Bangladesh is well on its way to become an economy worth $500 billion, but the nation is now at a disadvantage in terms of its logistics performance when compared to its rivals across the world.
As a result of the nation’s inadequate logistical infrastructure, the costs of doing business in the country are steadily rising, which is a barrier to attracting a greater amount of Foreign Direct Investment (FDI).
Economists have stated that Bangladesh must make an investment of 320 billion dollars by the year 2030 in order to achieve the Sustainable Development Goals (SDGs) and to achieve the socioeconomic goal that it has set for itself in Vision 2041.
According to those with knowledge of the industry, Bangladesh’s ports need a lengthier amount of time to clear cargo in comparison to nations in South and East Asia. There is a lack of infrastructure, poor digitization, and interoperability across clearing agencies, which results in thirty-five percent of the items being destroyed while they are going through the ports.
Economists and logistical specialists from both Bangladesh and other countries have proposed that Bangladesh adopt a worldwide standard logistics strategy in order to lower the costs of doing business, therefore addressing the potential issues that may arise after the nation’s graduation from the LDC category in 2026 and achieving the status of a developed country by 2041.
Bangladesh comes in at position 125 on the Trade Freedom Index-2022, whereas India is ranked 90th, Vietnam is ranked 52nd, and China is ranked 80th.
Bangladesh came in at position 105th overall in the Global Competitiveness Index (GCI) Country Ranking 2019, whereas India came in at position 68th, China at position 28th, and Vietnam at position 67th.
Costs associated with logistics in Bangladesh are among the highest in the world
When it comes to competing in foreign markets, Bangladeshi businesspeople state that they have difficulties as a result of the inadequate domestic logistics infrastructure. This is because they often fail to reach the deadline, which eventually affects the supply chain process as a whole.
In order to guarantee that Bangladesh’s economy continues to expand in a sustainable manner, they encouraged the government to take the required steps to improve the logistics infrastructure in order to reduce the costs of doing business and to make it easier for businesses to begin operations.
The chairman and chief executive officer of Policy Exchange Bangladesh (PEB), Dr. M. Masrur Reaz, said that Bangladesh had a significant potential due to the presence of river, rail, and road transportation. In spite of this, the nation is unable to make effective use of the opportunity because of its inadequate infrastructure.
The development of contemporary logistics systems for the purpose of enhancing trade competitiveness was emphasized by him, as were policy goals for the purpose of enhancing the logistical support situation.
A regional trade opportunity is looming big, but it demands moving beyond a labor cost-based advantage, according to the economist, who added that competitiveness is essential to achieving the appropriate level of trade, investment, and employment.
As an additional point of interest, he said that Bangladesh purchases commodities from ten ASEAN nations that are worth almost $7.0 billion, but the country exports less than $1.0 billion to those countries annually.
On the other hand, because of the inadequate trade facilitation (TF) environment, the transaction costs of shipping have increased by 2% to 24%. “Trade facilitation” (TF) refers to actions that go beyond typical policy instruments in order to lower the costs and restrictions that are associated with trade,” Masrur said.
We ought to make use of ports, trains, roads, and waterways in order to foster the development of the logistical support necessary to compete with global rivals. However, we are falling behind because there is a lack of adequate policy and coordination across all of the ministries and agencies,” he pointed out.
According to the chairman of the Philippines Economic Board (PEB), trade facilitation in Bangladesh has not yet caught up with its development success and ambitions. In order to achieve competitive integration with global markets, modern ports are necessary.
As a result, the economist proposed that Bangladesh should increase its regional connection and access to global markets, modernize its facilities so that they are able to accommodate vessels of a larger capacity, and boost vessel turnaround, productivity, and container dwell-time.
Developmental obstacles in the field of logistics
There are a significant number of obstacles that have been recognized by prominent economists and stakeholders in relation to the development of logistical assistance. There is a lack of a national logistics strategy, there are entry barriers for foreign logistics operators, there are long container dwell times at Chattogram Port, there is a complex governance system for the port, there are policies that lead to less efficient port operation, there is limited participation of the private sector in port operation, Chittagong Port is much shallower than other South Asian ports, and there are several inefficiencies that result in long pre-birthing times.
It has been said by Md Jashim Uddin, the president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), that there is no alternative to an integrated logistics management system in order to guarantee competitiveness in international commerce.
Time and money are both increased as a result of congestion on the route between Dhaka and Chittagong as well as at the port. In order to find a solution to the issue, we need to concentrate on the development of rail and inland waterways in order to transport the product to the target point in a timely and effective manner. In addition, he said that in order to compete with the global market, we need to lower our manufacturing costs.
During a workshop, Dr. Shomik Raj Mehndiratta, who is the Practice Manager of Transport at the World Bank South Asia, said that logistics has been regarded as the most sophisticated participant in the development process in order to guarantee the highest possible level of service in the most effective manner.
The time has come, according to him, to concentrate on inventory management, the transportation of products, and other problems that are connected to the philosophy of logistics. This is necessary in order to maintain competitiveness in the global era.
The workshop, which lasted for two days and was titled “Formulating National Logistics Industry Development Policy for Bangladesh and Experience from Global Good Practices,” was jointly organized by the World Bank Group, the Ministry of Industries, and the Business Initiative Leading Development (BUILD).
In order to establish a logistics ecosystem in preparation for vision 2041, reform opportunities
The development of a framework for coordination, review, and monitoring; the implementation of a mechanism for sector review and monitoring framework; the promotion of public-private partnerships for the development, operations, and maintenance of infrastructure; and the implementation of a single window for transport and logistics were all suggestions made by logistical experts in order to achieve the status of a developed country in a timely manner.
In an interview with The Business Post, Bangladesh’s Minister of Industries Nurul Majid Mahmud Humayun said that the country is making progress toward resolving all of its issues.
“In the near future, we will finalize the national logistics strategy after soliciting feedback from all stakeholders in order to grow our logistics industry. The government has already completed a significant amount of infrastructure development in order to make the supply chain more streamlined and effective, which will contribute to the accomplishment of Vision 2041,” said the speaker.