Tue, 28 June 2022
The Daily Ittefaq

Bangladesh firms fear effects of offensive in Ukraine

Update : 28 Feb 2022, 12:13

Amid Russia-Ukraine war and the worsening crisis, a question is rife - What will be the impact of Russia-Ukraine war on Bangladeshi businesses.

Apart from the humanitarian impact of war, economic impact is also estimated to be large. Global stock markets and currencies have fallen sharply. Demand for safe-havens such as gold has risen. Treasury yields across the world are also lower. Oil prices jumped more than 3.5 per cent to shoot past $100 a barrel on Thursday for the first time since September 2014.

Due to the Ukraine war, Bangladesh's largest export market, product shipments by air and sea are likely to be hampered. Russia and Ukraine are both key suppliers of some basic commodities, industrial raw materials and industrial machinery, so the conflict may have a negative influence on the prices of these items.

Some bankers believe the crisis will have an impact on the banking sector, as major foreign trading partners have already prohibited some banks from transacting with Russia.

Bilateral trade between Bangladeshi-Russian is worth almost $1 billion, whereas bilateral trade with Ukraine is worth roughly $350 million.

Due to the significant concentration of clothing items, Bangladesh's trade balance with both countries is skewed towards the country.

Russia and Ukraine, on the other hand, are key suppliers of wheat, cotton, and industrial materials and gear to Bangladesh.

"Our business, particularly apparel exports, will be impacted. However, the magnitude of the impact on exports depends on how long the war continues,” said Bangladesh Garment Manufacturers and Exporters Association president Faruque Hassan.

According to Bangladesh Textile Mills Association president Mohammad Ali Khokon, "Primarily, we would lose the Ukraine market since it is a war-torn country. There's a chance it'll lose business in its neighboring countries, too."

Local enterprises, he warned, will enter another insecure phase as a result of the new global crisis, which comes as they recover from the devastating effects of Covid-19.

Nearly a third of the world's wheat supply comes from Russia and Ukraine, according to importers.

The two countries also supply a good amount of corn, rapeseed, canola, sunflower oil and pulses, and Bangladesh depends on imports to meet its domestic requirement for such commodities.

The prices of wheat, soybean seeds, crude soybean and palm oil for future delivery also surged in global markets.

Because of the surge in purchases from India, local importers stated they have cut the quantity of shipments from Ukraine and Russia in recent years. 

Local importers said they reduced the number of shipments from Ukraine and Russia in recent years and increased purchases from India due to convenience in transport.

Besides, the Russia-Ukraine crisis, Bangladesh will certainly experience higher grain costs.

"Suppliers are not taking orders for delivery from the region, and pending supplies have also become questionable," stated an anonymous product importer.

He also mentioned that Indian exporters are quoting higher pricing.

On the Impact on Bangladesh, Abdul Bashar Chowdhury, chairman of the Chittagong-based BSM Group says “Definitely, there will be an impact on commodity markets and costs as suppliers in other countries have already increased prices,” he said, adding that the crisis has made commodity markets other than that of food grains volatile as well.

"All have increased prices," said Mostafa Kamal, chairman and managing director of Meghna Group of Industries, citing a $10 increase in wheat costs to $305 per tonne from an Indian supplier.

"It appears that the high prices of edible oil will continue," he remarked.

Palm oil prices have risen to between $1,600 and $1,700 per tonne, while soybean oil prices have risen to over $1,800 per tonne, up from $700 to $800 previously.

"No one has ever seen edible oil prices so high. I'm not sure what you mean. I've been in business since we gained independence, but I've never seen such exorbitant costs," Kamal added.

Meghna Group of Industries is one of Bangladesh's largest commodity importers and processors.

Rizwan Rahman, president of Dhaka Chamber of Commerce and Industry said more than 15 per cent of Bangladesh’s exported goods are going to Germany. However, Germany is also in a tense position due to its geographical proximity to the war.

Many North Atlantic Treaty Organisation (NATO) members import goods from Bangladesh and so, those exports may be affected. He also said that Russia is one of the country’s largest foreign investors in various sectors.

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