The upward progress of Bangladesh’s export sector continues, taking the country towards LDC graduation. The seaports of the country are one of the drivers of this overall progress. Direct trade has started from Chittagong port this year, resulting in direct shipping from the country to several destinations. As a result, the cost is greatly reduced while the profit margin is increased. Besides, after the implementation of Padma Bridge, Mongla port is seeing the light of hope, with the increasing interest of foreigners to invest in Bangladesh. If properly man-aged, port-centric trade will be a boon for Bangladesh’s economy. Sustaining and accelerating this progress requires modernisation and continuous development of the country’s ports, and sound diplomacy to establish a sufficient port-led integrated network writes SM TANJIL-UL-HAQUE
Bangladesh has demonstrated remarkable developments in the last few decades. Robust macroeconomic management, exceptional achievements in poverty reduction, and sustainable expansions have paved the way for the country to achieve World Bank’s ‘Lower-Middle Income Status’ in 2015 and secure the United Nations Development Policy recommendation to graduate to ‘Developing Country’ in 2026.
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The level of the country’s growth has increased consistently at 6% per year since 2000. Based on this impressive record, Bangladesh has set its ambitious vision of becoming a ‘High Income Country’ by 2041. Until now, the development of Bangladesh has been mainly export-oriented. Over the years, Bangladesh has become an important player in the global trade industry, particularly in the textile and apparel value chain. Bangladesh’s export record shows an annual average growth of about 10.25% since 2001. To uphold extraordinary growth, seaports can be the biggest influencer. However, in order to maintain it, port infrastructure should be developed, logistics be modernised, and export competitiveness be increased in the future.
Geographically Bangladesh is in a blessed location with the Bay of Bengal’s easy-lying slope having natural options for seaports. The country already has two functional seaports, Chittagong and Mongla. In addition, the government is constructing Payra seaport in Patuakhali, and a deep seaport in Matarbari, Cox’s Bazar. The Padma rail link can create a freight line with India via Beanpole port near Jashore. If the development trend can be maintained in the seaports, the benefits will be tremendous. The country’s real journey of maritime started with the victory of the sea under the leadership of Prime Minister Sheikh Hasina. In continuation of the journey, establishing Payra port as the third seaport of the country started in 2013. On the other hand, the volume of container handling at Chittagong seaport is increasing rapidly due to an increase in seaborne imports and exports.
As a result, import-export activities here have to be carried out beyond capacity. This has increased the pressure in one of the country’s major sea ports. The Government has taken up a project called ‘Matarbari Port Development’ with the aim of reducing excess pressure on the Chittagong port and handling a large number of ships and containers. Under this project, a deep sea port is being constructed in Matarbari. Again, all the seaports are being developed as modern and environment friendly to meet the growing import and export demand of the country. These development activities are progressing rapidly with the aim of making the ports modern and world-class by 2023 and the port city as an economic powerhouse by 2035. If this development continues, growth is likely in the economic progress of the country.
NECESSITY OF MODERN PORTS AND LOGISTICS
The Covid pandemic has brought to the fore the key role a country’s port plays in the timely delivery of goods, both nationally and internationally to hold the country’s overall economy. According to the World Bank, more than 80% of global merchandise trade by volume is carried by sea, with about 35% of total volume and 60% of commercial value shipped in containers. Meanwhile, inefficient ports impede the realisation of national and international trade potential by imposing direct and indirect additional costs and time, which translate into financial crises. Efficient management of ports and containers is thus integral to trade and connectivity.
The role of ports is not limited to cargo handling, as ports have over time become logistics integrators, which means they include the provision of value-added logistics services that enable reduction of cost, time, and complexity in carrying out import and export operations. In this regard, through the use of advanced technology, enabling efficient service delivery, the competitiveness of ports can be enhanced to facilitate improved trade and logistics performance. A study titled ‘Time Release Study 2022’ conducted by the National Board of Revenue (NBR) has also suggested adding modern machinery and increasing the use of latest technology to reduce the time of the release of imported goods from the main ports of the country.
The supply of various logistics performances is driven by the quality of supporting infrastructures such as roads, railways, and ports. Improved transport efficiency, regional connectivity, inland conditions, and port accessibility enhance a port’s competitiveness and help create a conducive environment for the industry. A well-connected and resourceful port system with enhanced logistical capabilities is a key determinant of foreign direct investment (FDI) in a country, and can also act as a catalyst for regional economic development.
PORT AND SUPPLY CONDITION
The country’s nascent trade logistics infrastructure has room for improvement as reflected in the Logistics Performance Index (LPI). Bangladesh ranks 100th with a score of 2.58, while comparable countries such as Indonesia and India score higher on the scale. On the other hand, increasing port capacity and efficiency plays an integral role in enhancing the country’s trade competitiveness and facilitating expected growth in trade by providing more efficient logistics services through container handling supported by advanced technology.
In the re- cent Container, Port Performance Index by the World Bank and S&P Global Market Intelligence, Chittagong Port ranked 341 out of 370 ports analysed, indicating room for significant modernisation and capacity building. That said, it is also clear that the authorities are making efforts to deal with increasing trade, and cargo pressure. In 2021, Chittagong Port handled 3.2 million TEUs (twenty-foot equivalent units) which is an in- crease of 13% compared to 2020.
Demand at the Chittagong port remained sturdy even during the pandemic, as container growth and vessel growth kept the port at full capacity at around 3.1% and 9.72% respectively. Port service levels, however, continue to be challenged and show that there is room for better port performance through the expansion of port facilities and the use of modern technology and value-added services to further enhance port efficiency and logistics performance.
BENEFITS OF PADMA BRIDGE
Road transport costs are relatively high in most developing countries and represent a high share of direct supply costs. In Bangladesh, a congested transport system and a new logistics ecosystem accrue high economic costs. According to a recent study, the average speed of trucks on highways is about 19 kilometers per hour, which is less than half of what it would be in a congested state. If the congested situation is addressed, there is an opportunity to reduce logistics costs by at most 35% depending on the sector.
In that case, Padma Bridge and Bangabandhu Tunnel can play an important role by reducing congestion on road. Besides, Padma Bridge, by increasing foreign investments, created the opportunity for Bangladesh to become an international hub of trade. Now, if an agreement can be reached as its seaports can be used by West Bengal and other Eastern Indian provinces, Nepal, and Bhutan, then the true potential of regional trade will be unlocked. Furthermore, the Mongla Port near Khulna has always played a secondary role to her counterpart in Chittagong port as it is the preferred route for traders.
A major setback for the Mongla Port has been the time and cost increase in the Padma crossing to reach Dhaka or the Eastern part of the country. Padma Bridge can save almost ten hours in time and have a cost-benefit of up to $1.6 billion per year by 2044. It is safe to say that traders can now prefer to use the Mongla Port more efficiently in both domestic and international trade.
PORT OF POSSIBILITIES
The situation of Chittagong port, which is known as the lifeline of the economy of Bangladesh, has improved rapidly in recent times. Once the port users used to make various complaints regarding im- port and export, but now that is not the case. The income of the port is also increasing every year, and the port authority is carrying out various development activities from its own funds. According to the government’s Economic Survey, the revenue from Chittagong Port in the fiscal year 2010-11 was over Tk 1,453 crore.
In the financial year 2015- 16, it increased to 2,030 crores. In the recently concluded the fiscal year 2021-22, this income has in- creased to about 3,600 crores. Chittagong Port Authority (CPA) with the help of domestic and foreign shipping companies from February this year to last September; launched direct shipping services on seven out of around 20 major routes. Direct shipping from Chittagong has reduced shipment costs and export lead times while increasing port mobility. Shipping industry insiders said that earlier it took at least 40 to 45 days to reach these destinations through transhipment ports, which has now come down to 15 to 20 days.
This not only reduced time but also reduced shipment costs by at least 40 percent. Direct shipping to Portugal, Slovenia, Thailand, and the Middle East will begin by 2022 as CPA wants more routes. However, its deadline has not been finalised yet. Port users say direct shipping to Slovenia will be another milestone, as it will make it easier to transport goods to Ger- many and Portugal. Secretary of Chittagong Port Authority (CPA) Omar Farooq said, “India’s coastal shipping is going on. MoU signed on cargo transportation at Ranong Port in Thailand. All government-level approvals have been completed. Direct shipping is in process on this route as well.” He further said that garment exporters are benefiting due to the opening of a direct route to Europe.
The lead time will be reduced and this is a milestone for the country’s economy. Due to the initiatives of private operators and port authorities, the operation of Chittagong port, which was once plagued with container or ship congestion, has now become much smoother. This outdoor waiting time is now reduced; 60-65% of the ships get berthing at the jetty on arrival. In the last six months, many of the ships got this opportunity within a day. Business analysts say that by adding more skilled operators and investing in increasing capacity, Chittagong port will soon become the ‘business hub’ of South Asia.
How to improvise port trade
- Creating direct road links
- Maintaining road safety
- Preventing traffic congestion
- Establishing industrial zone in a suitable, profitable position
- Creating swift link between port and industrial zones
- Forming logistics transfer chain
- Tackling shortage of skillful employee
- Uplifting fishermen and other local community
- Developing Island housing
- Modernising materials and overall infrastructure
- Increasing cargo handling equipment and jetties
- Utilising modern equipment properly
GREATER COMPETITION AHEAD
Bangladesh has had some success in managing risk and expanding its customer base to adapt to changing demands. However, diversifying into high-value-added products and tapping into other large and emerging markets, particularly in the East, remains challenging. In addition, rising wage demands, pressure on supply, the intensity of global competition based on increasingly efficient automation, and the structural shift in demand from fast fashion to premium high-quality, durable goods in developed economies have placed significant competitive pressure on Bangladeshi manufacturers.
The progress of Vietnam’s Preferential Trade Agreement (PTA) with the European Union (EU) will create more competition for Bangladesh’s export share in the region. Bangladesh’s next phase of growth calls for rapid improvements in trade competitiveness because the country’s current advantage is based on disproportionately low wages, an advantage that is slowly eroding. Bangladesh is ranked 105th in the Global Competitiveness Index, which suggests that logistics, infrastructure, innovation, and business dynamism can be improved.
Bangladesh needs to do something if it wants to be at par with other coastal countries in Asia, as suggested by the World Bank’s Index. This shows that Bangladesh’s strong export performance over the years could have been greater if the country’s domestic infrastructure needs were met. There is a substantial need to support infrastructure to improve trade. Achieving Bangladesh’s Vision 2041 requires significant development of enabling trade infrastructure to enhance the country’s connectivity with international markets.
THE WAY FORWARD
Improving Bangladesh’s trade infrastructure and logistics will not only increase the global market share of garments and textiles, but also diversify into new markets and sectors. According to the UNESCAP study, improved infrastructure is estimated to have a potential impact of $35.5 billion for Bangladesh by 2030. It calls for the development of an integrated supply chain comprising world-class ports, roads, storage, and transportation supported by state-of-the-art technology for highly competitive turnaround and clearance times. In the sector, a boon is forthcoming as a reputed Saudi Arabian company have shown interest to invest for the operation, maintenance, and modernisation of the country’s Patenga container terminal.
Opportunities like these should be grabbed for greater good. Recognising the need to upgrade its ports with advanced and modern facilities to support the expected growth in trade, the government has taken some bold and timely steps such as the Matarbari Port Project and the Bay Terminal Project at Chittagong. The government has identified Chittagong Port as an important international gateway, critical to both the efficiency of the transport system and the country’s economic success. For the ports to be able to handle the growing export demand, timely implementation of additional port capacity and increasing port efficiency will be important. Complex projects like the Bay Terminal project, involving world-class port operators like Singapore’s, will enable the port-led network to leapfrog and achieve its goal of becoming a world-class port-integrated network.
The improvements will enable multimodal solutions, increase competition and ensure full utilisation of the sectors’ potential.
The bay terminal, capable of supporting inland cargo as well as transiting regional cargo in the Bay of Bengal area, can help increase the handling capacity of Chittagong Port from the current 3.2 million TEUs, bringing it closer to the expected 5.6 million TEU containers in the year 2036, as foreseen in the strategic master plan. The improvements will enable multimodal solutions, increase competition and ensure full utilisation of the sectors’ potential. Thus, port development is important along with timely modernisation of road and rail connectivity. Ultimately, every element of the supply chain needs to be optimised to create an efficient and sustainable port and logistics network. A holistic government approach in the form of greater coordination between relevant ministries, authorities, and the private sector is needed to in- crease the effective capacity, support infrastructure, and eliminate distortions in the logistics service market.