Home ›› 17 Nov 2022 ›› News
Bangladesh is on track to become a $500 billion economy but the country is now lagging behind in logistics performance compared to its global competitors.
The business operation cost in the country is increasing day by day due to poor logistics infrastructure, creating barrier to bring more Foreign Direct Investment (FDI).
Economists suggested that Bangladesh needs to invest $320 billion by 2030 to attain Sustainable Development Goals (SDGs) as well as to reach its socioeconomic target of Vision 2041.
The sector insiders claim that Bangladesh takes longer clearance time at ports compared to South and East Asian countries. Thirty five per cent of the products get damaged in ports due to infrastructure deficiency, inadequate digitisation, and interoperability among clearance agencies.
Economists and logistical experts from home and abroad have suggested that Bangladesh needs global standard logistics policy to reduce business costs to tackle the possible challenges after LDC graduation in 2026, and achieve developed country status by 2041.
In the Trade Freedom Index-2022, Bangladesh ranks 125th while India 90th, Vietnam 52nd, and China 80th.
In the Global Competitiveness Index (GCI) Country Ranking 2019, Bangladesh overall ranked 105th while India 68th, China 28th and Vietnam 67th.
Bangladesh’s logistics costs one of the highest globally
Bangladeshi businessmen claim that due to poor domestic logistics infrastructure, they face challenge in competition in international market, as they often fail to meet the deadline which ultimately disrupts overall supply chain.
They urged the government to take necessary initiatives for improving logistics infrastructure to cut business costs and ensure ease of doing business for the sake of Bangladesh’s sustainable economic growth.
Dr M Masrur Reaz, chairman and CEO of Policy Exchange Bangladesh (PEB), said Bangladesh has great opportunity having river, rail and road transportations. But, the country fails to make good use of the opportunity due to poor infrastructure.
He underscored developing modern logistics systems for trade competitiveness as well as policy priorities to improve the logistics support situation.
Mentioning competitiveness key to attaining necessary level of trade, investment, and employment, the economist said regional trade opportunities loom large but requires going beyond labour cost-based advantage.
“Bangladesh imports goods worth nearly $7.0 billion from 10 ASEAN countries while it exports less than $1.0 billion per annum to those countries,” he added.
“However, transactions costs of shipment increases by 2% to 24% due to weak trade facilitation (TF) environment. TF refers to measures that aim to reduce the costs and barriers to trade, beyond traditional policy tools,” Masrur informed.
“Developing the logistics support to compete with global counterparts, we should utilise ports, railways, roads, and waterways. But we are lagging behind due to the lack of proper policy and coordination between all departments and agencies,” he pointed out.
The PEB chairman said trade facilitation in Bangladesh is yet to catch up with its development performance and goals. Modern ports lead to competitive integration with global markets.
“So, Bangladesh must enhance regional connectivity and access to global markets, modernise facility with ability to handle upsized vessels, and improve vessel turnaround, productivity and container dwell-time,” the economist suggested.
Challenges to logistics development
Noted economists and stakeholders have identified a good number of challenges to the development of logistics support. The challenges include absence of a national logistics strategy; entry barriers for foreign logistics operators; long container dwell times at Chattogram Port; complex port governance system; policies leading to less efficient port operation; limited participation of private sector in port operation; Chittagong Port, at 9.1 metres, is much shallower than other South Asian ports; and several inefficiencies resulting in long pre-birthing.
The president of Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) Md Jashim Uddin said there is no alternative to an integrated logistics management system to ensure competitiveness in international trade.
“Congestion on the Dhaka-Chittagong highway and in the port increases the time and cost. To resolve the problem, we need to focus on rail and inland waterways development to reach the product to the destination point efficiently in time. We must reduce production cost to compete with global market,” he also said.
Speaking at a workshop, World Bank South Asia's Practice Manager of Transport Dr Shomik Raj Mehndiratta said logistics has been treated as the most sophisticated player in the growth to ensure the quality of service in the most efficient way.
“To remain competitive in the global era, it is time to focus on inventory management, transport of goods, and other issues which are related to the logistics philosophy," he said.
The World Bank Group, the industries ministry, and the Business Initiative Leading Development (BUILD) jointly organised the two-day workshop, titled “Formulating National Logistics Industry Development Policy for Bangladesh and Experience from Global Good Practices”.
Reform opportunities to build logistics ecosystem for vision 2041
To achieve developed country status in due time, logistical experts suggested development of co-ordination framework, review and monitoring; implementation of mechanism for sector review and monitoring framework; promoting public-private partnerships for development, operations and maintenance of infrastructure; and implementation of single window for transport and logistics.
Industries Minister Nurul Majid Mahmud Humayun told The Business Post that Bangladesh is moving towards overcoming all challenges.
“We will finalise national logistics policy soon after taking opinion from stakeholders to develop our logistics sector. The government has already carried out massive infrastructure development to make the supply chain smooth and efficient which will help achieving Vision 2041,” he added.
