Despite its strategic location and low-cost labour, Bangladesh continues to struggle with attracting foreign direct investment (FDI) due to its inefficient logistics system, economists and business leaders have said.
The country’s poor performance in global logistics rankings is also limiting export diversification and posing serious risks in the upcoming post-LDC era.
They recommended swift implementation of the National Logistics Policy, formation of a dedicated authority or ministry, and investment in green, multimodal logistics systems to reduce lead times and trade costs.
Additional priorities include private sector-led Inland Container Depots (ICDs), improved port-led economic zones, and stronger coordination among government agencies.
Logistics cost cuts could boost exports by 20%
Dr M Masrur Reaz, chairman of Policy Exchange Bangladesh, noted that Bangladesh’s exports remain overly dependent on readymade garments, which account for 82% of total earnings.
“We’ve failed to diversify our products and markets,” he said, pointing to Bangladesh’s poor standing in global competitiveness and innovation indices.
“In various global indices such as the Global Competitiveness Index, Global Innovation Index, and Global Skills Report, Bangladesh continues to lag behind regional peers like India, Vietnam, Japan, and Cambodia.”
Citing research, he said exports could rise by 20% if logistics costs are cut by 25%, and a 1% drop in transport cost could boost exports by 7.4%.
He stressed the need for bonded warehouses for SMEs, better infrastructure across air, sea, rail, and land ports, and full rollout of the logistics policy with sector-specific plans.
Poor logistics undermining FDI
Net FDI fell to US$1.27 billion in 2024 - its lowest in five years - down from $1.46 billion in 2023, according to Bangladesh Bank.
DCCI President Taskeen Ahmed attributed the decline to high logistics costs, customs delays, and infrastructure gaps.
“Bangladesh ranks 88th out of 139 in the 2023 Logistics Performance Index. Logistics costs are 15%-20% of GDP, well above the global average of 8%-10%,” he said.
He called for port automation, digital freight platforms, warehouse management systems, and the expansion of systems like ASYCUDA and the National Single Window.
Call for a ‘Logistics Decade’
Abul Kasem Khan, chairperson of BUILD, proposed declaring 2026-2035 the ‘Logistics Decade’ and creating a dedicated ministry to lead reform.
He said Bangladesh needs to invest 8%-10% of GDP, or $20 billion annually, in logistics and infrastructure to meet development goals.
Despite its potential, Bangladesh currently attracts only $1-1.5 billion in FDI annually in these sectors, far below its capacity, he said, calling for a 50-year master plan for sustainable logistics development.
Multimodal ecosystem needed post-LDC
Dr Sheik Moinuddin, special assistant at the Ministry of Road Transport and Bridges, stressed the need for a multimodal transport system - road, rail, river, air, sea, and digital - to maintain competitiveness after LDC graduation.
He urged more inclusive policy-making involving the private sector and long-term planning to guide future development.
Port capacity to reach 10 million TEUs by 2030
Md Habibur Rahman of the Chittagong Port Authority projected that Bangladesh’s seaport capacity will reach 10 million TEUs by 2030.
However, he warned that without increased trade activity, the capacity could go underutilised.
He called for investment in railways as a cost-effective alternative and proposed a freight-only expressway between Chattogram Port and Sitakunda.
He also urged private sector management of loss-making ports like Pangaon.
ADB offers support
Humayun Kabir of the Asian Development Bank (ADB) said the ADB is working closely with the government and stands ready to provide technical assistance to implement the National Logistics Policy.
Courtesy: Daily Sun.
Bd-pratidin English/TR
