Middle East crisis hits businesses hard, small entrepreneurs deeply worried

At Keraniganj’s Zihan Plastic Industries, a factory producing plastic toys and employing around 800 workers, the impact of the Middle East crisis is already severe.

Prices of raw materials used in plastic toy manufacturing have risen sharply in the global market, driven by the turmoil, forcing the company to reduce imports. At the same time, worsening power shortages in the country have led to increased load-shedding in recent months. As a result, the factory’s output has fallen by half, while sales have dropped by 40 to 50 per cent compared with normal times.

Mohammad Sumun, managing director of the company, recently told Prothom Alo that soaring prices of plastic raw materials in the Middle East had compelled the company to cancel several import orders.

He also alleged that syndicates in the local market had also pushed up raw material prices.

“In addition, we are facing six to seven hours of load-shedding day and night. Diesel is also unavailable,” Sumun said. “Wholesale sales have fallen because shops are required to close in the evening. If the war in the Middle East drags on, shutting down the factory may be the only option left.”

Like Suman, small entrepreneurs scattered across the country have, to varying degrees, been grappling with mounting challenges triggered by the Middle East war that broke out after the US and Israel carried out an attack against Iran.

With no certainty yet over a resolution to the Middle East crisis, which has persisted for nearly two months, business owners say they are deeply anxious about the future.

Conversations with several small entrepreneurs across the country suggest they are broadly facing four major problems: rising raw material prices and supply shortages; production disruptions caused by electricity load-shedding; higher production costs driven by fuel shortages and increased prices; and a collapse in sales following the mandatory closure of shops in the evening.

Entrepreneurs say the crisis has become so acute that meeting wages and other operating costs is increasingly difficult.

After war broke out between Iran and Israel–United States forces on 28 February, the Strait of Hormuz, a vital route for global fuel transport, was effectively shut down. That pushed crude oil prices in the international market above US$100 a barrel.

Faced with supply shortages and soaring prices, the government introduced fuel rationing last month. Since then, motorists have been forced to queue for long periods at filling stations, and many have had to return without fuel.

Compounding the strain, the Energy and Mineral Resources Division raised fuel prices by Tk15 to Tk20 per litre last Saturday night.

Handicrafts firm Hat Bakso produces miniature replicas, fridge magnet replicas, frames, paperweights, card holders, desk calendars, lapel pins, coat pins, tie pins, cufflinks, key rings and luggage tags, among other products. Although corporate institutions make up its main customer base, the company also sells to retail customers online.

The war has pushed up the price of resin, the principal raw material used in its replicas, by 20 per cent. Transport costs have also risen due to higher fuel prices.

Shafat Kadir, chief executive officer of Hat Bakso, told Prothom Alo that the surge in raw material prices had increased production costs.

“As corporate orders account for 65 to 70 per cent of our business, and we have no scope to raise prices on orders already taken, we are incurring losses,” he said. “Online sales have also fallen by 20 to 30 per cent since Pahela Baishakh.”

In Gopalpur, Faridpur, RK Metal manufactures agricultural machinery including onion storage equipment, grass cutters, rice threshers and maize threshers. The firm’s business has been poor for two years, and the Middle East crisis has worsened the situation further. Sales of agricultural machinery have now fallen by half.

Confirming the downturn, RK Metal managing director Paritosh Kumar Malo told Prothom Alo: “Two years ago, 25 to 30 workers were employed at my factory. Now only eight to ten remain. With business shrinking, we have been forced to reduce manpower.”

He further said the war had driven up the prices of raw materials, while electric motors had become significantly more expensive. Many government projects were currently on hold, and farmers, deprived of subsidies, were reluctant to purchase new machinery.

Asked about the broader outlook, Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue (CPD), said that even if the Iran war ended today, it would take more than a year for fuel supplies to return to normal.

“The reason is that fuel infrastructure in Middle Eastern countries has been damaged by the war,” he said. “That means the government no longer has the scope to rely only on short-term measures. To ensure affordable energy in the future, dependence on fossil fuels must be reduced and solar power generation expanded.”