Bangladesh’s economy is likely to experience a shock in the coming days as its biggest trading partner, China, reels under a deadly coronavirus outbreak. The disease, which has already spread to 27 countries, has killed more than 300 people so far.
Experts said if the situation lingers any further, it might affect the country’s industrial supply chain, which relies heavily on Chinese imports.
According to central bank data, Bangladesh's total merchandise import payments were USD 56 billion in 2018–19, of which more than 28 per cent were from China. Nearly 70 per cent of the imports from China comprised 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. Hence, the actual impact of the coronavirus outbreak that began in Wuhan last month will be felt after the end of the New Year vacation.
Many Bangladeshi importers said the Chinese holiday would end in early February and if the coronavirus outbreak is not controlled by then, they would find it difficult to travel to China and their business might be affected.
The director of the Bangladesh Mobile Phone Importers Association, Rezwanul Hoque, said the total mobile phone import supply chain might face disruptions on account of the coronavirus epidemic as the mobile phone importers were dependent solely on China for their products. Besides, a Chinese team was scheduled to come to Bangladesh this week for business purposes but the tour has been cancelled following the coronavirus outbreak, Hoque said. At the same time, Bangladeshi businesses have cancelled the scheduled trips of their representatives to China, he added.
Mofazzal Hossain, manager (sales and marketing) of TK Group, told The Independent that the coronavirus outbreak in China has put a number of their project works in limbo.
“We import almost all our machinery from China and we need the assistance of the Chinese nationals to install and run these. Since the outbreak, the Chinese experts cannot get out of their country. Because of that, work on a good number of projects has been halted here,” he said.
Hossain, however, said the impact on the imports of raw materials is yet to be felt because many of the Bangladeshi importers have pre-ordered their raw materials before the outbreak, envisaging the closure of Chinese factories during the Chinese New Year holidays.
Anwar ul Islam Chowdhury Parvez, the president of the Bangladesh Chamber of Industries (BCI), a trade organisation having over 1,000 members, also said the impact of the coronavirus is yet to be understood since the outbreak coincides with the holidays of the Chinese New Year.
“The holidays will end on February 10. We’ll understand the impact then. I am hopeful because most of the imports of our group are from regions other than Wuhan, and, so, I believe, once the factories open in China, we will be able to resume our imports for textile goods,” said Chowdhury, who is also the chairman of the Evince Group, a leading clothing manufacturer.
Chowdhury said he heard yesterday that some of the Chinese IT companies have already opened their businesses in distant provinces. “China is a large country. I’m hopeful that the supply line from that country will remain open,” he told The Independent.
Abul Kasem Khan, a former president of the Dhaka Chamber of Commerce and Industry (DCCI), however, said the economic impact caused by coronavirus in China is negligible as of now. “However, there is uncertainty in the near future, and Bangladesh is not immune to that,” he said.
He also pointed out that Bangladesh, in its imports of many materials—especially the raw material for the textiles 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, because of 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.
Dr Ahsan H Mansur, executive director of the Policy Research Institute (PRI) of Bangladesh, said 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, the travels of these people would be restricted. It will impact the project implementation rate in Bangladesh,” he said.
Another impact will be on the supply chain of the readymade garments industry, Dr Mansur said.
“Most of the raw materials of our woven industry come from China. If the supply chain gets disrupted, then it would affect the country’s exports,” he said.
He also said the small investors, who frequently go to China to visit factories and explore business opportunities, would be highly impacted.