INDEPEMDENT UNIVERSITY

Final Assignment
MBA Spring 2021, Managerial Economics
Mohammed Iqbal Hossain, Student ID: 2031313
Introduction:

Light Engineering sector is a growing market in Bangladesh. Meeting 48% to 50% of the total
domestic demand and providing backup support to the cement, paper, jute, textile, sugar, food
processing, railway, shipping, garments capital machinery, the light engineering sector of
Bangladesh is considered to be the ‘mother of all sectors’, according to Bangladesh Business
Promotion Council[CITATION Ban16 \l 1033 ]. It is also considered to as ‘booster sector’ because it
boosts economy by reducing import of substitute spare parts for the local industry and increases
exports. This sector is also one of the major export items for Bangladesh. [CITATION Ban16 \l
1033 ]. In 2018-2019 Bangladesh exported Eng. products (excluding Bicycle) 257.06 million
dollar, the percentage of which is 0.84% (Figure 1) of the total exports. [ CITATION EPB19 \l 1033 ].

Figure 1: Share of engineering products in total exports

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 LEI yearly Export data
800

700 688.84

600

500 510.08

400 381.63
324.98
300 292.92
270.23 257.06
200

100

0
2014-15 2015-16 2016-17 2017-18 2019-19 2019-20 2020-21 (Jul-Mar)

Figure 2: Yearly Export trend

It is interesting to note from above data and trend (Figure 2) that during COVID-19 scenario the
export of the engineering products is also rising.

COVID-19 started at the end of 2019 from China and then it spread almost all of the countries in
the world. The World Health Organization (WHO) declared the outbreak as a pandemic on 11
March 2020. According to Worldometers.info 158,420,383 people infected so far and 3,299,060
people died worldwide. In Bangladesh first COVID case was found on 8 March 2020 and
773,513 people infected so far of which 11,934 died. In Bangladesh second web of COVID-19
started during March 2021 and reached its peak in the first week of April which still persists.
The infection rate still remains above 5%, which is WHO’s safety line. Following
diagram (Figure 3) shows the COVID web in Bangladesh.

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 Figure 3: Source: https://www.worldometers.info/coronavirus/country/bangladesh/

Under this backdrop, Govt had to impose lock down several times in 2020 and in 2021 to fight
the second wave of the Covid-19. But the impact is high for the country. Many industries,
financial institutions, educational institutions, shops etc. had to close down and people’s
movement had to be restricted. Foreign byers stopped buying. This impacted economy as well.
Real GDP growth rate for 2019-20 (projected) was down to 5.24% from previous year’s 8.15%
and GDP growth rate is projected by various agencies such as ADB at 6.8%, IMF at 4.4% and
World Bank at 1.1% although government estimate is 8.2% [ CITATION BRA20 \l 1033 ].
Government gave some stimulus packages for some of the export oriented sectors and
agriculture but these were not sufficient for fulfilling the needs.

The case scenario:

Imagine that you are the top manager in an export-oriented business enterprise producing light
engineering products based in Chittagong. The enterprise has a reputation of being one of the
finest light engineering exporting companies from Bangladesh to the Middle-east market. From
March 2020 your business enterprise has been facing covid-19 related production cuts along with

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lesser import orders. Due to the ongoing second wave of the covid-19, your enterprise is facing
uncertainty about when the situation improves and it resumes full-scale operation and starts
exporting the products to the Middle-east market again. Under this backdrop, briefly give your
opinion on the following questions?

Five questions and answers:

The following five questions (A,B,C,D and E) are explained below

A. Will you lay-off your workers, including the technical experts who are considered the
best technical experts in the country and also a major reason behind your product quality?
Give arguments in favour of your answer by mentioning what possible measures you will
take to deal with the situation.

Answer: As mentioned above COVID-19 situation has worsened country’s economy as well as
individual firms, industries as well the general public. The sector is export-oriented and the
workers are skilled and semi-skilled. It is not wise to lay-off the workers in this situation. The
impact of lay-off will be manifold as follows:

 Impact on their livelihood: The workers live their livelihood and support their families on
their job and if they lose their job their survival will be difficult. They will be upset and
surprised. Ultimately it will give burden on the economy as a whole and can backslash on
our industry as well.  Even those who are not terminated will also be impacted and their
productivity will fall because of fear of losing job, additional responsibilities with extra
pressure or stress. So laying-off or downsizing is not the only solution.

 Loss of knowledge: Our technical experts are considered the best technical experts in the
country and our product quality depends on them. They have attained huge experience
and are trained on the technical subjects. Most of our technical experts are kept on
probation for two years after hiring and it takes years to develop their expertise. It will be
difficult to find and build skilled and knowledgeable workforce even if COVID situation

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 improves later on. So our policy is not to lose employee’s knowledge, experience, and
expertise and not to go for lay-off. 

The possible measures: As corvid situation was worsen the economy and our sector and our
enterprise has been facing covid-19 related production cuts along with lesser import orders there
is still hope to survive. Following measures will be taken:

 Limited productions: Since there are lesser import orders, concentration will be given on
local market. Some of the industries are still operating with limited production and since
import of spare parts is not possible for those industries our enterprise can take this
opportunity. As mention earlier domestic LEI sector are contributing almost 50% to the
domestic market. So there is every possibility of entering this market instead of
dependency on the foreign market. So instead of laying-off our enterprise will continue
production in limited scale and will try to keep our expert workforce.

 Take advantage of govt stimulus package: The government of Bangladesh has announced
huge stimulus package due to COVID crisis. According to a report published by the
Ministry of Finance in November 2020, the government announced Tk 121,353 crores
worth of stimulus packages. This is equivalent to 4.3 percent of gross domestic product of
the country. One of the important features of Bangladesh's stimulus packages is that these
are more of liquidity support and less of fiscal stimulus. Of the total stimulus packages
unveiled so far 80.7 percent (3.5 percent of GDP) is liquidity support and 19.3 percent
(0.8 percent of GDP) is fiscal stimulus. [ CITATION Kha20 \l 1033 ]. So our enterprise will
try to cover up liquidity crisis though using stimulus package wisely.

 Other short and long term loan from commercial banks: Due to COVID-19 pandemic
Banks has excess liquidity and are eager to invest but industries are not takin loans due to
pandemic situation. According to report by Dhaka Tribune, excess liquidity in banks
amounted to Tk204,738 crore at the end of December 2020 and is expected to hit the
Tk225,000 crore mark after February, clearly showing that ideal money is increasing
gradually.[ CITATION Dha21 \l 1033 ] . So our enterprise will take this advantage of getting

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 loans from commercial banks and fulfil our liquidly crisis and running the operation in a
limited scale.

 Reduction of variable costs: One of the measures is to lower the variable costs as much as
possible to reduce the outflow of cash and improve the liquidity crisis. Variable costs
such as, workers will be encouraged to go for leave from their available leave balances so
that lay-off can be avoided. In the worst case, workers may be given reduced pay for the
time being due to liquidity crisis.

 
B. Imagine your enterprise has a bank loan of 50 million taka from a private commercial bank
of Chittagong at an interest rate of 9.50%. Now, as the sale has come down heavily and it is
even difficult for your firm to manage its minimum necessary costs including its regular
management and maintenance costs, then what policy you may adopt to deal with the bank.
Please explain

Answer: The following measures can be done to deal with the bank:

 We will try to reschedule our payment with the bank so that in the short run we don’t face
further liquidity crisis. Bank-customer relationship is important in this case. Our
enterprise had never been default of paying the instalments and bank will understand the
current pandemic situation. So rescheduling is one of the options.

 Another option is renegotiate with the bank to reduce the interest rate further which may
reduce our liability to the bank.

C. In case if the destination market (i.e. the Middle-east market where you export your
product) starts demanding regular supply of your product as its covid-19 situation
improves, while due to continuous lock-down in Chittagong your firm’s production is
totally closed down now. Against such a situation, what possible policy will you adopt to
deal with the foreign buyers to prevent them from future trading with you? Explain.

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Answer: As our production is totally closed now, the following measures can be taken to deal
with foreign buyers.

 Communication and stay informed: our firm has a long term good relationships with our
foreign buyers and never default in supplying our products to them. During COVID
situation we will communicate every steps to them how we are tackling the situation in
the country, the condition of our workers, government and bank support etc. We will tell
them that our workers and staff are committed to work immediately when situation is
improved. We will show our dedication to keep their operation running soon after the
outbreak. Since the situation prevails in almost all of the countries globally there may not
be alternative sources for them and we will make sure that we are the natural choice for
them due to our long term relationships and ask them to keep patience. These types of
communication in transparent way may convince buyers not to stop relationship with us.
So the key is here to stay in touch with them and maintain a good relationship with them.

 Emergency production: in case of dare necessity we can start operation in a very limited
scale by following health rules and other precautionary measures with the help of local
administration. And propose foreign buyers that in case of necessity we can supply some
emergency spare parts and materials. So that they are convinced about our commitment.

D. In case if you come to know from a recent scientific research that the covid-19 situation
is going to improve fully within next 6 months, will your decisions in the earlier three
questions (i.e. a, b and c above) be changed? Explain why.

Answer: If scientific research suggests that the situation may improve within next six months we
will stick to our earlier decisions because of the following reasons.

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  When situation improves our skilled workers and technical experts are needed to start full
and smooth operation and we will not lay-off them as we decided earlier. Moreover we
will train them continuously during closer periods to upskills their knowledge so that they
don’t forget their expertise.
 Our decision to take government stipules package will continue since the packages have
lower interest rates relating to commercial banks. We may take bank support very limited
scale since the interest rate is higher compare to government package.
 We will ask banks rescheduling our existing 50 million taka with commercials banks
because we are unable to pay installments during pandemic period and we will ask them
to give us a six months grace period. So earlier decision prevails as well in this case.
 We will continue to communicate with our stakeholders specially with foreign buyers to
keep them update and show our commitment during pandemic and post pandemic period.
 We will try to produce emergency materials with limited scale to keep our foreign buyers
running their operation.
 In short, most of the decisions we took earlier in section A, B, C will prevails.

E. Once the covid-19 situation becomes fully normal, will you suggest your firm-owner to
take certain precautionary measures to protect the interests of your enterprise in the
coming days from such uncertainty like the outbreak of the covid-19? Explain with
arguments.

Answer: Covid-19 pandemic changed the world a lot. It is not certain that situation becomes
fully normal. International Monetary Fund (IMF) published an article in their regular FINANCE
& DEVELOPMENT journal titles How will the world be different after COVID-19? [ CITATION
Int20 \l 1033 ]. In the article six prominent thinkers reflected their views on post COVID era. One
of the thinkers Daniel Susskind questioned, “What will the world look like after COVID-19?
Many of the problems we will face in the next decade will simply be more extreme versions of
those that we already confront today. The world will only look significantly different this time if,
as we emerge from this crisis, we decide to take action to resolve these problems and bring
about fundamental change.”

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Another thinker, James Manyika argues that, “The world after COVID19 is unlikely to return to
the world that was. Many trends already underway in the global economy are being accelerated
by the impact of the pandemic.”

Sergio Rebelo argues that, COVID-19 will leave a lasting imprint on the world economy,
causing permanent changes and teaching important lessons. He also said that, “Companies with
international supply chains are dealing with shortages and bottlenecks. We are likely to see
many of these companies reshore some of their production. Unfortunately, this trend will not
create many jobs because most of the production is likely to be automated.”

Under this above backdrop it is important that we have to prepare for the future to deal with such
situation.

 Prepare a resilience plan: The COVID crisis has weakened the economy and the
enterprises as well as made us vulnerable. We were not prepared for the uncertainty and
did not know how to deal with crisis situation like this. I will propose to make resilience
plan so that our enterprise can adapt when disruptions occur like this in future and
maintain business operations and keep our employees safe.

 Build an emergency fund for the crisis. This fund will help to meet liquidity crisis during
uncertainty period. The sources of fund may come from existing profit and invest this
fund for further regeneration.

 Automating our functions: Automation is the key to success. If we can automate business
and production process we can continue our business during crisis period with minimum
efforts and employees. In fact, post COVID society will be technology driven and we
have to embrace that technology.

 Insurance policy for our factory and staff. New insurance policy may emerge in the
country to deal with the situation. We can explore existing as well as new policy to
provide support in the crisis period.

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  Staff benevolent fund and loan facilities: This fund will help employees amidst crisis
situation and also employees can take loan from this fund to meet emergency demands.
The fund provides financial help for a variety of daily living costs such as household
bills, rents, food and clothing for the employees living at home and in hardship.

 Ensuring Supply chain: Pandemic has disrupted our supply chain as well as we found difficulty to
produce emergency products due to short supply of raw materials and accessories. One research
conducted by Capgemini consulting firm reveled that “68% Organizations that have taken more
than three months to recover from supply chain disruptions caused by COVID-19.” [ CITATION
Cap20 \l 1033 ]. So it is important to make sure that future interruptions can handle smooth
supply of raw materials and other accessories. Again diversification is the solution. Discussion
and agreement will be made with multiple suppliers if circumstances arise. The financial strength
and resiliency of supply chain will be evaluated to know their capacity and readiness in the
emergency period.

 New product development and market opportunities: We also plan for new products for the
alternative marker rather than relying on fully middle-east market. We can explore regional
markets as well as existing local markets to diversify our future markets to reduce dependency on
a single country or buyer. Innovation is our priority and we will research for new opportunity to
deal with future uncertainty.

Conclusion:

COVID-19 brought us a situation the world never faced before. The government and enterprises,
general public never prepare for the uncertainty they faced and it is still not sure when the
pandemic will disappear. It appears that we have to adapt to anew normal situation unlike earlier
situation and cope with the uncertain period. As a top manager in an export-oriented business
enterprise, I have to be more vigilant and resilient so that I can put my enterprise to deal with the
future uncertainty as well as cope with the existing crisis and try to find best alternatives to
survive and thrive.

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Bibliography
(EPB), E. P. (2019). Export Statistics 2018-2019. Export Promotion Bureau (EPB).

Bangladesh Foreign Trade Institute. (2016). A Study on Sector-based Need Assessment of Business
Promotion Council- Light Engineering Sector. Dhaka: Bangladesh Foreign Trade Institute.

BRAC Institute of Governance and Development. (2020). COVID-19’s Impact on Bangladesh Economy.
BRAC Institute of Governance and Development.

Capgemini Research Institute. (2020). Fast Forward Rethinking supply chain risilience for a post-COVID-
19 world. Paris : Capgemini Research Institute.

Dhaka Tribune. (2021). Businesses bear loan repayment brunt amid swelling bank liquidity. Dhaka:
Dhaka Tribune.

International Monetary Fund. (2020). Life Post–COVID-19. FINANCE & DEVELOPMENT, 57(2), 1-4.

Khatun, F. (2020). How effective have stimulus packages been? Dhaka: Daily Star.

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