Roadblocks to Pakistan’s Dream of Becoming a “Transit Hub” for CAS and Beyond

Currently, the logistics and road transport sector contributes over 12% of GDP and employs 6% of the country’s workforce, handling 98% of Pakistan’s transportation needs.

Yet, despite its significance, Pakistan’s road logistics sector is mired in inefficiency, underinvestment, and outdated governance frameworks. The latest Pakistan Business Council (PBC) report “Pakistan Road Logistics, Challenges, Opportunities and Policy Response”-2025 paints a sobering picture: Pakistan’s Logistics Performance Index (LPI) has dropped from 2.42 in 2018 to 2.3 in 2025, ranking far behind regional countries India (rank 44), Iran (100), and Bangladesh (64). Figures aside, we already know the diapleted condition of roads and fuel costs run havoc this year for the sector.

The lack of an integrated national transport policy and a dedicated Ministry of Transport and Logistics has hampered coordinated action. Responsibilities are fragmented across federal, provincial, and quasi-government entities, leading to poor planning and execution. This structural weakness allows informal operators, backed by politically influential sectors to evade regulations — further distorting the market and discouraging formal players. In the PBC Report: Dedicated Ministry or Focal Authority for the Logistics Sector: It is important to realize that logistics is an interconnected sector, and one mode is not independent of the other. Therefore, a focused approach is required to help the sector grow.

The logistics operators are under immense pressure of excessive rate of taxes, the federal government’s recent decision in the 2026-2027 budget to increase the withholding tax on logistics services from 6% to 7%. The 7% on revenue translates to more that 100% of the thin profit margin in this sector. Normal tax rate for companies is about 29% of the profit in Pakistan for other businesses.

Even 4% and 6% was excessive than 29%. This decision will deal a devastating blow to the service sector — particularly to an already struggling goods transport industry due to high fuel costs and inflation, that plays a critical role in Pakistan’s economy. This increase will push small and medium-sized transporters out of the formal tax net in a desperate attempt to keep their businesses afloat. This will inevitably undermining both government revenue collection and the rule of law.

One glaring issue is the non-implementation of Axle Load regulations. Overloading is a major cause of premature road infrastructure failure and road accidents.

The World Bank estimates that road accidents cost Pakistan 4.5% of GDP, equivalent to $12.5 billion annually. Strict enforcement of Axle Load laws, including vehicle impoundment and cargo seizure for violations, is essential to safeguard both infrastructure and lives. In the PBC Report: “Axle Load Enforcement: 1) Strengthen Regulations: Enforce axle load limits uniformly across all regions to minimize road damage and extend infrastructure lifespan. 2) Monitoring and Penalties: Implement weighbridges equipped with automated systems for accurate load monitoring and impose strict penalties for violations”.

Despite the best intentions, investments in Pakistan’s motorways have largely failed to deliver their intended economic benefits. Many motorways built under BOT arrangements either prohibit overloaded trucks—to protect the infrastructure for which investors are liable—or allow such vehicles, resulting in severe damage and escalating repair costs (major maintenance now required in the second year, instead of the seventh).

The motorway network has thus become a white elephant, unable to service its debts or justify the public and private investments made. Motorways cannot be financially viable on passenger traffic alone. Their full commercial and economic potential depends on carrying freight traffic. Yet freight operators avoid these roads, preferring to run overloaded on national highways where axle load limits are not enforced—causing massive damage to both highway infrastructure and the public exchequer.

Another pressing need is the modernization of Pakistan’s trucking fleet. With only 330,000 registered trucks — compared to India’s 12.5 million — the sector suffers from outdated, fuel-inefficient vehicles that raise costs, emissions, and road safety risks.

The PBC recommends developing green financing tools to support fleet renewal with Euro-5 compliant and electric vehicles, a move that would also align with emerging global climate regulations like the EU Green Deal. In the Pakistan Business Council Report: “Fleet Modernization and Financing: Expand Access to Credit: Develop low-interest loan schemes and financial products tailored to small and medium-sized operators, enabling them to upgrade their fleets”.

The path forward is clear:

• Set a supporting Tax Policy to logistics, similar to other businesses and industries.

• Enforce Axle Load limits strictly

• Provide targeted green financing for fleet upgrades

• Establish a unified Ministry of Transport and Logistics to drive reforms

By tackling these issues with urgency, Pakistan can then realize its dream of becoming a “Transit Hub” for the central Asia and beyond, transform its logistics sector into a regional powerhouse — supporting exports, creating jobs, and enhancing national competitiveness. On this National Logistics Day, let us commit to removing these roadblock with policy and initiatives to realize the sector’s full potential.

Copyright Business Recorder, 2026