Dependence on a single country for sourcing goods is risky

The ongoing Covid-19 pandemic and the trade war between China and the US have brought to the fore an important issue, that dependence on a single country for sourcing goods is risky.

A smooth supply chain is essential for ensuring a seamless flow in the production process, which in turn helps businesses continue their operations without interruption.

However, the coronavirus outbreak that began in China's Wuhan province in December last year and subsequent nationwide lockdown aimed at preventing its spread massively disrupted the supply of various raw materials, intermediate goods and finished products early this year.

As a result, from western buyers to manufacturers in Bangladesh, everyone had to consider alternative sources for their goods.

And so, the old proverb -- Don't put all your eggs in one basket -- has once again shown its relevance.

"The whole world is talking about cutting single country dependency and here lies an opportunity for Bangladesh," said Md Saiful Islam, president of the Leathergoods and Footwear Manufacturers and Exporters Association of Bangladesh (LFMEAB), which represents one of the biggest export earning sectors of the country.

As Bangladesh makes basic products, it is likely to attract buyers moving away from China in the short-run.

However, buyers will not be able overnight to cut their dependence on China, dubbed as the factory of the world. Besides, it will take even longer in case of hi-tech products.

For basic products though, order shifting is not difficult, Islam said in an interview recently.

"So, we see that western buyers want to reduce single country dependence for their own interests," he added.

By the end of 2021, a good amount of export orders moving away from China will come to us," said Islam, also the managing director of Picard Bangladesh, a leading leather goods exporter.

His belief lies in the fact that Bangladesh is a major producer of basic products in Asia and is well-positioned compared to Pakistan, India, Myanmar, Cambodia and Vietnam.

For buyers, Pakistan is not a workable state from the security perspective and availability of adequate financial infrastructure, he said.

Confidence towards India, where buyers are moving to, has eroded because of recent geopolitical developments, particularly India's standoff with China.

Vietnam and Cambodia are also running on overcapacity while the neighbouring Myanmar lacks work culture and financial infrastructure to attract buyers, he said.

"A work culture has grown in Bangladesh and people here work for 10 hours, six days a week from 8am to 6pm as guided by the ILO and local labour law," Islam said, adding that financial Institutes in Bangladesh are not below the world standards.

Besides, physical infrastructure is being developed here, he said, citing the construction of a deep-sea port and Padma bridge to connect to the south and southwest seaport Mongla and the completion of four-lane Dhaka-Chattogram highway.

Moreover, resilience in the manufacturing sector, particularly exports, has worked as a catalyst for customers as well as new buyers.

So, in the long run, the country is likely to attract more investments, according to Islam.

Opportunities for Bangladeshi entrepreneurs and suppliers are also going to increase as many suppliers in other countries are going to die out after failing to sustain their businesses amid the devastating effects of the Covid-19 pandemic.

"Many of our competitors in other countries are dying. In the long term, when the situation will improve, orders will come to us," he said. "So, we must retain our skilled and semi-skilled workforce at any cost. It is our real strength.

"We have not seen any social or workers' unrest when the country was shut down to tackle the coronavirus. If we can withstand this crisis, there is a silver lining for Bangladesh."

However, there is no simple trade-off between health and economy, he added.

All LFMEAB member companies, including Picard Bangladesh, have changed their factory layouts as per World Health Organization guidelines.

The pandemic has enabled factories to be compliant to ensure occupational, health and hygiene safety and this will pay off, Islam said.

Leather goods and footwear lost its second position in exports last fiscal year as the global coronavirus outbreak brought almost all economies to their knees.

Overall export earnings from the leather industry declined 22 per cent year-on-year to $800 million in fiscal 2019-20 from $1.02 billion a year ago.

The downturn continued in the July-September period of fiscal 2020-21, data from the Export Promotion Bureau shows.

"But the good thing is that we see increasing inquiries," Islam said.

"Every black cloud has a silver lining. The world will not be the same forever. We expect that things will begin to become normal by the first quarter of next year if the third wave of infection does not come," he added.