Bangladesh Political Debacle: Bashundhara Paper Mills suffers severe losses amid exchange rate surge, sudden business stoppage, and LC restrictions; revenue falls by 40.11%

Bangladesh Political Debacle: Bashundhara Paper Mills suffers severe losses amid exchange rate surge, sudden business stoppage, and LC restrictions; revenue falls by 40.11%

- An unprecedented government-ordered nationwide internet and mobile connectivity blackout, blocked social media, block raids, several days of general holidays, shut down, closed educational institutions which led to the economy as well as the business came to a sudden stop.
- reluctant to open the LC by the bank, increase in bank interest rates from 9% to 14.50%, and the availability of the US dollar
The Pulp and Paper Times

The paper manufacturing industry of Bangladesh witnessed skyrocketing success in the last four decades, and transformed from an import-dependent sector to an export-dependent one. However, the industry built with investments worth hundreds of crores of taka is now on the verge of collapse due to crises of gas, electricity, raw materials, dollar and credit.

According to Bashundhara Paper Mills Limited, In the 1st quarter 2024-25 ended on 30 September 2024, economic activities continued to recover to a certain extent. There are uncertainties about global economic development and growth. Despite the recovery, economic growth remains weak. The economy is facing challenges at multiple fronts such as rising inflation, balance of payment deficit along with budget deficit, declining foreign exchange reserves, contraction in remittances, a depreciating currency, rising income inequality and the demand supply imbalance in the energy sector. If continued, the situation may reduce the demand products and negatively affect the company’s profitability.

According to Daily Sun Report, Dhaka, Illegal paper imports, evading customs and VAT, false declarations, and smuggling have been hampering the development of the sector from the beginning. In addition, people involved in the sector have said that the existence of the domestic paper industry is facing a catastrophe due to unequal competition as duty-free paper imported under bonded warehouse facilities is being supplied at low prices in the open market.

When asked, Rezaul Islam, director (commercial) of Pearl Paper and Board Mills Limited, told the Daily Sun, “We are not getting gas in the paper factory. This has reduced production by 30% to 50%. Our factory in Dhamrai has been facing gas problems for a long time, but there is no solution to it. As the interest rate on bank loans has doubled, the operating expenses have increased a lot. This has made it difficult to sustain the factory.”

He said that the production capacity of existing paper mills is 2.5 times more than the local demand. Therefore, it is important not to finance the establishment of new mills in this sector by banks. Besides, reducing the price of gas and electricity used in domestic industry production in line with international market prices, and increasing cash support for exports are also needed.

“In the 2nd quarter ended 31 December, the global economy is of vital importance for consumer spending, and this impacts the publication paper and packaging paper industry. There are uncertainties about global economic development and growth. We have been severely suffered by external economic variables like increase in the exchange rate of the foreign currency, price hike of raw materials, import restrictions, reluctant to open the LC by the bank, increase in bank interest rates from 9% to 14.50%, and the availability of the US dollar. Due to unavoidable political and economic circumstances, we were not able to open LC for raw materials, which led to a huge loss in our business,” Bashundhara paper mills said in its results for Q2.

Bashundhara paper mills further stated that negative developments in trade policy or global trade-including sanctions, import duties and other trade restrictions between countries-could directly or indirectly affect sourcing inventory products and the company’s profitability. The ongoing conflict in the Middle East is causing uncertainty in the global business environment, and its prolongation or extension may have a negative impact on world trade, the supply chain and raw material prices. Significant or unforeseen fluctuations in the prices of other important production inputs such as energy and chemicals, and problems related to their availability, could erode profitability and threaten business continuity.

An unprecedented government-ordered nationwide internet and mobile connectivity blackout, blocked social media, block raids, several days of general holidays, shut down, closed educational institutions which led to the economy as well as the business came to a sudden stop. As a result, revenue has decreased by 40.11% for the year 2024-2025 from the same year of 2023-2024, paper mills said.

According to the Bangladesh Paper Mills Association (BPMA), 70 out of 128 paper mills in the country have already stopped production. The remaining 58 factories are running at a standstill due to gas and raw material shortages. More than 300 supporting industries have been developed in the country centered around the paper industry.

BPMA Secretary Nowsherul Alam told the Daily Sun, “The country’s paper mills have been producing offset, newsprint, writing and printing paper, cigarette and bidi paper, packaging paper, duplex board, media paper, liner, sticker paper and various grades of tissue paper, along with all other quality papers. Production in factories has decreased by almost half due to gas shortage, LC shortage, and disruption in raw material imports. Along with this, the risk of default has increased for entrepreneurs due to low sales due to high inflation, high interest rates on loans, and a new wave of loan defaulters. Many have stopped production in factories due to inability to provide working capital.”

“The abnormal rise in the dollar price has increased import costs. The main raw materials of the paper industry are waste paper, pulp, and chemicals. It can be said that there is no policy protection in this sector, which was built with huge investments. Many people are selling paper in the open market without any problems by bringing it under bonded warehouse facilities. This has threatened the domestic industry. Some are smuggling paper of one grade by announcing it as another grade, and no one is watching. Then how will the domestic industry survive? If all these factories are closed, millions of workers will be unemployed. As a result, it will not be possible to achieve the desired growth of the country.”
 

Web Title: Bangladesh Political Debacle: Bashundhara Paper Mills suffers severe losses amid exchange rate surge, sudden business stoppage, and LC restrictions; revenue falls by 40.11%