Address exporters' high logistics costs to offset post-LDC tariff hikes: Experts

Bangladesh should address its exporters' high logistics costs to offset the post-LDC graduation tariffs in major export markets and thus sustain economic growth, said experts at a workshop on Wednesday. 

Bangladesh for its common exports to the major destination countries would face 8.6% to 17% tariffs four years later as soon as it graduates from the LDC status, the experts mentioned, adding that halving its highest-among-peers logistics costs across industries, however, might help to retain the country's export competitiveness. 

The two-day workshop titled "Formulating National Logistics Industry Development Policy for Bangladesh: Experience from Global Good Practices" was jointly organised by the Ministry of Industries, the World Bank and the Business Initiative Leading Development (BUILD), a top public-private dialogue platform by some top chambers of commerce and industries of the country.

How poor logistics infrastructure makes Bangladesh suffer

The country's emergence as the second largest apparel exporter in the world has been mainly driven by its wage competitiveness, while exporters have long been in pains for the logistics and supply chain bottlenecks.

Due to inadequate port, road, rail, and inland water transportation infrastructure amid continuous growth in economic activities and international trade, Bangladeshi exporters need an abnormal high lead time to ship their goods abroad, entrepreneur Syed Nasim Manzur, president of the Leather Goods and Footwear Manufacturers & Exports Association of Bangladesh said in the event.

For example, he said, having orders from a European buyer, a Bangladeshi exporter needs at least 108 days –35 days for imports of raw material, 30 days for production and 43 days for sending products to Germany's Hamburg port, while India and Vietnam need only 81 and 64 days, respectively, reflecting their exporters speed to market.

Manzur, the managing director of the country's pioneering footwear exporter Apex, also said both Bangladesh and India need 20 days to receive a Chinese shipment by sea, which is 7 days for Vietnam and Cambodia. 

Indian customs clear the consignment by 3-6 days, the Southeast Asian competitors do it in 5-7 days, while Bangladeshi customs on average take 10-15 days. 

Besides, the sole dependence on Chattogram port, Dhaka airport, Dhaka-Chattogram highway for trucks creates a huge congestion everywhere that only adds to logistics costs of firms. 

Economist M Mashrur Reaz, chairman of the think tank Policy Exchange of Bangladesh, in his keynote, citing various international studies, showed how much the logistics issues increase Bangladeshi companies' costs. 

Except for leather goods and apparel no industry spends less than 10% of their total revenue for logistics, while trucking cost here is one of the highest among peers, Reaz cited from studies.

Considering horticulture products' logistics cost shooting to 48%, the average logistics spending is somewhere around 17%, while the extra lead time only adds to the costs. 

At another session World Banks Lead Transport Specialist Dr Charles Kunaka showed how Thailand reduced its average rate of logistics cost to 11% from 19% through its planned program in a decade. 

Speakers at the workshop showed how poor Bangladesh performs in terms of logistics as it lags behind all its global market competitors. 

For example, according to the latest report Agility Emerging Market Logistics Index 2022, Bangladesh ranks 39 among 50 emerging economies as it scored only 4.44 out of 10, while China, India, Vietnam, even Pakistan and Sri Lanka way ahead of the second largest economy of South Asia targeting $300 billion exports in 2041 to become a developed country. 

Global competitiveness index (GCI 2019) that ranks countries by infrastructure, ICT adoption, Business Dynamism, Innovation Capacity Bangladesh stands 105th, way behind its trade competitors Vietnam, India and China. 

World Bank's Logistics Performance Index, 2018 ranked Bangladesh 107 among 150 countries in terms of timeliness, 79 in tracking and tracing goods, 102 in logistics quality, 104 in international shipment, 100 in infrastructure, and 121 in customs clearance. 

Experts, industry professionals and business leaders emphasised combined steps for a significant improvement in all the indices without which exporters' low competitiveness would hurt the economy, while local market logistics costs also need to be reduced. 

Proper infrastructures for sea, land and airports, integrated and automated network for efficient services at every logistics point and removing all supply chain bottlenecks were at the top of their recommendation lists. 

They emphasised the under-process national policy for modern logistics in the country to be accommodative for enough foreign direct investments as globally reputed logistics companies not only invest their capital, but also bring expertise without which the country cannot catch up to keep up its growth. 

 Industries Minister Nurul Majid Mahmud Humayun, State Minister Kamal Ahmed Mojumder, Finance Ministry's Economic Relations Division's Secretary Sharifa Khan alongside a large number of industry representatives, local and foreign experts spoke in the workshop.