How MNCs are smartly meeting their dollar demands head on

A number of multinational companies (MNCs) operating in Bangladesh, particularly those involved in manufacturing and reliant on imported materials, are desperately seeking alternative options to secure dollars.

Industry insiders said these companies are exploring various avenues to obtain the necessary greenback, including seeking assistance from parent companies, engaging in export activities themselves, and collaborating with exporters to meet their urgent needs.

Infograph: TBS

For example, Unilever Bangladesh, the largest MNC in the country, is looking at different options to meet its demand for the foreign currency.

"We are exploring export opportunities. Also, we are talking to the exporters who retain foreign currency from their proceeds," said Mohammad Zaved Akhtar, chief executive officer and managing director of Unilever Bangladesh, which controls over 50% of the $4 billion local market of the fast-moving consumer goods (FMCG).

But he knows that export of Unilever Bangladesh's products won't be easy as import costs have shot up because of hikes in raw material prices and depreciation of the taka against the dollar.

Unilever Bangladesh has to depend on imports of raw materials and around 40% of its raw materials come from India and the rest from China and other countries. So, Unilever needs the US dollar to pay its import bills.

But a new option – trade with India in the rupee – has opened a new option for Bangladeshi importers.

"We are working on opening LCs (letters of credit) for import in the Indian rupee. Indeed, we have already opened an LC in rupee, but that one is very small," Zaved told The Business Standard on Saturday.

In a ground-breaking move, Bangladesh and India launched trade in the rupee on 11 July, allowing Bangladeshi businesses to settle their transactions in a currency other than the US dollar.

Currently, Bangladesh conducts its external trade exclusively in the American greenback. However, over the past 12 months, the appreciation of the US currency against the taka by approximately 25% has significantly impacted foreign exchange reserves, which have shrunk by a third since the onset of the Russia-Ukraine war.

As the US dollar is the world's reserve currency and roughly 40% of the global transactions are done in dollars, whether the United States is involved or not, as per a study by the International Monetary Fund, many economies from Asia to Africa, Latin America and Europe have been watching their currencies taking a freefall. And Bangladesh is feeling the pinch more than many countries as it depends heavily on imports to meet the demand for raw materials, industrial goods, gas, fuel oils, sugar, edible oil and most other necessities.

Germany's BASF, which produces chemicals and materials for industrial solutions, surface technologies, nutrition and care and agricultural solutions for clients in Bangladesh, is also facing problems with the shortage of the dollar.

"We are taking credit from our parent company. Usually, we take 90 days for repayment, now we request them to defer the payment considering the existing dollar crisis in Bangladesh," said Sazzadul Hassan, chairman and managing director of BASF Bangladesh.

He said they are facing the dollar crisis despite 90% of his company's clients importing directly from BASF units in other countries. For example, he said Incepta Pharmaceuticals, which is a client of BASF, imports from Germany or another country by opening LCs by itself. 

Replying to a query, he said the dollar situation has not improved though it did not deteriorate. Still, large foreign banks and reputed local banks decline to open LCs and request importers to defer payments, he noted.

It is not only Unilever or BASF that is facing the crisis for the dollar.

On 16 July, Robi, the country's second-largest mobile network operator, announced a $55 million loan from its parent company Axiata Group, a Malaysian multinational telecommunications conglomerate. 

Robi said the loan is being taken as a precautionary measure to safeguard against any potential impact from the ongoing dollar crisis in the country.

In April this year, Berger Paints Bangladesh, which is also listed on the Dhaka Stock Exchange like Unilever and Robi, signed an agreement with its foreign parent company J&N Investments (Asia) Limited to avail of $60 million in loans to meet the needs for import payments. 

Berger Paints Bangladesh holds over 50% share in the Tk5,000 crore painting market in the country, according to insiders.

In addition to the above-mentioned MNCs engaged in manufacturing, other notable players, such as GSK Bangladesh, Nestlé Bangladesh, Bata Shoe Company (Bangladesh), Reckitt Benckiser, Coats Bangladesh, Linde Bangladesh and Novartis. 

Insiders said many of these companies are also facing challenges in acquiring the dollar needed to import raw materials.

On 24 February 2022, when Russia invaded Ukraine, Bangladesh's foreign exchange reserves were over $45 billion. Since then it started to fall rapidly because of the steep rise in prices of commodities, be it fuel oils, gas, fertiliser, raw materials and foods. 

As a result, the demand for the dollar skyrocketed and it got strong massively – from Tk86 a dollar in March 2022 over Tk100 by June. The price of a dollar shot up to Tk115 during the July-September quarter.

Bangladesh's gross forex reserves reached a record $48 billion in August 2021 and it now stands at around $30 billion, forcing the government to sign a $4.7 billion loan package to avert a bigger crisis.