Eliminating congestion could lower logistics costs by 7% to 35%
In order to meet the needs of its growing economy and to boost export growth, Bangladesh needs to improve its transport and logistics system, states a new World Bank report launched on Wednesday at a hotel in Dhaka. The report- titled “Moving Forward: Connectivity and Logistics to Sustain Bangladesh’s Success”- finds that by making logistics more efficient, Bangladesh can significantly boost export growth, and maintain its position as a leading readymade garments and textile producer.
The report notes that congestion on roads and in seaports, high logistics costs, inadequate infrastructure and fragmented governance hamper manufacturing and freight, further eroding Bangladesh’s competitive edge and putting its robust growth path at risk.
Dr Mashiur Rahman, economic affairs adviser to the prime minister, was present at the event as chief guest, while Matias Herrera Dappe, senior economist at the World Bank and author of the report, briefed the media about the report. Mercy Tembon, World Bank country director for Bangladesh and Bhutan, clarified the different issues mentioned in the report.“We should follow multi modal transport system in terms of using rail, road and shipping at the same time,” said Mashiur Rahman.
“India has proposed to connect the Kolkata, Mongla and Chittagong ports,” he added.
Bangladesh is ranked 100th among 161 countries in the World Bank logistics performance index 2018, and needs to increase logistic performance. “There is no doubt that reforms and investments for better transport and logistics will yield Bangladesh substantial economic benefits and strengthen its competitive advantage,” said Matias Herrera Dappe.
“By improving the logistics system, Bangladesh can significantly optimize its connectivity, business environment and competitiveness, putting itself on the right path to become a dynamic upper middle income country,” said Mercy Tembon.
According to the report, Bangladesh can accelerate export by 25 percent by reducing logistics costs by 25 percent.
Achieving efficient logistics requires a system-wide approach following four points. The points include developing a system-wide strategy for increasing logistics efficiency, improving the quality and integration of logistics services, and improving infrastructure quality, capacity, and management.
According to the report, making logistics more efficient can bring significant benefits by reducing the time at Chittagong port, reducing congestion along national highways, removing inefficiencies in services.
The report further says that close to half a million tons of freight move between districts per day, whereas manufacture product is 53 percent and agriculture product is 23 percent.Logistics costs are high in most sectors including horticulture, wooden furniture, readymade garments, and jute textile.
Several factors explain high trucking rates-- inefficiencies in the transportation and logistics system, low truck utilization, extreme levels of congestion in roads and ports ,and large number of trips of empty trucks are the main causes. Truck owners count that 35 percent of the trips have empty trucks.
Eliminating congestion could drastically reduce the social costs of logistics: if there were no congestion in Bangladesh, emissions from trucks could drop by 50% to 73%.