It is high time we focus on the logistics sector

The importance of the logistics sector for domestic and foreign trade is on the rise. The size of the sector is also increasing. The more efficient the logistics sector can be, the lower the cost of trade will be. Goods can be delivered in less time.

The size of the logistics sector has been increasing with the surge of foreign trade in Bangladesh over the last decade. Except for the production of goods, all other activities are related to the logistics sector. For example, after production in factories, products reach consumers through logistics. 

Again, raw materials are brought to factories from different countries using logistics. Bringing raw materials and sending finished goods abroad or supplying them at home requires infrastructure and transportation services. And skilled manpower is needed for this work. The more these three types of facilities can be created, the more dynamic the logistics sector will be.

The logistics sector includes transport, warehousing, cold storage, private container depots, and port services. Companies serving this sector are ports, freight forwarders, clearing and forwarding agents, shipping agents, depot operators, and logistics companies engaged in the transportation of goods.

With the increase in foreign trade, the activities of the logistics sector are also on the rise. In fiscal 2021–22, the expenditure on imports of goods was $89 billion. At the same time, exports of goods amounted to $52 billion. Accordingly, in the last financial year, the size of foreign trade combined with imports and exports was $141 billion. Foreign trade increased by 35% in the last financial year compared to fiscal 2020–21. Foreign trade volume was $104 billion in FY21.

If the infrastructure and services of the logistics sector can be sped up, then the cost of bringing raw materials from abroad will be reduced. Again, exporters will not have to suffer to send products abroad.

The import-export trade data of Chattogram Port also shows an increase in the size of the logistics sector. For example, from the 2012–13 to the 2016–17 financial years, the port handled an average of 18 lakh TEUs of goods per year. Over the following five years (from 2017–18 to the 2021–22 financial years), this number increased to an average of 28 lakh TEUs annually. It means the average growth in five years is 46%.

Port capacity is the first requirement for this large volume of goods being imported. The goods are unloaded from the port and kept in depots. Again, it is taken directly from the port by vehicles to factories or warehouses. 

As the demand for container depot investment rises in tandem with the rise in goods transportation, so does the demand for goods transportation vehicles. Again, the demand for warehouses to store general goods has also been created. 

There is a need for new, lighter ships to transport goods across the country. Investments in these sectors have increased in the last decade. The port's capacity is also increasing. The number of depots has risen. There has been an increase in the number of vehicles for transporting goods by road or lighter ships for inland waterways.

If the infrastructure and services of the logistics sector can be sped up, then the cost of bringing raw materials from abroad will be reduced. Again, exporters will not have to suffer to send products abroad. For example, if the capacity of the port is not increased, there will be delays in reaching ships at jetties. 

This will take more time to transport raw materials to factories. Again, if there is a delay in the customs clearance of any product, the raw material cannot be easily cleared from the port. This should include compensation for keeping the goods at the port for a long time. 

A few years ago, many export shipments from the garment sector had to be airlifted due to the non-availability of raw materials on time. It has increased the cost. Exporters have to give concessions. Again, due to a lack of supervision, incidents like the theft of export goods have occurred on highways. This can be prevented by increasing the use of technology.

There is not much difference in the purchase price of products around the world. The logistics sector makes the difference. Because if someone takes a long time to bring products to factories and the cost is high, then they will fall behind in the competition. Again, if the export goods cannot be shipped on time, they cannot reach foreign buyers.

In order to speed up the logistics sector, investment should be increased. The use of modern technology should be increased. Because the government has set a target to become an upper middle-income country by 2031 and a developed country by 2041. The current government is implementing megaprojects to materialise Vision 2041. The Padma Bridge was opened to the public last year. 

This will increase economic activity in the southern region in the coming days. New industries will be built there. Again, the government is building 100 economic zones in the country. Exports have started from some economic zones. Production has started at the Bangabandhu Shilpa Nagar, the largest one located in Mirsharai. Once all the economic zones are fully operational, then new infrastructure needs to be created in the logistics sector.

But even though the logistics sector is so important, we do not have any national policies. At least nine ministries and 20 government agencies are associated with the logistics sector. In order to make this sector dynamic, first of all, it is necessary to identify where and what is required in the logistics sector. 

Accordingly, the policy should be simplified so that the private sector comes forward with investment. Capacity should be increased according to a well-thought-out plan in the service sector, including ports in the government sector. Skilled manpower is not being created in this sector. For this, training centres need to be established and many sub-sectors of logistics have to be managed by hiring manpower from abroad. 

Giving importance to this sector will reduce business costs. Product exports will increase. Imports will also be less expensive. Industrialisation will speed up.

The writer is the vice-president, Bangladesh Freight Forwarders Association (BAFFA)