Logistics & Freight Industries In Bangladesh

Logistics And Freight Industries In Bangladesh

Logistics and freight industry in Bangladesh is developing rapidly, gearing up to the current needs of an information society. Logistics and freight are booming in Bangladesh. In the last two decades, the country has rapidly expanded its exports and imports, attracting a new breed of logistics company that is eager to take advantage of the growth.
Initially, there was little guidance or regulation around the industry. Even now, many government officials aren’t familiar with the industry’s practices.
Foreign companies have led the way in setting up joint ventures with local companies, forming partnerships that have helped build the country’s skills in the sector. These days, logistics companies are responsible for everything involved in getting goods safely to their destinations—from loading and unloading at ports to transporting them to warehouses. Improvement in the logistics sector of Bangladesh is a milestone for the country’s export and import sectors, as it has increased its ranking significantly in the recent survey. According to the Agility Emerging Markets Logistics Index (AEMLI) of Kuwait-based Agility Global Integrated Logistics, Bangladesh has jumped eight spots and ranked 15 in 2019. This is the largest gain of any market in the 50-country “Agility Emerging Markets Logistics Index 2019”, according to a recent survey. Since Bangladesh’s annual export and import trade volume reached US$100 billion, the sector has a huge potential to improve. For Bangladesh, improving its logistics performance provides an opportunity to increase its world market share in garments and textiles, which account for 84% of its total exports, expand into new markets, and diversify its manufacturing and agriculture into high-value products.[1] Market dynamics In Bangladesh, logistics and freight services are essential to the export industry. The foreign freight forwarders and 3PL that have entered the market have created local jobs and stimulated the growth of logistical expertise. There are about 1,600 local and 20-30 international logistics and freight companies that provide necessary support to the export and import sector. The total business hovers around US$1.5 billion to US$2 billion, and the industry directly generated about 40,000 jobs in the last three decades Bangladesh has a well-developed logistics industry because of its strategic location and the existence of a large number of waterways. The major sub sectors in the logistics business in Bangladesh are: freight transport services, air transport services, and rail transport services. The Agility Emerging Market Logistics Index (AEMLI) identifies: air cargo carriers, shipping lines, freight forwarders and distribution property companies will have the highest business viability in the logistics sector of Bangladesh. Dominant logistics sub sectors in Bangladesh The logistics and freight business in Bangladesh is a fairly new industry. It is an emerging sector, largely built on the country’s export-oriented growth. In the past decade, this sector has experienced rapid growth, in terms of both volume and value. This sector, which was once dominated by international companies, is now increasingly becoming competitive with the entry of local firms. Various studies identified several subsectors in this area evident in Bangladesh, such as (1) wholesale trade services; (2) retail trade services; (3) freight transport services; (4) cargo handling services; (5) storage and warehousing services; (6) postal and courier services; and (7) 4PL. However, a study by Nyenrode Business Universiteit, the Netherlands[4] pinpointed the sub sectors having a strong dominance in this business, they are as follows: Freight transport agency services; Air and space transport services of freight and Cargo handling services. The annual turnover scenario in the Bangladesh market In our recent study of the logistics and freight industry in Bangladesh, we found that most of the companies are MSMEs (micro, small, and medium-sized enterprises) with an annual turnover of Tk. 15 million to 100 million. Well-renowned large MSME companies see an average annual turnover of Tk. 100 million to less than Tk. 1 billion. Newly established companies showed an annual turnover trend of less than Tk. 15 million or more than Tk. 1 billion. There are nine ministries and more than 20 government agencies that play roles in setting policies and regulations, planning, operating infrastructure, and providing services in the logistics and freight industry in Bangladesh[5]. The major private sector associations include: Bangladesh Freight Forwarders Association (BAFFA); Bangladesh Cargo Vessel Owners Association (BCVOA); Coastal-Ship Owners Association of Bangladesh (COAB); Bangladesh Master Stevedores Association (BMSA); Bangladesh Shipping Agents Association (BSAA); Cargo Handling Agents’ Association (CHAA); Outsourcing and Logistic Service Provider Association of Bangladesh (OLSPAB)[6]. Regions of business concentration Dhaka and Chittagong are the two largest logistics business clusters in Bangladesh, with nearly 70% of warehousing space across the country. Dhaka has become a central hub for manufacturing and warehousing, while Chittagong is a gateway for international trade, accounting for 90% of export-import cargo. These two cities also account for most of the country’s manufacturing units and consumption centers. Additionally, there are regional logistics business clusters or distribution hubs such as Khulna, Barisal, Bogura, Rangpur, Cumilla that have emerged to cater to domestic consumption markets. Donors involved In Bangladesh’s transport and logistics infrastructure sector, the majority of the financial assistance comes from the Asian Development Bank (ADB), the World Bank, the UK via the Department for International Development (DFID), Japan and via the Japan International Cooperation Agency (JICA) and finally South Korea. Major challenges impeding logistics business growth in Bangladesh Bangladesh is a complex country to do business in. Nine ministries and more than 20 government agencies play roles in setting policies and regulations, planning, operating infrastructure, and providing services. The fragmented governance of the logistics sector exacerbates the coordination problem intrinsic to infrastructure development, leading to transport modes that developed and evolved in silos and basic mismatches of infrastructure standards, such as bridges that are narrower than approach roads. Service providers cannot track and trace shipments. Because of the low quality of services, many manufacturing firms provide their logistics needs in-house to better control the performance of their supply chains. There is no competition in logistics service markets in Bangladesh. The involvement of unions and associations prevents direct interaction between service providers and shippers. As service providers are not rewarded for the quality of their services, they have no incentive to provide high-quality services or innovate. The Bangladesh logistics and freight industry is in need of serious change. The main obstacles to high-quality service are the following: High trucking rates due to inefficiencies in the transportation and logistics system, low truck utilization, extreme levels of congestion in roads and ports, and a large number of trips of empty trucks are the main causes. Truck owners count that 35 percent of the trips have empty trucks. Instances of unprofessional behavior by logistics service providers. Most truck drivers are low skilled and illiterate. Lack of skill-training relating to modern warehousing (i.e. temperature-controlled transport & storage), cross-docking, inventory management, efficient customer service, cold chain, etc.

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