Economy starts to feel strain of political turmoil

The beaches are empty in the resort town of Cox’s Bazar, by the Bay of Bengal on Bangladesh’s southern coast. Scores of hotels line a narrow stretch of road parallel to the waterfront, but there are no guests. A handful of desperate hawkers harass the occasional straggling tourist.

“We’re bleeding,” said Amjad Hossain, an official at the upscale hotel The Cox Today. “A few more days of this and we may have to start laying off staff.”

All quiet: Opposition protests, including a country-wide strike, are crimping Bangladesh’s economy. European Pressphoto Agency

Prolonged political turmoil in the South Asian country of 150 million people is taking a heavy toll on tourism and the economy, with holiday companies scrapping tours, farmers failing to get produce to market and some businesses scaling back operations temporarily as they wait for the violence to subside.

The upheaval has hit the country’s garment sector particularly hard, causing a 30% drop in production since the unrest began, according to an industry association.

The current bout of turmoil began on January 5th, when Prime Minister Sheikh Hasina’s government banned an opposition demonstration, citing security concerns. Police arrested hundreds of activists and confined opposition leader Khaleda Zia to her office, prompting opposition groups to launch an indefinite blockade of road, rail and river transport.

Although Zia — herself a former prime minister — has now been released, her party says the blockade will continue until Hasina, who has been in power since 2009, agrees to call early elections.

What began as sporadic violence has escalated. On Tuesday, seven people were burned alive when a bus traveling to Dhaka from Cox’s Bazar was firebombed.

Police said pickets trying to enforce the blockade were to blame. Zia’s party denied responsibility and accused the government of carrying out the attack in order to discredit the opposition movement.

More than 50 people have died in political violence since January 5, 24 of them in arson attacks on buses and trains.

For Cox’s Bazar the timing couldn’t have been worse. December to February is the peak tourist season when, in less turbulent times the resort would expect to accommodate some 700,000 visitors.

Instead, the hotels are practically empty. Fewer than 10 rooms in the 190-room The Cox Today, for example, are currently occupied, according to hotel official Amjad Hossain.

The Tourism Developers Association of Bangladesh says the tourism and hospitality sector has been losing 2 billion takas ($26 million) in revenues per day.

Abul Kashem, general secretary of the Cox’s Bazar hotel owners’ association said: “People are having to watch their backs all the time. Who’s going to come here for a holiday now?” He said local businesses had already shed around 10,000 jobs to cut costs.

It’s not only the tourism sector that stands to lose out. Bangladesh’s economy has grown at roughly 6% every year for the past two decades, powered in large part by garment exports to Western countries and wage remittances sent home by migrant workers.

Accounting for 80% of Bangladesh’s exports, the garment industry is a key driver of the economy. The country’s roughly 4,000 factories, which churn out ‘fast fashion’ for brand-name stores in the West, employ nearly 4 million people, mostly women.

Strikes and blockades hurt exports since trucks cannot reach the port in the southeast city of Chittagong. The country’s $24-billion-a-year apparel industry is particularly vulnerable. Several garment factory owners in Dhaka said they had been forced to airlift cargo, incurring additional expenses, for fear of missing deadlines.

Leaders of the Bangladesh Garment Manufacturers and Exporters Association, a trade group, said member factories had so far lost work orders worth more than $10 million with losses expected to rise.

“This is the period when orders for summer clothing come in,” said Shahidullah Azim, vice-president of the BGMEA. “If this continues, foreign buyers will lose faith.” He said buyers had expressed concern about the collapse of the distribution system and road transport.

Even before the latest round of politically inspired violence, ratings agency Fitch had highlighted substantial political risk, linked to continued polarization between the governing and opposition parties, as a key source of uncertainty for Bangladesh’s economic outlook.

More recently, the agency has warned that the violence could also sap foreign investors’ confidence, raising risks to Bangladesh’s economic growth over the long term.

Ahsan Mansur, executive director of the Policy Research Institute, a Dhaka-based think-tank, said the upheaval would hamper production and distribution in the short term while investment would be hurt in the longer term. The collapse of the distribution network was likely to result in a rise in commodity prices, he said, adding that slowing exports could cause balance of payment problems for the country.

“Unless a political solution can be found quickly, things could get quite bleak,” he said.



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