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Fully foreign-owned logistics firms likely

MoC-EU research to analyse pros and cons

Mehdi Musharraf Bhuiyan | May 05, 2018 00:00:00

The government may soon withdraw restriction on fully foreign-owned logistics companies to start business in Bangladesh amid growing push from overseas players.

Currently, the majority foreign shareholding in the logistics business of the country is not allowed.

The ministry of commerce (MoC) in collaboration with the EU Business Council is set to conduct a joint action research, which will analyse the costs and benefits of such move, officials involved in the process told FE last week.

As per the current provision, new foreign investors aiming to operate in the logistics sector of the country must come through a joint venture (JV) with a local firm.

They also cannot own more than 49 per cent share in such joint venture operations.

The government is also currently following a reluctant approach in renewing the licence of fully-foreign owned logistics companies already working in the country.

The move, insiders said, was originally aimed at building the capacity of the local logistics companies while generating more domestic investment and entrepreneurship in the sector.

During a recent joint working group meeting of the European Union and Bangladesh, the EU representatives called for lifting the legal restrictions on the full foreign ownership in logistics companies, while also calling for easing the licence renewal process of the existing foreign-owned companies.

EU representatives have long maintained that the existing provision, which prevents the foreign logistics companies from being the majority shareholders, is discouraging more foreign direct investment in the logistics sector of the country.

The long experience and wide network of the European logistics companies are seen as crucial because Bangladesh's logistics services need a major uplift against the backdrop of the country's shift towards an export-oriented economy.

EU representatives in the meeting have also pointed out that European companies are best-placed to provide logistics services at a level and scale required in the planned special economic zones.

The EU stance on allowing 100 per cent foreign ownership has also received backing from Bangladesh Investment Development Authority (BIDA), said an official who attended the meeting.

"Possible resistance from local logistics entities against such a move has also been taken into account," said the official who preferred not to be named.

"We will carry out an action research to analyse the actual costs and benefits of such move", additional secretary of the ministry of commerce Obaidul Azam told FE.

"We have already prepared Terms of Reference for conducting this action research. Hopefully, the outcomes of action research will be submitted to the next EU-Bangladesh Business Climate Dialogue", he added.

The joint research, officials said, will develop an overview of the current state of Bangladesh's logistic sector while also taking stock of existing local and foreign investment in this sector.

"The study will also examine the country's existing legal and regulatory framework regarding foreign investment in the logistics sector while also assessing the sector's capacity to cater to the demands emerging from economic growth", Mr Azam said.

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