TBS senior reporters Abbas Uddin Noyon and Mahfuz Ullah Babu have talked to corporate bosses about business outlook in the context of the prevailing pandemic situation
We will be able to return to normalcy in mid-2021
-Rupali Chowdhury, managing director of Berger Bangladesh
The pandemic has hit all business sectors. Everything remained closed for long but even though businesses have reopened, people are not buying much, except for essentials. As a result, we also had to limit production throughout the year.
We always live with hope. We believe we will get Covid-19 vaccines in 2021. As a result, I hope the year will be good.
However, the second wave of the pandemic is going on. Everyone thinks the pandemic will become intense by the end of January, but no one can say when it will finally end.
Even if a vaccine is developed, we are not sure when it will be available for us. If we get it after citizens of developed countries are vaccinated, it will take a long time for us to recover from the current damage.
Ordinary people need to limit their expenditures further as their earnings had dropped due to the pandemic. We do not know yet what our situation will be if consumer spending decreases.
People have not yet started going to restaurants. They are not travelling either and have put a cap on expenditures. Although there has been some recovery in the top segment because of the wealthy class, it will take at least one more year for mid-range sales to return to normalcy.
As a result, the 2021 plan cannot be made now. I can only expect that things will be good.
Ceramic sector will struggle if duties and VAT do not decrease
-Md Shamsul Huda, vice-president of BCMEA and managing director of Great Wall Ceramic Industries
At present, the ceramic industry employs about five lakh people in the country, including 55,000 workers who are directly employed in more than 100 companies. Although annual sales are more than Tk6,000 crore, it may fall by 50% this year due to the pandemic.
Although sales stopped at the beginning of the lockdown, demand for ceramic products was created when the restriction was lifted. However, due to the lack of raw materials, ceramic manufacturers found it difficult to continue production. This sector is experiencing negative growth as people's earnings had fallen and the raw material supply system has not become normal yet.
Due to supply chain problems, raw material procurement costs have now risen by at least 15-20% compared to the normal time. Carrying costs at ports have increased as well. On the other hand, demand at the individual level has fallen. As a result, our production has not returned to normalcy yet.
In addition to the companies, the association has also taken steps to recover from losses and return to normalcy in 2021. We held two meetings with the government last month.
We proposed that the government reduce tariffs on raw material imports and cut supplementary tariffs in the local market. In addition to the turnaround of the housing sector, we expect to revive in 2021 if we get government benefits.
Bangladesh's electronics and technology market will turn around in 2021
-Golam Murshed, managing director of Walton Hi-Tech Industries Limited
The global economy, including that of Bangladesh, has been severely hit by the Covid-19 pandemic. This has affected almost all individuals and organisations.
We had been under lockdown from the last week of March 2020 to the last week of May in line with the government instructions. Later, our company's operations were conducted on a limited scale till July in compliance with the government directives.
The lockdown was in force during Eid-ul-Fitr, the main season for the sale of electronics. So, the year 2020 was naturally a bad one for everyone.
Even then, 2020 would remain a significant and memorable year for several reasons. That year, Walton Hi-Tech Industries Limited was listed on the stock market as the first Bangladeshi electronics company. After the trade of Walton shares began on Dhaka and Chattogram stock exchanges on 23 September, the shares reached the circuit breaker's highest limit in the first trading session.
In the first three quarters of fiscal year 2019-20, the profit of Walton Hi-Tech Industries was 16.14% more than that in the same period of the previous financial year. But the pandemic disrupted our business growth in the fourth quarter.
Even then, sales in the export sector in that period increased by 134.4% compared to that in the same period of the previous year. Walton's contribution to the public revenue sector also rose by 51%.
After overcoming Covid-19 losses, Walton's business turned around since the first quarter of fiscal year 2020-21. Coronavirus vaccinations have already begun in different countries. I hope 2021 will be good for everyone.
The electronics industry largely depends on technology. We are making capital investments for R&D (research and development) expansion and industrial development to produce technological products, and the country is getting the benefits.
Next year, we are going to bolster our R&D activities further. At the same time, we are emphasising business expansion.
Our expectation is that the country's electronics and technology market will turn around in 2021. Export activities will increase further as well. As a result, we will go one step further in achieving the goal of becoming one of the world's top five electronics brands in 2030.
Pran-RFL will create 10,000 new jobs in 2021
-RN Paul, managing director of Pran-RFL Group
About our business in 2020, we can say it was not bad. We mostly sell essential products. We focused more on products that the people had used to fight the virus.
The market for our face masks has grown a lot. We have 12 items specifically for the pandemic market.
Our portfolio had grown as we sell essential and hygiene products. During this period, we achieved at least 20% growth as we focused on items outside the line of luxury products.
Another good aspect of 2020 was remittance. As it was good, business increased in villages as well. However, the overall economic situation was not good. People did not do much shopping, except for the daily necessities.
We do not think people's behaviour will change much in 2021. A large segment of the countrymen is in financial crisis. The amount of their purchases will not increase much beyond the daily essentials. However, we expect that our sales will grow by more than 20%.
We Bangladeshis are the nation that fights battles and survives. So, people will return to normal activities even if they are not vaccinated. Traders who were on the back foot in 2020 will take a leap in the new year.
Many government projects will be completed this year. Once many infrastructure projects are finished, there will be some investments in the private sector as well.
Apart from essential products, the market for personal vehicles will also grow in 2021. Pran-RFL's bicycle market expanded in Europe amid the pandemic, and this trend will continue next year. The domestic bicycle market will also grow.
Like other times, our business plan will include an expansion policy. The demand for new products is being created due to changed circumstances. With that in mind, we have new investment plans as well.
Our target is to increase employment by at least 10% in 2021. As a result, more than 10,000 new jobs will be added to our existing workforce of 1.05 lakh people.
Recovery scope in furniture industry limited in 2021
-Selim H Rahman, managing director of Hatil Furniture
The year 2020 was a nightmare for furniture traders due to the pandemic. Businesses in most sectors reopened after an almost three-month lockdown that started in March was over, but people did not shop much, except for essentials.
Even though big showrooms reopened, traders could not bear operation costs. Almost all furniture traders had to count losses.
We have been trying to turn around for the past two months. High-priced furniture manufacturers are doing a bit better as procurements for different government projects have begun. Many such traders experienced growth as well. However, sales of furniture that ordinary people buy have not recovered yet.
Lower slab furniture sales are still less than 60%. Because of some programmes, including weddings, medium range furniture sales have recovered by about 80% compared to the normal time. We do not think the situation will return to normalcy before 2022.
The global coronavirus situation has not become normal yet. All countries are afraid of the second wave. People in Bangladesh have returned to a somewhat normal situation, but no one is shopping, except for essentials.
Consumers are reducing spending as they are uncertain about where the economy is heading to. Raw material prices have gone up due to problems in the global supply chain caused by the pandemic.
Producers do not have easy access to raw materials. No one could plan for the new year as 2021 started in such a situation. At the moment, we are just planning to return to normal production. Retaining jobs is also a challenge for us.
Housing sector turned around with the help of government policy
-Alamgir Shamsul Alamin, president of the Real Estate and Housing Association of Bangladesh
The private housing sector plunged into a major crisis shortly after the pandemic hit, and this happened just when the sector began turning around after several years of downturn.
About 12,000 companies in 269 industrial sub-sectors involved in the housing sector are also under a serious threat. Due to the pandemic, most of the organisations had to suspend their activities to maintain social distancing during the lockdown.
The supply of construction materials was cut off and the technical manpower as well as workers did not continue their work. On the one hand, construction was suspended, and on the other hand, clients were not paying the monthly instalments of flats.
This put the housing sector in a terrible crisis. However, due to the opportunity to whiten black money in this sector, real estate businessmen have now begun overcoming the crisis.
Several factors, including the opportunity to buy flats and plots using undisclosed money without being questioned as well as the reduction in bank loans' interest rates and giving government officials housing loans on easy terms, have been a blessing for this sector. As a result, housing entrepreneurs are seeing good opportunities as they cope with the pandemic blows. Despite the loss in 2020, all real estate owners are expecting good business in the new year.
As part of our 2021 business plan, we want to reduce flat prices by building housing units for the low-income people. However, there are fears among all traders as rod prices have gone up several times due to problems in the international supply chain. If there is no problem in rod and cement prices, we expect business to be better than usual in 2021.
2021 should be a better year for automobile sector
-Nayeemur Rahman, head of business planning, Uttara Motors Ltd
The post-shutdown recovery trend is expected to improve further in 2021 as vaccines increase optimism in fighting the virus and keep the wheel of the economy rolling.
The automobile industry is one of the hardest-hit sectors in 2020 due to the pandemic. And, except two wheelers, no category saw their demand to recover up to the pre-shutdown level. Nevertheless, we are optimistic that 2021 will be a better year for the automobile sector.
Most importantly, the mid- and long-term potential of Bangladesh – as a combined automotive and two-wheeler market – is a great source of trust among entrepreneurs.
Uttara Group firmly holds its investment plans for the coming days – be it for strengthening its Bajaj motorcycle market leadership or building a car assembly plant.
Bajaj meets almost 40% of the motorcycle demand in Bangladesh, and Uttara Motors already has three large plants to manufacture and assemble motorcycles.
We will continue with the car assembling plan under technical collaboration with Japanese Suzuki, which occupies more than half of the Indian market. But we need a supportive automobile policy which is in a positive direction till now.
Commercial vehicles are the segment to lag most in demand recovery after the shutdown. Sales of buses, trucks and pickups are still below halfway to the pre-Covid-19 level, while sales of passenger cars are a little better. Three-wheeler sales are also down compared to what it was in recent years.
We are expecting each of these segments to grow in 2021.
I am confident about fast recovery
-Ashish Goupal, managing director of Marico Bangladesh
Bangladesh has handled the pandemic commendably. While 2021 will come with challenges of recovering from the effects of the pandemic, I am confident that the fast-moving consumer goods (FMCG) industry will continue its growth momentum.
Moreover, Marico will continue to make a difference in the lives of its consumers, employees, business partners, and communities.
Consumers will win
-GM Kamrul Hassan, CEO of Abdul Monem Group (consumer section)
Throughout 2020, there was almost no business for many products, except for daily essentials. We did not go for any new investment and could not recruit new employees either. We refrained from all kinds of expenses, except for essential expenditures.
Despite a fall in demand due to the pandemic, many companies are continuing production out of the obligation to use their capacity. As a result, some have accumulated inventory while some have incurred losses by keeping their capacity idle.
During the new normal, traders will change their business policies to make up for the losses. Thus, organisations competing with each other need to do a lot more aggressive marketing for recovery.
On the other hand, people's mindset is changing due to a decline in their earnings. Outside their basic demands, they will not buy many luxury products. A specific class will even look for basic products at a lower price.
As a result, all companies will try to remain competitive in the market by lowering prices. That is why consumers will win in the win-win situation for consumer-supplier behaviour in the post-pandemic period. Even if sales increase, it will be difficult to make profits.
With the changes in business strategy in 2021, the manufacturing sector will have to bring changes to the value chain. Strategies need to be put in place to bring back consumers who refrained from making purchases due to financial crisis. Organisations need to be much more consumer- and trade-centric.
During this period, only advertisements and communication will not do. To capture the market again, consumers need to be given benefits.
We can expect a major upswing in economic activities
-Shahriar Jahan Rahat, deputy managing director, KSRM
The year 2020 was an acid test for the economy and all its stakeholders. It forced individuals and businesses to take a deep dive into their financials and re-assess their course. The perfect "rainy day" scenario!
There was so much to learn throughout the storm. Rest assured, it can be assumed that businesses that survived through this are destined to have a strong financial foundation in the future as they learned the hard way that a total economic stall is possible and what its consequences are. As the saying goes, "What does not kill us makes us stronger".
In a recent interview with CalTech, the famous billionaire of Berkshire Hathaway, Charlie Munger, said that he expects the economy to make a U-turn in about a year when vaccines will be rolled out. He mentioned how he had seen the deadly poliovirus losing its severity after the invention of its vaccine. I agree with his views.
The technology and logistics we have now are light-years more advanced and the distribution of vaccines will be faster than the world has ever seen before. We need to grow past the fear factor and look at this scenario objectively. There was a time when the flu wiped out countless people and now it is not even a concern.
Speaking optimistically, we can soon expect to arrive at a time when this pandemic will be a thing of the past and there will be a major upswing in economic activities, just the way it had usually been after any major financial collapse. Looking back on the major financial crisis of 2008 now, it looks like a small dip, though we at the time thought that the world was coming to an end.
Human beings have always had this extraordinary capacity of coming out of crises and doing better than they were doing before. The perfect example of this is the economic boom after World War II.
Time and again, Bangladesh has proved its resilience against any adversities. We weathered through the famines post our Liberation War, faced and survived the deadliest of cyclones, and now have one of the sharpest rises in GDP at a time when the rest of the world is seeing only modest growth.
Our government did better to get our economy back on its feet faster and more efficiently than most countries. The pandemic has shone a light on the fact that we need to diversify into more technologically advanced products.
I recently read an article by a colleague of mine at the Chattogram Chamber of Commerce and Industry that they realised how a blockade in the supply chain in the RMG sector had made them realise that they could easily manufacture zippers and buttons domestically without relying on foreign supplies. This means more employment and improved manufacturing capabilities for Bangladesh. Within my organisation, we are seeing a sharp rise in demand which is a tell-tale sign that the economy is yearning to get back to its stride.
I truly believe that we will only be reorganising even better and making our economy stronger than it was before. This fear of gloom and doom is, therefore, needless to say, temporary. The government actions have been astute and the policies in place are in favour of industrialisation.
I believe, with such pragmatism, our manufacturing sector will be stronger than ever, and we are steadily striving towards generating more employment and economic growth for our beloved Bangladesh.
Cement sector will remain normal without raw material complexities
-Mohammed Amirul Haque, managing director and CEO of Premier Cement Mills Limited
After the outbreak of the novel coronavirus in the country, 90% of cement production was stopped in April-May during general holidays. At present, production has resumed up to 80-90%. Many companies are also experiencing growth due to big government projects.
However, the cement sector is in crisis as demand declined due to the pandemic as well as tax complexities. Some factories are at risk of closure as they faced losses and consistently failed to meet operating costs as well.
Although the government's mega projects and the housing sector helped the cement sector turn around, it is in crisis due to the imposition of a 3% advance income tax on cement in the budget and tariffs on clinker imports being higher than that in the international market.
At present, the import of clinker – the main raw material for cement – is subject to a tariff of Tk500 per tonne. Clinker is currently imported at $38-40 per tonne, with an import duty of Tk500 exceeding 16%.
But more than 5% tariff on intermediate raw materials is, in no way, acceptable. This does not happen in any other industry.
The pandemic has caused this industry to incur a loss of about Tk5,000 crore. Many companies are in trouble due to production capacity being more than double the demand. In 2021, it will be the most important thing to find new markets and resolve the complexities of raw material imports.