With great growth, comes a great need for a national logistics development policy
To resolve issues and achieve national economic targets, a holistic and integrated approach to developing the logistics sector is the need of the hour
Improving logistics efficiency - including but not limited to cost-effective, seamless movements of people and goods, ensuring connectivity from the sender to recipient end - is key to global business competitiveness.
From an investor's perspective, efficiency and effectiveness in the logistics management system have been treated as the central principle for considering an investment decision.
Historically, there has been a positive correlation between a well-structured logistics management system and trade growth. Not surprisingly, an effective logistics sector is now recognised, almost everywhere, as one of the core enablers of economic development.
Bangladesh has been termed as one of the economic miracles maintaining sustainable economic growth for the last several years. Additionally, Bangladesh has been ranked as the 41st economy in the world in 2022 based on the GDP size, while the country's economy is expected to reach 28th and 23rd, respectively, by 2030 and 2050.
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To achieve these targets and earn business confidence, logistics development is a prerequisite.
With great growth, comes a great need for logistics support
Considering the GDP targets, the size of the economy will be about $2.5 trillion in 2041. To make sure that we maintain the necessary level of growth, our overall investment should be 40.87% of our GDP by 2041.
UNCTAD's LDC reports focused that Bangladesh needs $119.9 bn of investment every year from 2021 to 2030 to attain the SDGs target to reach 7% of the annual GDP growth.
The development of trade logistics and infrastructure has been treated as one of the talismanic ways to attain SDGs by 2030. UNCTAD reveals that 11 out of 17 SDGs have a deep concentration on the logistics infrastructure.
General Economic Division(GED) has year-wise specific projections up to 2041; in respect of passenger traffic through roads, inland water and railway, estimates show that total passenger traffic (billion passengers per kilometre) will reach about 5,620 by 2041 from the base year (2018) of 195.
Similarly, the case of freight traffic (billion tonnes per km in 2018) will reach 295 from the present level of 31. Air and seaport cargo traffic will also face astounding increases because of the economy's needs.
The current logistics infrastructure of the country cannot bear this tremendous burden.
The possibilities and solutions
World Bank Group's study titled 'Moving Forward: Connectivity and Logistics to Sustain Bangladesh's Success' revealed that a reduction of container release time in CTG port by one day would increase export by 7.4%; by ensuring minimum speed on National Highways to 40 k.m/hr, 3.7% of export growth will be achieved; and formulation of national logistics policy along with reducing the internal logistics cost by 17% will boost the export by 7.4%.
The overall impact of the implementation of the suggestions will increase the national export earnings by 19%. The study pointed out that the country's inefficient logistics management system increases the production and operation costs of different industries by 4-48%.
Experts researched that after the LDC graduation, the country will lose several preferential treatments in major European destinations, increasing the cost of export by more than 11%.
The first step is, perhaps, to frame an effective policy to ensure a structured development of the sector. Several countries such as Ethiopia, India, Indonesia, Malaysia, Myanmar, South Korea, Sri Lanka, Thailand, Vietnam (and others) have their own national logistics strategy, master plan, blueprint, act, strategic plan, action plan, etc.
On 17 September 2022, the Ministry of Commerce and Industry of the Government of India (GoI) announced the National Logistics Policy to improve cost competitiveness and create jobs for millions.
GoI aims to reduce the cost of logistics to GDP to 9% by the next five years from the present 13-14%, as well as to reach the volume of the logistics market to $200 bn in forthcoming years from the present $160 bn.
"Gati Shakti Project: National Master Plan for Multi-modal Connectivity" launched by the Indian Prime Minister, has been treated as a pioneer direction to formulate the NLP. Most interestingly, 11 states of India have their own regional logistics policy that will be integrated with the NLP.
The institutional fragmentation of the logistics sector in Bangladesh is multifaceted.
Nine ministries and 20 sub-agencies have jurisdiction over the logistics sector including but not limited to Roads, Transport and Bridges, Home Affairs, Housing and Public Works, Local Government, Railways, Shipping, Civil Aviation, Finance, Planning, etc.
In that respect, Bangladesh has already identified the need for an effective logistics policy.
A dialogue and policy on logistics infrastructure development
By recognising the urgency of the private sector to have structured policy assistance from the government end, the Prime Minister's Office and Business Initiative Leading Development (BUILD) jointly formed the first-ever public-private dialogue platform titled "Logistics Infrastructure Development Working Committee (LIDWC)" in 2020 to work for the sustainable logistics development.
As per the guidance of the committee and since its inception, BUILD continued to work for logistics development through different types of policy advocacy. The committee has been treated as the first ever working committee in the form of a public-private dialogue platform (PPDP) in the history of Bangladesh to provide data-driven, fact and research-based policy advocacy to achieve targeted macroeconomic indicators of prospective plan 2021-2041.
Logistics as an export-diversified and priority sector, along with 21 sub-sectors of logistics, have been included in the upcoming National Industrial Policy 2022 as a result of the advocacy of LIDWC. A draft national logistics development policy framework is underway considering the global best practices and country demands, and now the Ministry of Industries will take the lead to formalise the policy.
The vision of the policy has to be set effectively along with the time-bound action plan. The most important target of the policy is to earmark an action plan to reduce the cost of logistics which in turn will reduce the lead time. This is one of the more prominent obstacles to ensuring competitiveness in the country.
Demand for logistics infrastructure is indeed an important and integral part of targeted economic development. Logistics is for supportive supply chain management to ensure a responsive linkage between the point of origin and point of consumption of the operation of business and commerce in the modern management philosophy for domestic and international trade.
Bangladesh ranks 100 on the global Logistics Performance Index, which means there is much room for improvement. Third-party logistics, containerisation, trucking management, etc need integrated strategies. There should be specific targets to improve rankings.
Ways forward
The Bangladesh government has announced 100 economic zones, some of which are already in operation. Some mega projects are in the pipeline and will be in operation soon. The digital logistics system is essential to contribute further to supporting these developments.
Bond management, warehouse maintenance, air freight stations, inland container depots, cargo terminals, and container freight stations are intermediate activities to support investment needs and planned upgradation.
To improve the overall logistics support system, some things are critical. For instance, smooth trade facilitation activities at the border and beyond and investment to improve rankings in the global competitiveness index and global skill index. The logistics, as an umbrella policy, would need to seek coordination of all relevant ministries and agencies to work closely and improve logistics performance.
A knowledge-based economy believes that a logical harmonisation between the demand (private sector) and supply (public sector) sides should be matched while formulating policies to ensure a stable and sustainable business environment. Lessons from good global practices for planning an effective logistic policy are also important.
Different ministries, development partners and private sectors are working on the development of the logistics infrastructure in Bangladesh. Dedicated development strategies for road, rail, air, port and urban transportation have been included in Perspective-Plan 2041.
Harmonisation among all the initiatives and ensuring synchronisation and coordination among all concerned is the priority now through the policy.
Concerned government organisations and representatives of public and private sector stakeholders started a journey in 2020 with the hope of providing research and advocacy assistance to establish Bangladesh as a modern multimodal regional logistics hub. Formulation of the National Logistics Development Policy will be the very first step to attaining the dream.
There is a long way to go to make a dream come true where public and private sectors would walk together to develop dedicated logistics sub-sectoral development strategies.
All the relevant stakeholders need to focus on a holistic and integrated approach to ensure sustainable development of the logistics sector to achieve the national economic targets a reality.
