Enhancing the Logistic Network

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By Farihah Zaima Faruque

On a ranking of major logistics markets for the future, Bangladesh climbed 13 places from 25th to 12th position in 2013. According to the Agility Emerging Market Logistics Index (AEMLI) Bangladesh is considered as one of the 45 major emerging markets of the world. However, Bangladesh needs to work rigorously to improve its logistic framework to handle the rapidly growing inbound and outbound cargo and container movement in line with the country’s notable economic growth. A report by Bangladesh Supply Chain Management Society (BSCMS) anticipates that the country would be dealing with 35 million TEUs (twenty-foot equivalent unit) of cargo by 2021 and 53 million TEUs by 2025. The increment is staggering and is almost double of what it handles at present.

The two dominant operational seaports of Bangladesh – Chattogram port and Mongla port – plays a significant role towards handling the country’s cargo movement with the former managing 90 percent of it. The Chattogram port is flourishing but the southwest coastal belt is not utilized to its full potential. It is well capable of handling 70,000 TEUs a year but in fiscal 2016-17 it handled a mere 26,952 TEUs, 36 percent less from the previous year.

Findings from the BSCMS report also states that the rail transportation is also not utilizing its capacity entirely to support the increased export-import cargo being handled by the Chattogram port. It can reclaim its lost stature from the current dilapidated performance by increasing its capacity building by 10 percent – more than what it is handling at present. The World Bank states that in general the transportation of freight by railway in Bangladesh is reducing steadily due to lack of capacity and poor quality of service. Transportation of freight is however increasing between the port of Chittagong and the ICD at Dhaka because of its low cost and the fact that cargo does not have to be cleared until it reaches Dhaka. The development of a new ICD near Dhaka could increase the share of freight transportation by railway.

According to UNESCAP the Bangladeshi railway network scores low when compared to other Asian countries, receiving a rating of 2.5 where 7 is assigned to railway networks that are extensive and efficient by international standards, and 1 is given to railway networks that are extremely underdeveloped. Reforms are necessary in the current insufficient infrastructure, the poor condition of physical assets, and high overhead costs. Investment in infrastructure and equipment is therefore needed and has been initiated by the Asian Development Bank (ADB) and the World Bank.
It seems like the logistics mechanism would heavily rely on seaport and rail transportation in the coming years since it is estimated that the existing four lane capacity of the Dhaka-Chattogram Highway will come to exhaustion before 2025. The rate of development of new roads in Bangladesh has been one of the highest in the world over the last two decades. Simultaneously road transportation is facing other issues. It is limited to cargo up to 15 meters largely due to the infrastructure for loading and unloading not permitting containers. Transportation of containers is also not possible on the corridor between Dhaka and Chittagong due to bridge restrictions. Road accessibility is, by some companies in the Bangladeshi garment and overall export sector, defined as a major investment obstacle. This at the same time is working in favor of the airway logistic since export and import via airway is increasing at a double-digit rate.

Cargo handling at the airport is somewhat at a deplorable condition since warehouse space is currently inadequate. Due to insufficient monitoring system the existing warehouse with racking facility is not used fully. Owing to the increasing growth of export-import cargo the current warehouse space will not be sufficient by the year 2025. If one goes by prediction then Bangladesh will need additional warehouse space of 26.74 million square feet by the fiscal year 2021-22. In the foreseeable future the demand for warehouse space is supposed to increase to 68.24 million square feet.

Survey by the BSCMS also states that the implemented and planned waterway-based inland container depots are also assumed to come to exhaustion by the year 2025. The responsibility now lies on the government’s shoulder to support the logistics sector and increase its capacity to boost its growth in the coming years. Implementing a national logistics policy framework for a larger and holistic improvement in the sector is highly recommended.

At a recent conference on logistics in Bangladesh, Salman F Rahman, the Prime Minister’s private industry and investment advisor also stated that growth targets in the logistic sector will not be achieved until cost-effective, hi-tech based logistic equipment and quality infrastructure are not ensured. The country’s GDP relies heavily on import-export, which mainly runs the economy.

Bangladesh is also considered one of the ‘Next Eleven’ countries, having the potential to become one of the world’s largest economies in the 21st century along with Brazil, Russia, India and China (BRIC). Adequate logistic framework plays a pivotal role in the import and export mechanism therefore the logistic sector needs to improve for the rapid growth of business. On a broader scale, a multimodal transport system can improve the international trade and investment environment for the Bangladeshi logistics sector. Some Bangladeshi road and rail freight transportation companies have set up joint ventures and partnerships with internal shipping lines in order to increase trading with powerful multinational companies. More than collaboration, increasing investment in the Bangladeshi infrastructure and stimulating government procedures are also required in order to help Bangladesh to improve the connectivity of the different modes of transport. Such specific measures will surely make a positive contribution towards the improvement of the logistics network in Bangladesh in the coming years.

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