Matarbari Deep Sea Port: A vista of economic development in the Bay of Bengal Region
The benefits of Matarbari deep seaport will extend beyond shipping costs. It has the potential to impact the socio-economic conditions of the people of neighbouring regions in a big way
The ruling Awami League has already commenced its election campaign, with Prime Minister Sheikh Hasina urging people to vote for her party in the upcoming general elections during the inauguration of the rail link over the Padma Bridge on 10 October.
The government also plans to open the first-ever road tunnel project, the Bangabandhu tunnel under the Karnaphuli River in Chittagong, and the Metrorail project in Dhaka this month.
The Prime Minister also inaugurated the first-ever elevated expressway and the Chattogram-Cox's Bazar direct rail link, enabling direct travel from Dhaka to Bangladesh's southeastern tourist city.
Since coming to power in 2009, the ruling party has pursued a policy of development focused on building massive infrastructure projects with the vision of making Bangladesh a developed country by 2041. However, this policy has faced criticism from various quarters, including the opposition BNP and its allies.
Keep updated, follow The Business Standard's Google news channel
The opposition alliance has voiced concerns about the mega projects undertaken by the government, including the Padma Bridge, except for the deep seaport in Matarbari in Bangladesh's Cox's Bazar district. This suggests that the two rival leading political parties have a tacit consensus for constructing the Matarbari deep seaport, funded by the Japanese government.
Since gaining independence in 1971, previous governments have discussed or attempted to build a deep seaport on the Bangladeshi coast but geopolitical and regional political factors hindered these efforts. For instance, in 2020, the government scrapped the Sonadia deep seaport project, which China had wanted to finance, reportedly due to New Delhi's disapproval.
Iwama Kiminori, the Japanese Ambassador to Bangladesh, stated at a seminar in late September 2023 at the Japanese embassy that the Matarbari deep seaport was likely to transform Bangladesh into a regional hub in the Bay of Bengal and South Asian regions.
In April, Tokyo announced that Japan would establish an industrial hub in Bangladesh, with supply chains reaching landlocked northeastern India, Nepal and Bhutan. This announcement came a month after Japanese Prime Minister Kishida Fumio's visit to India.
During the bilateral tour of Japan, Prime Minister Sheikh Hasina and her Japanese counterpart, Kishida, agreed to deepen economic cooperation for mutual benefit and regional prosperity. The joint statement on the tour reads: "They [the two prime ministers] affirmed their continuous and accelerated cooperation so that Matarbari Port can become a hub of energy, logistics and industry in Bangladesh, using Japanese expertise and technology to enhance connectivity between Bangladesh and its neighbouring countries."
Since then, bilateral engagements between Bangladesh and Japan have increased.
In July, the Japanese Minister in charge of the Ministry of Economy, Trade, and Industry, Nishimura Yasutoshi, visited Bangladesh. His stated goals include "Japanese companies shifting their production to Bangladesh, upgrading the Bangladesh industry and realistic energy transition", and he explained the future direction in which Japan and Bangladesh would advance the co-creation of economic ties in a more sophisticated and equal manner.
In the first week of October, the Parliamentary Vice Minister for Foreign Affairs in Japan, Komura Masahiro, visited Bangladesh and held talks with Bangladeshi officials.
The series of bilateral visits from Japan demonstrates how committed Tokyo is to transforming landlocked northeastern India, Bhutan and Nepal using the Bay of Bengal linchpin Bangladesh, which already has three operational ports and an under-construction deep seaport.
Asian Confluence, an Indian think-tank based in the Indian city of Shillong, in its research on regional connectivity, terms the Matarbari deep seaport as a 'game changer' in a vast region encompassing eight landlocked northeastern states of India, Bhutan, Nepal and Bangladesh.
The question remains: How will Matarbari Deep Seaport be a 'game changer'?
We need to consider the geographical landscape to find the answer to this question. Bangladesh is semi-landlocked and bordered by India on three sides: north, east and west.
However, it benefits from its strategic location at the apex of the world's largest bay, the Bay of Bengal, one of the vital sea lanes extending from Sri Lanka to Indonesia in Southeast Asia, in the Indian Ocean. Bangladesh also separates eight northeastern landlocked states from mainland India.
The northeastern states are linked to the rest of India through a narrow strip of Indian land called Chicken's Neck, or the Siliguri Corridor, which is a maximum of 22 kilometres wide. Any disruption in the corridor would completely isolate the eight northeastern states from India.
Additionally, the landlocked countries of Bhutan and Nepal are separated from Bangladesh by a narrow strip of India's northeastern states.
Bangladesh's advantage is that the country's premier port in Chittagong is the closest to the northeastern states and can serve northeastern India, Bhutan and Nepal. Bangladesh acts as a wedge between South Asia and Southeast Asia.
Given the importance of the Bay of Bengal to the world economy and the global supply chain, Western countries, Japan and India have proposed the Indo-Pacific Strategy as a counterweight to China's Belt and Road Initiative.
Japan has put forward its trademark Free and Open Indo-Pacific(FOIP) policy, Free and Open Indo-Pacific, which implies that the Indo-Pacific must remain open to all.
Bangladesh is a focal point of Japan's FOIP policy, the Bay of Bengal Industrial Growth Belt (BIG-B), and the Industrial Value Chain initiative. Tokyo appears to view Bangladesh, northeastern India, Bhutan and Nepal as a single economic unit in terms of investment.
A recent JETRO study revealed that most Japanese companies want to expand their business in Bangladesh. A special economic zone for Japanese companies has been established in Narayanganj.
The increased economic activities and investment will inevitably put immense pressure on Bangladesh's inadequate logistics, such as ports, roads, bridges and other key factors crucial for business sustainability and competitiveness.
According to the World Bank's logistics index, Bangladesh's costs are relatively high.
The World Bank, in its logistics index report, places Bangladesh among the countries with good logistics, including seaports. Businessmen argue that poor service at the port and customs, coupled with the absence of a deep seaport in Bangladesh's waters, erodes the country's business competitiveness compared to countries contending for foreign investment.
Experts have long called on the Bangladeshi government to construct a deep seaport to reduce shipping costs. Still, none of the previous governments succeeded in building one on the Bangladeshi coast.
India is concerned about China's growing presence in the Bay of Bengal, which it considers its backyard, while Beijing aims to consolidate its position in the world's largest bay. Many experts feared Bangladesh's dream of a deep seaport would never materialise due to the India-China rivalry.
However, things changed gradually as Japan, a country friendly to Bangladesh and India, stepped in. Bangladesh has been building its first-ever deep seaport with Japanese funding in Matarbari, Cox's Bazar.
The question of how Matarbari would be a game changer is a subject of research. To assess the potential impacts of the Matarbari deep seaport, the Ocean Policy Research Institute of Japan has initiated a study.
A simple economic analysis shows how the Matarbari deep seaport, once operational by 2026 or 2027, would reshape the shipping landscape in the Bay of Bengal region.
Shipping freight rates fluctuate depending on demand. Currently, the freight charge is at its lowest in recent years. A smaller ship carrying a maximum of 2,500 TEUs (20-foot equivalent unit) containers from China's Shanghai port to Chittagong port charges between $1,800 and $1,900 for a 40-foot container, with the rate for a 20-foot container standing at $1,200 to $1,400.
For exports, shipping companies charge $1,400 to $1,900 as freight for carrying a 40-foot container from Chittagong to a European port.
Bangladeshi businessmen primarily use 40-foot containers for exports but demand for 20-foot containers is increasing. On the other hand, the freight for a container ranges from $1,700 to $2,000, depending on the type of container.
Importing through Singapore's port is time-consuming and costly despite the initially lower freight rates shipping companies offer. If a container is carried via Singapore from Shanghai port, businessmen must spend an additional $300 for each container due to port equipment charges and other fees.
The Matarbari deep seaport will revolutionise the port and shipping landscape. Large ships, known as mother vessels, capable of carrying 10,000 to 12,000 TEU containers, will dock at Matarbari, as it will have the necessary port channel and jetties to accommodate these high-draft vessels.
Instead of transporting containers by multiple smaller feeder vessels from Singapore or Colombo, one mother vessel will transport the containers of several feeder vessels directly to Matarbari without transhipment. Carrying more containers on a single ship from origin to destination will automatically reduce the cost of port logistics.
However, due to the recent Ukraine-Russia war and the country's shortage of dollars, exports and imports have decreased significantly. As a result, shipping lines are reducing direct shipments. This situation is unlikely to continue for long.
The economic benefits of the Matarbari deep seaport will extend beyond shipping costs. Its direct and indirect positive impacts will have a broader effect on the socio-economic conditions of the people in the vast region, without a doubt.
The authors have been working on the Ocean Policy Research Institute project on the Matarbari deep seaport.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions and views of The Business Standard.
