Economy poised to suffer from shutdown shock for months
- Industries are struggling with massive stacks of unsold inventories due to no sales during the coronavirus shutdown
- Textile millers who supply yarn and fabrics to local readymade garment exporters have unsold inventory worth around Tk13,000 crore. Millers who make products for the local market are sitting on a higher stack of around Tk20,000cr worth of products
- It will take months to revive the economy that has been halted in the shutdown, say industry insiders
- As the factories will go slow and run under capacity for months, there will be serious consequences on employment
Nasir Glass Industries Limited, the country's largest float glass manufacturer with a capacity of 600 tonnes per day, is now sitting on a 20,000-tonne stack piled up in the last two months due to a complete halt in sales amid the Covid-19 pandemic.
Textile millers who supply yarn and fabrics to local readymade garment exporters have unsold inventories of goods worth around $1.5 billion (nearly Tk13,000 crore).
But the millers who make products for the local market are sitting on a higher stack as there were hardly any sales during Pahela Baishakh and Eid-ul-Fitr -- the two biggest seasons for cloth sales.
The cement and steel sectors are also struggling with a mounting stack of unsold inventory. The construction industry that had been growing fast for the past two decades and emerged as one of the biggest job creators is yet to revive activity.
The aviation, tourism and transport sectors that have resumed their services are barely seeing any customers and they are being forced to close their services again.
The situation is almost the same in all sectors except food and pharmaceuticals companies and some apparel exporters who remained out of the purview of the two-month nationwide shutdown imposed to curb the spread of Covid-19.
Industry insiders say even though restrictions have been lifted, it will take months to revive the economy that has been throttled in the shutdown.
As the factories will go slow and run under capacity for months, there will be serious consequences on employment, they fear.
"We missed two peak months and are now heading to monsoon time when construction activities get down to the bottom," says Masud Khan, adviser to the Crown Cement.
Inward remittance has nosedived and the inevitable slowdown of government projects have also affected the sales of cement and steel makers badly, he adds.
He hardly sees any sales since the reopening of the economy.
"Economy has been reopened, but we are not seeing any revival in orders that were cancelled in April and May," says Mohammad Ali Khokon, president of Bangladesh Textile Mills Association (BTMA).
He says they have unsold products worth Tk20,000 crore for the local market and $1.5 billion or around Tk13,000 crore for export markets. They are now struggling to manage their inventory of unsold goods, he adds.
DBL Group that has 24 units, mostly garments and allied industries, has reopened all its factories.
MA Jabbar, managing director of the group, says his garment factories are running with around 80 percent capacity, but his ceramics unit has a big stack as there was no sale in the two months of shutdown.
"I am okay now, but I don't know what will happen after two months," says Jabbar as he has got some fresh export orders in addition to the revival of orders that were held up.
Buyers are now giving him a lead time of just 45 days instead of the previous 180 days and that's the reason his factories are running on with a good capacity.
Banks are opened fully as per a regulatory order, but they are also nowhere close to their normal activities.
"Depositors are coming back and we are opening five to seven accounts every day. Some businesses are also making queries for loans," says a manager of a private bank at the Demra area, but it is less than one-fifth of what it used to be.
MA Halim Chowdhury, managing director of Pubali Bank, the largest private lender in terms of branch network, believes things will start rolling better once the banks begin disbursing loans under the stimulus packages.
Sheikh Fazle Fahim, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), says businesses are opening up cautiously, but it will take two weeks to get back the pace.
Referring to the fact that many industries have huge unsold inventory as they could not sell their products in the last two months, he says "So, they are going slow."
The FBCCI has held a series of meetings with representatives of different sectors and chambers at the district level in the last two weeks to help them get loans under the government-announced stimulus packages, Fahim maintains.
The federation is also making a database of informal sector workers so that they can get allocations from the Tk700 crore fund offered by the prime minister to support them, he adds.
Mustafa K Mujeri, a senior economist, says unless factories are able to dispose of their unsold inventories, they will not hire workers for resuming production fully.
"It's a process and it will take weeks, maybe months, to put the supply chain in place and revive the economic activity," he concludes.