Businesses fear further losses as second wave looms large | The Daily Star
12:00 AM, November 11, 2020 / LAST MODIFIED: 09:40 PM, November 11, 2020

Businesses fear further losses as second wave looms large

They call for mandatory use of masks, following health protocols

Exporters and local businesses have received a shot in the arm since June on the back of improved economic activity but the fragile recovery could evaporate before taking root if the country is hit with a second wave of the Covid-19. 

Bangladeshis doing business internationally had witnessed their worst crisis in recent memory as orders collapsed after developed economies put in place lockdowns to tame the raging virus. Likewise, domestic firms missed almost all major spending seasons because of depressed demand and income losses.

As the cases of infections and deaths from the rogue virus reached a plateau and even started to decline at home and abroad in recent months and economies around the world reopened, buyers began putting in orders, giving exporters a much-needed lifeline. 

The businesses focused on the local markets also made a turnaround.

Confidence among the country's manufacturing and service sectors grew in October thanks to the ongoing economic recovery, according to a new survey.

The Business Confidence Index prepared by the South Asian Network on Economic Modeling (SANEM) rose to 55.24 for the October-December period compared to 51.06 between July and September, on a scale of 0 to 100, with 100 depicting the highest level of confidence.

The improvement is evident in all major sectors: readymade garments, textile, leather and leather engineering, pharmaceuticals, wholesale, retail, transport, information and communication technology and finance.  

Production in keyindustries such as jute, textile, yarn, cloth, garments, knitwear, paper, mild-steel and petroleum products, cement, pharmaceuticals, tea and salt all rose in June compared to May, the latest data from the Bangladesh Bureau of Statistics showed.

But if there are new waves of infections as already seen in some export destinations, the recovery for the exporters would be short-lived. In the same vein, a second wave in Bangladesh could mean a return of containment measures and this may drag down economic activity for a second time in less than eight months.

"For Bangladesh, a second wave, if that happens, will be disastrous," said Shams Mahmud, president of the Dhaka Chamber of Commerce and Industry (DCCI).

Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association, said, "Of course, we are worried. We have to observe the situation with caution."

The garments sector, which accounts for more than 80 per cent of export earnings, has been on a recovery track volume-wise in the last two or three months albeit at a compromised price level. This is leaving the suppliers extremely vulnerable.

"With the second wave in western countries, the volume might drop as well, buyers might hold back placing new orders," Huq said.

"This means factories, whichare already in a weak financial position due to the price hits, might end up with idle capacity. This might provide extremely difficult for the industry to cope with."

Bangladesh's merchandise exports declined 4.08 per cent year-on-year to $2.94 billion in October because of the faltering recovery of garment shipments from the coronavirus pandemic, official data showed.

Md Saiful Islam, president of the Leathergoods and Footwear Manufacturers & Exporters Association of Bangladesh, said some countries in the European Union, the largest export destination for Bangladesh's leather products and footwear, have already witnessed a second wave. 

"This being the case, with varying extents, our sector is going to face the heat of the second wave, whether there is any second wave in Bangladesh or not."

The entrepreneur said the period from November to December was supposed to be a sales season in most of Bangladesh's export markets. "If the second wave hits hard the countries, stocks in the markets will pile up."

This will result in the slowing down, postponement or even cancellation of export orders by foreign brands and buyers as seen at the height of the first wave.

Islam lamented that just as the industry had started to recover, the second wave has started knocking at the door of Bangladesh.

"The second wave could further delay the recovery and will put some factories, particularly small and medium firms, in a struggle for survival."

If countries such as China face any second wave, the supply chain and imports will face serious disruptions, especially for the export sector, said Islam.

Abdul Muktadir, chairman and managing director of Incepta Pharmaceuticals, said the most severe form of the pandemic faced by the country still seems milder compared to that undergone by other countries.

"But if lockdowns are introduced because of the second wave, businesses would suffer. So, we should try to manage the situation without enforcing lockdowns. If we can do that, the status quo will be maintained."

He said if the government could ensure that every person wears a mask, then there would be no second wave in Bangladesh.

"Wearing masks and following health protocols to avoid the second wave would be extremely beneficial for the economy and the livelihoods."

He called on the government to enforce its initiative to ensure mandatory use of masks and maintaining of health protocols.

"The second wave may inflict more losses to the businesses than the first one," said Tapan Sengupta, deputy managing director of Bangladesh Steel Re-Rolling Mills (BSRM), the country's top steel maker.

Asif Ibrahim, vice-chairman of the Newage Group of Industries, said the second wave leading to shutdowns in Europe has initiated cancellations of export orders since the beginning of November. This may impact export earnings.

He said Bangladesh has shown resiliency during the first wave. "Hopefully, we can take lessons from it and minimise the impacts through proper planning and government stimulus packages."

Like other sectors, the real estate sector also faced a major impact, said Tanvir Ahmed, managing director of Sheltech, one of the top realtors in Bangladesh.

According to the Real Estate and Housing Association of Bangladesh, progress in about 6,000 real estate projects has slowed down as construction work was halted for about three months because of the pandemic.

At the beginning of 2020, the realtors were expecting growth on the back of a lower interest rate, a rise in the ceiling of loans and reduction of property transfer fees, Ahmed said.

"However, due to the Covid-19, the industry is still suffering and it will be very hard to recover."

Ahmed said Bangladesh has to prepare to limit the spread of the virus to ensure economic stability.

"So, the occupational health and safety should be given special priority," Ahmed said. 

Shams Mahmud of the DCCI said the micro, small and medium enterprises have not received the support they required and were finding it difficult to stay afloat.

"We are seeing the second wave hitting Western countries. Export markets may suffer because of that. The positive news is online sales are up. So, even if we see a decline in stores, the orders may not come to a standstill for Bangladeshi exporters."

The small-scale enterprises missed out on business during Pahela Baishakh and Eid-ul-Fitr and witnessed subdued sales during Eid-ul-Azha. Many failed to secure loans from banks and have had to borrow from loan sharks at higher interest rates.

"The second wave will deal a severe blow to them," he said.

The small-scale enterprises need immediate support. Otherwise, new employment generation, ensuring financial security for informal sector people and women empowerment will all face a setback, the DCCI chief said.

The government should engage the media to raise awareness at this point, Mahmud said. 

"We have come a long way since the outbreak of the Covid-19 in Bangladesh. So, we now have an idea where we have fallen short."

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