Rising logistics costs are hiking the cost of doing business in Bangladesh and discouraging investors, stakeholders say and urge mapping out sector-wise predictable expenditures on this score.
Both local and foreign investors are finding it difficult to estimate logistics expenses accurately for their investment projections.
Business leaders stress effective implementation of the National Logistics Policy 2024 by establishing a dedicated authority to monitor and remove bottlenecks.
In the World Bank's Logistics Performance Index 2023, Bangladesh ranked 88th out of 139 countries, underscoring the underlying challenges in the business-supplementing sector.
Businesses and economists have identified customs-related complicacies as one of the major hindrances.
AK Azad, former president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), says customs delays, unpredictable transportation costs, and high shipping charges are eroding Bangladesh's export competitiveness.
He points out that ship-berthing time has increased by four to five days recently, with rising port-service charges compounding the shipment problem.
"Customs officials sometimes refuse to accept the Harmonized System (HS) code -- either for personal gains or to harass businesses -- further complicating the process," Azad says.
Despite longstanding complaints from businesses, the situation remains unchanged, the leading businessman laments.
Azad strongly feels that business-friendly customs and port operations are essential for attracting investment, and strikes a note of warning that inefficiencies are diverting investors to other countries.
Zaved Akhtar, president of the Foreign Investors Chamber of Commerce and Industry (FICCI), urges the government to implement the National Logistics Policy 2024, introduced in May, to sweep out inefficiencies in fields of logistics and infrastructure.
"Bangladesh ranks 33rd among 50 emerging markets in the global logistics index, which evaluates sector competitiveness," Akhtar notes, adding that efficient logistics are critical for boosting the country's investment potential.
President of Dhaka Chamber of Commerce and Industry (DCCI) Ashraf Ahmed says most customs-clearance procedures remain manual that breads delays at ports in foreign-trade operations.
"We still need to submit the bill of lading in hard copy after endorsement from banks," he says to explain the outmoded processing of trade with the fast-moving outer world.
The issue lies not with technology but with outdated procedures, as foreign-exchange regulations and import policies require bank endorsements to get customs-acknowledged documents, he mentions.
Mr Ahmed deplores that the process of obtaining multiple certifications for customs clearance is also cumbersome.
He feels the need for clearer guidelines on the requisite documents to release goods from ports, noting that customs delays remain the most time-consuming roadblock.
Abul Kasem Khan, a former president of DCCI, has highlighted the importance of sector-wise logistics-cost mapping for effective policy implementation.
"We need to determine the logistics cost for each sector to plan investments effectively." Mr Kasem mentions that while the National Logistics Policy provides a broad framework for government stance on the logistics sector, poor execution is forcing businesses to incur unexpected expenses.
Mapping sector-specific logistics costs could also reduce scope for corruption and inefficiencies in service delivery.
Inefficiencies have a cost that results in competitiveness loss in external trade, as is evident from that fact that logistics costs in Bangladesh currently range from 24 per cent to 40 per cent while it is below 10 per cent in neighbouring nations.
Abul Kasem echoes the views stressing the need for a well-defined logistics-cost structure to attract investors.
"Competitor countries like India and Vietnam offer clear cost estimates, while Bangladesh remains unpredictable."
He reminds that signing Free Trade Agreements (FTAs), joining the ASEAN, and preparing for Bangladesh's graduation from the least-developed country (LDC) category presuppose efficient logistics management.
Ferdous Ara Begum, CEO of Business Initiative Leading Development (BUILD), notes that the logistics policy offers a roadmap for reforms. However, investors expect visible action plans and accountability.
"The Prime Minister's Office (PMO) is leading the policy's implementation, and the Chief Adviser's Office must take proactive steps to ensure progress," she says.
On September 30, 2024, the Ministry of Commerce held a meeting with logistics-sector stakeholders for a push to accelerate policy execution.
Ferdous Ara, who also leads the White Paper Committee on Private Sector Investment, aired doubts about the previous government's reported investment figures.
"The former government claimed that investment amounted to 23 per cent of GDP, but this would have been reflected in logistics-sector growth and employment generation," she argues. She notes that while the private sector has made some investments in logistics, significant government-led investments remain largely invisible.
Dr Masrur Reaz, founder-chairman of the Policy Research Institute, Bangladesh, has stressed that trade and investment and export growth depend heavily on efficient logistics.
He calls for improvements in ports, multimodal transportation, inland container depots, customs clearance, and freight-forwarding services to meet export targets and diversify trade.
"The logistics policy must be implemented within a defined timeline to keep Bangladesh competitive on the global market," he suggests.
He also urges regulatory reforms to attract private investment in infrastructure projects such as the Bay Container Terminal and inland dry ports.
A World Bank study in 2019 found that logistics costs in Bangladesh vary widely, from 4.5 per cent of sales (in the leather footwear sector) to 47.9 per cent of sales (in horticulture). Inventory-carrying costs account for a large share of these expenses, with road transport dominating logistics operations.
At Chattogram Port, the average dwell time is 4 days for export containers and 11 days for import containers.
Reducing these times would significantly lower logistics costs.
Business leaders and policymakers agree that streamlining logistics operations and implementing the National Logistics Policy 2024 are crucial for attracting investments, boosting exports, and sustaining economic growth.
Hossain Ahmed, Member (Customs policy), has said the NBR is now open to exchange views with stakeholders and know their expectations.
"Such scope was limited for years in NBR to accept constructive recommendations of the stakeholders," he added about the change taking place.
He, however, mentions that the customs officials have to check tax evasion as they are mandated for though such act may create negative impression in some businesses.
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