Resurgent virus clouds businesses
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WEDNESDAY, AUGUST 10, 2022
Resurgent virus clouds businesses

Economy

Mahfuz Ullah Babu
10 April, 2021, 11:15 pm
Last modified: 11 April, 2021, 10:20 am

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Resurgent virus clouds businesses

Entrepreneurs shaken again, not knowing how long and to what degree the virus may keep infecting people

Mahfuz Ullah Babu
10 April, 2021, 11:15 pm
Last modified: 11 April, 2021, 10:20 am
56% Bangladeshis killed by Covid-19 aged 60+

All business had been disrupted since the coronavirus pandemic reached Bangladesh March last year.

A year later, with signs of a weakening pandemic, companies were on the way to recovery and felt optimistic of a comeback.

That optimism has been short lived, however, as the virus has had a resurgence with a vengeance and new coronavirus strains are causing record high infections and deaths every day.

Despite the fact that the government has been trying to strike a balance between saving lives and saving the economy, the public health emergency is compelling a stricter lockdown going forward.

Entrepreneurs are on shaky ground again. No one knows for how long and to what extent the marauding virus would wreak havoc.

"We got confident seeing the weakening of the virus alongside a tremendous vaccination success. But the current rising infection and death rates suggest that we felt hopeful too soon," said Dhaka Chamber of Commerce and Industry's former president, Abul Kasem Khan. 

"The lives vs livelihoods dilemma has reappeared as a tougher question now, he said.

"The fall in demand that started in 2020 is a major concern. Catering to 'whatever' demand there is, is yet another challenge in the midst of this public health emergency," said Kasem, now chairing Business Initiative Leading Development.

With the memory of last year's lockdown still fresh in mind, stock investors are also worried about the impact of a further lockdown.

The bourses of Dhaka and Chattogram suffered such a free fall ahead of the 2020 shutdown that the regulator had to impose floor prices on individual stocks to avert further devastation.

Later in the second half of 2020, the market bounced back riding on lowered interest rates and signs of economic recovery.

However, amid a natural correction since February 2021, the market began to slide below the recent lows with the second wave of Covid-19 in the country.

The announcement of lockdown drove a massive sale-off last Sunday and the market recovered more over the following three sessions as soon as investors saw the lockdown was enforced partially from April 5.

Again, the market nosedived on Thursday with the Covid-19 curve rising further amid talks about yet another tighter lockdown in the air. The announcement of another 'strict' weeklong lockdown was made on Friday with effect from 14 April.

For now, everything but long distance public transport is allowed to run observing the health guidelines and factories are allowed to operate fully. Offices are running with a partial on-site employee presence and all retail stores are open but for shorter hours.

The government plans to initiate a strict lockdown from 14 April, which would shut down everything except for emergency services. 

A stark reminder

For businessmen, that is a stark reminder of last year's 66-day shutdown which left thousands jobless, millions losing income, and thousands of cottage, micro, small and medium enterprises on the verge of destruction. Most of the larger corporate entities felt the squeeze too with the lockdown affecting their bottom line as well.

"The resurgence of a pandemic emergency is a fresh blow to businesses. It is like a fresh hit on a healing wound," said Md Shahidullah, vice-president of the Bangladesh Cement Manufacturers Association and a director of the Bangladesh Steel Manufacturers Association.

Shahidullah said cement and steel mills on average were utilising 20-25% of their capacities during the 2020 shutdown, which recovered up to around 70-75% at the end of last year.  

But as soon as the disruption came last week, capacity utilisation in cement mills instantly fell to around 60% on average, despite no official restrictions on construction and manufacturing, said Shahidullah.

If a complete lockdown comes, industries will face an even harder time this year as repeated shocks in consecutive years kill resilience, he added.

"The last time, mainly due to determined employers and government stimulus support, most entrepreneurs managed to pay their employees. But this repeat shock is pushing our worries over the brink," said Matiur Rahman, chairman and managing director of Uttara Group which is engaged in the automobile, textile, tea, and financial sectors.

Recovered demand even helped some companies post year-on-year growth in December-January.

Supplies take a hit

In addition to demand-side challenges, Covid-19 has been disrupting supplies too.

For example, enjoying a record monthly sale in June 2020, the motorcycle industry lost momentum again when local plants felt the pinch of raw materials and parts since the source factories in India took longer to come back on line.

"We pray the lockdown is not prolonged this time," said Matiur, who is also president of the Bangladesh Motorcycle Assemblers and Manufacturers Association.

In March this year, the motorcycle industry sold more than 60,000 units, nearly double the figure for the same month a year ago.

Horlicks, a most popular health food drinks brand, suffered a sales decline in 2020 in Bangladesh. This, not because of a fall in demand but due to a shortage of its semi-finished raw material even after the shutdown was over, according to Masud Khan, chairman of Unilever Consumer Care Limited which acquired the business from GlaxoSmithKline last year.

The regional plant in India that caters to the Horlicks plant here, went through a shutdown due to Covid-19 infections even after India lifted its prolonged lockdown. But with factories and retail outlets shut down again, the momentum will be lost again.

Textile and apparel would be devastated

"The textile and apparel industries marched well ahead to recover from their 2020 losses in production, sales, and profits. But now this repeat blow is going to devastate low profit margin businesses," said Mohammad Ali Khokon, president of Bangladesh Textile Mills Association.

Apparel exporters were still well below their average capacity utilisation level but orders were flowing in. But it looks like that is over.

Meanwhile, local manufacturers and traders who were waiting for their peak sales season with the Bangla New Year and Eid-ul-Fitr in April-May, are going to be the worst hit since they were unable to get any financial support against their 2020 losses.

Ali prescribes longer operating hours at banks, offices, and retail outlets so that traffic congestion and overcrowding can be avoided.

"Saving lives and saving the economy are two confronting ideas now, but we need to manage both," said the former chamber leader Kasem.   

"Only responsible behaviour on the part of everyone can help the nation overcome the crisis," he said, adding, "the government should come up with fiscal incentives to retain investment, production, employment, and very importantly, consumption."

"This [lockdown] need not be the end of the world if you strictly follow health measures and stay alive," said RN Paul, managing director of RFL Group that employs 55,000 people.

"Leaving the economic headwinds behind, it is not impossible to stay afloat, especially when the government is aware of the challenges," he said.

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COVID-19 / virus / businesses

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