Put Logistics on Fast Track

As Bangladesh moves onto a trajectory of higher growth rates and the economy expands, where the country braces for multibillion-dollar FDIs, we will need to shift to a higher gear where efficiency will dictate operations at major ports of entry and exit, be it air or sea.

The recently released “Agility Emerging Markets Logistics Index” ranks Bangladesh at 39th position out of 50 emerging economies. The survey respondents comprised more than 500 logistics professionals who gave their opinion on the prospects and challenges of emerging markets in the years ahead. The key measures used to put the report together were based upon three broad categories: domestic logistics, international logistics and business fundamentals.

Bangladesh also slipped six spots to 140th among 169 countries in a ranking of the world’s most connected nations brought out by global logistics company DHL. The Global Connectedness Index 2018 was measured by four pillars: international flow of trade, capital, information and people. Bangladesh’s overall ranking fell from the 2015 edition although it improved its position in trade, capital and information pillars.

In Agility’s index Bangladesh’s score got dragged down in the business fundamentals sub-index that deals with some major issues like regulatory environment, contract enforcement and anti-corruption frameworks, etc.

Unfortunately for the country, the report blames “weak frameworks covering finance, property rights and contract enforcement.”

DHL’s index ranked Bangladesh lower than its peer countries. India ranked 74th, Pakistan 127th, Vietnam 39th and Cambodia 49th. Myanmar is seven notches ahead of Bangladesh. In South Asia, only Afghanistan (167), Bhutan (150) and Nepal (151) were ranked lower than Bangladesh.

The top 10 countries ranked by their shares of Bangladesh’s international flows are: India (25 per cent), the UAE (14 per cent), Saudi Arabia (7 per cent), Malaysia (7 percent), the UK (5 per cent), Russia (5 per cent), Qatar (5 per cent), the US (4 per cent), Singapore (4 per cent), and China (4 per cent).

While Bangladesh has been highlighted as one of the top performers in Asia over the last decade, with consistent annual growth rates averaging 6.3 per cent, respondents pointed out concerns over “a struggling domestic banking system” as potential red flag for future growth. Low wage has been the primary driving factor in attracting foreign investment to the country over the years but that scenario has changed with the upward movement in wages – posting the highest climb in December 2018 with the introduction of a new wage board in the apparel sector, recording a 51 per cent hike. The challenge, therefore, will be to make progress in other areas (logistics) to keep Bangladesh as a preferred destination for low cost manufacturing.

From a logistical point of view, infrastructure and its efficient operation are major cost barriers. As pointed out by the president of Bangladesh Freight Forwarders Association (BAFFA), “deficiency in infrastructure ultimately increases the cost of doing business, which badly impacts exports.” This was in response to the lack of capacity and facilities in the country’s sea ports and airports. Indeed, there have been calls to privatise these key facilities in order to boost efficiency, which would ultimately result in the lowering of costs of moving freight and reduce lead times.

The government is planning to cut red tape so that it takes seven days to start a business, rather than 19.5, and reduce the time it takes for a company to connect to the national grid to 28 days, from 404. As Bangladesh moves onto a trajectory of higher growth rates and the economy expands, where the country braces for multibilliondollar foreign direct investments and the ground is prepared for some 100 special economic zones, we will need to shift to a higher gear resulting in a scenario where efficiency will dictate operations at major ports of entry and exit, be it air or sea.