Removing transport impediments to sustain export growth

We deal here with Chittagong Port and the Dhaka-Chittagong Highway.  Bangladesh's growth prospects depend critically on achieving more rapid growth of exports.  In recent years the export performance has slowed with a lackluster outcome for non-garment exports.  If the Government is able to increase export growth both by a larger RMG sector and diversification of export goods then the economic growth rate can be increased above 8.0 per cent. 

However, the port infrastructure and facilities at Chittagong and critical condition of Dhaka-Chittagong highway are serious impediments to sustain current export growth of Bangladesh, much less increase the flow. One cannot exaggerate how important is this point.  The response of the Government is not satisfactory for this highway and port.  Politics dominates the economic needs.   Strong political will and leadership are needed to improve conditions.  

Improving the capacity of Chittagong Port is essential. Container grow at 12.5 per cent and over the next six (6) years doubles the number to be handled.  There are large projects underway to build other ports as alternatives to Chittagong.  Progress on one such facility is substantial but there is little prospect of any new port handling a large number of containers.  The burden for the next six years will fall on Chittagong port. 

To deal with a 100 per cent increase of container handling in next six years there is no alternative other than to figure out how to improve the efficiency of Chittagong Port and to implement appropriate actions quickly.

We suggest that there are two areas for action:  First, the physical conditions at the port.  Second, Customs management of the containers.  There is no time to lose.

As for the physical management of the port, there are three actions that can be taken promptly.  First, is to increase the authority of the Chittagong Port Authority (CPA) to take actions to improve port operations.  Currently, the CPA has to seek approval from the Ministry for most actions.  This is excessive centralization and results in long delays in CPA efforts to improve port operations.  

The second step is to commission a study of port operations and how these can be improved.  We believe that taking a number of small actions can probably increase efficiency as much as 50 per cent, half of what is needed.  The impact on the port of management measures taken after 1/11 testify to the potential for increased efficiency.  A consultant should be selected on an emergency basis with CPA considering the top three port consulting companies with the objective of getting through the selection in three months.  This must be exempt from bidding rules as a matter of national emergency but if one sticks to the top three companies [ask Asian Development Bank (ADB) and World Bank (WB) for names] then there is little risk of corruption.  The port operations study should be completed in six months, providing recommendations for actions that can be implemented within two years and avoiding any major expenditure [less than $50 million].  The point is not to look for big projects but for better management [e.g. change traffic flows, introduce new programs in port management, better reports to higher management at CPA and the Ministry on port performance, different rules for payments for containers yet to be cleared, improved equipment, changes in port fees, etc.].  More use of modern computer technology, better tracking of containers, and reduced paper work can do wonders.  Of course, this calls on CPA to drive through the implementation of these actions and to do so they must be able to take action quickly. 

The third step is to implement the recommendations that CPA believes appropriate based on the findings put forward by the consultants.  CPA may set up an assessment group of some good young officers both from CPA and the Navy whose responsibility is to keep track of the progress in implementation and to draw the attention of the CPA Board to bottlenecks.  Change is very difficult and the CPA Board has to take the leadership to drive through new ways of doing things.  This viewpoint is to look for better port management rules and small expenditure projects.

Customs operations present a different set of problems.  There are three possible actions: We believe these will speed up port efficiency by another 50 per cent, reaching the doubling needed to get through the next six years.

First, is to expand the use of the off-dock facilities to handle import containers.  This could be done with full computerization of the Customs services to reduce paper work and allow the computer programs to check most things related to import documentation.  Customs may oppose such actions but this is a critical aspect of economic development and the National Board of Revenue (NBR) must force these changes.  The unwillingness to take the first step to full computerization would tantamount to bureaucratic resistance.

Second, the coverage of physical inspection of containers should be reduced.  Good computer analysis will help to identify risky containers based on the type of imported goods and the reputation of the importer.  These simple steps will reduce the slowing of port operations due to Customs procedures without loss of revenues.  Inspection of containers should be reduced to less than 10 per cent with selection for inspection arising from the computer analysis. 

Third, reintroduce Pre-Shipment Inspection from China, India and Southeast Asia along with universal coverage of a handful of special products.  This will speed up customs clearance.  Again we expect resistance from the authorities but this is what is needed to speed up port processing of containers.

Next, we turn to the critical Dhaka-Chittagong highway.  At this point things seem to be so bad that controlling traffic flows should be turned over to the army for one year.  It is urgent to double the capacity of the highway.  There are simple things for the army to do.

(1) Reduce side friction by insuring that there is no use of the edges of the highway for parking, commercial activity, or allowing buses to discharge or take passengers except at authorized points. 

(2) Enforce the weight limits on trucks by having the army operate or at least guard the weight stations.  As there are claims and counterclaims about bad behavior, magistrates should be appointed and available to support the army in its improving operations of the highway.

(3) Speeding and reckless driving should be controlled by handing out hefty fines and requiring payment. 

(4) Trucks and buses using this critical highway should have to obtain special permission, say a special additional license plate valid for say three months, paying a special user fee.  A data base of these users would be maintained identifying vehicle owners and authorized drivers.  Bad behaviour would then be followed up, with fines enforced and permission to use the highway denied to those who repeatedly violate the rules.

(5) Three-wheelers, rickshaw vans or any type of manual or slow moving vehicles should not be allow to ply over this highway.

(6) The Department of Roads and Highways needs to ensure that construction of facilities associated with the Chittagong-Dhaka highway meets high quality standards e.g. repairing pot holes, exits and entrances to the highway etc.

Use of technology will enable greatly improved control of traffic flows and the capacity of the highway will improve.  Funds from fines and the 'special use' fee will finance much of the increased operations cost with the highway is operated properly.  All of these actions and many others can be implemented rapidly.  There has to be a will to move away from the corrupt mind set and try to solve the transportation problems.  Failure to do so will slow export growth and keep the economy from making greater progress.

Syed Ershad Ahmed is a logistics and transportation specialist; Dr Forrest Cookson is an economist.

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