Middle East crisis: 580 exporting firms at major risk

Bangladesh’s export volume to the Persian Gulf region of the Middle East is not very large. However, nearly two thousand companies export products to this market regularly and irregularly. As the Strait of Hormuz has been almost closed for two weeks, these exporting companies are now facing the biggest risk.

According to data from the National Board of Revenue (NBR), Bangladesh exported goods worth a total of $750 million to eight Persian Gulf countries in the last fiscal year. These products were exported by 1,823 companies. Among them, 580 companies are those whose 50 per cent to 100 per cent of total exports went to these eight countries.

Exporters and researchers said that many Bangladeshi exporters initially send products to neighbouring markets in South Asia, including India, to gain experience. Later, the Middle Eastern market becomes their main export destination. After further strengthening their capacity, they enter larger markets in Europe and the United States. Last year, smaller exporters faced a major risk due to restrictions imposed by India. Before recovering from that shock, the current crisis in the Middle East has created new uncertainty for them.

Analysis of NBR data shows that although a few large industrial groups such as Pran‑RFL Group, Akij Group and Abul Khair Group export products to the Persian Gulf region, most of the others are small and medium-sized enterprises. Many commercial exporters are also active in this market.

On 28 February, after the United States and Israel launched attacks against Iran, Iran showed retaliatory reactions. The conflict quickly spread across the Persian Gulf region. Iran subsequently announced that it would obstruct ship movement in the Strait of Hormuz. As a result, exports by sea have effectively stopped.

Because of this, sea-route exports have been halted to large parts of Iran, the United Arab Emirates, Iraq, Kuwait, Qatar, Bahrain, and Saudi Arabia. Exports to Oman, which lies close to the Strait of Hormuz, have also stopped.

Although exports by sea have been halted, a limited quantity of goods is still being shipped by air. However, only about 19 per cent of total exports to these eight countries go by air, while the remaining 81 per cent is transported by sea, which is now almost completely suspended.

According to NBR, both ready-made garments (RMG) and non-garment products are exported to the Middle East. In the last fiscal year, 493 types of non-RMG products (according to eight-digit HS codes) were exported to that region. Major products included jute goods, food products such as biscuits and beverages, vegetables, spices, betel leaves, tobacco, and footwear.

Spices and biscuits are notable export products to this region. In the last fiscal year, exports of these two products alone amounted to nearly $100 million.

Welcome Impex Food and Beverage, based in Aminbazar in Dhaka, has been exporting these products to Saudi Arabia for the last four years. Around 30 workers are employed at the company’s factory. In the last fiscal year, it exported products worth about $206,000.

Chairman Anwar Hossain said that due to the war making exports uncertain, the pace of production has been reduced. Temporary workers have also been given leave. They are now trying to find new markets, but the situation has become complicated because the war is affecting many markets.

Another major export item to the Persian Gulf region is vegetables. In the last fiscal year, vegetables worth about $30 million were exported to the region.

Ali Beverage and Food Products exports vegetables, betel leaves, and processed food to Saudi Arabia. Its partner Mohammad Yunus Sarker said that some products are still being shipped despite the war, as flights to Jeddah and Medina remain normal. However, transport costs have increased significantly.

Previously, sending goods by air cost Tk 107 per kilogram, but it now costs about Tk 150. By sea, the cost of shipping one container was around $2,200, which has now increased to about $5,700.

Pacific Sea Foods, based in Chattogram, exports frozen fish to the Middle East. Its managing director Dodul Kumar Dutta said:

“Most of our exports go to the Middle Eastern region. After the war, exports to Saudi Arabia are still happening, but shipping costs have increased by $1,000 per container. At the same time, air-freight export options are not available. So even though we have orders, we cannot export properly.”

Another export product to the Middle East is jute goods. In the last fiscal year, about $40 million worth of jute products were exported to this region. After India imposed restrictions, many exporters had begun turning toward the Middle Eastern market. The current crisis has now disrupted that potential as well.

Quality Jute Yarn, an exporter of jute products, sends 47 per cent of its total exports to the Persian Gulf region. When asked, its managing director MA Malek told Prothom Alo that the company has three jute mills in Narayanganj, Khulna, and Feni, employing five thousand workers.

He said they export carpet yarn worth about Tk 4 billion annually, mainly to Iran (previously shipped via Dubai), Turkey, Turkmenistan, and various African countries. Since the war began, exports to Iran as well as all other countries have stopped because shipping costs have increased sharply.

Previously, shipping a container to Turkey cost $2,200, but it has now increased to $6,500. As exports have stopped under these conditions, production has had to be reduced.

Readymade garments are also exported to the Middle East. According to NBR data, 1,141 companies exported garments to Persian Gulf countries in the last fiscal year. Their total exports amounted to about $410 million. Among them, 241 companies sent more than half of their total exports to that region.

Universal Apparels, located in Joar Sahara in Dhaka, has been exporting garments to Saudi Arabia for the past two years. Its general manager Md Aktaruzzaman said the company had no shipment scheduled when the war began, but shipments are scheduled for next month.

If the war does not end before then, the products will not be exported. As a result, they are worried. The major concern is that all exports from their factory go entirely to Saudi Arabia.

According to data from the United Nations Economic and Social Commission for Western Asia, the seven Persian Gulf countries imported goods worth about $891 billion in 2024. Although Bangladesh’s exports to this region are still relatively small, there is significant potential for expansion in this market.

Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), said the Middle East is an expanding market for Bangladesh. Exports from Bangladesh were increasing not only because of expatriate demand but also due to growing demand among local consumers in those countries.

He said that because of the war, exports to this market have been disrupted, increasing the risk. However, if the conflict ends quickly, the possibility of expanding both markets and product diversity will emerge again.