A weak regulatory framework and poor corruption prevention measures are undermining Bangladesh's potential as a big logistics market, says a new global report.
At the same time, factors such as political uncertainty, long-standing risks of natural disasters and a struggling domestic banking system are casting a shadow over the long-term growth prospects of the country.
Such cautionary observations have been made in the latest round of 'Agility Emerging Markets Logistics Index' that got out last week.
Leading global logistics giant Agility has been conducting this survey since 2009.
Bangladesh has been ranked the 39th among 50 emerging economies (EMs), which were part of this logistics index this year.
Only two other Asian nations including Cambodia and Myanmar have been placed behind Bangladesh in the ranking topped by India and China.
A deeper look at the index, however, revealed Bangladesh has been undone mostly by 'Business Fundamentals' sub-index which deals with issues like regulatory environment, credit and debt dynamics as well as domestic stability and market accessibility.
Focusing on this -- the Agility report blamed the "weak frameworks covering finance, property rights and contract enforcement" as well as feeble corruption protections for Bangladesh's poor score in the 'Business Fundamentals' sub-index.
When contacted, industry insiders said a robust infrastructure is essential for enhancing the country's logistics framework.
"Deficiency in infrastructure ultimately increases the cost of doing business, which badly impacts exports," said Mahbubul Anam, president of the Bangladesh Freight Forwarders Association (BAFFA).
Noting the lack of capacity and facilities in the country's sea ports and airports, he called increased privatisation of these facilities.
"India, for example, has already gone for the privatisation of most of its major airports and seaports," Mr Anam said.
Meanwhile, the Agility report found that despite the country's weak regulatory framework, relevant professionals around the world are becoming increasingly optimistic about Bangladesh's future potentials as a logistics market.
In a survey of 507 logistics professionals about which country has the most potential to grow as a logistics market in next five years, Bangladesh was ranked the 15th -- up from the 20th place the country attained last year.
Bangladesh is the biggest winner in the ranking, jumping five places to claim the 15th position, the report said.
"Bangladesh's gain is likely related to robust economic growth driven by strong private consumption and investment," it noted.
"The economy of Bangladesh has been one of the top performers in Asia over the past decade, averaging 6.3 per cent growth annually and earning it the title the 'new Asian Tiger,'" the report noted.
"However, political uncertainty, long-standing risks of natural disasters as well as a struggling domestic banking system cloud growth prospects," it cautioned.
The global report noted that labour costs, which have played a key role in attracting foreign investments in Bangladesh over the years, have also been climbing.
In December 2018, the minimum wage for garment workers increased by 51 per cent, though this was followed by protests from garment worker unions, which are pushing for a threefold increase, the report said.
"The country's approach to the issue will be a balancing act of offering competitive wages to maintain its role as a low cost manufacturing location, whilst carefully managing labour disputes," it said.
Meanwhile, from a global perspective, the Agility report said Brexit could benefit emerging markets as 59 per cent of executives surveyed as part of the report expected emerging markets to seek trade concessions and new deals from the UK in the aftermath of Britain's departure from the EU.
Some 56 per cent of those surveyed say a prolonged trade standoff between the U.S. and China could benefit Southeast Asian countries, which offer manufacturing and sourcing alternatives to China.
The report also observed that China's US$4-US$8 trillion Belt & Road Initiative (BRI) infrastructure drive is a bigger plus for China than for the countries in Asia, the Middle East, Africa and Europe where it is investing.
Sixty-four per cent of executives surveyed see the BRI boosting growth and trade for China while only 41.4 per cent believe it will help other emerging markets.
© 2017 - All Rights with The Financial Express