What ails Bangladesh trade growth?

Trade com­mu­nity and stake­hold­ers in the ship­ping and lo­gis­tics sec­tor of Bangladesh pin­point at crit­i­cal is­sues that need to be im­me­di­ately re­solved to en­sure un­ham­pered trade and eco­nomic growth in Bangladesh and South East Asia

Maritime Gateway - - Contents -

Trade com­mu­nity and stake­hold­ers in the ship­ping and lo­gis­tics sec­tor of Bangladesh pin­point at crit­i­cal is­sues that need to be im­me­di­ately re­solved to en­sure un­ham­pered trade and eco­nomic growth in Bangladesh and South East Asia

Apromis­ing coun­try with plenty of op­por­tu­ni­ties in trade, Bangladesh is ush­er­ing new heights. How­ever these bun­dle of op­por­tu­ni­ties have not been fully uti­lized. Bangladesh has been wit­ness­ing pro­gres­sive growth but ham­pered by many bot­tle­necks over the years. In this back­ground Mar­itime Gate­way in as­so­ci­a­tion with Drewry has con­ducted an ex­ten­sive sur­vey to dwell upon and un­veil facts col­lected from all stake­hold­ers of ship­ping and lo­gis­tics in­dus­try to bring to the no­tice of gov­ern­ment, the pain points that need to be re­lieved.

Bangladesh has reg­is­tered a vol­ume of 2,566,597 TEUS in CY 2017 with a rise of more than 9 per cent year-on-year growth against CY 2016 vol­ume by clock­ing CAGR of around 10 per cent dur­ing CY 20082017. The coun­try’s mer­chan­dise ex­ports are ma­jorly dom­i­nated by gar­ments with around 80 per cent share. The coun­try’s 90 per cent of the to­tal cargo is be­ing han­dled at Chittagong Port.

Ship­ping and lo­gis­tics in­dus­try growth is ma­jorly driven by in­vest­ment in the improve­ment of port in­fra­struc­ture, trans­porta­tion, in­for­ma­tion tech­nol­ogy (IT), stor­age, han­dling and cus­tom clear­ance fa­cil­i­ties...etc.

In a com­pet­i­tive world, re­duc­tion in lo­gis­tics cost is of prime im­por­tance for all type of busi­nesses. In mer­can­tile trade busi­nesses lo­gis­tics com­po­nents are vi­tal start­ing from in­land con­nec­tiv­ity to cargo han­dling at ports to cus­tom/le­gal pro­ce­dures. (Ref Fig­ure - 01)

Bangladesh with ever ris­ing gar­ment ex­ports is plagued by high lo­gis­tic cost and time de­lays. The sur­vey ranks the ab­sence of ad­e­quate port ca­pac­ity as a crit­i­cal fac­tor

for the high sup­ply chain cost of con­tainer­ised cargo mov­ing in and out of Bangladesh. Ca­pac­ity con­straint at the port, es­pe­cially at the Chittagong port is so wretched that the ex­port con­tain­ers are moved di­rectly from CFS to the quay crane hook. The sec­ond fac­tor af­fect­ing the cost is port con­nec­tiv­ity in­fra­struc­ture like road, rail and in­land wa­ter­way.

Now the ques­tion arises why ca­pac­ity con­straints have been ham­per­ing Bangladesh’s in­ter­na­tional trade? Why is it not be­ing ad­dressed? Through sur­vey re­sults, de­lay in de­ci­sion mak­ing is the pri­mary cause for this sorry state of af­fair at the ports. For ex­am­ple, The New Moor­ing Con­tainer Ter­mi­nal (NCT) re­mained unutilised for years af­ter the con­struc­tion was com­pleted in 2007 due to de­lays in de­ci­sions for the ap­point­ment of an op­er­a­tor and pur­chase of equip­ment. Apart from port con­ges­tion, de­lay in cus­tom clear­ance was high­lighted as key fac­tor af­fect­ing im­porters and ex­porters of Bangladesh with ad­di­tional cost.

(Ref Fig­ure - 02)

When asked whether in­ter­na­tional ter­mi­nal op­er­a­tors can bring in ef­fi­ciency in Bangladesh port/ter­mi­nal op­er­a­tion? 74 per cent re­spon­dents sup­ported that in­ter­na­tional ter­mi­nal op­er­a­tors can im­prove ef­fi­ciency.

They also men­tioned that PPP model of op­er­at­ing ter­mi­nals is al­ready a proven model world­wide and the same can help in Bangladesh. Ex­per­tise of well-es­tab­lished and well ex­pe­ri­enced global port op­er­a­tors will def­i­nitely boost the per­for­mance of ports and the cus­tomer-friendly ap­proach, dig­i­ti­za­tion, ad­vanced cargo han­dling equip­ment’s which they use will ap­pend for bet­ter­ment of ports.

(Ref Fig­ure - 03)

Opt­ing for PPP model was cho­sen by many re­spon­dents for the quick turn­around at ex­ist­ing/up­com­ing ports and ter­mi­nals in Bangladesh. 81 per cent of the re­spon­dent’s choice is to go for PPP model. The rea­sons men­tioned are for­eign in­vest­ments will help Gov­ern­ment to get money flow for the swift ac­tion in de­vel­op­ment of Projects. Few also ex­pressed that de­lays in ac­tion, im­ple­men­ta­tion can be elim­i­nated in this model for bet­ter­ment of trade.

(Ref Fig­ure - 04)

De­ci­sion-mak­ing de­lays, lack of plan­ning and po­lit­i­cal fac­tors are con­sid­ered as ma­jor rea­sons by re­spon­dents for the lag in lo­gis­tic projects im­ple­men­ta­tion. About

70 per cent of freight move­ment at Chittagong Port orig­i­nates and is des­tined for Dhaka re­gion and rest 30 per cent for Chittagong re­gion. In case of Dhaka to Chittagong trans­porta­tion, time taken by a truck should be ide­ally nine hours but mostly it takes more than a day, in­creas­ing the cost and time for ship­pers. These con­ges­tion is­sues

de­te­ri­o­rate and cre­ate chaos in trans­porta­tion of exim cargo.

(Ref Fig­ure - 05)

Apart from the above men­tioned rea­sons af­fect­ing ship­pers with ad­di­tional cost, lack of mech­a­niza­tion at ports also plays a vi­tal role in in­creas­ing cost for the ship­pers in Bangladesh. In­stal­la­tion of ad­vanced cargo han­dling equip­ment can re­solve the is­sues and im­prove the ef­fi­ciency in port han­dling. Lack of di­rect port calls is also a con­cern, as Bangladesh is los­ing rev­enue to neigh­bour­ing coun­tries due to its in­ad­e­quate draft in wel­com­ing big­ger ves­sels. Sil­ta­tion at river-based ports and high cost of dredg­ing adds to the op­er­a­tional costs.

(Ref Fig­ure - 06)

Lack of re­turn cargo is the ma­jor rea­son high­lighted by re­spon­dents when we asked about why Pan­goan Ter­mi­nal has not grown as per ex­pec­ta­tions? How­ever the same rea­son is ap­pli­ca­ble to the coun­try’s trade as there has been wide gap in be­tween ex­ports and im­ports. Ves­sel fre­quency and new ser­vices need to be im­proved at the ter­mi­nal for the rapid growth of vol­ume. One of the key rea­sons is lack of trade en­cour­age­ment for this emerg­ing ter­mi­nal to serve the trade fullest.

(Ref Fig­ure - 07)

Po­lit­i­cal chal­lenges and is­sues ranked top in in­tra-re­gional trade bar­ri­ers in south Asia. Hope­fully all coun­tries should step for­ward in re­solv­ing these bar­ri­ers for the bet­ter­ment of trade flow among all south Asian coun­tries. Then the next chal­lenge is con­nec­tiv­ity is­sue among south Asian coun­tries as re­gional ports are not well con­nected. High lo­gis­tics cost also plays a ma­jor role in slow growth in in­tra-re­gional trade in south Asia.

(Ref Fig­ure - 08)

About 60 per cent of the re­spon­dents voted for In­dian east coast to serve Bangladesh tran­ship­ment cargo. In­dian east coast is strate­gi­cally closer to Bangladesh ports and can help in re­duc­ing lo­gis­tic cost, in­crease turn­around time, im­prove con­nec­tiv­ity and pro­mote healthy com­pe­ti­tion among tran­ship­ment hubs with com­pet­i­tive tar­iffs. How­ever, ship­pers in Bangladesh are also con­cerned about high con­ges­tion is­sues at

Kolkata and Hal­dia ports. A ma­jor­ity of re­spon­dents called for de­vel­op­ing a deep draft port in Bangladesh to han­dle its own cargo more ef­fec­tively.

(Ref Fig­ure - 09)

Take aways:

Due to its lo­ca­tional ad­van­tage, Bangladesh can play a key role in south Asia re­gional trade and lo­gis­tics. Im­prove­ments in in­tra-re­gional trade re­la­tions can aug­ment ex­ports and cut im­port costs. Bangladesh has in­creased its global mar­ket share by two fold in ex­ports in the last decade. How­ever, the po­ten­tial is much higher. Bangladesh has enor­mous po­ten­tial to in­crease trade with its neigh­bours as most of its trade with neigh­bour­ing coun­tries is only less than half of its cur­rent po­ten­tial. Key bar­ri­ers like poor in­fra­struc­ture, con­ges­tion is­sues, port calls, mar­i­nat­ing draft, po­lit­i­cal is­sues, project im­ple­men­ta­tion de­lays, lack of stor­age ca­pac­ity, trans­port ser­vices, con­nec­tiv­ity is­sues and clear­ance de­lays need to be ad­dressed im­me­di­ately to bol­ster Bangladesh to be­come more com­pet­i­tive re­gion­ally and glob­ally.

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