Trade cost as a share of trade revenue in Bangladesh remained highest in South Asia on the back of higher total transport expenses, according to a research focused on shift to paperless trading.
The study, styled Quantitative Analysis of the Move to Paperless Trade, conducted by the Commonwealth Secretariat, shows that the trade cost in the country was over 80 per cent of trade revenues in the year 2020.
This is just 80 per cent in Pakistan and more than 60 per cent in India and Sri Lanka. This is less than 20 per cent in the UK and over 20 per cent in Singapore, Canada and New Zealand.
The survey was conducted on the 54 Commonwealth economies having more than $5.0-trillion trade (imports and exports).
This exorbitant cost may be reduced to less than 20 per cent once the overall digitization is adopted by 2026, its report says.
But, the report notes, “public sentiment across emerging Asia, particularly Bangladesh and Malaysia, was seen as a potential obstacle to rapid adoption or reforms in reducing the trade costs”.
The Commonwealth secretariat shared with the FE the main objective of the report, that is, to undertake a quantitative analysis of adopting paperless trade documentation to national and regional economies across the Commonwealth, focusing on Less Developed Countries (LDCs) and Small Island Developing States (SIDS) in Africa, Asia, the Caribbean and the Pacific Islands.
The report also seeks solution to the current challenges facing Commonwealth nations in implementing paperless trade by means of qualitative desk research, discourse analysis and semi-structured in-depth interviews.
For total transport cost for US$25000 worth of shipments, Bangladesh required in 2020 less than $20,000. This is the same for Pakistan. But in India transport cost is less than $15000 for $25000 shipment. However, the average total transport cost in 54 Commonwealth economies is over 16000.
“The cost will come down below $5000 after overall automation for Bangladesh,” the report mentions.
The documentary-compliance cost in Bangladesh also remained over $200 for $25000 shipment. It may be reduced to less $100 for $25000 export.
The report, however, says the transport costs were higher as the covid-19 had created supply disruptions, pushing up import and transportation costs.
It also mentions that costs are made “worse by the potential for border fraud and corruption, making the costs of transporting goods between countries extremely high”.
However, there are some Commonwealth economies like Tonga and Gambia counting more than 100- percent trade cost as a share of trade revenues.
