Industry experts claim that Bangladesh’s logistics and freight sectors have been expanding in tandem with the country’s exports and imports for many years. The sector was established in Bangladesh in 1991– 1992. At first, there were no regulations or policies governing the sector, and even government officials, exporters, and importers had no knowledge of how to run the sector. In the current environment, foreign businesses frequently establish joint ventures with our local businesses, and this cooperation has laid the groundwork for the further development of domestic logistical knowledge. It is important to note that logistics companies handle all duties up until the time that the items arrive at warehouses, including loading and unloading.
Market Dynamics: Local and Global
Bangladesh’s annual export and import trade volume have exceeded USD 100 billion. It indicates that there is a lot of room for expansion in this area. As per the Agility Emerging Markets Logistics Index (AEMLI), Bangladesh climbed eight positions to rank 15 in 2019. According to a recent study, this market experienced the biggest rise of any in the 50-nation “Agility Emerging Markets Logistics Index 2019”. Bangladesh has the chance to expand its global market share in apparel and textiles, which make up 84% of its total exports. By optimizing the logistics performance, Bangladesh can penetrate into new markets and convert its manufacturing and agriculture sectors into high-value sectors. Foreign freight forwarders and 3PL, or foreign companies that take care of warehousing, transportation, and other logistic services, have encouraged the growth of export-related logistics in the context of Bangladesh. Typically, these foreign parties sign joint business agreements with Bangladeshi locals, and these types of agreements are helping boost the development of our expertise in the logistics sector.Currently, 1,600 local and 20 to 30 international logistics and freight forwarding firms are supporting Bangladesh’s export and import operations, with a total annual revenue of USD 1.5 billion to USD 2 billion. Also, the sector has created 40,000 direct jobs over the previous three decades. The freight transportation services segment is the most important subsector in the local logistics industry. It
is important to note that the logistics for Bangladeshi exports, particularly those for food and textiles, are sophisticated in terms of operations, whereas the rest of the country’s logistics industry is not. As per Agility Emerging Market Logistics Index (AEMLI), shipping lines, air cargo carriers, freight forwarders, and distribution property businesses are the ones which enjoy the commercial viability to the fullest in the domestic logistics industry.
Logistics Sub-Sector in Bangladesh
There are several subsectors in this field that are present in Bangladesh, according to a number of studies, including wholesale trade services, retail trade services, freight transport services, cargo handling services, storage and warehousing services, postal and courier services.
However, research from Nyenrode Business University in the Netherlands identified the following subsectors as having a strong hold on this industry:
Agency services for freight transportation;
Freight and passenger transportation via air and space
Services for processing cargo.
Rail and road transportation
are major segments for inland logistics services in Bangladesh. Shipping freight makes up 80% of the share in the export and import businesses, while air and road are responsible for only 20%. Logistics companies mostly provide transport services for freight through sea, road and airways. Rail transport of freight for exports and imports has not been introduced in Bangladesh yet.
Size of the Logistics Sector in Bangladesh
The logistics industry has experienced impressive annual growth. It can be explained with some numbers. There were 2,926 TEUs in the Chattogram port at the start of August 2019. The amount increased to about 4,000 by 2021. With a growth rate of almost 10%, it is astounding. A similar increase has been seen at the airport in Dhaka. In Bangladesh, there are a total of 1,100 logistics businesses. Out of the 1,100 logistics firms, about 500 have been transformed into C&F agents. Some large corporations handle C&F, distribution, and storage. Almost all businesses are attempting to sell a variety of products. The logistics industry in Bangladesh has seen a rise in multiple independent, small businesses. Rather than acting as third-party suppliers, these numerous businesses must become integrated with the larger ones. Independent organizations frequently lack awareness, in contrast to parent full-fledged logistics firms. However, they are perfectly adapted to help the parent logistics companies.
Opportunities in the Sector
Bangladesh, an import-dependent nation, relies heavily on imported capital equipment, raw materials, and intermediate materials for its businesses. Additionally, it imports both dry and liquid goods in bulk volume, including fertilizers, food grains, cement clinkers, natural gypsums, limestone, raw sugars, etc. The majority of these goods are emptied into lighter vessels in outlying anchorages. Local logistics are also essential to the success and costeffectiveness of the trade, including the availability of necessary lighter vessels, stevedoring, and timely customs and port clearances. The formula is straightforward, the more competitive the freight prices, the more effective the logistics system. On the other side, export commerce is primarily made up of clothing, followed by jute and jute products, agricultural products, home textiles, fish and prawns, etc. It is known as liner trade and is delivered in containers because the commodities are all consumer goods. The Chattogram port has achieved the distinction of belonging to the three million TEU club thanks to the consistent expansion of container traffic. Given that, Chattogram is only a feeder port for container traffic rather than a principal port, it is, in fact, an outstanding accomplishment. With the commissioning of Patenga Container Terminal and Bay Terminal with greater draught, the performance is anticipated to improve substantially.
Major Challenges for the Industry
Although the industry has had a fair share of its growth period, it also has some major hurdles that it needs to tackle down the line.
These are discussed as summaries below:
Setting laws and regulations, planning, running infrastructure, and offering services are all responsibilities of nine ministries and more than twenty government organizations. The coordination issue inherent in infrastructure development is made worse by the fragmented governance of the logistics sector, which results in transport modes that developed and evolved in isolation and fundamental infrastructure standards mismatches, such as bridges that are narrower than approach roads.Shipments cannot be tracked and traced by service providers. Due to the poor quality of services, many industrial companies handle their own internal logistics to better manage the efficiency of their supply chains. Bangladesh's marketplaces for logistics services are uncompetitive. Direct communication between service providers and shippers is prevented by the presence of unions and groups. Service providers lack the motivation to innovate or offer high quality services since they are not compensated for the quality of their offerings.The main causes of high trucking rates are inefficient transportation and logistics systems, low truck utilization, extremely high levels of traffic in highways and ports, and numerous journeys made by empty trucks. Owners of trucks estimate that empty vehicles make up 35% of journeys.Lack of knowledge and training in contemporary warehouse techniques, such as cross-docking, inventory management, effective customer service, cold chain, etc.
In Bangladesh's overall economy, the readymade garment industry is a significant and important business sector. The success of this sector, along with others, largely depends on the planning of transportation and coordination services and the extent to which these services ensure that goods are transported efficiently and effectively from a manufacturing facility, a stockroom, or a port in the country of origin to target showrooms around the globe. The relentlessly complex demands of the global economy have significantly increased the significance of logistics services. This growing unpredictability results from coordinated global assembly and creation networks, an increase in the need for last-minute coordination, and an increase in the usage of multi-purpose transports. A ton of actors and a variety of legal and administrative systems have made the system even more complex. The effectiveness, efficiency, and cost of logistics services have a substantial impact on the estimation of a good’s price at its final destination, as costs are incurred at each stage of logistics. With the increased level of technological advancement and infrastructural development, the logistics sector of Bangladesh is expected to create a significant impact in the way of achieving ultimate efficiency.
With a total market value of over 6,000 crores, the ceramics industry in Bangladesh has been one of the country’s fastest-growing manufacturing industries. Thanks to sustained economic growth and increasing urbanisation, the industry meets 85% of domestic demand and has the potential to become the country’s largest export industry in the not-toodistant future. With domestic sales increasing by 20% per year on average, export sales increasing by 26% per year on average in the last three years, and total production capacity increasing by around 200% in the last five years, the industry is poised for future success.
The industry benefits from rising incomes, rapid urbanisation, and duty-free access to some international markets. There is still much to be done to address the problems this industry is facing, such as uninterrupted power and gas supplies, which are essential to continue competing in global markets. If Bangladesh’s ceramics sector can get over the obstacles, it has every chance to develop and increase its contribution to the nation’s foreign exchange earnings. It stands to see what the future holds for this industry.
Md. Shah Jalal
IDLC Finance LimitedDownload View