance Corporation

HBL Habib Bank Limited

HDR Human Development Report

HFIs Housing Finance Institutions

IFC International Finance Corporation

IFS International Financial Statistics

IMF International Monetary Fund

ISAL Informal Subdivision of Agricultural Land

ISO International Standards Organization

IT Information Technology

ITU International Telecommunications Union

http://en.wikipedia.org/wiki/Gross_Register_Tonnage

Survey Report on Domestic Commerce

Innovative Development Strategies (Pvt) ii

KBCA Karachi Building Control Authority

KDA Karachi Development Authority

KESC Karachi Electric Supply Corporation

KM(s) Kilometer(s)

KPT Karachi Port Trust

KSE Karachi Stock Exchange

LCL Less Than Container Load

LOA Length Overall

MCB Muslim Commercial Bank

MENA Middle East and North Africa

MOC Ministry of Commerce

MOD Ministry of Defense

MTDF Medium Term Development Framework

NBP National Bank of Pakistan

NCS National Conservation Strategy

NER Net Primary School Enrollment Rate

NHA National Highway Authority

NIE Newly industrialized economy

NIT National Institute of Transport

NLC National Logistics Cell

NTN National Tax Number

NTRC National Transportation Research Center

NTTFC National Trade and Transport Facilitation Committee

NWFP North West Frontier Province

PASSCO Pakistan Agricultural Storage and Services Corporation

PEC Pakistan Engineering Council

PHDEB Pakistan Horticulture Development and Export Board

PIAC Pakistan International Airlines Corporation

PIDE Pakistan Institute Of Development Economists

PIHS Pakistan Integrated Household Survey

PKR Pakistani Rupee

PQA Port Qasim Authority

PR Pakistan Railways

PREF Pakistan Real Estate Federation

PSDP Public Sector Development Program

R&D Research and Development

REER Real Effective Exchange Rate

REITs Real Estate Investment Trusts

RICS Royal Institute of Chartered Surveyors

SAI Social Accountability International

SBP State Bank of Pakistan

SKAA Sindh Katchi Abadis Authority

SME Small and Medium Enterprises

SPS Sanitary and Phytosanitary

SRO Statutory Regulation Order

Std Standard

TEP Total Factor Productivity

TEU Twenty-Foot Equivalent Units

TI Transparency International

TOR Terms of Reference


Innovative Development Strategies (Pvt) iii

TSDI Transport Sector Development Initiative

TTFP Trade and Transportation Facilitation Program

UK United Kingdom

UNDP United Nations Development Program

US United States

USA United States of America

USC Utility Stores Corporation

USD United States Dollars

WAPDA Water and Power Development Authority

WDI World Development Indicators

WEF World Economic Forum

WGI Worldwide Governance Indicators

WTO World Trade Organization

Innovative Development Strategies (Pvt) iv

Acknowledgment

The IDS team owes a debt of gratitude to the officers of the Ministry of Commerce for their

guidance, assistance and feedback during the course of this study. Our special thanks go out,

in particular, to Syed Asif Ali Shah, Secretary; Mr. Naseem Qureshi and Mr. Ashraf Khan,

Additional Secretaries; Mr. Abrar Hussian, Joint Secretary; Syed Irtiqa Zaidi, Consultant and

Mr. Qaseem Subhani, Section Officer, for sparing their precious time and efforts for the

study.

We feel a deep sense of gratitude for the Minister for Commerce. Mr. Humayun Akhtar

Khan, who took out considerable time from his busy schedule to guide us. It was his sincere

and deep conviction which enabled us to conduct and compile this detailed and

comprehensive study on Domestic Commerce of our country. His apt guidance and keen

analytical oversight were extremely helpful in finalizing the study and formulating the policy

recommendations.

This study has benefited from comments received from the following:

1. State Bank of Pakistan, Karachi.

2. Federal Board of Revenue, Government of Pakistan, Islamabad.

3. Planning and Development Division, Government of Pakistan, Islamabad.

4. Trade Development Authority, Government of Pakistan, Karachi.

5. (Management Consultants) Establishment Division, Government of Pakistan,

Islamabad.

6. Finance Division, Government of Pakistan, Islamabad.

7. Pakistan Institute of Development Economics, Islamabad.

8. NTTFC, Karachi.

9. FPCCI, Karachi.

10. Planning and Development Board, Government of Punjab, Lahore.

11. Planning and Development Board, Government of NWFP, Peshawar.

12. Planning and Development Board, Government of Sindh, Karachi.

13. Planning and Development Board, Government of Balochistan, Quetta.

14. Investment and Commerce Department, Government of Punjab, Lahore.

15. Industries, Production & Supplies Initiatives, Government of Pakistan, Islamabad.

16. SMEDA, Lahore.

17. Statistics Division, Government of Pakistan, Islamabad.

1

SYNTHESIS REPORT

by

DR. ASAD SAYEED

Innovative Development Strategies (Pvt) 3

Executive Summary Introduction

1. The Domestic Commerce Survey was commissioned by the Federal Ministry of

Commerce to reduce a research gap that exists in the sector. Policy planning in this sector has

taken place without adequate economic research backup and consideration of the critical

linkages across sectors. The survey, conducted across five areas of domestic commerce, i.e.

retail, wholesale, transport, storage and real estate, aims to provide the necessary backup for

explicit, integrated policy planning and this synthesis report attempts to present a holistic

picture of the key results from the studies.

2. The survey was carried out in a selected number of large, medium and small cities.

Markets in small towns were used as proxies for rural markets since organized markets

generally do not exist in rural areas and small/medium towns are considered feeding areas to

the rural markets. In all, 2000 establishments in retail and wholesale markets, transport, real

estate and storage and warehousing were surveyed. The main areas of inquiry in the studies

related to firm level characteristics, competitiveness, protection, subsidies and incentive

schemes and regulation.

Firm Level Characteristics

3. The survey finds that capital invested in the firm at the time of its initiation is an

important indicator of firm size. The level of start up capital appears generally low for all

sectors (median start up capital is reported to be Rs. 200,000), indicating that the size of firms

across all sectors is small. Disaggregating firms according to their age indicates a discernable

difference in start up capital between firms established more than 10 years ago and those

established in the last five years. However, the difference between firms established in the

last 5 years and between 5-10 years is not substantial. In the retail and wholesale sectors we

see that roughly 55-60% of the firms consistently start their businesses with less than Rs.

200,000. In real terms, one can conjecture that firm size at the time of initiation of business

has declined in the last ten years. The only sector where firm size appears to have increased

over time is storage; however, the increase does not seem significant once real prices are

used.

4. Registration is a proxy for the ‘formal’ nature of the enterprise. Roughly half of the

establishments surveyed across the sectors were registered. Registration, it appears, is closely

correlated to firm size. As such, the lowest level of registration is found amongst retail

outlets. In all other sectors, the level of registration is over 50%, with the highest share in the

storage sector.

5. Employment level at the firm is low in all the sectors surveyed with the mean full

time employment levels in establishments across all sectors of about 3 persons. No sector has

mean level of employment higher than 9. Part time employment appears fairly low across all

sectors as well (less than one in the retail and storage sectors). Despite all this, given the

relatively labour intensive nature of this segment of the economy, it is nonetheless a potential

employment generator for low skilled segment of the population.

6. With regards to human capital, only 10.7% of owners in the storage sector (and 1% in

transport) had been to a technical college or university. 27% owners in storage and 34.4% in

transport had gone through on-the-job training, working as employees elsewhere. The

remaining, more than half of the owners said they had learnt their vocation either from

friends and relatives or were self taught. This is an impediment for firm growth. In wholesale

and retail trade more than half of full time employees and 96% of part time employees had



not finished primary schooling. The nature of work as its is done today does not require high

level of skills and literacy making these sectors an important absorber of low skill workers.

7. Access to formal sector financial services is an important area of concern. More than

91% of the sources of startup capital were family savings and sale of assets. Only in the

transport sector is the share of those who used formal bank credit as part of the startup capital

relatively high. Use of loans from informal money markets is also low at less than 2% of the

aggregate sample. The aggregate level of borrowing from all sources in the last five years

was a mere 8.75% of the surveyed firms with commercial banks and family and friends the

most common sources of loans. Additionally, larger firms (those with start up capital in

excess of Rs. 500, 000) have a greater propensity to borrow from banks but the difference is

not large. The data implies that the threshold at which bank borrowing becomes feasible in

Pakistan is perhaps higher than that at which sectors in domestic commerce surveyed here

operate.

Competitiveness and Efficiency of the Domestic Commerce Sector

8. Efficient use of resources is an important prerequisite for sustained growth and

conventional economic wisdom is that a competitive environment is an important condition

for efficiency. Market competition is intense in all sectors. In the retail sector 52 percent of

firms said that up to 11 similar enterprises existed within a radius of 1 kilometer. A third of

wholesalers reported more than 25 similar outlets in the vicinity. And 51 percent of storage

owners had up to 5 similar enterprises within a radius of 1 kilometer.

9. The trucking industry faces minimal entry barriers, as is evident from the extremely

large number of existing operators and frequent new entrants. More than 25 percent of the

companies surveyed were established in the last five years and an additional 25 percent were

less than ten years old. In the retail sector, however, almost 58 percent of firms interviewed

reported that they had faced barriers to entry of which 68 percent ranked capital requirements

as the most important barrier. Need to have personal contacts and government regulations and

tariffs were other important barriers. Wholesale firms and storage owners reported similar

barriers.

10. With regards to infrastructure, 23% of the reported total cost of the enterprises goes

towards electricity, water and telephone charges in the retail, wholesale and storage sectors.

For the storage sector, the infrastructure cost is significantly higher at 34.39% of total

expenditure. The cost of electricity generally dominates. One reason for this high cost of

electricity is that the commercial and industrial sectors cross-subsidize the consumer and

agricultural sectors. Further, roughly half of the respondents claimed that on average they lost

2 to 6 hours in a day due to poor road infrastructure.

11. Among constraints to growth, limited access to finance figures prominently with 50%

of retail respondents, 40% of wholesale respondents and 35% of storage respondents citing

this as a primary constraint. Absence of collateral and unavailability of credit history cause

small establishments to be left out of formal credit markets. Taxation and regulation are seen

to pose a constraint as well especially in the transport sector. Sales tax is an active

disincentive to growth where remaining small allows retailers to avoid taxes.

12. Quality of public services is cited in many cases as a primary or secondary constraint

to growth. Poor condition of roads leading to the establishments, inadequate parking space

and no additional space on which to expand, are cited frequently. The transport sector faces

problems due to inadequate attention to the maintenance of highways and roads. Corruption

and law and order are largely cited as third ranked constraints to growth in most cases.

Synthesis Report


Governance

13. The survey concentrated on contract enforcement, law and order, taxation, regulation

and collective action with regards to governance.

14. More than 90% of the sample agreed on having to rely on the reputation of those they

enter into contracts with. However, more than 80% of the respondents in each of these sectors

agreed that a contract would protect them from being cheated while over 60% agreed that the

legal system would uphold their contracts and property rights in business disputes.

Furthermore, almost 40% of the respondents agree with the suggestion that people from other

baraderies/communities are more likely to cheat them and over half of the respondents agree

with the suggestion that people from another city are likely to cheat them. These

inconsistencies suggest that perception based data may not be a good guide for analysing

contract enforcement, as factual data (that is the incidence of resorting to police intervention

in dispute resolution) depicts a low degree of confidence in the formal justice system.

15. Corruption and law and order have been frequently reported in the surveys as the third

ranked constraints to growth. In the road transport sub-sector, it is the second most important

constraint. In rail transport, there is a high incidence of pilferage and switching of items such

as live animals and rigid rules make it difficult to obtain compensation. In the storage and

wholesale sectors the large majority of disputes appears to be over late payments and is

resolved through negotiation. Formal justice is not sought. In the wholesale sector, a common

contravention of the law is illegal encroachments which are ignored by corrupt officials in

Market Committees. The incidence of serious crimes was higher in wholesale with 27

respondents reporting murder and 121 mentioning serious theft. However, only 37-39% of

the total number of any type of crime cases were reported to the police and dispute resolution

was generally sought through negotiation.

16. All five sectors cite regulation systems as one of the main constraints to growth,

where zoning regulations are the most frequently cited constraint though the lack of clear

regulation on property rights is not seen as an impediment. Regulation regarding access to

finance is reported to be unfriendly towards small enterprises in all sectors. Another

important aspect of regulation is reported to be the tough import tariff regime in the past,

which has resulted in underdevelopment in all four sectors. Lastly, registration is an aspect of

regulation that is not adhered to in a large number of enterprises in the sample.

17. Taxation is considered one of the key constraints to growth by 16-25 percent of

respondents. Given the low level of registration, it may seem as though tax liability is

assumed by few establishments. However, in the retail and wholesale sectors where

registration is as low as 38 percent and 42 percent respectively, 50 percent of retail

establishments and 72 percent of wholesale establishments provide a receipt to customers,

indicating that they bear some form of tax liability.

18. Collective action through industry associations is highest in the transport sector with

75.5 percent of the sample being members of transport associations. 45.8 percent of real

estate establishments are members of associations, 47.3 percent and 26.2 percent of storage

establishments are members of market based associations and city wide associations

respectively and 58.7 percent and 18.8 percent of wholesale establishments are members of

market based associations and city wide associations respectively. Data are not available for

the retail sector. Transport unions, while active, are not effective. There is a tendency to

observe strikes which results in temporary compromises, but at an immense cost to the

economy. Prevalent opinion is that the country’s trade associations have failed to develop

successful institutional relations with the government.



Conclusion and Areas of Policy Focus 19. The retailing and wholesaling business is the front end of commerce and the main

finding of the survey is the small size of enterprises implying that value-addition and profit

margins are low. The smallness in size and the lack of collateral create problems of moral

hazard and high transaction cost so far as conventional banking practices are concerned. In

the regard the newly introduced SME and micro credit banks that do practice unconventional

banking should be encouraged.

20. Urban land use policy and recently high land prices also create a serious disincentive

for growth. Direct interest by the MOC in matters of land use policy and zoning laws as part

of an over-arching commerce policy can potentially create the requisite clout on the

provincial and local governments to develop capacity and prioritize this critically important

growth impediment.

21. Contract enforcement and dispute resolution requires that the capacity of small claims

courts and business tribunals be enhanced.

22. Development of the storage and warehousing sector, being endogenous to the

wholesale, retail and international trade development, will take place once these chains

develop. However, urban zoning and planned linkages with the transport infrastructure are

critical. Also, appropriate regulation and licensing of insurance companies that are certified

can help in creating a pool of reputable insurers in the market.

23. For the transport industry as a whole, a supply chain management approach should be

adopted with an inter-modal transport system where the different modes of transport adapt

their operations to one another. The new road transport legislation seeks to address many of

the bottlenecks highlighted: its implementation should be strengthened with utmost urgency.

Furthermore, the shear volume of road freight traffic carried by trucks warrants that trucking

be recognized as an industry by itself. A revision of the current restrictive industrial and

import policies for vehicles and auto parts is also in order but the domestic truck assembly

plants also need to be modernized. One way of bringing the industry into the formal economy

is by mandating a carrier registration policy.

24. The change in the structure of the industry from a large number of small-scale

enterprises to well organized large entities competing against one another requires attention

to ‘soft’ management issues such as automation, marketing, and availability of a well trained

labor force. The government could follow up the registration drive by creating a nation wide

database of freight and passenger services. The relatively high level of education of transport

owners should make such a transition simple on the technical front. Meanwhile, the non-

government sector could take the lead in setting up driver training centers, where customer

relations trainings are accorded at affordable costs. With regards to access to formal credit in

the transport sector, a World Bank report has outlined concrete steps: (i) developing a Truck

Leasing Concept with banks; (ii) establishing a revolving National Guarantee Fund in order

to give incentives to decrease interest to banks; and (iii) developing a fund to buy and scrap

old but operational two-axle trucks in order to provide truckers with down payments for

newer vehicles. These options need to be evaluated in greater detail.


Introduction

1. The domestic commerce sector has been termed as the ‘front end’ of the economy

(Haque, 2006). It is through this vital link that production of goods and services as well as the

gains from international trade reach th e consumer.

2. In spite of the fact that the ‘domestic commerce’ sector contributes roughly one third

to national GDP and 10% of aggregate employment, it has not been the subject of research

and explicit policy planning. Perhaps this is because it is assumed that the development and

proliferation of domestic commerce is endogenous to expansion in the commodity producing

sectors and international trade. As such, policy planning on this sector has first of all taken

place without much economic research backup, but also without keeping in view the critical

linkages across sectors that constitute the domestic commerce economy and the commodity

producing sectors. For instance, explicit cognizance is not taken of how, for instance, the road

and rail infrastructure links up with the wholesale and retail markets or planning for storage

and warehousing within the ambit of urban zoning. The same can be said about regulatory

policies as well as the incentives and subsidies regime.

3. The Domestic Commerce Survey, commissioned by the Federal Ministry of

Commerce, seeks to reduce this research gap in the hope that it will provide the necessary

backup for explicit and integrated policy planning for this sector. This synthesis report

attempts at taking a holistic picture of the survey conducted across five areas of domestic

commerce, i.e. retail, wholesale, transport, storage warehousing and real estate.

4. The report is divided in five sections. Section 1 explains in detail the sample across

which the survey was undertaken, its representativeness and the methodology of data

collection in each sector. Section 2 looks at firm level characteristics for the sample as a

whole and for each sector. Firm size, employment levels, human capital levels and access to

financial and other auxiliary markets provide a description of the nature of establishments in

the sector. Section 3 then delves into the structure of the markets that prevail, i.e. the level of

competition in the sectors and the entry barriers they face. It also makes some preliminary

forays into levels of profitability and value addition in the domestic commerce area. Finally

in this section we also look into the infrastructure side of ‘cost of doing business’ that can

have an impact on future growth prospects of this sector. In section 4, we delve into

governance issues of contract enforcement, the regulatory environment, issues of law and

order and the nature of collective action. Section 5 concludes.


Section 1

Sample Size, Data Collection Methodology and Sector

Characteristics1

1.1: Survey

5. The Domestic Commerce Survey was conducted across four sectors: retail and

wholesale markets, storage and warehousing, transport and real estate. The survey was

carried out in a selected number of cities (including large, medium and small cities). As

organized markets generally do not exist in rural areas and small/medium towns are

considered feeding areas to the rural markets, markets in small towns were used as proxies

for rural markets. The survey was integrated at city level for the four sectors. Below is a

sector-wise break up of the sample (which comprised in all 2000 establishments).

Table 1.1: Sector-wise break up of the sample

Sector Sample

Retail 1000

Wholesale 500

Real Estate 200

Storage and warehouses 200

Transport 100

6. With respect to the representativeness of the data, the margin of error at the 90%

confidence level is given in Table 1.2.

Table 1.2: Representativeness: Error Margins at the 90% Confidence Level*

Sector Error Margin (%)

Retail 2.71

Wholesale 3.72

Storage 0.35

Real Estate 5.82

Transport 8.23 Note: * Refer to Appendix 1 for details on sampling, the raising factor used and error margin

calculations.

1 Tables in this section draw upon Innovative Development Strategies, "Basic Statistical Analyses of the

Sample Survey Data on Domestic Commerce"(2007).

Synthesis Report


1.2: Areas of Inquiry

7. The Domestic Commerce Survey was conducted across four sectors namely: retail

and wholesale markets, storage and warehousing, transport and real estate. Within the sectors

the main areas of inquiry were regarding competitiveness, protection, subsidies and incentive

schemes and regulation. More specifically the areas of inquiry are given in Table 1.3.

Table 1.3: Areas of Inquiry

1. Firm Characteristics - Registration Status - Size (paid up capital, employment levels). - Employment (part time, full time, family, wages) - Human capital - Sources of Finance - Business services used

2. Competitiveness and Efficiency - Level of Competition (firms within a distance) - Barriers to Entry - value addition and proftiability - Cost and access to infrastructure - Constraints to Growth

3. Governance - contract enforcement - law and order - taxation - regulation (zoning, other issues) - collective action (association, etc).

1.3: Sampling Technique by Sector

8. The sample sizes for the different sectors within domestic commerce had a minimum

value of 100. For this sample size, a population proportion can be estimated by the sample

proportion within about eight percent with probability of at least 0.90. The sample sizes for

the surveys of the other sectors of domestic commerce were

multiples of that for transport, as indicated in Table 1.4.

9. The distribution of the samples within cities is given in the following table.

Table 1.4: The distribution of the samples within cities

City Retail Wholesale RealEstate Storage Transport

Faisalabad Gujranwala Lahore Rawalpindi Multan Okara Hyderabad Nawabshah Karachi Sukkar Peshawar Abbotabad Quetta Islamabad

90 60 140 60 60 40 60 40 180 50 60 40 60 60

45 30 70 70 30 20 30 20 90 25 30 20 30 30

15 10 30 10 10 10 10 10 40 10 10 10 10 15

15 15 25 10 15 15 15 5

35 10 10 5

15 10

10 5 15 5 5 5 5 5 20 5 5 5 5 5



10. Details of the total sample, the cities and localities in which each survey was

conducted and the selection methodology adopted within these cities for each sector are

discussed below.

1.3.1 Retail and Wholesale Markets 1.3.1.1 Total Sample

11. Literature suggests that the retail sector is dominated by small, sole proprietorships

with a predominance of all-purpose grocery stores; therefore these categories have formed the

bulk of the retail sample. The retail sample consisted of 1000 establishments of which 138

were grocery stores (83 of which were medium-sized establishments), 105 clothing stores (46

of which were medium sized), 78 were electronics stores, 49 were bookshops, 47 were

medical stores while the remaining stores dealt with jewelry, computer hardware and

software, fruits and vegetables, baked items, toys, etc. 92% of the establishments in the

sample were sole proprietorships and only 20% of the establishments were classified as large.

12. Within the wholesale sector, the only clearly defined market is for agricultural

produce, particularly fruit and vegetables. Out of the 543 establishments comprising the

sample, a fifth traded in groceries, while the rest dealt in commodities including clothing,

books and medical supplies.

1.3.1.2 Cities and Localities

13. The survey was carried out in a selected number of cities (including large, medium

and small cities). As organized markets generally do not exist in rural areas and

small/medium towns are considered feeding areas to the rural markets, markets in small

towns were used as proxies for rural markets.

14. The retail markets covered in each city are given in the following table.

Table 1.5: The retail markets covered in each city

City Market

Faisalabad Ghanta Ghar, Satyana Road and Ghulam M.Abad

Gujranwala Gujranwala City

Lahore Anarkali, Shah Alam, Ichra, Baghanpura, Gulberg

Rawalpindi Saddar Market, Satellite Town, Muslim Town

Multan Bohar Gate, Haram Gate ,Cantt

Okara Okara City

Hyderabad Shahi Bazar, Latifabad No. 7, Phuleli

Nawabshah Shahi Bazar

Karachi Saddar, Landhi, Liaquatabad, Shah Faisal,

Sukkar New Sukkar, Old Sukkar

Peshawar Cantt, City, University Town

Abbotabad Main Saddar

Quetta City, Satellite Town

Islamabad Aabpara Market, Karachi Company, Super Market

15. The following table gives a province- and city-wise division of wholesale

establishments covered by the survey.

Synthesis Report


Table 1.6: Province- and city-wise division of wholesale establishments covered by the survey

Provinces/Cities Number of establishments surveyed

Punjab 275

Faisalabad 45

Gujranwala 30

Lahore 70

Rawalpindi 30

Multan 30

Okara 20

Federal 30

Islamabad 30

NWFP 50

Peshawar 30

Abbotabad 20

Sindh 165

Hyderabad 30

Nawabshah 20

Karachi 90

Sukkur 25

Balochistan 30

Quetta 30

Pakistan 520

1.3.1.3 Selection Methodology

16. In the retail and wholesale sector, if there was more than one sample market in a city,

then an equal number of sample establishments were selected from each market, depending

on the required sample size. The center of the market was taken as the starting point for the

sample and every tenth establishment from thereon was selected until the required sample

size was achieved.

1.3.2. Storage and Warehousing 1.3.2.1 Total Sample

17. There are few sources of secondary information on storage and warehousing in

Pakistan. Storage issues may be divided into two major categories: those to do with

agricultural storage (storage of grains as well as of fruits and vegetables) and storage of

manufactured products for distribution to retailers.

18. A total of 200 storages were sampled in the survey. Of the total storages sampled, 39

were in the form of godowns, used mainly for agricultural storage. Ten of the storages were

open stores, used again primarily for grain, but also, in one case, for wood. The sample

included 65 cold storages, 24 storages belonging to distributors as well as storages affiliated

with wholesale and retail outlets. The table below gives the complete breakdown.



Table 1.7: Types of Storages

Type of Storage Number

Grain Storage

Godown 39

Open storage 10

General Storage

Cold storage 65

Distributor's storage 24

Storage for retail outlet 15

Storage for wholesale outlet 47

Total 200

1.3.2.2 Cities and Localities

19. The storage and warehousing survey was conducted across 14 cities. Below is given a

province- and city-wise break-up of the sample.

Table 1.8: Province- and city-wise break-up of the sample

Provinces/Cities Numbers of establishments surveyed

Punjab 105

Faisalabad 15

Gujranwala 15

Lahore 25

Rawalpindi 10

Multan 15

Okara 15

Federal Area 10

Islamabad 10

NWFP 15

Peshawar 10

Abbotabad 5

Sindh 65

Hyderabad 15

Nawabshah 5

Karachi 35

Sukkur 10

Balochistan 15

Quetta 15

Pakistan 200


20. Identifying storages for the survey was not a straightforward exercise as commercial

storage facilities, other than cold storages, which typically are located near fruit and vegetable

wholesale markets, are often not advertised as such. In many cases storages are not run

commercially, but are maintained by distributors or wholesalers and sometimes also by retailers.

21. The eventual method of selection was thus: in each city, areas where storages are located

were identified and the requisite sample was randomly selected by sampling every second or

third establishment (as the case and need may be). Other than the questionnaires specifically

designed for storage outlets, a brief section on storage modalities was also included in the

questionnaire on wholesale and retail trade, as it was surmised that many wholesalers and

retailers might not be using dedicated storages for their goods. The findings of that section are

also helpful for the purposes of analysis of the storage and warehousing sector.

Synthesis Report


1.3.3 Real Estate 1.3.3.1 Total Sample

22. Real estate markets, as opposed to the foundation stages of real estate issues (such as land

rights, etc), have received little attention from researchers and therefore there is a lack of reliable

information on real estate values, yields and returns. Nevertheless the available literature,

including Housing Census Reports and various other government publications, has been studied.

Furthermore a country-wide survey has been conducted, covering 200 establishments. Various

stakeholders have been covered in this survey including real estate agents and key property

developers.

1.3.3.2 Cities and Localities.

23. The survey was conducted in 14 cities. The table below gives a

province- and city-wise division of the sample.

Table 1.9: Province- and city-wise division of the sample

Provinces/Cities Number of establishments surveyed

Punjab 100

Faisalabad 15

Gujranwala 10

Lahore 30

Rawalpindi 10

Multan 10

Okara 10

Federal Area 15

Islamabad 15

NWFP 20

Peshawar 10

Abbotabad 10

Sindh 70

Hyderabad 10

Nawabshah 10

Karachi 40

Sukkur 10

Balochistan 10

Quetta 10

Pakistan 200


24. While selecting the sample, real estate agents were randomly selected from within

markets, while key property developers in a city were identified, and a sample was selected

from amongst the known group. Focus group discussions form the basis for a great part of

the analysis of real estate markets.

1.3.4 Transport 1.3.4.1 Total Sample

25. The four sub-sectors within transport discussed herein are road, rail, aviation and ports.

There was some existing literature on this sector; qualitative data was readily available on the

road (freight) and rail (passengers and freight) sub-sectors, but was scant on aviation and ports.

On the other hand, sufficient quantitative data to conduct the required statistical analysis was



only available for rail. Virtually no detailed data sets existed for road transport, a fact that

necessitated undertaking an extensive survey exercise. A sample of 100 establishments was

determined upon and was divided among freight (68 surveys; receiving greater weight, due to its

higher commercial significance) and passenger services (44 surveys). The sample size was

determined with the help of national level industry data acquired from the Federal Bureau of

Statistics.

1.3.4.2 Cities/Localities

26. The survey was conducted in 14 cities. The table below gives a province- and city-

wise division of the sample.

Table 1.10: Province- and city-wise division of the sample

Location Number of structured questionnaires

Freight services Passenger services

Punjab

Faisalabad 8 5

Lahore 15

Multan 3 2

Okara 4 3

Rawalpindi 4 5

Gujrawala 2 4

Sindh

Karachi 5 10

Hyderabad 4 2

Nawabshah 3 2

Sukkur 4 2

NWFP

Peshawar 4 3

Abbotabad 4 2

Balochistan

Quetta 4 3

Federal Area

Islamabad 4 1

Total 68 44

Total 1122


27. The sampling technique employed in the transport sector presents a deviation from the

other sectors. Samples were selected as before in the same 14 cities and were divided among

freight (receiving greater weight due to its higher commercial significance) and passenger

services. Within each identified location, respondents were selected using the snowballing

technique, keeping in mind the need to conduct the exercise in multiple markets within a

selected city as well as to ensure variation among the size of the firms interviewed. A random

sampling technique was not feasible, as no ‘universe’ for the transport sector exists for any of

these locations. Moreover, the diversity of the selected locations and the transient nature of

most transporters (especially those without any physical hub) would have made mapping a

cost-prohibitive exercise. However, the data obtained from the survey, while useful for topics

including governance and institutions, was fairly weak in the areas of revenue, profit margins,

volumes and costs. This is often the case in the transport sector in Pakistan due to the

2 The sigma total is higher than the sample size since 12 respondents dealt both with passenger and freight

services.

Synthesis Report


informal nature of the sector and agents’ unwillingness to reveal information on revenues and

costs.

28. Thus for the road sector, instead of the domestic commerce survey, an existing

primary data set collected from transporters of coniferous timber for 2004-05 and 2005-06

was used. The data contains variables dealing with price, costs, and profit margins for the

major timber routes in the country. The sample size for the data set was 62, which was

representative of the timber industry in Pakistan. A total of 5 hubs of timber trade in the

country were surveyed. As with the data set collected specifically for the domestic commerce

exercise, respondents for the timber survey were selected through snowballing. 29. Analysis of the rail, aviation and ports sub-sectors primarily draws on secondary

literature. Key informant interviews were only utilized to substantiate existing information

and fill gaps. Due to the small number of interview respondents, information from secondary

literature was treated as sacrosanct wherever the two sources of information differed.

Interview respondents were selected purposively, the selection criterion being relevance of

respondents to the required information. The table below gives details of interviews

conducted for each sub-sector.

Table 1.11: Details of interviews conducted for each sub-sector

Number of interviews

Location

Rail 8 Lahore, Islamabad

Aviation 3 Karachi

Ports 11 Karachi, Lahore


Section 2

Firm Level Characteristics

30. Firm level characteristics provide the micro view of the structure of the market for

domestic commerce in Pakistan. For this purpose, capital invested in the firm at the time of

its initiation provides an important indicator of firm size. Given that firms in the wholesale

and retail sectors are largely owner driven, experience in the business is an important

indicator of human capital development through learning by doing. This is also an indirect

indicator of productivity improvements. Different avenues through which capital was

acquired throws light on the extent to which formal and informal capital markets are accessed

by entrepreneurs in and across these sectors. Moreover, it also provides an important

indication of the importance of own or family savings are brought to bear in starting a

business. Finally, in this section we also look at the level of access to other business services

for the sectors that were surveyed.

Table 2.1: Quantum of Start up Capital (Rs.)

Mean (Rs.) Median Minimum Maximum Number of firms

Retail 610, 039 150, 000 500 70, 000, 000 972

Wholesale 776, 603 200, 000 1, 000 30, 000, 000 493

Storage 5, 757, 154 1, 000, 000 1, 000 300, 000, 000 175

Transport 2, 403, 444 575, 000 10, 000 35, 000, 000 90

Total 1, 232, 979 200, 000 0 3.0E + 08 1995

2.1 Firm Size

31. The median start up capital of firms is reported to be Rs. 200, 000. As expected, the

highest median start up capital is in the transport sector at Rs. 575,000. Because of the higher

level of capital investment in the transport sector, i.e. investment in a vehicle makes the

sector more ‘capital intensive’ than the other sectors surveyed. However, the level of start up

capital appears generally low for all sectors. For sectors other than transport, capital

requirement will be concentrated around renting or purchasing the premises and furnishing it.

Although it is expected that at the time of the initiation of the business inventory cost will be

minimal, the amount of start up capital is low for all the sectors. Once we discount the

possibility of underreporting, this data indicates that the size of firms across all sectors is

small.3 Smallness of firm size is further corroborated by low levels of full time employment

also (see section 2.3.). The following table provides statistics on levels of start up capital

across sectors.

32. For the retail and wholesale sector the cut off is taken to be firms with start-up capital

of Rs.200, 000 or less. Since firm size is larger in transport and storage – primarily because of

3 Since firm age is low, it is not the case that in terms of real prices there will be much difference either.

Synthesis Report


greater capital outlays– the cut off is taken to be firms with start-up capital of Rs.1 million or

less.

Figure 1: Firm Age/Start-up Capital Groups

0

10

20

30

40

50

60

70

80

90

%age of Firms

Retail Wholesale Storage Transport

Sectors (Start-up capital for retail and wholesale: < Rs.200,

000; for Storage and Transport: < Rs.1 million.)

Upto 5 years

6-10 years

10 + years

33. We further disaggregated firms according to their age to check if there is a pattern

over time with regard to the size of firms. In Figure 1 we present data of firms in four sectors

according to the age of firm and startup capital less than Rs.200, 000 in the retail and

wholesale sectors and less than Rs.1, 000, 000 in the storage and transport sectors. While the

real value of startup capital in today’s prices will be somewhat higher for older firms, there is

a discernable difference across all sectors between firms established more than 10 years ago

and those established in the last five years. However, difference in the number of firms

established in the last 5 years and between 5-10 years is not substantial in the aggregate. This

is particularly pronounced in the retail and wholesale sectors where we see that roughly 55-

60% of the firms consistently start their businesses with less than Rs. 200,000 at their

disposal. In real terms, therefore, one can safely conjecture that on the whole firm size at the

time of initiation of business has declined in the last ten years. Similarly, in the transport

sector our data shows that firm size has actually declined. The only sector where firm size

appears to have increased over time is storage where a natural progression over time appears

to have occurred. Even in this sector, however, the increase in size of firms does not seem

significant once real prices are used.

34. The data thus does not paint a promising picture so far as firm size is concerned. Over

time, as incomes have increased, firm size at the time of initiating the business has remained

at best stagnant.

2.2 Registration Status

35. Registration is a proxy for the ‘formal’ nature of the enterprise. Roughly half of the

establishments surveyed across the sectors were registered. Registration, it appears, is closely

correlated to firm size. As such, the lowest level of registration is found amongst retail

outlets. Amongst all other sectors, the level of registration is over 50%, with the highest share

in the storage sector. Perhaps because of the high share of capital intensive nature of

activities such as cold storages and those operated by large distributors in urban centres,



levels of registration were high in this sector. Given a higher proportion of smaller firms in

the wholesale and transport sector, the level of formalization through registration is low. The

following table depicts the level of registration across sectors.

Table 2.2: Registration Levels

Number of firms Percentage of total sample

Retail 394 39.4

Wholesale 258 51.6

Storage 142 72.8

Transport 58 59.2

Total 852 47.5

36. Those who had not registered were asked about reasons for not registering. More than

two thirds (76%) responded that there was no requirement for registration. The next largest

category (15%) was those who said that since there was no penalty for non-registration, they

did not register. The number of procedures for registration (4%) and high tax rates (3%) also

featured in descending order.

2.3 Employment Patterns

37. Table 2.3 provides descriptive data on employment. Mean full time employment

levels across all sectors is 3. While there is a large variation in employment levels across

sectors, as mentioned above, given the overall smallness in the size of firms in no sector is

the level of mean employment higher than 9. As expected, the mean level of full time

employment is 3 times higher in the transport and storage sector compared to that in

wholesale and retail. Not only are transport and storage facilities larger in size, the nature of

the vocation is such that a higher number of full time employees is required in both sectors.

Drivers and cleaners are required to operate a transport business while watchmen, book

keepers and loaders are a necessary component of the storage business.

Table 2.3: Employment Levels

Mean full time employees (number)

Mean part time employees (number)

Retail 2 0

Wholesale 2 0

Storage 9 2

Transport 8 1

Total 3 0

38. The average retail and wholesale outlet in Pakistan, on the other hand, is a family run

affair, perhaps with some part time help. This is borne out by the data also. Roughly 37% of

retail and 18% of wholesale outlets have no permanent employee.4

39. Part time employment, contrary to expectations, appears fairly low across all sectors.

Mean part time employment is less than one in the retail and storage sectors but somewhat

higher in the transport and wholesale sectors.

40. The data above indicates that those domestic commerce sectors surveyed have overall

low employment generation capacity at present. However, given the relatively labour

intensive nature of this segment of the economy, it is a potential employment generator at the

lower end of the skill segment of the population.

4 It is expected that in retail there is unpaid family help but there is no data available on this.

Synthesis Report


2.4 Human Capital

41. Information on human capital endowments is available, albeit partially, for both

owners as well as workers. Detailed information on education and training for owners is

available for the storage and transport sectors. Only 10.7% of owners in the storage sector

(and one in transport) had been to a technical college or university. Bulk of the owners in

both sectors (27% for storage and 34.4% in transport) had gone through on the job training,

working as employees elsewhere. The remaining, more than half of the owners said they had

learnt their vocation either from friends and relatives or were self taught. While the

requirement for higher endowments of human capital in these sectors is not very stringent, it

appears that the low level of education and formal training will pose an impediment for firm

growth. Given the lack of skill specificity required in wholesale and retail trade, it is expected

that educational attainments will be even lower in these sectors. The following table describes

education attained by mangers/owners in the storage and transport sectors.



Information for educational attainment of employees was obtained for the retail, wholesale

and storage sectors. In aggregate, more than half of the full time employees and 96% of part

time employees had not finished primary schooling. Table 2.5 provides the number of

permanent employees across sectors who have not finished primary schooling.

Table 2.5: Employee’s Education Levels

Percentage of sample that have not finished primary school

Retail 62.2

Wholesale 42.8

Storage 16.3

Total 51.2

42. Low levels of education attainment is to be expected amongst employees from both

supply and demand sides. On the demand side, the nature of work does not require high level

of skills and literacy, whereas the supply of individuals with low levels of literacy and

educational attainment is large. The domestic commerce sector is an important absorber of

this segment of the workforce.

2.5 Access to Financial Services

43. Access to formal sector financial services is perhaps one of the most important

prerequisites for the growth and efficiency of an enterprise. Data collected on this important

area of concern was on sources of finance used for starting the business and subsequently

those who sought access to financing in the last five years for purposes of either initiating a

business, further investment or working capital. We also explore data for reasons that

entrepreneurs could not access the financial sector.

44. The predominant form of startup capital has been family savings and sale of assets.

More than 91% of the resources raised in the sample across all sectors were from these

sources. There was little variation across the sectors. Use of formal sector bank credit in

startup capital was very low in the aggregate. Across different sectors also, resort to formal

sector credit for business startup was low across all sectors. Only in the transport sector is the

share of those who used bank credit as part of the startup capital relatively high. Loans from

the informal money markets are also miniscule at less than 2% of the aggregate sample.

Interestingly the only sector where the role of informal credit is high at 17.2% is real estate.

Perhaps the use of ‘black money’ in real estate trading is reflective of this relatively high

share of informal financial markets in this sector.

45. Data was collected on borrowing from different sources in the last five years from the

retail, wholesale, transport and storage sectors. The aggregate level of borrowing from all

sources in the last five years was a mere 8.75% of the surveyed firms. No major variation was

found across sectors, only a slightly higher than average trend of borrowing in the transport

and storage sectors is observed. Higher capital requirements have necessitated this relatively

higher level of borrowing in these sectors.

46. As to the source of borrowing, roughly half borrowed from the commercial banks.

The next most prevalent source of borrowing was from the family and friends and not from

the informal financial market. In fact, borrowing from the informal money market was

miniscule with only 2 retail and wholesale establishments and 3 storage firms borrowing

from this source.

Synthesis Report


Table 2.6: Details the sources of loans taken across sector.

Retail Wholesale Storage Transport Total

Source Count (% of sample)

Count (% of sample)

Count (% of sample)

Count (% of sample)

Count (% of sample)

Commercial bank 49 (4.9)

17 (3.40)

10 (5.10)

10 (10.10)

86 (4.79)

Money lender 2 (0.2)

2 (0.40)

3 (1.53)

0 (0)

7 (0.39)

Friends/relatives 38 (3.8)

13 (2.60)

10 (5.10)

0 (0)

61 (3.39)

Other 3 (0.3)

0 (0)

0 (0)

0 (0)

3 (0.17)

Total 92 (9.2)

32 (6.40)

23 (11.74)

10 (10.10)

157 (8.75)

Sources of Loans Taken in the Last Five Years

47. From this data, we can tentatively conclude that in an overall context of low levels of

borrowing, access to the formal financial sector was not uncommon. More important is the

observation of extremely low levels of access to the informal financial market.

Figure 2: Loans from Commercial Banks in Retail and Wholesale.

0

1

2

3

4

5

6

7

%ag

e o

f fi

rms t

akin

g lo

an

s f

rom

co

mm

erc

ial b

an

ks

500000 500001 +

Start-up Capital (Rs.)

Retail Wholesale



Figure 3: Loans from Commercial Banks in Storage and Transport.

0

2

4

6

8

10

12

14

%ag

e o

f fi

rms

takin

g lo

an

s

1000000 1000001 +

Start-up Capital (Rs.)

Storage Transport

48. We further checked if firms that are larger in size tend to access the formal financial

sector compared to smaller firms. A priori we would expect this to be the case given the

greater ability of larger firms to provide for collateral and meet the criteria for accessing the

formal financial sector.

49. Using start up capital as a proxy for firm size, we see in Figure 2 that firms with a

startup capital of more than Rs. 500, 000 have a greater propensity to borrow from banks than

smaller firms in the wholesale and retail sector, but the difference is minimal. It is also

interesting to note that the wholesale sector (which, in principle should have a greater capital

outlay than the retailers) accesses the banks for financial services less than the retail sector. A

similar picture emerges for the storage and transport sectors (Figure 3), where the proxy for

startup capital has been taken to be Rs. 1 million and above for large firms. The ratio of firms

borrowing from banks improves but similar to the retail & wholesale sectors, the difference is

not significant. This data implies that the threshold at which bank borrowing becomes

feasible in Pakistan is perhaps higher than that at which sectors in domestic commerce

surveyed here operate.

50. Procedural problems of acquiring loans also kept away some 27 firms from acquiring

loans from the formal financial sector. More than half of this sample who were denied loans

after having applied for them were from the retail sector. In retail the most prevalent reason

for credit denied from the banks was the lack of collateral. If access to the formal financial

credit market is to be developed then policy will have to devise procedures to provide credit

to small businesses in general and retail outlets in particular.

51. Data on the purpose for which loans were acquired demonstrates that the bulk of the

borrowing took place for expansion of businesses rather than for working capital

requirements. Since working capital is an important requirement for the retail and wholesale

Synthesis Report


sectors, we find that their mode of borrowing for this purpose is predominantly in the form of

acquiring credit from suppliers.5

2.6 Use of Other market Services

52. An important indicator of a robust domestic commerce environment will be the use of

support services. The need for and use of these services not only informs us about the level of

awareness and scale of activity of the firms surveyed but also of the availability of such

services in the market. Data for these variables was collected for the retail, wholesale, storage

and transport sectors.6

53. Engineering services will be most relevant for the transport and storage sectors, with

the use of trucks and lorries, etc. as necessary components of the business. Consequently the

demand for engineering services was highest amongst the transport and storage sectors.

However, given the engineering ‘intensive’ nature of these sectors – especially transport – the

levels of demand is low. Since there is not much difference in the level of services, the

market for engineering services appears well developed.

54. Demand for management consultants was low across all sectors. One fourth of the

storage firms, however, demanded these services. It is most likely that those storage firms

that demanded management services were the larger urban distributors. The demand for

marketing services, on the other hand, is much more prevalent amongst all sectors; however,

the supply of demand services, measured through their use, appears lower than that for other

services. Demand for accounting services is significant only for storage, necessitated by

requirements for inventory management. The use of legal services was most prevalent in the

transport sector. Perhaps the interface with the police necessitates greater access to legal

services. Demand for legal services in the storage sector is 28.1%. A priori one would expect

this demand to be higher, since losses and damage is expected to be more frequent. The gap

between the use of legal services by the storage sector is also larger than that for other

sectors. Perhaps the cost of these services is too steep for storage enterprise owners to access

them.

55. The demand for insurance services is again low, considering that it is an important

service for all four sectors, both in terms of their fixed assets as well as inventory. Again

demand for insurance is high for transport and storage. Because of the high capital cost

involved in vehicles, use of insurance services is the highest in the transport sector. However,

the gap between demand for and use of services varies a great deal. Perhaps the cost of

insurance is inhibits higher levels of insurance in the transport sector. The use of information

technology, as expected, is minimal. The only sector which expresses demand for it is

storage, though usage in this sector is also fairly low.

5 Although supplier-buyer credit was strictly speaking ‘borrowing’, it was not included in the ‘loans acquired’

question in the survey. 6 For detailed data description, refer to Appendix 3.1.


Section 3

Competitiveness and Efficiency of the Domestic Commerce Sector

56. Efficient use of resources in domestic commerce is an important prerequisite for

sustained growth in the sector. Based on conventional economic wisdom, a competitive

environment is an important condition for efficiency. Linked to the level of competitiveness

is that of barriers to entry which is an important indicator of market competition. Levels of

profitability and value addition provides us with information on efficiency at the firm and

sector level. Based on survey data as well as secondary information, this section will analyse

these conditions. Both the cost of and access to infrastructure is an important cost of doing

business. The survey provides some information on this important aspect of competitiveness

and efficiency also which is analysed in section 3.4. Section 3.5 provides survey results on

perceptions of constraints to growth that the respondents provided.

3.1. Market Competition

Table 3.1 presents results of the level of competition for firms in the retail, wholesale and

storage sectorys based on survey data. Competition is measured on the basis of similar

enterprises with a certain radius of the firm that was surveyed. Information on the transport

sector presented in Table 3.1 is culled from the background paper on the transport sector.

Table 3.1: Competition Within a Given Radius

Retail Wholesale Storage Transport

Number of similar enterprises within a radius of 1 km

1 to 5 297 115 96

On average enterprises transporting goods have to deal with more than 25 competitors in their area of operation. Competition for inter-city passenger services is less severe. Pakistan Railways is a monopoly

6 to 11 198 77 33

12 to 25 168 85 16

More than 25 259 141 14

Don’t Know 24 18 29

Total 946 436 188

Synthesis Report


57. As we see in the above table, market competition was intense in the retail sector with

52 percent of firms saying that up to 11 similar enterprises existed within a radius of 1

kilometer. The responses were roughly similar across revenue categories, indicating that both

large and small enterprises faced similar competition. Wholesale markets are generally

clustered by nature of goods, so market competition was fairly intense with a third of

respondents saying that there were more than 25 similar outlets in the vicinity.

58. Market competition was intense in the storage sector also with about 51 percent of

storage owners saying that up to 5 similar enterprises existed within a radius of 1 kilometer.

The responses were roughly similar across revenue categories, indicating that both large and

small enterprises faced similar competition.

59. Competition in the trucking sector is also intense.7 The trucking industry faces

minimal entry barriers, as is evident from the extremely large number of existing operators

and frequent new entrants. More than 25 percent of the companies surveyed were established

in the last five years. The age of an additional 25 percent of the firms was less than ten years.

The vast majority of businesses have been established from scratch, with only a minor

proportion either being inherited or bought as a running business.

60. Majority of the competition for transport enterprises comes from both small and large

private-owned transport companies. On average, enterprises transporting goods have to deal

with more than 25 competitors in their area of operation. Competition for inter-city passenger

services of comparable quality is less severe. Competition levels are reportedly greater in

Punjab as compared to Sindh. The National Logistics Cell (NLC) is the only public sector

company in the road transport sub-sector and enjoys preferential treatment from the

government, despite its poor services and relatively higher rates. Notwithstanding, it is a

minor player in the market, accounting only for about 5 percent of the total intra-country

freight volume.

3.2. Barriers to Entry

61. In the retail sector, almost 58 percent of firms interviewed reported that they had

faced barriers to entry, and when asked to rank the most important barriers, in order of

importance, a significant 68 percent ranked capital requirements as the most important

barrier. The need to have personal contacts in the proposed business was cited as the most

important barrier by 10 percent of respondents, while almost 33 percent of respondents cited

it as the second key barrier to entry. Government regulations and tariffs were also cited as

important barriers to entry, with 18 percent of respondents ranking this at no. 2, and 19

percent at no. 3.

62. In wholesale, about 65 percent of firms interviewed reported that they had faced

barriers to entry, and 76 percent cited the need for finance as the most significant barrier.

The need to have personal contacts in the proposed business was cited as the most important

barrier by 7 percent of respondents, while almost a third of respondents cited it as the second

key barrier to entry. Government regulations and tariffs were cited as the second and third

ranked barriers by about 20 percent of respondents.

63. In the storage sector, roughly 77 percent of storage owners interviewed reported that

they had faced barriers to entry, and when asked to rank the most important barriers, in order

of importance, almost 60 percent ranked capital requirements as the most important barrier.

The need to have personal contacts in the proposed business was cited as the most important

barrier by 5.6 percent of respondents, while almost 24 percent of respondents cited it as the

7 This and the next paragraph draws mainly from the Transport Sector background Paper.



second key barrier to entry. Government regulations and tariffs were also cited as important

barriers to entry, with 20 percent of respondents ranking this at no. 2.

64. In road transport, although barriers to entry are minimal in absolute terms, minor

irritants include large capital requirements, corruption and government tariffs are the major

ones. In Sindh, the level of required capital was reported to be an especially important

concern, perhaps because an extremely high proportion of the province’s enterprises are

‘small’ and are thus capital constrained. A few companies surveyed stated that personal

contacts in the industry were necessary to enter. Even fewer reported that the ‘transport

mafia’ played a role in restricting new firms from joining the business. However, such

seldom experiences are seldom8 and could be discounted in the macro picture.

3.3. Value Addition and Profitability

65. Due to an unavailability of comprehensive data across time on prices as well as

operating revenues and expenditures, an analysis of value addition across all sectors was not

possible. Thus our analysis has been restricted to retail, wholesale and transport sectors only.

While figures for average monthly value added have been calculated for the retail and

wholesale sectors, a longitudinal study and forecasting was not possible due to lack to time

series data. Only in the transport sector, was a proper analysis on value addition possible. The

importance of this sector for both domestic and international commerce is immense and

hence its output and value addition indices are of significance across sectors and regions.

Below is a sector wise analysis of different sectors.

3.3.1 Transport

66. Within the transport sector, it has been difficult to obtain data on prices, operating

revenues and expenditures. However, output indices for the sector (excluding aviation, due to

lack of the above mentioned data) have been calculated while weights for value added index

have been calculated for the road sector only (owing to availability of data in this sub-sector).

Table 3.2: Relative weights to compute output index

9

Road Passenger 0.5101 Freight 0.4145

Rail Passenger 0.0452 Freight 0.0301

Total 1.00

8 The proportion of respondents suggesting this was very small. 9 For details on calculation of weights refer to Appendix 2.1.

Synthesis Report


Table 3.3: Total, Freight and passenger indices

Table 3.4: Relative weights for value added index

Road Passenger 0.5284 Freight 0.4715

Total 1.00

67. Table 3.2 reflects the relatively higher weight of passenger services compared to

freight in both road and rail sub-sectors.

68. A steadily growing transport index is depicted in Table 3.3, where the total, passenger

and freight indices follow extremely similar trajectories. Growth rates in the late 1990s for

the sector were high, however these declined dramatically in 2000-01; then, onward while the

growth rate has picked up somewhat it is still not at the late 1990s’ level. An explanation for

this may be discerned in the relationship between the transport output index and the national

GDP growth rate10

. The relation is inverse as observed in two cycles in the past two decades;

in the late 1990s GDP growth rates plummeted while the transport output index was at its

peak while in 2000-01, when GDP growth accelerates, the transport output index slumped.

This relation may be observed earlier as well (in the 1980s) and suggests an average 3-5 year

lag period between the movement in the transport index and GDP growth.

69. Forecasts for the transport output index up till 2009-10 suggest a significant upturn in

the sector, given the high GDP growth rates since 2002-03 and the presence of a 3-5 year

lag.11

Secondly, passenger services are likely to grow at a higher rate than freight; such a

trend in fact is already under way as confirmed by survey results. As there is little difference

in per unit prices between passenger and freight carriers, the divergence may be attributed to

rising passenger volumes.

70. Table 3.4 gives relative weights for a value added index for the road sub-sector,

revealing passenger services to be higher than freight.12

As the difference is minimal, the

value added potential of the two services is likely to be comparable. Due to unavailability of

data, weights could not be calculated for the rail sub-sector. A cursory examination of the

sub-sector reveals that freight services cross-subsidize passenger services while the core

commercial network cross-subsidizes the non-commercial network. Both passenger and

freight cover their direct train-related operating costs and produce a surplus; core freight

produces a surplus towards access and infrastructure costs; services on the non-core network

operate at a loss, however and; overall both core and non-core networks operate at a loss if

10 GDP growth rates are given in Appendix 2.2. 11 For details of forecasting techniques, refer to Appendix 2.3. 12 The index cannot be calculated due to unavailability of time series data.

Years Total Output Index

Passenger Output index

Freight Output Index

1995/96 67.28 66.67 68.77

1996/97 71.16 70.60 72.55

1997/98 75.49 74.90 76.97

1998/99 80.36 79.76 81.84

1999/00 85.30 84.64 86.98

2000/01 90.33 89.66 92.02

2001/02 91.10 90.14 93.51

2002/03 93.45 92.96 94.68

2003/04 96.59 95.94 98.20

2004/05 100.00 100.00 100.00



train and track depreciation costs are added. As far as rail’s prospects go, the bulk of its

operations constitute passenger traffic, though it is the most cost-effective in terms of

containerized cargo (compared to road) however clients appear to prefer paying higher prices

for more efficient container transport.

3.3.2 Retail

71. Value added in this sector is calculated through use of the data on revenues,

expenditures and profits obtained from the survey. There was significant variation in reported

revenues and profits. The median monthly revenue was approximately Rs.127, 750 while the

mean was Rs.413, 610 and the maximum reported was over Rs.31 million. Furthermore, 70

percent of all establishments had average monthly revenues under Rs.250, 000.13

Data on

profits reflects a similarly skewed distribution; median monthly profit is recorded at

approximately Rs.20, 000 while mean monthly profit is Rs.72, 000.14

The average computed

profit figure (Rs.11, 000 was median profit and Rs.54, 000 was mean profit) was lower than

the directly reported profit, reinforcing the view that respondents typically overstate

expenditures and understate revenues. Due to this likely misreporting of profits, estimates of

value added must be considered with caution. Average monthly value added was estimated at

almost Rs.95, 000; however, the distribution was significantly skewed as reflected by median

value added, estimated at Rs.20, 000. Average value added in Punjab (Rs.113, 000) and

Sindh (Rs.111, 000) was higher than average while in NWFP (Rs.48, 000) it was lower than

average, reflecting disparities in commercial activity.

3.3.3 Wholesale 72. Value added in this sector is calculated through use of the data on revenues,

expenditures and profits gained from the survey. Significant variation was found in reported

revenues and profits, much like the retail sector. The median monthly revenue was

approximated at Rs.300, 000 while the mean was Rs.921, 048 and the maximum reported was

over Rs.40 million. Furthermore, about 65 percent of the establishments had average monthly

revenues up to Rs.500, 000.15

In general, wholesale and wholesale cum retail establishments

exhibit higher revenue figures than retail.

73. Data on profits reflects a similarly skewed distribution; median monthly profit was

recorded at approximately Rs.35, 000 while mean monthly profit was Rs.73, 000.16

One again

the computed profits (median computed profit was Rs.16, 000) were lower than the directly

reported figures. Due to this likely misreporting of profits, estimates of value added must be

considered with caution. Average monthly value added was estimated at almost Rs.54, 000;

however, the provincial disparity was again reflected by the higher than average value added

in Punjab (Rs.124, 000).

74. The only conclusion that can be drawn for the wholesale and retail sectors on survey

information is that profitability, on average, is low perhaps due to a highly competitive

environment in which these establishments operate. Perhaps this is to be expected given the

variety in firm size in this sector. If growth in this sector is to be promoted, it will have to be

based on depth rather than breadth; i.e. it will require firms to increase their size rather than

merely smaller firms entering the fray to meet existing demand. This is where linkages with

13 Refer to Appendix 2.4 for a detailed table on retail establishments’ revenues. 14 Profit was recorded in two ways; through a direct question as well as by computing the difference between

the average monthly revenue and expenditure figures. 15 Refer to Appendix 2.5 for a detailed table on wholesale establishments’ revenues. 16 As in the case of the retail sector, profit was recorded by means of a direct question as well as through

computing the difference between average monthly revenue and expenditure figures

Synthesis Report


efficient and accessible infrastructure and other market services – most importantly the

financial market – will be critical.

3.4 Infrastructure: Bottlenecks

75. One important component of the cost of doing business is the cost at which

infrastructure is provided to the commercial sector. Added to this are issues of the cost of the

time to access infrastructure as well as the losses incurred due to inadequate provisioning of

infrastructure.

According to survey results, about 23% of the total cost in the aggregate foes towards

electricity, water and telephone charges for the retail, wholesale and storage sectors. For the

storage sector, the infrastructure cost is significantly higher at 34.39% of total expenditure.

Table 3.5: Cost of Infrastructure as a Proportion of Total Cost (%).

Retail Wholesale Storage Total

Electricity 9.86 7.09 31.51 17.27

Water 0.56 0.22 0.60 0.50

Telephone mobile internet fax postal 4.81 10.84 2.27 5.22

Total 15.23 18.14 34.39 22.99

76. The cost of electricity dominates among the three infrastructure items, except of the

wholesale sector where the cost of telephony is somewhat higher. Given the high electricity

intensive nature of the storage sector, a part of the sample for which consists of cold storage,

the cost of electricity as part of total expenditure is as high as roughly one third. The storage

sector was also asked about the time it took to obtain an electricity connection. 29%

responded that this connection was obtained within one week, whereas 60% said that it took

between 2 to 4 weeks to get an electricity connection. For the rest of 11% it took more than 4

weeks.17

77. The cost of electricity in Pakistan, especially for commercial enterprises costs, is

much higher than that in the region. Part of this high cost of electricity is that the commercial

and industrial sectors cross-subsidize the consumer and agricultural sectors. While this may

be due to large political economy considerations of the state, if growth in these sectors is a

priority then the government will have to find a more rational approach to cross-

subsidization.18

78. Infrastructure related losses due to the state of the road network are most constraining

for the road transport sector. Roughly half of the respondents claimed that they lost 2 to 6

hours on average due to poor raid infrastructure in a day. This was further corroborated by

their opinion where about 60% of the respondents in the road transport sector. Given the

priority that is being given to road construction and road works in the last few years, it is

hoped that the situation on this front will improve.

3.5 Constraints to Growth

79. Chief among constraints to growth is limited access to finance across all sectors. 50%

of retail respondents, 40% of wholesale respondents and 35% of storage respondents consider

limited access to finance to be a primary constraint. Only in the transport sector taxation and

17 Significantly for 10% of the respondents it took 20-30 weeks to get the electricity connection. 18 Increasing the cost of manufactures and the commercial sector eventually is passed on to the consumer in

the form of higher prices. The net subsidy to the consumer is therefore likely to be minimal.



regulation are seen to pose a greater constraint.19

Small establishments are left out of the loop

of formal credit markets due to the absence of collateral and unavailability of credit history.

Furthermore even in the informal credit market, the need for personal contacts or the lack of

collateral disadvantages small establishments. Even government extended support for Small

and Medium Enterprises (SMEs) often do not reach small establishments (in particular retail)

due to the specification that SMEs must have at least 10 employees.

80. Taxation and Regulation are also oft-cited primary constraints to growth. The sales

tax is an impediment and in fact an active disincentive to growth in the retail sector where

remaining small allows retailers to evade taxes. Furthermore a tough tariff regime has led to

problems for all sectors, making machinery necessary for cold storage and distribution as

well as vehicles very expensive. Also after sales care or maintenance has become a problem

for all four sectors due to the lack of after sales service among local manufacturers of

machinery.

81. Quality of public services is cited in many cases as a primary or secondary constraint

to growth. In the retail, wholesale and storage sectors, the condition of road leading to the

establishment was in poor condition in 16.8 percent of the sample, 18 percent of the sample

and 28.57% of the sample respectively. In the retail sector, 65% of the sample did not have

adequate parking apace, while in the wholesale this number rose to 71.6%. In 60-62% of the

cases, in both retail and wholesale, encroachments were not observed. All three sectors face

problems in terms of expansion; while 56-60% of the retail and wholesale establishments said

there was no additional space on which to expand. The storage sector faces costs in terms of

conversion fees when the decision to build a storage is made; as no land is assigned for

storages, rather, industrial plots are converted into warehousing lots. The transport sector

faces problems with respect to the maintenance of the highways and roads in general; while

the road network is expanded by the government, inadequate attention is paid to maintenance.

82. Corruption and law and order are largely cited as third ranked constraints to growth in

most cases. Lack of confidence in the formal justice system is betrayed by the fact that in

both serious criminal and business disputes, the large majority are resolved through

negotiation in all four sectors. Furthermore corruption leads to bribery costs, in particular for

the transport sector.

83. Regulation on property rights ownership is the least frequently cited constraint to

growth in all four sectors.

19 22.5% of respondents in transport considered taxation and regulation as constraints as opposed to 20%

who considered access to finance the biggest constraint.


Section 4

Governance

84. Governance, succinctly defined as the method and nature of the interface with the

state or public agencies is now acknowledged as the critical ingredient in sustained growth

and productivity improvements (Kauffman, et.al. 2002). Governance issues within the five

sectors on which the survey concentrated were: contract enforcement, law and order,

taxation, regulation and collective action. Unavailability of survey data for real estate

restricted analysis; however the remaining four sectors are discussed at length below.

4.1. Contract Enforcement20

85. Details on the nature of the contract were only available for the transport and storage

sectors. About 60 percent of the storage sample said that the only form of contracts in storage

were simple receipts given by the storage owners to the customers; 20 percent said that

records were computerized and electronic receipts were given out while 18 percent said they

worked with more formal contracts. Similarly in the road transport sector the majority of

respondents (almost 50%) said contracts were simple statements written on plain paper and

signed by both parties. Other contract forms included receipts, arrangements written on stamp

paper and signed by both parties. In a small minority of transport enterprises, no contracts are

used at all. In such cases either the two parties enjoy an established professional relationship

or the transaction is certified by a system of honour or by a payment in advance. In the retail

and wholesale sectors, the only detail on contract forms is regarding the receipt that is given

to customers in 50 percent and 72 percent of the cases.

86. Data on contract enforcement provides conflicting results. More than 90 percent of

the sample in the retail, wholesale, storage and transport sectors agreed (or strongly agreed)

upon having to rely on the reputation of those they enter into contracts with (Appendix 4.1);

however, more than 80% of the respondents in each of these sectors agreed (or strongly

agreed) that a contract would protect them from being cheated (Appendix 4.2) while over

60% agreed (or strongly agreed) that the legal system would uphold their contracts and

property rights in business disputes (refer to Appendix 4.3).

87. The results depict contradiction in that if the contract provides protection than the

reputation of those entered into contracts with should be immaterial. Furthermore almost 40%

of the respondents in the aforementioned sectors agree (or strongly agree) with the suggestion

that people from other baraderies/communities are more likely to cheat them (Appendix 4.4),

while over 50 percent of the respondents agree (or strongly agree) with the suggestion that

people from another city are likely to cheat them (Appendix 4.5). The lack of trust in people

from different communities or cities for a substantial protion of the sample belies the data

suggesting high incidence of faith in the legal system and contracts. Moreover, the

20 For details of survey responses on contract enforcement refer to Appendix 4.



contradiction in data recurs when across the four sectors a very low incidence of seeking

police intervention in disputes (whether of criminal or business nature) is observed.

88. These inconsistencies suggest that perception based data may not be a good guide for

analysing contract enforcement, as factual data (that is the incidence of resorting to police

intervention in dispute resolution) depicts a low degree of confidence in the formal justice

system.

4.2. Corruption & Law and Order

89. In all four sectors, corruption and law and order have been strongly cited as third

ranked constraints to growth. In fact in the road transport sub-sector it is the second most

important constraint. The routine interface with the police – perhaps one of the more visibly

corrupt and arbitrary state instruments – serves to create this constraint for transporters.

90. Inn rail transport, there is a high incidence of pilferage and switching of items such as

live animals (whose description cannot be exact on paper). While there is a formal system of

compensation if the loss can be proven, the complaint that rigid rules make it difficult to

actually obtain compensation is common.

91. In the storage and wholesale sectors the large majority of disputes appear to be over

late payments, with 53 percent of the respondents in both sectors reporting facing this issue in

the last one year. Over 85% of the disputes were resolved through negotiation in both sectors

and formal justice was not sought. The incidence of serious crimes was low in these two

sectors though about 17 percent of the wholesale sample reported theft cases; 54 percent of

these cases were dealt through negotiation, without police intervention.

92. Within the wholesale sector, another common contravention of the law is illegal

encroachments which are ignored by corrupt officials in Market Committees. In the retail

sector, the incidence of serious crimes was higher with 27 respondents reporting murder and

121 mentioning serious theft. However in both instances only 37-39% of the cases were

reported to the police and dispute resolution was achieved largely through negotiation. While

the law and order situation is of considerable concern for all four sectors (being one of the

highest ranked constraints to growth), respondents displayed a lack of confidence in formal

justice and a strong tendency to resort to negotiation.

4.3. Regulation

93. All five sectors cite regulation systems as one of the top ranked constraint to growth.

Though the lack of clear regulation on property rights is not seen as an impediment to growth

among the majority of the sample, zoning regulations are the most frequently cited constraint

across sectors. Regulation regarding access to finance is unfriendly towards small enterprises

in all sectors. Another important aspect of regulation is tough import tariff regime, which has

resulted underdevelopment in all four sectors. Lastly registration is an aspect of regulation

that is not adhered to in a large number of enterprises in the sample. Below we discuss

regulation issues pertinent to the different sectors.

4.3.1 Retail

94. A tough import tariff regime has negatively impacted retail in both directions of the

link in the supply chain. Cold storage machinery and refrigerated vehicles necessary for

transporting goods from the wholesale market to retail outlets are subject to a 25 percent

import duty and a 15 percent sales tax. While some locally manufactured substitute

machinery does exist, in the absence of after sales service, maintenance costs are high.

Synthesis Report


Secondly, machinery used at the retail outlet such as chillers and deep freezers is also subject

to the tariff regime, again adding to costs.

95. Formal credit facilities are usually denied to retail establishments owing to their small

size. Even informal sources require either a collateral or personal contacts. Government

initiated financing schemes are one possible source for these establishments but the

classification of Small and Medium Enterprises (SMEs) as establishments having at least ten

employees has meant that several retail establishments have been left out of the loop even

when financing options are made available for small enterprises.

96. Lastly, urban zoning is particularly unfriendly to small retailers. There is an excess of

demand for retail space in market places and for the poor retailer, lacking capital, it is

impossible to enter structured expensive retailing.

4.3.2 Wholesale

97. Wholesale markets are ill planned in Pakistan, whether they be privately owned or

under the administrative control of Market Committees. Typically these markets are

congested, lack well designed entry and exit points and other infrastructural facilities (such as

roads, storage, etc). Overcrowding is one major problem which city administrators, in some

areas, have tried to solve by locating wholesale markets out of cities. This has resulted in

other problems such as an increase in distribution costs within the city.

4.3.3 Storage

98. Storage is in many cases a highly seasonal business yet 92 percent of those who

reported seasonality said they did not convert their facility to any other use during the ‘off

season’. While most of them cited a lack of need or the impossibility of conversion, 15

percent cited regulations as not permitting use of storage facility for any other purpose.

99. Zoning regulations do not specify land for warehousing purposes but industrial plots

may be used for warehousing (in the case of Karachi and Islamabad, on the payment of a

conversion fees). In these cases, when storage facilities are built from scratch, considerable

delay can occur in acquiring utility connections21

City authorities do however provide land

for cold storages near fruit and vegetable markets.

4.3.4 Transport22

100. A major concern with regard to the regulatory framework is the dated transport

regulations. Regulations that are pertinent to transport carriers are the National Highway

Safety Ordinance, the 2000 Road Safety Act, and till a few months back, the 1865 Carrier’s

Act. Underlying most regulatory bottlenecks in the road transport sub-sector are dated

legislations. The Carrier’s Act 1865, which governed the carriage of goods by roads in

Pakistan till April 2006, was in dire need of reform. Liability ceilings had remained fixed at

PKR 100 per item23

, while the Act lacked any incentive structures designed to ensure

conformance with laws and to enhance efficiency levels of carriers. A draft law, modeled on

the CMR Convention 1956 is being considered since some time. The draft law attempts to

introduce legislation that provides road carriers sufficient protection in terms of definite

21 Median time taken to get an electricity connection was 3 weeks but mean was 90 weeks. Median time taken

to get a natural gas connection was 3 weeks and mean was 9 weeks. Median time taken to get a water connection was 2 weeks mean was 6.2 weeks.

22 This section draws on Domestic Commerce Survey: An Overview of the Transport Sector (2007). 23 Zahid Jamil and Shahid Jamil, “Modernizing Pakistan’s Carriage of Goods Legislation”, National Trade and

Transport Facilitation Committee, 2003. <http:// www.nttfc.org/proceed03/proc03-jamil.htm>.



limits on their liabilities. The draft also pushes for the issuance of electronic documentation.24

The Carriage of Goods by Roads (Liabilities) Act No. 21 has now taken over from the 1865

Act25

. However, for all practical purposes the regulations of the 1865 Act remain in place.

The government has not only delayed updating of legislation but has persistently failed to

disseminate information on changes in legislation governing the industry; naturally this has

had negative impacts on conformance levels and fair implementation practices.

101. Another aspect of regulation with respect to transport is gender related; given the low

rate of mobility of women in Pakistan, regulation has a pivotal role to play in the transport

sector. Regulation to eliminate any gender bias, thus, is essential for greater contribution of

women as clients of the transport sector, as well as to the overall economy.

102. Contravention of regulation is regularly observed in the road transport sub-sector,

particularly with respect to road safety protocols. In 1992, Pakistan’s road fatality rate stood

at 18.62 fatalities per 1,000 vehicles, reflecting the highest rate in Asia26

. Economic losses

due to lack of safety measures are estimated at over 2 percent of GDP27

. Forty-three percent

of rear axle trucks regularly indulge in exceeding the 12 tons legal axle-load limit mandated

by the Road Safety Act 2000. Local truck manufacturers produce wider and elevated truck

bodies in order for truck owners to be able to overload and consequently minimize haulage

costs. The primary adverse effects of overloading include loss of transport time for trucks

having to be off road for repairs and overloading fines. The National Highway and Motorway

Police, though authorized to prevent commercial vehicles from overloading, lack retention

powers and usually evade participation in enforcement issues in which retention and/or legal

proceedings appear to be involved.

103. The transport industry, too, is equally guilty of not participating in a process to redress

the institutional bottlenecks that cause poor governance practices. As the industry perceives

lax implementation of laws to be in its favor, many enterprises overlook the potential losses

due to laxity in terms of efficiency losses, and thus higher costs for operators.

104. Zoning has resulted in travel routes being restricted for transporters both within urban

towns and on inter-city routes, amounting to both monetary and time losses. The average

additional costs incurred due to restrictions are higher for inter-city route restrictions and are

higher in Punjab than in Sindh. Transporters of non-agriculture goods face the greatest

number of restrictions in urban towns followed by transporters of agricultural goods though

additional costs because of the restrictions were reported to be higher on average for

agricultural commodity transporters. With regard to constrained movement in inter-city

routes, transporters of both agriculture and non-agriculture goods faced much more

restrictions than passenger services. Permissible times for traveling for goods transporters are

also restricted in both urban towns and inter-city routes. These hindrances on average cause

about 17 hours to be lost per carrier per month. This estimate needs to be treated cautiously

given the variance in the type of service, routes traveled and the internal variation in the data.

Again transporters in Punjab lose significantly greater time on average than transporters in

Sindh.

105. Lastly the tough tariff regime has resulted in an aging truck fleet. Replacement and maintenance

of the fleet is severely restricted due to this aspect of regulation.

24 Ibid. 25 ENHESA, “Pakistan Monitoring Reports”, 2007.

<http://www.enhesa.com/enhesa/en/global/country.asp?CountryCode=PK> (accessed on 20 December, 2006).

26 Asian Development Bank, “Technical Assistance for Regional Initiatives in Road Safety”, Manila. 27 Ibid.

Synthesis Report


4.4. Taxation

106. Taxation is considered one of the key constraints to growth by 16-25 percent of

respondents in the aggregate sample. Given the low level of registration, it may seem as

though tax liability is assumed by few establishments. However, in the retail and wholesale

sectors where registration is as low as 38 percent and 42 percent respectively, 50 percent of

retail establishments and 72 percent of wholesale establishments provide a receipt to

customers, indicating that they bear some form of tax liability. In the storage sector,

registration is observed to be high (72 percent of the sample), therefore it may be assumed

that tax liability is assumed across much of the sector. While data on the transport sector

suggests low registration (59.2 percent of the sample was registered) there is no specific

information on taxation obtained from the survey at all.

107. Within the retail sector sales tax (GST) is considered to be a disincentive to growth as

small retailers can easily evade taxes while more visible supermarkets are under regulatory

scrutiny.

4.5. Associations and Collective Action

108. While data is not available for the retail sector, collective action through industry

associations in the transport sector is the highest with 75.5 percent of the sample being

members of transport associations.28

While 45.8 percent of real estate establishments are

members of associations, 47.3 percent and 26.2 percent of storage establishments are

members of market based associations and city wide associations respectively and 58.7

percent and 18.8 percent of wholesale establishments are members of market based

associations and city wide associations respectively.29

109. Trade union data is available only for the transport sector. Transport unions, while

active, are not effective. There is a pronounced tendency among transport unions, especially

passenger carrier unions, to observe strikes to soften the government’s stance on any

particular issue. This often results in temporary compromises, but at an immense cost to the

economy in terms of stalled economic activity. The strikes however are not of an extended

duration. The mean time per strike calculated from the survey responses comes to less than a

week in duration.

110. Prevalent opinion is that the country’s trade associations have failed to develop

successful institutional relations with the government, which would present a formal channel

for influencing policies.30

28 Moreover, 4.1 percent of establishments are also members of the chamber of commerce 29 Owing to the possibility of overlap these numbers may not be added 30 World Bank, “Trade and Transport Facilitation Project”, 2001.


Section 5

Conclusion and Areas of Policy Focus

111. This survey, the first of its kind, has brought forth a number of preliminary

conclusions from which we can draw on a number of areas where the Ministry of Commerce

can take policy initiatives in conjunction with other federal, provincial and local government

ministries and departments.

112. The retailing and wholesaling business is the front end of commerce. The most

important result we draw from the survey with regard to this sector is the small size of

enterprises. Smallness in size implies that value-addition and profit margins are low at this

end. As such, enterprise level growth is primarily a function of the levels of income in that

particular area and in the economy in general. In that sense, the conventional hypothesis that

the growth of the retail and wholesale sectors is endogenous to the size of the market appears

to be borne out by the survey.

113. This is not to say that policy does not have a role to ease out pressures that enterprises

in the sector face. As discussed earlier, access to formal sector credit is a constraint. The

smallness in size and the lack of collateral create problems of moral hazard and high

transaction cost so far as conventional banking practices are concerned. The newly

introduced SME and micro credit banks that do practice unconventional banking should be

encouraged to reach out to this segment of entrepreneurship also.

114. Urban land use policy and recently high land prices also create a serious disincentive

for growth. Artificial and spurious land transactions have created an asset price bubble in

land and real estate markets which negatively affect various sections of society, including

small businesses. A rational land use policy, coupled with appropriate zoning laws that are

enforced will go a long way in the planned growth of not only the retail & whole sectors but

other areas of domestic commerce also. Direct interest by the MOC in these matters as part of

an over-arching commerce policy can potentially create the requisite clout on the provincial

and local governments to develop capacity and prioritize this critically important growth

impediment.

115. Contract enforcement and dispute resolution also requires that the capacity of small

claims courts and business tribunals is enhanced. Also the creation of consumer courts is

important for protection of consumer rights. This will also provide a fillip to qualitative

competition amongst the wholesale& retail businesses.

116. The development of the storage and warehousing sector is endogenous to the

wholesale, retail and international trade development. As such, much of its development will

take place once the other two chains develop. However, the development of the sector is

critically dependant on issues of urban zoning and planned linkages with the transport

Synthesis Report


infrastructure. Rational urban planning and zoning laws are, as mentioned earlier, critical for

the development of this sector.

117. Another area that is important for this sector (as well as transport) is that of insurance

services. Predictable and affordable insurance of goods and assets will not only increase

demand for these services but will reduce risk and uncertainty for the entrepreneur also.

Appropriate regulation and licensing of insurance companies that are certified can help in

creating a pool of reputable insurers in the market.

118. For the transport industry as a whole, a supply chain management approach with an

intermodal transport system attaining optimal productivity, and with each of its segments

adapting their operations to one another should be adopted. There is considerable scope for

revision of the regulatory framework directing the sector. The new road transport legislation

seeks to address many of the bottlenecks highlighted in the preceding discussion.

Implementation of the legislation should be strengthened with utmost urgency. There is also a

need for the authorities to ensure wide dissemination of any changes in the regulatory

framework. This could be done through distribution of leaflets/booklets sent directly to

offices of transport agencies, distributed during Transport Association and Chamber of

Commerce meetings, or supplied through any other means.

119. Moreover, measured steps should be undertaken to integrate trucking into the formal

economy. Currently, the government’s approach does not seem to recognize trucking as an

industry by itself. The shear volume of road freight traffic carried by trucks warrants such

recognition. In order to enhance functional efficiency, a revision of the current restrictive

industrial and import policies for vehicles and auto parts is in order. The Government of

Pakistan (GoP) applies excessive customs duties on Complete Built Units and Completely

Knocked Down kits. Moreover, import of second hand trucks is not allowed. Not only does

the import policy need to be relaxed, but the domestic truck assembly plants also need to be

modernized. A simultaneous approach on both fronts is required.

120. One way of bringing the industry into the formal economy is by mandating a carrier

registration policy. Through this process, the road sub-sector’s services could be standardized

with relative ease. The government’s ability to ensure quality control would also be

strengthened through such a process. Collection of up-to-date data to feed into future policies

is another advantage of the sector’ shift to the formal economy. This said, realistically, a

registration drive would have to provide sufficient incentives to the transport entities to

register themselves. An incentive mechanism where benefits from registering would

outweigh the costs would be essential for successful implementation of a registration plan.

121. The change in the structure of the industry from a large number of small-scale

enterprises to well organized large entities competing against one another requires attention

to ‘soft’ management issues such as automation, marketing, and availability of a well trained

labor force. The government could follow up the registration drive by creating a nation wide

database of freight and passenger services. Under an integrated domestic commerce structure,

clients of the transport industry could be incentivized to utilize automated services to interact

with transporters. Transport firms could also be provided incentives to automate services,

perhaps by subsidizing their transition. The relatively high level of education of transport

owners should make such a transition simple on the technical front. Meanwhile, the non-

government sector could take the lead in setting up driver training centers, where customer

relations trainings are accorded at affordable costs. Alternatively, this task could be placed

under the Trade and Transportation Facilitation Program (TTFP), which has been

instrumental in conducting trainings for freight forwarders in the past.

122. Road industry’s growth is severely hampered by lack of access to formal sector credit.

A World Bank report has outlined concrete steps that can be taken to redress the situation in

this regard: (i) developing a Truck Leasing Concept with banks; (ii) establishing a revolving



National Guarantee Fund in order to give incentives to decrease interest to banks; and (iii)

developing a fund to buy and scrap old but operational two-axle trucks in order to provide

truckers with down payments for newer vehicles31

. All of these are pertinent. In addition,

given the high incidence of loss to goods, the effective role of the insurance industry by

developing cargo, third party, and collision insurance into an industrial norm needs to be

increased.

31 World Bank, “Trade Competitiveness”, 2006.

Synthesis Report


Appendix 1

Precision of Estimation and Sample Sizes

If we want to estimate an unknown proportion, p, using the sample proportion, p̂ , such that

p̂ is within the distance, , of the true proportion, p, with probability at least 0.90,

i.e., 90.0)ˆ( ppP

then from page 2 of the Statistical Appendix, the sample size rule is expressed by:

)1(645.1

2

ppn

Using the fact that 2)5.0()1( pp , the recommended operational sample-size rule is

expressed by:

2

2

)5.0(645.1

n .

However, for a given sample size, the above result can be expressed with on the left-hand

side, as follows:

n

2)5.0(645.1 .

Thus if the sample size, n, is a given value, say n=200, then the above expression implies:

05816.0200

)5.0(645.1

2

.

Thus we can conclude that for a sample size of n=200, an unknown proportion would be

estimated within 5.8% of the true proportion with probability of at least 0.90.

The above expression could be used to get different for different sample sizes used in the

surveys.

Table 1.1: Retail Sample (divided across four provinces) and margin for error (e)

ALL UNITS (90%) Retail

Punjab NWFP Sind Balochistan Total

1900000 460000 600000 90000 3050000

P 0.50 0.50 0.50 0.50 0.50

1-P 0.50 0.50 0.50 0.50 0.50

P(1-P) 0.25000 0.25000 0.25000 0.25000 0.25000

Z 1.645 1.645 1.645 1.645 1.645

Z^2 2.706025 2.706025 2.706025 2.706025 2.706025

Z^2[P(1-P)] 0.67651 0.67651 0.67651 0.67651 0.67651

E 0.037157 0.08225 0.045277 0.106184293 0.027117022

E^2 0.001381 0.006765 0.00205 0.011275104 0.000735333

Z^2[P(1-P)/e^2 490 100 330 60 920

490.00 100.00 330.00 60.00 920.00



Table 1.2: Wholesale sample (divided across four provinces) and margin for error (e)

ALL UNITS (90%) Wholesale


70443 14567 21742 1848 108600

P 0.50 0.50 0.50 0.50 0.50

1-P 0.50 0.50 0.50 0.50 0.50

P(1-P) 0.25000 0.25000 0.25000 0.25000 0.25000

Z 1.645 1.645 1.645 1.645 1.645

Z^2 2.706025 2.706025 2.706025 2.706025 2.706025

Z^2[P(1-P)] 0.67651 0.67651 0.67651 0.67651 0.67651

E 0.049598616 0.116319 0.064032 0.150167268 0.037157

E^2 0.002460023 0.01353 0.0041 0.022550208 0.001381

Z^2[P(1-P)/e^2 275 50 165 30 490

275 50 165 30 490

Table 1.3: Storage Sample (divided across four provinces) and margin for error (e)

ALL UNITS (90%) Storage


1045 74 605 61 1785

P 0.50 0.50 0.50 0.50 0.50

1-P 0.50 0.50 0.50 0.50 0.50

P(1-P) 0.25000 0.25000 0.25000 0.25000 0.25000

Z 1.645 1.645 1.645 1.645 1.645

Z^2 2.706025 2.706025 2.706025 2.706025 2.706025

Z^2[P(1-P)] 0.67651 0.67651 0.67651 0.67651 0.67651

E 0.00663 0.0451 0.01038 0.048322 0.00345

e^2 4.39569E-

05 0.002034 0.000108 0.002335 1.19025E-05

Z^2[P(1-P)/e^2 102 15 65 14 56837

50 10 35 5 100

Table 1.4: Real Estate Sample (divided across four provinces) and margin for error (e)

ALL UNITS (90%) Real Estate


6382 847 3168 176 10573

P 0.50 0.50 0.50 0.50 0.50

1-P 0.50 0.50 0.50 0.50 0.50

P(1-P) 0.25000 0.25000 0.25000 0.25000 0.25000

Z 1.645 1.645 1.645 1.645 1.645

Z^2 2.706025 2.706025 2.706025 2.706025 2.706025

Z^2[P(1-P)] 0.67651 0.67651 0.67651 0.67651 0.67651

E 0.08225 0.183917 0.098308 0.260097338 0.05816

e^2 0.006765 0.033825 0.009664 0.067650625 0.003383

Z^2[P(1-P)/e^2 100 20 70 10 200

100 20 70 10 200

Synthesis Report


Table 1.5: Transport sample (divided across four provinces) and margin for error (e)

ALL UNITS (90%) Transport


3312 674 1063 130 5179

P 0.50 0.50 0.50 0.50 0.50

1-P 0.50 0.50 0.50 0.50 0.50

P(1-P) 0.25000 0.25000 0.25000 0.25000 0.25000

Z 1.645 1.645 1.645 1.645 1.645

Z^2 2.706025 2.706025 2.706025 2.706025 2.706025

Z^2[P(1-P)] 0.67651 0.67651 0.67651 0.67651 0.67651

E 0.116319 0.260097 0.139028 0.367833 0.08225

e^2 0.01353 0.067651 0.019329 0.135301 0.006765

Z^2[P(1-P)/e^2 50 10 35 5 100

50 10 35 5 10032

32 For a detailed explanation of the calculation, refer to Statistical Appendix.



Appendix 2

The Laspeyres fixed-weighted index has been to derive results33

. Three separate indices have

been generated: the total transport output index, the passenger output index, and the freight

output index. Relative weights for the index have been computed using operating revenue

estimates for passenger and freight services. Data was available for rail, but had to be

computed for road. The aviation sector is not included in the index. While data on the

operating revenue of the air sub-sector is available, but it does not differentiate between

domestic and international output. Data on price per unit, the other necessary variable to

calculate relative weights (in the absence of revenue information) is altogether missing.

Nonetheless, since aviation’s total share in the transport sector is less than one percent, its

omission should have no significant impact the final index.

To compute the weights for road, the price per passenger-km and ton-km for passengers and

freight services were calculated respectively from the primary data. Mean values for number

of passengers and tons were used to calculate the per unit price wherever such entries were

missing in the primary data. Then, using published output figures for each of the two

services, we arrived at their respective operating revenues.

The formula for the Laspeyres index is as follows34

:

X

PQ

PQ

PQI ii 0

00

01

= 033022011

1PQPQPQ

X

= 3

03

2

02

1

01 QX

PQ

X

PQ

X

P

= 332211 QWQWQW

where,

I= Index

Po= Base year price

Qo= Base year output

Q1,2,3= Output in other years

W1,2,3= relative weights

33 This section is largely drawn from ‘Domestic Commerce in Pakistan: An Overview of the Transport Sector’,

Innovative Development Strategies (2007) 34 Lapeyres index is frequently used for intermediate sectors of the economy. Pakistan’s CPI is also

calculated using this index.

Synthesis Report


GDP Growth Table 1.7: Annual growth rates of transport

output index and national GDP

(%)

Year Output

Index growth GDP

growth

1996/97 5.77 1.7

1997/98 6.08 3.5

1998/99 6.45 4.2

1999/00 6.15 3.9

2000/01 5.90 2.0

2001/02 0.85 3.1

2002/03 2.58 4.7

2003/04 3.36 7.5

2004/05 3.53 8.6

A simple forecasting exercise was conducted for the transport sector’s output index till 2009-

10. Two estimates are provided, the first without considering the lag, and the second with the

lag factored in. Forecasts are made separately for the total, passenger and freight indices.

While a static average of the last three years has been taken to forecast growth of the total and

passenger indices (without lag), for the freight index, a moving average of the last four years

has been used to compensate for the fluctuation in the past trend.

Table 1.8: Retail: Average Monthly Revenue

Average Monthly Revenue Frequency Valid Percent Cumulative Percent

Up to Rs. 50,000 216 22.9 22.9

50,000 - 100,000 210 22.2 45.1

100,000 - 250,000 239 25.3 70.4

250,000 - 400,000 119 12.6 83.1

400,000 and above 160 16.9 100

Table 1.9: Wholesale: Average Monthly Revenue

Classes Frequency Valid Percent Cumulative Percent

Up to 100,000 111 20.5 20.5

100,000 to 250,000 117 21.6 42.1

250,000 to 400,000 72 13.3 55.5

400,000 to 550,000 50 9.2 64.7

550,000 to 700,000 34 6.3 71

Over 700,000 157 29.0 100

Total 541 100



Appendix 3

Table 1.10: Business Services


Engineering Services

Needed (count)

149 80 73 47 349

Needed (percentage of sample)

14.9% 16% 37.2% 47.5% 19.4%

Used (count)

134 59 65 42 300

Used (percentage of sample)

13.4% 11.8% 33.2% 42.4% 16.7%

Management Consultants

Needed (count)

66 61 49 17 193


6.6% 12.2% 25% 17.2% 10.8%

Used (count)

39 36 42 8 125


3.9% 7.2% 21.4% 8.1% 7%

Marketing Services

Needed (count)

222 151 69 37 479


22.2% 30.2% 35.2% 37.4% 26.7%

Used (count)

155 105 52 23 335


15.5% 21% 26.5% 23.2% 18.7%

Accounting Services

Needed (count)

93 70 58 19 240


9.3% 14% 29.6% 19.2% 13.4%

Used (count)

67 41 50 6 164


6.7% 8.2% 25.5% 6.1% 9.1%

Legal Services

Needed (count)

80 75 55 38 248


8% 15% 28.1% 38.4% 13.8%

Used (count)

54 48 43 25 170


5.4% 9.6% 21.9% 25.3% 9.5%

Continued…

Synthesis Report



Insurance Services

Needed (count)

110 58 53 41 262


11% 11.6% 27% 41.4% 14.6%

Used (count)

36 17 24 21 98

Used (percentage

of firms)

3.6% 3.4% 12.2% 21.2% 5.5%

Information Technology

Services

Needed (count)

73 44 43 6 166


7.3% 8.8% 21.9% 6.1% 9.2%

Used (count)

51 26 30 2 109


5.1% 5.2% 15.3% 2% 6.1%



Appendix 4


Count (% of

Sample)

Count (% of

Sample)

Count (% of

Sample)

Count (% of

Sample)

Count (% of

Sample)

I must rely on the reputation of those I enter into agreement

with.

Strongly agree

433 (43.4%)

235 (47.4%)

93 (48.9%)

45 (49.5%)

806 (45.4%)

Agree 490 (49.1%)

218 (44%)

83 (43.7%)

37 (40.7%)

828 (46.7%)

Disagree 70 (7%)

42 (8.5%)

14 (7.4%)

9 (9.9%)

135 (7.6%)

Strongly disagree

4 (0.4%)

1 (0.2%)

5 (0.3%)


Count (% of

Sample)

Count (% of

Sample)

Count (% of

Sample)

Count (% of

Sample)

Count (% of

Sample)

A contract will protect me from being cheated

Strongly agree

281 (28.4%)

114 (23%)

60 (31.7%)

22 24.2%

477 (27%)

Agree 552 (55.8%)

299 (60.4%)

106 (56.1%)

51 56%

1008 (57.1%)

Disagree 140 (14.2%)

76 (15.4%)

22 (11.6%)

18 19.8%

256 (14.5%)

Strongly disagree

16 (1.6%)

6 (1.2%)

1 (.5%)

23 (1.3%)


Count (% of

Sample)

Count (% of

Sample)

Count (% of

Sample)

Count (% of

Sample)

Count (% of

Sample)

The legal system will uphold my contract and property rights in business disputes.

Strongly agree

192 (19.5%)

82 (16.6%)

25 (13.3%)

11 (12.1%)

310 (17.6%)

Agree 500 (50.7%)

258 (52.1%)

92 (48.9%)

53 (58.2%)

903 (51.3%)

Disagree 257 (26%)

133 (26.9%)

54 (28.7%)

25 (27.5%)

469 (26.6%)

Strongly disagree

38 (3.9%)

22 (4.4%)

17 (9%)

2 2.2%

79 (4.5%)


Count (% of

Sample)

Count (% of

Sample)

Count (% of

Sample)

Count (% of

Sample)

Count (% of

Sample)

People from other communities/baraderies are more likely to cheat me.

Strongly agree

48 (4.9%)

38 (7.7%)

25 (13.3%)

11 (12.1%)

310 (17.6%)

Agree 243 (24.6%)

163 (33%)

92 (48.9%)

53 (58.2%)

903 (51.3%)

Disagree 573 (26%)

248 (50.2%)

54 (28.7%)

25 (27.5%)

469 (26.6%)

Strongly disagree

123 (12.5%)

45 (9.1%)

17 (9%)

2 2.2%

79 (4.5%)

Synthesis Report



Count (% of

Sample)

Count (% of

Sample)

Count (% of

Sample)

Count (% of

Sample)

Count (% of

Sample)

People from other cities are more likely to cheat me.

Strongly agree

73 (7.4%)

33 (6.7%)

22 (11.8%)

8 (8.9%)

136 (7.7%)

Agree 275 (27.8%)

172 (34.8%)

67 (36%)

24 (26.7%)

538 (30.6%)

Disagree 509 (51.5%)

229 (46.4%)

77 (41.4%)

49 (54.4%)

864 (49.1%)

Strongly disagree

131 (13.3%)

60 (12.1%)

20 (10.8%)

9 10%

220 (12.5%)



Bibliography

Asian Development Bank, “Technical Assistance for Regional Initiatives in Road Safety”,

Manila.

Haque, Nadeem-Ul, “Awake the Sleeper Within: Releasing the Energy of Stifled Domestic

Commerce,” (2006).

Innovative Development Strategies, ‘Domestic Commerce Report: An Overview of the

Transport Sector,” (2007).

Innovative Development Strategies, “Domestic Commerce Report: An Overview of the

Retail Markets,” (2007).


Wholesale Markets,’ (2007).


Storage Markets,” (2007).

Innovative Development Strategies, “Domestic Commerce Report: An Overview of the Real

Estate Market,’ (2007).

ENHESA.“Pakistan Monitoring Reports”, (2007).

<http://www.enhesa.com/enhesa/en/global/country.asp?CountryCode=PK> (accessed on 20

December, 2006).

World Bank, “Trade and Transport Facilitation Project”, 2001. World Bank, “Trade Competitiveness”, (2006).

Zahid Jamil and Shahid Jamil, “Modernizing Pakistan’s Carriage of Goods Legislation”,

National Trade and Transport Facilitation Committee, (2003). <http://

www.nttfc.org/proceed03/proc03-jamil.htm>.

http://www.enhesa.com/enhesa/en/global/country.asp?CountryCode=PK

http://www.nttfc.org/proceed03/proc03-jamil.htm

the state of domestic commerce in pakistan study 10- synthesis report

Economy & Finance