The courier service sector in Bangladesh, valued at approximately 7,000 crore taka, has grown significantly over the last four decades, involving around two lakh people either directly or indirectly. However, despite this growth, the sector faces a range of challenges hindering its desired success. From the imposition of a 15% Value Added Tax (VAT) and compensation fees to infrastructural weaknesses, the sector is struggling to meet its full potential. Business leaders in the field have called for government intervention to address these obstacles.
A Brief History of the Courier Sector: The private courier service sector in Bangladesh started its journey in 1983, following the closure of Biman Bangladesh Airlines’ parcel service. On November 1 of that year, four courier companies-Sundarban Courier, Continental Courier, Dreamland Courier, and Dolphin Courier-began offering alternatives to the public. Sundarban Courier was the first to adopt the term ‘courier’ as part of its brand name. As the decades passed, the courier service industry rapidly expanded, with businesses operating under the Ministry of Commerce’s Trade Ordinance License.
Sector’s Current Landscape: Today, there are 223 courier service companies in Bangladesh. Of these, 104 provide domestic courier services, 89 offer international courier services, and 30 specialize in onboard courier services. Some of the prominent players in the sector include Sundarban Courier Service, Continental Courier Services, Karatoya Courier, Sadagar Express, and Dreamland Courier Services, along with many others. In addition to these, various onboard and international courier services contribute to the country’s logistics and delivery landscape. The sector also has potential for continued growth, with an expected 50,000 new jobs to be created in the coming years.
Complications Stalling Growth: Despite the sector’s positive trajectory, several issues are preventing it from realizing its full growth potential. The government’s 15% VAT on courier services, as well as the compensation fee required for each booking, have become significant hurdles. Courier companies are also burdened by weak infrastructure, including road networks and facilities for efficient parcel delivery, which often delay services and increase operational costs.
According to the Mailing Operators and Courier Services Licensing Authority (MOCSLA), businesses must pay a compensation fee for each transaction. This fee varies based on the type of service. For instance, it costs 20 paisa per document, 1 taka per parcel, and 3 taka per express service item. This fee structure can add up significantly, adding a financial strain to courier businesses, especially smaller ones.
Salah Uddin Mohammad Musa, Inspector of MOCSLA, explained that this compensation fee is paid to the government. Initially deposited under the postal department code, this has since been moved to a government-approved code by the Ministry of Finance, adding another layer of bureaucracy.
The Need for Government Support: Industry leaders are calling on the government to provide more support to the sector in light of the challenges it faces. The Courier Services Association of Bangladesh (CSAB) president, Hafizur Rahman Pulak, emphasized the need for government cooperation to help the sector overcome its current barriers and reach its full potential. As the sector grows, the demand for faster, more reliable services continues to rise, particularly in the context of expanding e-commerce and international trade. Addressing these issues could help the courier sector contribute even more significantly to the economy, creating jobs, improving logistics, and boosting trade and commerce in Bangladesh. The hope is that, with the right interventions, the courier sector can rise above these challenges and continue its journey toward even greater success.
Courier Service Owners Object to Compensation Fee and High VAT Amid Business Challenges: Owners of courier service companies in Bangladesh have raised strong objections against the imposition of the compensation fee and the recent hike in VAT, citing these factors as major obstacles to their operations. The sector, which has shown promising growth over the years, is now facing significant hurdles that are making it difficult for many businesses to thrive.
Concerns Over Compensation Fee and VAT Hike: SAM Shawkat Hossain, the proprietor of Express One Limited, voiced his frustration over the monthly penalty imposed by the government’s postal department. He questioned the fairness of the penalty, highlighting those private businesses, such as banks or airlines, are not penalized in the same way by the government. He said, “Why is this penalty imposed on us? It is unfair that we have to pay it every month. Otherwise, there will be problems with our license.” He also expressed his concerns over the VAT increase from 5% to 15%, explaining that maintaining the previous VAT rate would have been beneficial for their business. “We are willing to pay taxes, but the 15% VAT is too high and is affecting our profitability,” he added.
Md. Abdur Razzak Raju, the proprietor of Probati Transportation System, echoed similar sentiments. He noted that the increase in VAT from 5% to 15% has made it more difficult for businesses to balance their operations. “Earlier, we had a share in the market, but that’s now gone, and we have to operate with more challenges,” Raju remarked.
Traffic Congestion and Fuel Price Increases: Another major issue highlighted by business owners is the severe traffic congestion on the roads. According to Shawkat Hossain, the traffic jams are significantly slowing down deliveries. Goods that would normally reach inter-districts within 12 hours now take 15 hours or more. This delay impacts their ability to maintain timely services, especially for time-sensitive deliveries. “Our business depends on other businesses. If their business is affected, ours gets affected too,” said Shawkat Hossain. He also mentioned the financial strain of providing Eid bonuses to employees, noting that even though it’s difficult, they would still ensure employees receive their bonuses, even if it means taking loans to cover costs.
Moreover, the government’s planned fuel price hike could further worsen the situation. Shawkat Hossain pointed out that if fuel prices increase, courier services will struggle to raise delivery charges in response, thereby increasing operational costs without the ability to adjust pricing quickly.
Calls for Infrastructure Improvements: To address some of these issues, courier service providers are calling for improvements in infrastructure, particularly in road systems. Shawkat Hossain suggested that if there were separate lanes for trucks transporting goods, it would help alleviate traffic congestion, ensuring faster delivery times. He also proposed the allocation of land along major highways for courier hubs to reduce the need to bring all vehicles into Dhaka, thus easing congestion. “If the government gives us some land at the price of a mouza along different roads, we can hub at different places. This will allow us to provide faster services without overcrowding Dhaka,” he said.
Growth of the Courier Sector Amid Challenges: Despite these challenges, the courier service sector has seen notable growth, particularly due to the rise in demand for online shopping during the COVID-19 pandemic. Around 50 new courier service providers entered the market during this time, catering to the increasing e-commerce demand. Md. Abdur Razzak Raju, Vice President of the Courier Services Association of Bangladesh (CSAB), pointed out that while his company doesn’t participate in online delivery services, there are significant opportunities in the online space. “General product delivery increases during Eid, and people send various items to their loved ones. The courier business is doing well despite the challenges,” he said. Raju also noted that while the valuation of the courier sector differs from one company to another, the overall market size is estimated to be around Tk 7,000 crore, indicating substantial growth.
A History of Regulatory Challenges: The courier sector has also faced regulatory hurdles in the past. Around 2004-2005, there were allegations of illegal money transfers and transactions through courier services, which raised concerns about the sector’s involvement in money laundering. This led to scrutiny by the Money Laundering Department of the Central Bank. However, in 2013, the government introduced clear regulations that prohibited the use of courier services for money transfers, which has helped streamline operations.
The Need for Government Support: Courier service owners have called on the government to reduce the VAT rate, remove the penalties imposed by the postal department, and improve infrastructure to support the sector’s growth. With the potential to create 50,000 additional jobs and support the country’s growing demand for courier services, the sector could be a major contributor to the economy if the right support is provided. As the courier sector continues to face significant challenges, stakeholders are hopeful that with government intervention, they can overcome these obstacles and continue to thrive in an increasingly competitive market.
Courier Service Sector Seeks Opportunity to Send Money Amid Growing Challenges: The demand for a system to allow the sending of money through courier services has resurfaced as business owner’s express frustration over the current state of the sector. The Courier Services Association of Bangladesh (CSAB) and various stakeholders are urging the government to reintroduce the ability to transfer money through courier services, which was once a viable option before it was shut down. Industry leaders are in talks with Bangladesh Bank to explore the possibility of reactivating this system, which could address a significant need for many customers.
Call for Reopening Money Transfer Services: Abdur Razzak Raju, a prominent member of CSAB, stated, “We used to have a system for sending money through couriers, but it is now completely closed. We are in talks with Bangladesh Bank to see if it can be started again.” He emphasized the importance of offering this service, which could help millions of people in Bangladesh who rely on couriers for more than just parcel deliveries. Raju also acknowledged the challenges in ensuring the safety and security of packages. While improvements have been made in security systems, including the introduction of arch machines for better checks, he noted that unwanted incidents still occur. “We don’t have the opportunity to see what customers put in their packages, but now the security systems have improved. However, unwanted incidents still happen occasionally,” he explained.
Increased Accountability and Sector Growth: The courier sector has become more accountable in recent years, especially after the implementation of various rules, policies, and licensing systems. “Our sector is accountable. If we don’t deliver a product on time, we have to be accountable,” Raju affirmed. However, he also pointed out that while courier service rules were established in 2013, a formal law has yet to be enacted to strengthen the regulatory framework. This issue has been discussed multiple times with previous governments but remains unresolved.CSAB reports that there are approximately 500 courier service companies operating in Bangladesh, with 139 of them being members of the association. To legally operate, these companies must obtain licenses and register with the relevant licensing authority. However, many businesses have not yet secured the necessary licenses, further complicating the industry’s regulation.
Fragmentation of the Courier Service Sector: The courier service sector in Bangladesh is fragmented, with five separate associations representing different groups within the industry. These include CSAB, the International Air Express Association of Bangladesh (IAEB), the Onboard Courier Service Association, the Bangladesh Parcel Service Owners Association, and the Bangladesh Private Courier Owners Association. This fragmentation has created a lack of unified voice, making it difficult to address the sector’s challenges effectively.
Kabir Ahmed, president of IAEB and owner of Conveyor Uni Express, expressed deep concerns about the worsening situation in the courier service industry. He highlighted issues such as the non-cooperation of customs authorities and exorbitantly high rents for civil aviation warehouses, which are making business operations increasingly difficult. “Civil aviation should be a regulatory body, not a business entity. They are harassing us,” Ahmed stated.
He also criticized the customs licensing rules, explaining that the costs associated with customs in Bangladesh are 200-300% higher than those in other countries. “Our rates are like a gold shop. It’s unsustainable for businesses here,” he added. Due to these ongoing challenges, many business owners have resorted to unethical practices to recover losses.
Competition with International Courier Giants: The high costs and regulatory issues are making it difficult for Bangladeshi courier companies to compete with international giants like DHL and FedEx. While there are currently 52 licensed international courier companies operating in the country, seven companies are still waiting for their licenses, further hindering competition and growth. Kabir Ahmed emphasized that to compete on an international level, local courier services need to build their capacity and overcome the obstacles they face. “We cannot compete with big international companies unless we first address these challenges,” Ahmed stated. “We need to eliminate these barriers and gain the necessary capacity to compete globally.”
The Path Forward: The courier sector in Bangladesh has significant potential, but its growth is being stunted by high operating costs, regulatory inefficiencies, and a lack of a cohesive strategy for overcoming these obstacles. The demand for a money transfer service through couriers, if reinstated, could open up new avenues for businesses and address an unmet need in the market. Industry leaders are hopeful that with the government’s intervention, especially in terms of regulatory reform, licensing processes, and addressing infrastructure issues, the courier sector will be able to thrive. However, until these challenges are addressed, many companies will continue to struggle to stay competitive in the face of overwhelming odds.
