Dhaka, Tuesday, 24 May 2022

BD can cut shipping costs by up to 9 percent

BD can cut shipping costs by up to 9 percent

Apparel Report: Bangladesh can cut shipping costs by up to 9 percent and boost exports by 7 percent if its ports become as efficient as those in Sri Lanka, according to a new World Bank report.

In a statement, Qimiao Fan, country director for World Bank Bangladesh, said as China is shifting out of labour-intensive sectors such as apparel, Bangladesh has the potential to capture a growing share of the global market.

He said, improving the performance of Bangladesh's container ports is a key step toward increasing trade and creating new jobs for the country's growing labour force.

The 'Competitiveness of South Asia's Container Ports' report, which was released on Thursday, said Bangladesh and its South Asian neighbours can make their container ports more efficient by boosting private sector participation, improving governance and encouraging competition to grab a bigger share of international trade and create more jobs.

Noting that Bangladesh and South Asia have had impressive economic growth in the last two decades, the report shows that inefficiencies in the region's ports threaten to hinder progress and stop it from matching other regions like East Asia.

If ports in Bangladesh, India and Pakistan had been as efficient as those of Sri Lanka, it could have cut shipping costs by up to nearly 9 percent, boosting the value of the region's exports by up to 7 percent and the potential gains associated with improving port performance are substantial, it said.

While container ports in India, Pakistan, and Sri Lanka have attained relatively higher levels of operational and economic performance through reforms and private investment, Bangladesh remains the only country on the Indian subcontinent where the private sector does not play a meaningful role in the container port sector, according to the report.

In Chittagong, which handles over 90 percent of Bangladesh's container traffic, the lack of investments and the growth in exports of garments have forced the port to operate almost at capacity and caused very high turnaround and waiting times.

The evidence on South Asia supports global findings that ports at which the private sector provides services to shipping companies (so-called landlord ports) attain higher levels of operational performance and economic efficiency than ports run based on other models.

Beginning in the late 1990s/early 2000s, India, Pakistan, and Sri Lanka reformed their port sectors, introducing private sector participation. Bangladesh is the only country on the Indian subcontinent that has not adopted the landlord model.

Large and medium-size landlord ports performed better than other types of port on average, according to the report.

Karla Gonzalez Carvajal, South Asia manager for transport and ICT global practice at the WB said, Experience from across the globe, including the South Asian experience, indicates that a three-pronged approach that encourages better governance, private investment, and competition in container ports will lead to more economic opportunities and jobs.

India is by far the largest container market in the region, moving about 10 million 20-foot equivalent units (TEUs) in 2013. Sri Lanka, whose market is dominated by transshipment, is the next largest player in the region, with throughput of more than 4 million TEUs. Pakistan (2.6 million TEUs) and Bangladesh (1.6 million TEUs) handle smaller volumes of cargo.

Between 2000 and 2013, annual container volumes rose 12 percent in India, 10 percent in Bangladesh, 9 percent in the Maldives, and 7 percent in Sri Lanka. It was the highest in Pakistan at 15 percent, according to the report.

Bangladesh has two international ports in Chittagong and Mongla. The report said Mongla's role is limited as it has a water depth of only 7 metres. In 2013, it handled just 8 percent of container and 10 percent of bulk and break-bulk cargo.

Chittagong is the deepest port in Bangladesh, but at 9.1 metres it is much shallower than its competitors. Colombo, for example, has a depth of 18 metres at its newest terminals, Karachi will have a depth of 16–18 metres at its newest terminal, and the Jawaharlal Nehru Port will be 16 metres deep. As a result, Bangladesh's exports have to be carried in feeders to the region's hub ports of Colombo, Singapore, and Tanjung Pelepas to link up with deep-sea services.

In contrast, the exports of India, Pakistan, and Sri Lanka, all of which have deep water, can use direct services to their main markets.

The report said Chittagong and Mongla are managed by port authorities that report to the shipping ministry, which provides overall sector policy guidance and some regulatory oversight. Both guidance and oversight are at best light touch. The Chittagong Port Authority exercises a high degree of operational and financial autonomy, although major expenditures require approval from the shipping ministry.

The WB said the development of port facilities at Chittagong has been slow. The CPA has completed only one fully specialised terminal, the Chittagong Container Terminal, and it handles only a third of total traffic.

Just over half of the port's container traffic is still handled at general cargo berths. The remaining containers are handled at the New Moorings Container Terminal, built in 2007, which still has no container cranes. Although occupancy at the CPA container berths is high and rising, there is a pressing need for more investment in capacity, according to the report.

Mongla Port has had excess capacity for many years. There are five usable berths; another four remain unfinished. Two of the five are used for containers and general cargo, using ships' gear to load and unload. Occupancy is very low (14 percent at one berth, 37 percent at the other).

Payra Seaport, the third seaport of the country, was not included in the report. The port started its trial operation last year.