Chittagong Port pay-order crisis stalls import-export operations

Following the fall of the Sheikh Hasina government, major shipping agents at Chittagong Port have stopped accepting payment orders from nine banks, causing delays in the release of import goods and complications in shipping export goods. 

Exporters are fearing this disruption may lead to missed lead times, potentially harming the country’s economy.

The situation arose after the Hasina government fell on August 5, with an interim government led by Dr. Muhammad Yunus taking over on August 8. Subsequently, the top positions at Bangladesh Bank began changing, uncovering long-standing irregularities. As a result, Bangladesh Bank ceased providing cash assistance to banks embroiled in loan corruption, further exacerbating the situation.

Nine banks in trouble

Six banks under the control of S Alam Group, including Islami Bank, are particularly affected. These banks are Islami Bank, First Security Islami Bank, Social Islami Bank, Union Bank, Global Islami Bank, and Bangladesh Commerce Bank. Additionally, National Bank, Padma Bank, and ICB Islami Bank, though not controlled by S Alam Group, are also facing difficulties. However, Al-Arafah Islami Bank, also linked to S Alam Group, remains unaffected due to the involvement of several other business groups.

Current state of container congestion

Port officials report that the anti-discrimination student movement, which began in mid-July, disrupted Chittagong Port's operations due to curfews and government holidays. The situation worsened until the government's fall on August 5, leading to a significant container backlog at the port. Although the situation began to normalize, with container congestion gradually decreasing, the port still holds 36,598 TEUs as of Saturday, August 24—about 6,000 TEUs more than usual.

Amidst efforts to decongest the port, shipping agents have stopped accepting pay orders from the nine banks in question. This has led to delays in clearing goods, as importers and exporters typically use pay orders to cover various fees and charges, including container rent and shipping agent fees.

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Hyundai Merchant Marine Company Limited, a key player in Bangladesh's shipping operations, has instructed its Bangladeshi agent, Ocean International Ltd, not to accept pay orders from nine specific banks. 

Golam Mostafa, an executive at Ocean International in Chittagong, explained to Jago News, "We have been told not to accept pay orders from these banks due to recent banking risks, particularly related to pay order monetisation. To mitigate these risks, we are temporarily not accepting pay orders from these banks."

Kazi Mahmud Imam Bilu, General Secretary of the Chittagong C&F Agent Association, criticiaed the decision, stating, "Shipping agents operating in Bangladesh should not take such unilateral actions. The banks in question have not been shut down by either the government or Bangladesh Bank, and as such, Bangladesh Bank is responsible for ensuring the encashment of traders' pay orders and checks."

The issue is not isolated to Ocean International; major shipping operators like Maersk Line and Famfa Solutions have also stopped accepting pay orders from these nine banks, including six controlled by S Alam Group. Some companies have even displayed lists of these banks outside their offices.

Syed Iqbal Ali Shimul, CEO of MGH Logistics, highlighted the financial risks faced by smaller shipping and freight forwarder agents. "Many agents operate on slim margins, earning just $20-$50 commission per consignment. If a pay order worth hundreds or thousands of dollars fails to be cashed, the agent bears the loss. To avoid this financial risk, agents are not accepting pay orders from certain banks under the current circumstances."

Shimul also suggested a workaround, stating, "C&F agents or importers can break the pay orders from these banks and issue new ones from other banks. Now that the issue is public, there should be no problem if shipping charges are paid with pay orders from other banks."

However, the refusal to accept pay orders has caused delays in the release of imported goods. Bilu noted, "Representatives of C&F agents are being turned away when they present pay orders for the redemption of imported goods. This is causing delays in releasing goods, leading to missed lead times for garment exporters and demurrage charges for importers. This could negatively impact the country's economy, including the export sector."

Bangladesh Shipping Agent Association Chairman Syed Md Arif acknowledged the challenges, stating, "Recently, checks and pay orders from some banks have not been cashed, which poses a risk for agents. We will gradually overcome these problems, but I urge all stakeholders to collaborate to avoid any temporary disruption in the import-export process."

Efforts to reach senior officials from the affected banks for comment were unsuccessful. However, two officials, speaking on condition of anonymity, confirmed that the banks are experiencing a liquidity crisis and are following directives from higher management.

MDIH/NMA