Manufacturing units running out of inputs

Job cuts feared if blockade continues, stimulating industrial and social unrest

Manufacturing units running out of inputs

Industrial units are poised to run out of their inputs with supply chain broken due to the non-stop blockade that enters 18th day today, according to industry insiders.

In this situation, economists warned that small businesses might announce layoffs while large companies might cut jobs to avoid losses in the days to come, leading to thousands of unemployment.

“Things are getting from worse to the worst,” said Mir Nasir Hussain, one of the leading businessmen in the country and former president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI).

He said most of the factories are not running with their full production capacities as supply of industrial raw-materials gets disrupted by the blockade.

“I do not want to talk about the issue because I am already tired of talking about the losses of businesses. Politicians are blind to our losses and deaf to our calls.”

Ex-president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Anwar-ul-Alam Chowdhury said the manufactures were running out of inventories that they had kept in stock.

“So, the factories are now on the verge of shutdown,” he said, adding that once the present stock is used up, things will get complicated.

Usually, an industry has the capacity to run its unit for 10-15 days or in some cases a month with the raw materials in stock, Anwar-ul-Alam said.

Finance adviser of a past caretaker government Mirza Azizul Islam sees the impact of continuous blockade as unrecoverable in most cases.

“The prolonged political chaos may lead small businesses to announce layoffs to avoid losses,” he said.

However, the large industries might not choose the option, but if the situation becomes worse, they are also likely to trim their workforces.

Mirza Azizul Islam ruled out possibility of having any massive impact on the society due to factory shutdown as, he said, over 50% workforces of the country were still involved with agriculture and informal sectors.

“There is little chance of social unrest if industrial units have to suspend their production.”

He, however, thinks political unrest may stoke social unrest if it continues.

As hundreds of goods-laden containers at sea ports and trucks at land ports remain stranded in blockade, both imports and exports are suffering badly.

The government, however, has continued its efforts to keep the ports functioning and carrying goods under police protection.

A limited number of vehicles with goods are being escorted by law enforcers to different destinations across the country during blockade.

According to newspaper reports, despite police protection only 30% goods could be carried from Dhaka to Chittagong port for shipments.

During blockade in 2013, most exporters showed little interest to send their products fearing arson attacks on the highway.

Opposition alliance led by BNP called the non-stop blockade demanding a fresh national election under a neutral administration. As the ruling Awami League continues to refuse the demand, the programme takes its toll on the economy.

BGMEA President Atiqul Islam said the garment industry, the lifeline of the economy, bears the brunt of the political unrest.

He said the industry produces about Tk430 crore worth of apparel goods per day. “If the strike or blockade hampers 50% of production, it will come down to Tk215 crore.”

During 2013 political unrest, he said the RMG exporters had to choose expensive air shipments that forced them to spend an additional amount of Tk5,500 crore. “They also had to sell products on discount and lost Tk900 crore.”

According to FBCCI, the transport sector alone loses Tk200 crore a day during the current blockade.

According to a study Dhaka Chamber of Commerce and Industry released yesterday, a day of hartal causes the country’s businesses, from export to retail shop, a financial losses of around Tk2,300 crore.

In 16 days of ongoing blockade, the country lost over Tk36,000 crore while in 62 days of the 2013 unrest, the country faced losses of Tk100,000 crore, the study said.

According to a 2013 analysis, Centre for Policy Dialogue, a local think tank, said the country’s GDP growth rate fell by 0.2-0.9 percentage points due to political instability in the run-up to the national election on January 5 last year.

Since 1990s there had significant impacts of political violence on economic growth, investment, public investment, savings, revenue collection, ADP implementation, private-sector credit growth, call money rate, export, import and foreign aid, the CPD said.

The New-York based global rating agency Fitch Ratings recently warned that the renewed political tensions and violence in Bangladesh in the first week of January might negatively affect foreign investor confidence, raising risks to growth over the long term.

“If violence were to persist and directly disrupt economic activity, especially by inflicting long-term harm to the key ready-made garment, this would be credit negative,” Fitch Ratings said.

Source: Dhaka Tribune


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