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Port sharing with India to bring woes to apparel exporters

Bangladesh government’s decision to share seaports with India likely to bring woes to the apparel exporters as the capacity is still inadequate to handle the current export-import business of the country, business people apprehended. However, they think it would create more congestion at the port unless the capacity of the port is increased with required equipments and human resource.

BD Port sharing with India to brings woes to apparel exporters
Figure: As the capacity of Chattogram port is still inadequate to handle the current export-import business, sharing the port with India might hamper Bangladesh apparel business.

In September, Bangladesh Cabinet has approved the draft of a proposed agreement with India to allow it to use the Chattogram and Mongla seaports for transporting goods to and from its land-locked northeastern states. As per the proposed agreement, India would be allowed to use Chattogram and Mongla ports to carry goods to their northeastern states within a very short span of time.

As per the draft deal, the agreement of sharing port facilities with India will remain effective for five years with a provision of automatic renewal for another five years. But both country could out from the deal with a prior six-month notice.

Why business people fear

For last one decade, Bangladesh’s economy has continued to grow and registered steady growth in export-imports, which pushed the GDP growth at 7.86% in the last fiscal year. On top of that, the country’s investments from home and abroad are increasing gradually but the capacity of ports and transportation did not improve in line with economic growth.

As a result, the country’s business community are fearsome about the government’s proposed deal of sharing a port with India as the present capacity is not enough to handle the export and import business of the country.

Meanwhile, lead-time is a big concern for the export-oriented industry as it increases the production cost and some time has to bear airfare for the delay to meet the lead-time.

BGMEA Vice President (Finance) Mohammed Nasir said, “In Bangladesh, it takes about 45 days for execution of an export order, which is 10 to 12 days in China and comparatively less in other competitor countries.”

There is still a shortage of required equipment at the Chattogram port, the principal port of the country, to handle the current export-import shipment. While the roads and highways are not in good shape to ensure smoother transportation of goods to the port.

Faruque Hassan, Senior Vice President, BGMEA

Due to congestion at the Chattogram port, sometimes garment exporters have to ship goods by air, which costs a huge amount of money. While sometimes the manufacturers have to offer a discount on price due to delay in shipment, he added.

Export-import growth

As per the data of Export Promotion Bureau (EPB), Bangladesh’s export earnings from the apparel sector stood at $30.61billion, up by 8.76%, in the last fiscal year, which was $28.15 billion in the fiscal year 2016-17. On top of that, in the first four months of the current fiscal year, Bangladesh exports earnings saw a sharp rise by over 20% to $ 11.33 billion.

Meanwhile, Bangladesh’s overall export earnings rose about 5.8% to $36.66 billion, which was $34.65 billion in Fy17.

According to Bangladesh Bank data, in the fiscal year 2017-18, Letters of Credit (LC) settlement reached at $51.53 billion, up 16.40 percent year-on-year. Investment in manufacturing increased imports, while the imports for mega projects expedited the growth of import.

“There is still a shortage of required equipment at the Chattogram port, the principal port of the country, to handle the current export-import shipment. While the roads and highways are not in good shape to ensure smoother transportation of goods to the port,” Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Senior Vice President Faruque Hassan told the Textile Today.

On top of that, Bangladesh has to think about its target of $50 billion export target by 2021 and other economic vision. In the year to come, Bangladesh on track to see huge investment from home and abroad said Hassan.

As the result, the port will see more cargo handling in line with the increased volume of export and import. So, it will likely to bring woes to the business community and, said Hassan, also Managing Director of Giant Group.

“I think, it would not be a wise decision to allow India to share port facilities right now.”

The export-import scenario at ports

Table 1: Cargo handling at the Chattogram port to deliver export goods.
FY Bulk (Metric tons) Container Total (Metric tons)
2014-15 35.80 million 13.13 million 48.94 million
2013-14 30.83 million 11.12 million 41.96 million
2012-13 28.38 million 9.9 million 38.31 million
2011-12 9.4 million 26.74 million 36.18 million
2016-17 49.37 million 17.08 million 66.46 million
2017-18 66.39 million 19.38 million 85.77 million

According to Chattogram Port Authority, cargo handling at the Chattogram port to deliver export goods has increased by 6.25% to 7.14 million metric tons in the last fiscal year, which was 6.70 million metric tons in the fiscal year 2016-17.

On the other hand, cargo handing in receiving imported goods and machinery has seen a 29.05% rise to 85.77 million metric tons in the FY18, which was 66.46 million metric tons in FY17.

Table 2: Cargo handing in receiving imported goods at the Chattogram port.
FY Bulk (Metric tons) Container Total (Metric tons)
2014-15 304540 5.5 million 5.8 million
2013-14 325950 5 million 5.3 million
2012-13 432571 4.6 million 5 million
2011-12 317690 4.3 million 4.7 million
2016-17 313836 6.3 million 6.7 million
2017-18 116725 7 million 7.1 million

Meanwhile, in the last fiscal year, the number of foreign ships at Mongla Port stood at 784, which was only 282 in 2012-13 fiscal. While the number of containers was 43,000 in 2017-18, whereas it was 20,717 in 2015-16.

How to get rid of port congestion

“For ensuring a better supply chain for the country’s apparel sector, the inefficiency of Chattogram port, traffic congestions in Dhaka-Chattogram highway, lack of skilled human resources are key barriers for Bangladesh,” Exporters Association of Bangladesh (EAB) president Abdus Salam Murshedy said to the Textile Today.

But the hope is the government has taken a good number of initiatives to remove the handless and it would be removed soon, said Salam a former president of BGMEA.

As the country’s economy is moving towards massive industrialization, the government has to adopt the latest technology and increase equipment to cope up with the growing export-imports cargo handling, said Salam, Managing Director of Envoy Textile.

Due to delayed delivery, Bangladesh may lose its competitiveness in the global market and even can lose work orders, he said urging to improve port efficiency.

Should we share port facilities with others?

Since the inbound and outbound cargo handling is increasing rapidly, the government should not share the port facilities with India right now as it would increase the congestion at the port. So, it raised questions about the decision, whether it will be a good decision or not to share a port with India.

Due to congestion at the Chittagong port, sometimes garment exporters have to ship goods by air, which costs a huge amount of money.

In the last fiscal year, Bangladesh registered a 7.86% GDP growth. This is because of country’s increased capacity in manufacturing industry especially the RMG sector. In the years to come, Bangladesh will invest hugely in the manufacturing industry, Former Caretaker Government Advisor Ab Mirza Azizul Islam said.

So, the import of capital machinery and other raw materials will see a sharp rise putting extra pressure on the country’s port capacity, said Islam.

If the government shares the port facilities with the Indian government, it will bring negative impact to the local business people especially the export-oriented sector, the economist said.

In allowing to share port facility to India, the government has to increase the port capacity in line with the industries business volume first. Then after an impact assessment, the government can share otherwise it would be disastrous for the country, said the economist.

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