Businesses see no imminent threat to trade over India-Pakistan conflict

Business leaders in Bangladesh do not foresee any significant disruption to the country's trade with India and Pakistan despite the ongoing tension between the two neighbours over the killing of 26 people, mainly tourists, in India's Kashmir on 22 April.

Some even suggest that Bangladesh could potentially benefit in terms of trade and investment if the situation escalates.

However, some businesses have expressed concerns that if the conflict lingers or turns into a war, it could disrupt the supply chain of raw materials for Bangladesh's vital ready-made garment (RMG) industry.

India is Bangladesh's second-largest trading partner after China. In the fiscal 2022-23, Bangladesh-India trade amounted to around $16 billion; Bangladesh imported goods worth about $14 billion, while its exports to India stood at $2 billion.

Trade through Bangladesh's land borders with India also accounts for a substantial portion of this volume. Additionally, a large share of the key raw materials for Bangladesh's RMG industry, particularly cotton and yarn, is sourced from India.

Showkat Aziz Russell, president of the Bangladesh Textile Mills Association (BTMA), told The Business Standard, "So far, we do not see any risk or concern for Bangladesh in the current situation. The issue is confined to the border area between India and Pakistan."

However, he noted, if the situation worsens or escalates into a war, Bangladesh would still be able to make alternative arrangements if imports from India are interrupted.

"Even when India has temporarily halted exports of certain products to Bangladesh in the past, we have managed to become self-sufficient or find alternatives. For cotton and yarn, we have other options like China and Vietnam," he said.

Russell added that if tensions between India and Pakistan persist, it could even pave the way for increased business and investment flow to Bangladesh.

Mahmud Hasan Khan Babu, managing director of Rising Group, a leading apparel exporter, echoed similar views. He said as of now, the situation does not pose a major concern for Bangladesh since the problem remains limited to the India-Pakistan border.

"In any prolonged conflict, some countries suffer while others benefit. However, from a humanitarian standpoint, we do not wish for a long-term war between them, as not everything can be measured purely in economic terms," he said.

Responding to a question at a press conference in Dhaka on Wednesday, Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said, "Due to the India-Pakistan conflict, Bangladeshi garment exporters will not face difficulties in sourcing raw materials. However, border trade may be disrupted."

Highlighting the sector's reliance on imports from the two nations, Belayet Hossain, former director of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told TBS, "We import cotton, thread, yarn, and many other raw materials from India and Pakistan for our garment production. If a full-fledged war breaks out between the two neighbouring countries, there will be disruption in local transportation, which may affect imports to Bangladesh."

He continued, "If the import of raw materials is delayed or disrupted, RMG factories in our country will face delays in production and shipment. Consequently, the entire sector will face challenges.

Mohammed Amirul Haque, chairman of Seacom Group, having 40 years of experience in the shipping business, warned that the ongoing conflict between India and Pakistan has already begun to disrupt air and sea logistics connected to Bangladesh, which could have serious implications for the country's supply chain and economy.

"The beginning of the war has already forced several international flights headed to Bangladesh to be diverted last night [Tuesday]," he said. "The airspaces of both India and Pakistan have become risky, compelling airlines to take longer, alternative routes to reach Bangladesh. This not only increases freight costs but also extends travel time, causing significant disruptions in logistics."

Khairul Alam Sujon, vice president of the Bangladesh Freight Forwarders Association (BAFFA), said while the beginning of any war may be certain, its outcome remains unknown. 

He said, "Take the Russia-Ukraine war as an example. We thought it would be over within a week, but it has dragged on for three years, creating global crises in fuel and food supplies.

"We have similar concerns regarding a potential India-Pakistan conflict. Bangladesh imports industrial raw materials like cotton, yarn, and food products from India, and rice is also currently being imported from Pakistan. In addition, fabrics and chemicals are sourced from there as well. These imported items are used in the production of export-oriented goods, so any disruption would directly affect our export sector."