December 7, 2022

Tackling exporters’ high logistics costs to offset post-PMA tariff hikes: experts

Bangladesh, for its joint exports to major destination countries, would face tariffs of 8.6% to 17% four years later upon graduating from LDC status, experts said, adding that halving its logistics costs, the highest among its peers in all sectors, however, could help maintain the country’s export competitiveness

TBS Report

November 16, 2022, 10:10 p.m.

Last modification: November 16, 2022, 11:36 p.m.

Infographic: TBS

“>

Infographic: TBS

Bangladesh would face high logistics costs from its exporters to offset post-graduation tariffs from LDCs in major export markets and thus support economic growth, experts said at a workshop on Wednesday.

Bangladesh, for its joint exports to major destination countries, would face tariffs of 8.6% to 17% four years later upon graduating from LDC status, experts said, adding that halving its logistics costs, the highest among its peers in all sectors, however, could help maintain the country’s export competitiveness.

The two-day workshop titled “Formulation of National Logistics Industry Development Policy for Bangladesh: Experience from Global Best Practices” was jointly organized by the Ministry of Industry, World Bank and Business Initiative Leading Development (BUILD), a leading public-private dialogue. platform by some of the best chambers of commerce and industry in the country.

How poor logistics infrastructure hurts Bangladesh

The country’s emergence as the world’s second-largest apparel exporter has been driven primarily by its wage competitiveness, while exporters have long suffered from logistics and supply chain bottlenecks.

Due to inadequate port, road, rail and river infrastructure amid continued growth in economic activities and international trade, Bangladeshi exporters require unusually long lead time to ship their goods overseas, the official said. entrepreneur Syed Nasim Manzur, president of Leather Goods and Footwear. Manufacturers & Exports Association of Bangladesh said at the event.

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

Manzur, managing director of the country’s pioneering shoe exporter, Apex, also said Bangladesh and India need 20 days to receive a Chinese shipment by sea, while Vietnam and Cambodia take 7 days.

Indian Customs clears the shipment in 3-6 days, Southeast Asian competitors 5-7 days, while Bangladesh Customs takes an average of 10-15 days.

Moreover, the mere reliance on Chattogram Port, Dhaka Airport and Dhaka-Chattogram Expressway for trucks everywhere creates huge congestion which only increases logistics costs for businesses.

Economist M Mashrur Reaz, Chairman of the Policy Exchange of Bangladesh think tank, in his keynote address, citing various international studies, showed how logistics issues drive up costs for Bangladeshi businesses.

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

If we consider that the logistics costs of horticulture products reach 48%, the average logistics expenses are around 17%, while the additional time only increases the costs.

In another session, the World Bank’s Senior Transport Specialist, Dr. Charles Kunaka, showed how Thailand reduced its average logistics cost rate from 19% to 11% through its planned program in a decade.

The speakers of the workshop showed the poor performance of Bangladesh in terms of logistics, as it lags behind all its competitors in the global market.

For example, according to the latest Agility Emerging Market Logistics Index 2022 report, Bangladesh ranks 39th out of 50 emerging economies with a score of only 4.44 out of 10, while China, India, Vietnam, even Pakistan and Sri Lanka are far ahead of the second largest economy. of South Asia aiming for 300 billion dollars of exports in 2041 to become a developed country.

Global Competitiveness Index (GCI 2019) which ranks countries on infrastructure, ICT adoption, business dynamism and innovation capacity Bangladesh ranks 105th, far behind trade rivals Vietnam, India India and China.

The World Bank’s Logistics Performance Index, 2018, ranked Bangladesh 107 out of 150 countries in terms of speed, 79 in tracking and tracing of goods, 102 in logistics quality, 104 in international shipping, 100 in infrastructure and 121 in clearance.

Experts, industry professionals and business leaders have emphasized combined measures for a significant improvement in all indices without which the weak competitiveness of exporters would harm the economy, while the logistics costs of the local market must also be reduced.

Appropriate infrastructure for sea, land and airports, an integrated and automated network for efficient services at every logistics point and the removal of all supply chain bottlenecks topped their lists of recommendations. .

They pointed out that the in-process national policy for modern logistics in the country is accommodating for enough foreign direct investment, as world-renowned logistics companies not only invest their capital, but also bring in expertise without which the country cannot catch up to maintain growth.

Minister of Industry Nurul Majid Mahmud Humayun, Minister of State Kamal Ahmed Mojumder, Secretary of the Economic Relations Division of the Ministry of Finance Sharifa Khan as well as a large number of industry representatives, experts locals and foreigners took the floor during the workshop.