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Freight forwarding business booming in Bangladesh
Publication Date : 04-05-2012
Freight forwarding business is booming in Bangladesh, riding on a significant increase in international trade.
Nearly 1,500 freight forwarding companies, including foreign and joint ventures, are operating in the market that has been growing steadily for the past one decade.
"The sector began flourishing in 2000. Now, around 50 new companies enter the sector every year," said AMZ Karim, in-charge of Cross Freight Lines.
Recession hit the sector in fiscal 2008-09, but now it has bounced back and going strong, according to Karim, who had worked for Maersk Line, a shipping company and ExpoLanka, a leading freight forwarder.
To start as a freight forwarder, he said a person needs a government licence issued by the Customs Department of National Board of Revenue (NBR). Obtaining a licence costs Taka 200,000-300,000 (US$2,438-3,658), he added.
A freight forwarder is a 'travel agent' for the cargo industry, or a third-party logistics provider through different types of carriers, including ships, airplanes, trucks, and railroads.
In line with the pace of international trade, demand for logistics services, including freight forwarding services, has increased simultaneously. To cash in on the market, foreign companies are also coming into Bangladesh to make money easily.
Bangladesh's imports and exports have been growing significantly for the past decade. Imports grew nearly 42 per cent to $33.66 billion in 2010-11 from $23.79 billion in 2009-10. Imports stood at $22 billion in 2008-09.
The country exported goods and services worth nearly $23 billion in 2010-11 and $18 billion in 2009-10. In 2008-09, Bangladesh's exports were $15.56 billion.
Businesses spend a large chunk of money on transporting the export and import goods, either by road, air, rail or waterways, or on storing the goods in warehouses.
Threats also exist for domestic freight forwarders, according to industry insiders.
"The sector has been growing rapidly with the pace of international trade and local entrepreneurs have been developed to provide logistics services," said Belal E Baki, managing director of Solidan Marine.
But foreigners are doing the business here so easily that many of them cannot do it in their own countries.
"Many of them (foreigners) work in this sector without proper permits," he said.
Abdur Rahim, director of Transmarine Logistics, said the guideline for Shipping Agent Licence 2009 said shipping agent licences are not allowed for 100 per cent foreign owned companies.
However, a licence may be issued to a joint venture company where foreign shareholders do not own more than a 49 per cent stake.
"We want the above condition to be implemented for the freight forwarding licence," said Rahim.
The present guideline for freight forwarders allows a foreigner to set up a company here with at least Taka 10 million ($121,936) in paid up capital and $500,000 in security deposits.
Rahim alleged that a section of freight forwarders has been trying to relax the conditions for paid up capital and security deposits for the foreigners. He said they have submitted a proposal in this regard to NBR, the licensing authority.
Captain Saifur Rahman, managing director of EBD Ltd, said the government should protect its own people first, before allowing foreigners into the industry.
Rahman also suggested that the amount of paid up capital be increased from Taka 10 million ($121,936), but there should not be any security money.