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19 February, 2020 10:36:43 AM

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The way Covid-19 is affecting Bangladesh economy

Bangladesh is heavily dependent on the Chinese market for raw material, capital goods imports and substantial exports
Prof. Sarwar Md. Saifullah Khaled
The way Covid-19 is affecting Bangladesh economy

Traders in Bangladesh are already feeling the pinch as longer than expected shutdowns of Chinese factories because of the coronavirus (covid-19) outbreak are having a big impact on the world’s second largest economy and the global supply chain. Forcing the closure of many factories in China, Bangladesh businesspeople begin to count the cost following a largely endemic viral disease in Wuhan city of China's Hubei Province that casts its virtually pandemic shadows over the country’s industrial sector.

While a few hundred China returnees have been quarantined in a huge camp or hospitals and over a hundred stranded in Wuhan confines, to date, official virologists have declared the country free from covid-19 infection. A first Bangladeshi was reported infected not at home or in China, but in a third country, Singapore. But an account of lost business as is learnt from businesspeople the fallouts from the viral eruption began weighing and may weigh further down economic and development activities in Bangladesh.

Bangladesh is heavily dependent on the Chinese market for raw material, capital goods imports and substantial exports. Reports have it that Khulna trader’s count loss of crab and eel export to the locked-down China. Entrepreneurs, especially in the apparel sector, in Dhaka fear raw-material supply-line cut and export disruptions also. The fruits market has also been affected. A ban on crab exports to China amid the covid-19 has left farmers reeling in Bagerhat. The suspension came into effect on January 23, 2020, the peak season for crab sales abroad. According to some farmers, if it continued for even a few more days, it is set to take a heavy toll on the industry. In the three months from December to February, China observed several festivals including the Lunar New Year. During this period Bangladesh provided a huge amount of crabs to China. Bangladesh’s exports make up more than 70 per cent of the crabs in the Chinese market. China stopped importing crabs this year in a bid to stem the outbreak of a new covid-19. But if the ban is not revoked, farmers here will incur heavy financial losses. More than 30 percent of the total crab exports are cultivated in Bagerhat. Full-grown crabs are difficult to preserve in farms for a long period.

Analysts say that the supply chain of raw material for the export-centric industries already snapped by the fatal covid-19 epidemic has started hitting Bangladesh's economy. In addition to a disruption to the global supply chain, many other sectors, like computers and electronics, textiles, heavy machinery, shipping, transport, tourism and development project funding, may bear some cascading effects.

As the markets are witnessing a substantial rise in prices of goods imported from China, including edible items, traders and consumers in Bangladesh are already feeling the pinch. Moreover, Bangladesh's apparel sector, the US $34 billion industry and the lifeline of the economy, may suffer badly for the outbreak of the virus. The supply chain of raw materials for the sector might be disrupted if it prolonged and spread further. China is the number one trade partner of Bangladesh. China-Bangladesh bilateral trade, as of fiscal year 2018-2019, stood at US $14.48 billion. China-Bangladesh bilateral trade is in favour of China as it has the largest share among the trade between the two countries.     

As per the Bangladesh Bank data in the fiscal year 2018-2019, Bangladesh imported goods worth US $13.65 billion, while the country exported products of US $831.2 million in the same period. On top of that, over 50 percent of Bangladesh's textile and textile-related goods, including garment accessories, are imported from China. Some economists look for a reverse-side business fortune. In what seen as a blessing in disguise they see a silver lining in the shadows. That is, Ready Made Garment (RMG) order shifts from China to other apparel exporters like Bangladesh which is second only to the economic superpower China in terms of global clothing business. But development project funding and works in mega infrastructure projects where many Chinese workmen work risk a slowdown.

In addition, about 40 percent of capital machinery and spare parts for the textile and garment industry come from China. In the bilateral trade, there is already a temporary impact as the communication between the two countries is reduced, so the movement of goods also. Moreover, as there are closures in stores and factories over the fear of virus spread, the supply chain of industrial materials, especially apparel, leather and other manufacturing sectors, will see the gap. Bangladesh’s textile and apparel sector is highly dependent on China. If the supply chain does not work properly it can be a disaster with a delay in shipment. Some factories are already struggling to run properly. As the supply of goods may fall due to disruption in the supply chain, the business of every need will likely to hit.

Moreover, the government of Bangladesh is implementing 10 fast-track projects, half of those being progressed by the Chinese funds and technical assistance. Including the much-hyped Padma Bridge, over 13,000 Chinese citizens like engineers, geologists, and technical officials are involved with these projects. If the covid-19 outbreak remained uncontrolled, it is feared that implementation of the projects might get slowed down thus pushing up the project costs. Road Transport and Bridges Ministry told recently that the construction of Padma Bridge work could be delayed if the covid-19 situation does not improve in two months.

They are also tasked, other than the fast-track projects, with some other development projects including the four-lane expressway of Dhaka Bypass Road. Half of the Chinese people, most importantly, are engaged in the major development projects like the Padma Bridge, Padma Rail Link, Payra Thermal Power Plant, Chittagong-Cox's Bazar Rail Line, Karnaphuli Tunnel and Dhaka Bypass Expressway. The rest are mainly employed in the apparel sector, local government and urban development programmes. As a number of workers are stuck in China, the outbreak will take a heavy toll on

the implementation of mega-projects.

On the other side, the local traders of daily necessities are also feeling the pinch of covid-19 outbreak. The fruits market in Bangladesh has already been affected. It is apprehended that there is a risk of the local market being badly affected if the covid-19 problem in China persists for long. However, government sources said that it is too early to say anything in this regard.

There will be no problem if the import of onion is halted from China given the amount of onion being imported at present. Onion is being imported from Myanmar, Turkey, Egypt and Pakistan. However, the government is keeping an eye on alternative markets to China to keep the price of ginger, garlic and other products under control. Nevertheless, the overall Bangladesh economy that relies heavily on China for import-exports trade of diverse types of commodities and development expertise is going to be hard hit if the calamity that engulfed China is going to last long.

The writer is a retired Professor of Economics and Vice Principal at Cumilla Women’s Government College, Cumilla.

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Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
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Editor : M. Shamsur Rahman
Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

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