Structure of Nepal’s trucking industry: Results from a nationwide survey
Over 1000 trucks from different regions of Nepal were sampled.
Abstract
This report includes outcomes from a nationwide survey of the trucking industry in Nepal. Using stratified random sampling methods; over 1000 trucks from different regions of Nepal were sampled. Information about the workforce, financing environment, and working environment of the trucking industry were collected. By doing so, more than 100 variables related to the Nepalese trucking industry were measured.
It is concluded that there are at least 39 local trucking entrepreneur’s associations (TEA’s) in Nepal who dictate the rule of the trucking operation for about 30,000 trucks along 429 recognized routes. TEA’s attract memberships because of their capability to help truck owners in need; however TEA’s have no legal authority.
The popularity of TEA’s amongst truck owners could be explained by the following:
- A rise in the mass based justice system due to the breakdown of enforcement ability of local government;
- The limited resources of truck owners and consequently their inability to absorb economic shocks;
- During the past decades a nationwide desirability for unionization in Nepal emerged.
Nepal is dominated by small truck owners, who on an average own 2.4 trucks. The truck owners derive from the transportation industry itself and 70% of them do not have another saleable skill. Therefore truck owners are part of or form collusive groups, which occasionally restrict supply in the market. The survey reveals that group formation manifests itself in the form of delayed permit issuance by TEAs on many routes.
Therefore, despite recent clampdown on the financial activities of TEAs, they remain an important player in Nepal. The survey also concludes that truck owners see TEAs as a source of insurance in cases of accidents and 93% of those surveyed say they plan to continue their affiliation with them.
The small truck owners rely on themselves to get loads, which is a highly competitive environment. Loads are highly asymmetric: almost 60% of the trucks have loads less than one fifth of the time while returning from their destinations. All of the owners use cell phones and have no other communication devices to track vehicles. Bribery is a common feature in all aspects of the trucking industry operations: bribes are paid to get permits from government or TEAs, and to different agencies that stop trucks on their way to their destination. Truck owners could find themselves in a hostile environment, e.g. during accidents truck operators are often attacked. Insurance firms are not offering diverse enough services; therefore small truck owners are cornered in a position where they need to select a TEA’s to protect their interest.
Syndicates impose costs on the overall economy in the form of deadweight loss. We calculated the cost to be $27.5575 million dollars per year. Furthermore, we estimated that in 2014, out of the 9.1% inflation rate of Kathmandu valley, 11% was due to the syndicates (i.e. in the absence of syndicates, the inflation rate should have been 8%). Additionally, deadweight loss due to syndicates is accounted for 2.6% of the total GDP growth.
This report has been produced by Kathmandu University, Nepal for Evidence on Demand with the assistance of the UK Department for International Development (DFID) contracted through the Climate, Environment, Infrastructure and Livelihoods Professional Evidence and Applied Knowledge Services (CEIL PEAKS) programme, jointly managed by DAI (which incorporates HTSPE Limited) and IMC Worldwide Limited.
Citation
Poudel, B. Structure of Nepal’s trucking industry: Results from a nationwide survey. Evidence on Demand, UK (2015) ii +38 pp. [DOI: 10.12774/eod_cr.january2015.poudelb]
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