The economy of Bangladesh is likely to experience a shock in the coming days as its biggest trading partner China suffers from a deadly coronavirus outbreak. The disease, which has spread to 27 countries, has killed more than 300 people so far.
Experts said if the situation lingers any longer, it might affect the country’s industrial supply chain which relies heavily on Chinese import.
The central bank data said, Bangladesh’s total merchandise import payments were $56 billion in 2018-19, of which more 28 percent was from China. Nearly 70 percent of the imports from China were textile raw materials, machinery, boilers and electrical and mechanical appliances.
At present, China is observing New Year, the country’s biggest festival, and almost all its factories are closed. So, the actual impact of Coronavirus outbreak that began in Wuhan last month will be felt after the end of New Year vacation.
Many of the Bangladeshi importers said the Chinese holiday would end early February and if the coronavirus outbreak was not controlled by then, they would find it difficult to travel to China and their business might be hampered.
Disruption in supply chain
Bangladesh Mobile Phone Importers Association director Rezwanul Hoque told Fintech that the total mobile phone import supply chain might face disruption due to the coronavirus epidemic as the mobile phone importers were solely dependent on China for the products.
Besides, a Chinese team was scheduled to come to Bangladesh this week for business purposes but the tour has been cancelled due to the coronavirus outbreak, Rezwanul said. At the same time, Bangladeshi businesses have cancelled their scheduled trip to China, he added.
Jakaria Shahid, managing director of Symphony said that the impact of the coronavirus would be huge on the country’s mobile phone importers or on the entities which depended largely on China for sourcing production inputs.
“If the Chinese workers delay returning to work, Bangladeshi entities would fail to continue production as their production inputs would exhaust soon,” he said.
“China is the largest trading partner of Bangladesh. Coronavirus outbreak might be a blow to the business of Bangladesh as many of our traders frequently visit China for importing raw materials and finished goods and many Chinese people also work in the manufacturing sector in our country,” Bangladesh Cosmetics and Toiletries Importers Association vice-president Md Zahirul Haque Bhuiyan told Fintech.
He said that business of many sectors in Bangladesh would be in danger if the coronavirus was not controlled immediately.
Mofazzal Hossain, Manager (sales and marketing) of TK Group told Fintech the coronavirus outbreak in China has put a number of their project works in limbo. “We import almost all of our machineries from China and we need the assistance of the Chinese nationals to install and run those machineries.”
“Since the outbreak, those Chinese experts cannot get out of their country and because of that, works in a good number of projects are halted here,” he said.
Mofazzal however said the impact on import of raw materials is yet to be felt as because many of the Bangladeshi importers have pre-ordered the raw materials before the outbreak, envisaging the closure of Chinese factories during Chinese New Year holidays.
The impact will be understood after the holidays
Anwar ul Islam Chowdhury Parvez, president of the Bangladesh Chamber of Industries (BCI), a trade-body having over 1,000 members also said the impact of coronavirus is yet to be understood because of the outbreak coincides with the holidays of the Chinese new year.
“The holiday will end on February 10, we will understand the impact then. I am hopeful because most of the import of our group is from regions other than Wuhun, so , I believe, once the factory opens in China, we will be able to resume our import for textile goods,” said Parvez, who is also the chairman of Evince Group – a leading clothing manufacturer.
Parvez said that he heard some of the Chinese IT companies have already opened their businesses in distant provinces. “China is a large country. I am hopeful that the supply line from that country will remain open,” he told Fintech.
Abul Kasem Khan, a former president of the Dhaka Chamber of Commerce and Industry (DCCI), said, the economic impact due to coronavirus in China is negligible as of now. “However there is an uncertainty in near future and Bangladesh is not immune to that,” he said.
He said Bangladesh, in case of import of many materials especially the raw materials for the textile and clothing industry, has no alternative to China. “Clothing factories normally have very small inventories. If the outbreak continues for a month or so, it might impact the country’s trade and economy in a negative way,” he said.
The former DCCI president also said if the epidemic lasts longer and spreads to other nations, it could send the whole global market into a wealth-destroying tailspin.
According to a Bloomberg report, due to a Chinese government-mandated extension of the Lunar New Year holiday, provinces generating at least two-thirds of economic output will be shuttered through next week, including Shanghai and key eastern manufacturing hubs.
What the experts said?
Khondoker Golam Moazzem, research director of Centre for Policy Dialogue (CPD) said. “Trading between China and Bangladesh are largely in favour of China and a large portion of our imported goods from the country is raw materials. Our business would depend on how quickly China would be able to control the outbreak.”
If the global buyers impose any restriction on China raw materials considering the public health, Bangladesh would have to go for alternative sourcing destination and it might increase the cost of products, he said.
Moazzem also said that the coronavirus outbreak might affect business in Bangladesh temporarily but it would not pose any impact on investment as the Chinese government was trying to control the situation quickly.
Dr Ahsan H Mansur, executive director of the Policy Research Institute (PRI) of Bangladesh told Fintech the impact of coronavirus on Bangladesh’s economy will come from different fronts.
“There are lots of Chinese experts and engineers working in different mega projects in Bangladesh. Because of the virus outbreak, these traveling of these people are put under restriction. It will put impact on the project implementation rate in Bangladesh,” he said.
Another impact will be in the supply chain of the readymade garments industry, he said. “Most of the raw materials of our woven industry come from China. If the supply-chain gets disrupted, then it will put an effect on the country’s export,” he said
He also said that the small investors, who frequently visit China for visiting factories and exploring business, will be impacted much.
Dr Mansur, however, said now there is an opportunity for Bangladesh to grab a share of Chinese clothing market, as many foreign buyers will search for alternative sourcing of their products.
“No country will buy goods from China for many more days in this situation. The orders destined for China may come to Bangladesh in that case. It may cast off the shadow from our export earnings,” he said.