With LDC graduation looming around the corner, trade partnerships with regional partners will become crucial for Bangladesh in the coming decades. And the country is working on such arrangements already.
During a recent visit by the Indian foreign minister, S Jaishankar, Bangladesh Prime Minister Sheikh Hasina proposed India use the Chittagong Port to increase connectivity between the two countries. On top of that, China (India's regional rival) has also heavily invested in the development of port facilities in Bangladesh and reportedly considers the Chittagong Port Authority (CPA) to be a crucial piece of the puzzle.
While relevant stakeholders in Bangladesh have welcomed these developments as conducive to trade and economic development in Bangladesh, there are genuine concerns regarding the capacity of the Chittagong port being able to handle the additional cargo loads.
According to the Container Port Performance Index (CPPI) 2021, an index developed by the World Bank, the Chittagong seaport ranked 341st among 370 ports and was found to be the least efficient port in Asia in terms of container handling.
Although the Matarbari maritime port is expected to be completed soon, Bangladesh still has no functional deep sea port and just recently began direct shipment of cargo from the Chittagong seaport to China, Hong Kong and the Netherlands. While these are encouraging signs, it is apparent that there is a lot of room for improvement.
To discuss the matter at large, The Business Standard spoke to Sheikh Fazle Fahim, the former President of the FBCCI for the 2019-21 session.
Bangladesh wants India to use the Chittagong port. Can the Chittagong port sustain the further load? If we are to accommodate India and potentially China through the Chittagong port, how should the port facilities be improved?
Bangladesh has the strategic advantage to become a global trade logistics hub in the Indo-Pacific, whether among SAARC, Bangladesh, Bhutan, India, Nepal (BBIN) Initiative, Bimstec or the Indian Ocean Rim Association (IORA). To achieve that goal, Bangladesh needs to form gradual comprehensive economic cooperation agreements (CECA) and strengthen its value chain.
As far as the global logistics indices are concerned, Bangladeshi ports have room for improvement. However, Bangladesh is nearing the completion of several megaprojects which will ensure the development of an industrial ecosystem such as the Bay Terminal, Mirarsarai, Moheshkhali, the Bangabandhu Tunnel under the Karnaphuli river, the Padma bridge, the construction of Terminal 3 at the Hazrat ShahJalal International Airport, Payra port etc.
The development of these infrastructures should advance our position in the logistics indices. During the recent visit of the Indian foreign minister, we came to know that India intends to form a Comprehensive Economic Cooperation Agreement (CECA) with Bangladesh. This is a promising sign since other countries that had previously engaged in CECA benefitted from such comprehensive partnerships which in turn improved the socio-economic conditions of their constituents.
In a recent report by the World Bank, the Chittagong port was found to be Asia's least efficient in container handling. How would this inefficacy factor in if India uses the port and how can container handling be improved?
The World Bank report showed the vulnerability of many high volume global ports such as Los Angeles. Given that, the vulnerability of CPA is understandable. The standard operating procedures were adopted by global operators decades ago. There are certain protocols of container handling that minimise processing lead time. For example, the process of clearing containers in modern ports starts way ahead of the ship's berthing.
The CPA is not comparable with the majority of modern ports in scope or size. Yet it handles 98% of our trade, which grew by 240% over the last decade. If we look into the parameters of the report it may give a better understanding of the index's outcome and what may be done to do things better.
We know that the CPA and other ports of Bangladesh are eyeing to capture a share of the global logistics market. To achieve that goal, the port authorities must form strategic partnerships with global operators based on the mutual exchange of technical know-how. They may explore multiple options. Firstly, they can purchase the business process engineering of operation and management (O&M). They can introduce subscription models and train their teams with long-term update provisions of technology and training.
The CPA and other ports can form joint ventures with top global port operators for knowledge transfer, especially in the fields of operations and management which would enable them to incorporate modern technologies like artificial intelligence and industrial internet of things (IIoT) into their operations.
In addition, the multimodal communication network will assist in efficient logistics management. The soft and hard infrastructures need to be integrated into the trade logistics model for greater efficiency and to demonstrate better performance indices.
Does Chittagong have the prospect of becoming the next Sri Lanka in the region, especially given we still have no functioning Deep Seaport?
It is not only Chittagong port. We have other assets as well to position ourselves as an agile logistics hub. Our capacity can be further improved by incorporating all ports under one authority, both water and land.
CPA's Bay terminal will improve traffic management of vessels with reduced lead time. The Payra port and the EPZs have received large vessels to improve the scope of work for their respective projects. That's why I believe that the CPA will advance in operation and management and will be able to handle increased traffic. Moreover, additional maritime ports are also on the horizon.
In conclusion, Bangladesh is poised to be an agile logistics hub to handle the proposed foreign investments by Japan and South Korea among other FDIs intended, in addition to domestic investments in economic zones and warehouse industries for industrial inputs and finished products for domestic consumption and export.
Recently two direct ships from Bangladesh to China and Hong Kong left from the Chittagong port. Why has it taken so long for Bangladesh to achieve direct shipments to China?
Our trade deficit might be a contributing factor to this delay. Moreover, the Covid-19 pandemic and the recent global developments [the Russian invasion of Ukraine] has also adversely affected our modus operandi.
But as we are moving to diversify the product basket and move up the high-value chain, more point-to-point shipping might become the trend. For example, apart from China, we have also directly shipped to Italy recently.
How would the decision to allow India to use our port facilities affect our local traders?
Ports form the backbone of the global economy and their relevance to global supply chains and economies was more evident during Covid-19.
According to research by Oxford University, for some countries, 43.5% of economic activity is dependent on trade going through a single port. The top 10 global ports influence 9.3% of the global economy, of which the port of Shanghai alone constitutes 1.7% of global output.
Studies found that for every $1,000 increase in final demand, a country's ports on average experience an $18.3 increase in imports. This number can rise to $108 in low-income countries and small islands. Ports are even more critical for some sectors, such as the mining and quarrying sector.
Moreover, Bangladesh is a heavily import-dependent country and 82% of its trade is conducted through maritime transport. Bangladesh also relies on imports for essential raw materials and value chain inputs into final products are routed through ports.
I believe that greater connectivity through ports while addressing tariff and non-tariff barriers will increase industry and product diversification. Intra and interregional connectivity, trade and investments usually benefit participants at different stages of the value chain. So, our economy would benefit as will India's as each stakeholder in the process have respective value chain advantages that will be complementary not competitive, bilaterally and beyond.