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Freight forwarding industry, an invisible backbone of Bangladesh’s economy

Kabir Ahmed | December 08, 2021 00:00:00

Kabir Ahmed

For an emerging economy like that of Bangladesh, exporting manufactured goods to the world and importing a range of commodities from the assorted origins are an essentially vital trade. With the expansion of open-market demands the freight and logistics industry came into being formally during 1991-92 in Bangladesh. At that time, experience, dexterity, communication support and skilled workforce were scarce. Amidst these limitations, the industry has been able to advance and gain its significance by managing to reach imported goods worth about USD 52.84 billion during the fiscal year 2017-18 and exported products worth about USD 36.67 billion, according to data from the Bangladesh Bank. The industry and its linkage services, after its 30 years of struggle, now generate around 150,000 jobs directly. Freight forwarding has become one of the crucial sectors contributing to the economic growth with a soaring magnitude. Country's economy largely depends on the revenue earned from the export and import functioning, and the services related thereto, with a current yearly import-export trade volume of over 80 billion US dollars. The major associations of exporters and importers i.e. BGMEA, BKMEA, LFMEAB, BFFEA, BJGEA, BEPZA and thousands of organizations and individuals solely rely upon the expertise of international logistics services provided by some 1,000 plus member companies of Bangladesh Freight Forwarders' Association (BAFFA). BAFFA shoulders the crucial and daunting multimodal loads of moving, distributing and delivery of this fairly massive volume throughout international arenas in complete synchronization of networks and collaboration with hundreds of airports, seaports, hubs and agents. The commodities handled range from RMG, perishables, medicines, essentials, leather merchandises, raw jute and finished jute products, machineries, fisheries, electronics, agro commodities, industrial raw materials, equipment, project cargoes, and many more.

The segments: Bangladesh Freight and Logistics Market is segmented by functions i.e. freight transport, freight forwarding, warehousing and value-added services to meet the demands of the end users. Freight forwarding is one of the most widely used methods of international transport for corporates, businesses and personal use around the world. Freight forwarding companies coordinate the shipments of goods from one destination to another using a range of carriers or modes: air freight; ocean freight; road freight; railway freight; multi Modal freight - when more than one freight mode is used;

The process: While the process of international freight forwarding might rightly seem complex, these following facts could simplify the understanding of this subject.

A freight forwarder is a licensed, government authority approved, entrusted and responsible entity for the cross-border transportation of goods between the origin and a destination. Freight forwarding companies assist the shippers and the receivers with the entire supply chain process on multiple levels consisting of: export and import documentation; booking confirmation; packing; cargo insurance; indigenous transports at origin i.e. from the shipper's factory to the sea-port; indigenous transports at destination i.e. from the airport to the prescribed warehouse; port handling; customs clearance; storage; inventory management; cross-border transportation.

The freight forwarders carry out chores as an intermediary between the shipper and transportation services, liaising with various carriers, negotiating prices, deciding upon the most suitable routing. They also oversee each step of the process. Using a freight forwarder to import and export goods can make the whole process much less stressful for the end-users with advantages of accuracy, time saving and cost control. The freight forwarding process can be broken up into six key stages, including: export haulage - the transfer of goods from its original source to the freight forwarders warehouse; export customs clearance - the goods receive clearance to leave its country of origin; origin handling - the unloading, inspection and validation of the cargo against its booking documents; import customs clearance - the customs paperwork for the cargo being checked by the authorities; destination handling - the handling of cargo once it reaches the destination office, including transfer to the import warehouse; import haulage - the transfer of cargo from the import warehouse to its final destination.

Freight forwarding companies adhere to strict regulations and will not carry certain goods and substances, particularly by air or sea freight. Although the list of prohibited items varies from country to country, freight forwarders are generally restricted to deal in dangerous Goods (including flammable liquid and toxic items); drugs (prescription and recreational); alcohol; batteries; perishable items (except for those on special express delivery); sharp objects.

With international freight forwarding comes a lot of paperwork. Freight forwarder will prepare or guide the shipper so that all relevant documents comply with the respective shipment in line with the trade regulation of the countries, including: commercial invoice; bill of lading contract; certificate of origin statement; inspection certificate; export license; import license; export packing list; import packing list; shippers export declaration document; import declaration.

The challenges: In today's fast paced, complex and supremely competitive trade markets, The function of a freight forwarder is more complicated than ever requiring precise, fast and on-time synchronization between the freight forwarders, shippers, buyers, agents, shipping carriers, airlines, ports and customs. Only experienced and forwarders acquainted with modern updates can manage such harmonization with efficiency and ease. The BAFFA member organizations have been doing this 24/7/365 relentlessly and effectively which has been ensuring the growth of the recipient sectors in our country. Traditional and sustainable service modes like DDP, FOB, Pre-paid are being accompanied with newly emerged and widely spreading service arenas such as 3PL, B2B, B2C, LMD and the freight forwarding in Bangladesh is simultaneously evolving its activities to match up to these new requirements of the global market.

Kuwait based Agility Global Integrated Logistics' "The Agility Emerging Markets Logistics Index (AEMLI)" 2018 considered Bangladesh as one of the 45 major emerging logistics markets in the world. The Index evaluated the country's logistics industry as highly progressive, yet it concurrently mentioned that the respective authority in the country needs to address major challenges within this sectors including: the need for absolute recognition of this industry; improvements in infrastructure; the need for diversification to other manufacturing segments beyond the apparel sector; the need for improvements in its pharmaceutical, steel, shipbuilding, and food processing sectors in order to record exponential market share in the future; the needs to focus on improving ways to strengthen its transport and logistics systems in order to meet the needs of its growing economy, to boost export growth.

Inference: Even after three decades of serving the nation and its vast export - import markets 24/7/365, the freight forwarding in Bangladesh remains an underrated and unappreciated service sector by and large. The toils, efforts, dedication, respect, responsibility, commitment carried by the freight forwarders over these years continue to linger unacknowledged by the very same organizations, forums, industries, importers, exporters and government bodies who have been depending on the freight forwarders for meticulous execution of cross-border transportation and deliveries of their goods around the globe. The rather dull and cheap act, if not inanity, of theirs beg to be replaced by ethical business sensibility with the clear understanding that these very sectors could never likely accomplish to flourish without the relentless services and supports from the freight forwarders in legal and professional formats. It is, therefore, the freight forwarders that form the invisible link between the supplier and consumer groups in both export and import segments.

A complete background analysis of the Bangladesh freight and logistics market including an appraisal of the economy and contribution of sectors in the economy, market overview, market size estimation for key segments, and emerging trends in the market segments, market dynamics, and logistics spending by the end-user industries and the impact of COVID - 19 need to be assessed and subsequently worked on by a combined "team" that can include the freight forwarders, air and ocean carriers, the customs and other related parties.

A number of native niggling aspects need to be addressed such as the growing congestion on roads and sea ports, scanty facility at the airport and high logistic costs reducing growths. The frame is also limiting the local players to expand their footprint and the international players to enter the market directly.

While Chattogram Port and Mongla Port, the two dominant operational seaports of Bangladesh, are playing a significant role in handling the country's local cargo movement with the former managing 90% of it, the market holds scope for grabbing more market share when the southwest coastal belt is utilized to its full potential which is capable of handling 70,000 TEUs a year but recorded a mere 26,952 TEUs only in fiscal 2016-17 and 36,115 the year before. The efficiency level of the sea port management and the airport management along with the infrastructural systems being used still desire a drastic upgrade and modernization.

Dhaka evolved as a central warehousing hub of the country with Chattogram has been the gateway for international trade, and is accounting for 90% of the export-import cargo and became the most important center for EXIM based warehousing. Dhaka and Chattogram jointly occupy 70% of the warehousing space of the country while Khulna, Barisal, Bogra, Rangpur, Cumilla are emerging as a storage destination. Bangladesh has slipped to the 100th position in World Bank's Logistics Performance Index (LPI) 2018 from an earlier 82nd position in 2016. The industry is still struggling to improve the performance compared to its neighboring country India which stood as the regional top and ranked 44th for the same year. The substantial decline in important avenues has made Bangladesh witness a downward trend in four indicators.

Now, all these are greatly due to the nonchalance of the authority to address the issues for immediate assessment and enactment. The "immediate", "short term", "mid-term" and "long term" plans and supports from an integrated authority seem a distant goal still as this extremely significant sector is yet to be recognized fore-mostly as an "industry" before any initiation can commence. BAFFA, hence, appreciates and welcomes the most recent initiative taken by the Office of The Prime Minister forming a committee where the BAFFA President has been appointed a member, to work on this crucial issue.

The writer is President, Bangladesh Freight Forwarders' Association (BAFFA) and Chairman, Conveyor Logistics Ltd. (A Conveyor Group Company)

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