Businesses feel shaky as China virus spirals

The impact of deadly coronavirus on the Bangladesh economy seems to be severe as garment exporters and other businesses who rely heavily on China for sourcing their raw materials and machinery worry that their supply chains will be disrupted if the situation lingers any longer.

Their concerns are not limited only with the imports, but also with exports as Bangladesh shipped around $1 billion worth of goods to China, the world's second largest economy, last fiscal year.

"China is a major source of raw materials for us. We are too worried," said Anwar-ul Alam Chowdhury Parvez, former president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

He has a genuine cause for worry as the country's exports are on a decline so far this fiscal year. Government data shows Bangladesh's overall exports went down by nearly 6 percent to $19.30 billion in July-

December period of this fiscal year compared to the same time period a year ago.

"It is a big threat for us as we have hardly any alternative sourcing market other than China," said Parvez, also the president of Bangladesh Chamber of Industries.

According to the central bank data, Bangladesh's total merchandise import payments were $56 billion in 2018-19, of which more than one-fourth was from China. Nearly 70 percent of the imports from China were textile raw materials, machinery, boilers and electrical and mechanical appliances.

But all this vital bilateral trade is now on the verge of collapse after the deadly outbreak of coronavirus in Wuhan of China on December 31, 2019. The disease, which has spread to 27 countries, has killed more than 300 people so far.

The outbreak has forced many countries to put restrictions on their nationals' travel to China. Economic activities and industrial production in China have gone down significantly. So, shipments of goods to and from China remain almost suspended.

KM Rezaul Hasanat, chairman and CEO of Viyellatex Group, said China has already extended its New Year vacation to February 9 from previous January 28 due to the outbreak of coronavirus.

"Now all the activities in factories are suspended and we don't know whether this holiday will be further extended," said Hasanat.

According to a Bloomberg report, due to a 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.

Mizanur Rahman, chairman of Meghna Group, the biggest bicycle exporter of Bangladesh is very worried with the situation as the raw materials for his factory will run out in three weeks unless the situation improves.

"Our export may collapse if the situation does not improve in a month," Mizan told The Business Standard.

But businesses are not sitting idle as they are looking for alternative options for sourcing their goods.

Mostofa Kamal, chairman of Meghna Group of Industries, said he can run his factories for a maximum of two months with the stock of raw materials. He has over three dozen companies, ranging from essential commodities to chemicals, shipping and many others.

Kamal imports machinery, steel and chemicals from China.

"If the situation in China doesn't improve in a month, we will explore other sources," he said.

Like Kamal, MA Jabbar, managing director of fast-growing DBL Group, an exporter of half a billion dollars of garments products globally, is trying to find out alternative markets to keep his supply chain intact.

"We have to explore other countries for buying machinery and raw materials, no matter how expensive those are," said Jabbar.

Prof Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue, said if the situation escalates, spreads and prolongs, then it is a matter of concern for many countries, including Bangladesh.