BUSINESS SUPPORTS STATE OF EMERGENCY

UNCLAS SECTION 01 OF 02 DHAKA 000079

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD PGOV PREL KDEM BG
SUBJECT: BUSINESS SUPPORTS STATE OF EMERGENCY



1. (SBU) SUMMARY: Business leaders support the January 11
declaration of a state of emergency, expecting it will allow
commerce to return to normal under conditions of political
stabilty. They believe the general public accepts the state
of emergency, say the new Chief Advisor is well regarded, and
express optimism that despite the short-term economic impact
of the blockade program, the medium to long-term impact will
be negligible. END SUMMARY.


2. (SBU) Business leaders' frustration with the political
stalemate came to a head on January 6, just days before
President Iajuddin Ahmed's January 11 declaration of a state
of emergency. Already suffering losses from two months of
political agitations and disruptions at the country's main
port, the business community feared that continuous agitation
both before and after a one-sided election could inflict
long-term damage on the economy and the key ready made
garment (RMG) sector. (Some estimate each blockade day cost
the RMG sector alone 20 billion taka ($29.4 million) and more
than 50 billion taka ($73 million) for the Bangladesh economy
generally.) Most of the major business chambers therefore
called for the two major political alliances to negotiate a
compromise political solution. The Federation of Bangladesh
Chambers of Commerce and Industry, the country's apex trade
body, went further. In their press conference they called on
the President/Chief Advisor to declare a state of emergency
if the political impasse could not be resolved quickly.

Business Reacts Favorably
--------------


3. (SBU) It comes as no surprise, then, that the business
community is expressing support for the state of emergency
and a reconstituted Council of Advisors. Econoff contacted
several prominent business leaders on January 14 for their
initial reactions.


4. (SBU) The RMG sector expressed relief over the turn of
events. A major cotton importer summed up reactions:
"Implementation of the state of emergency was well done;
there was no alternative." Now, he says, everyone can get
back to work. The woven sector, which depends heavily on
imports for its main inputs, had begun canceling orders
because port disruptions were preventing factories from
importing the textiles they needed. The knitwear sector,
which sources most of its yarn domestically, was able to meet
order commitments by using airfreight instead of sea freight,
but the additional costs were becoming prohibitive. RMG
owners we contacted expect port operations to return to
normal within two to three weeks. Officials at the Dhaka
Export Processing Zone confirm these estimates.


5. (SBU) Estimates of the number of orders cancelled vary
widely, with some estimates as high as 50%. Syed Ershad
Ahmed of the Bangladesh branch of Expeditors, a global
shipping and logistics company, works closely with several
major US buyers, including Wal-Mart and The Gap. Ershad said
buyers have not yet turned to other countries to source their
products, due primarily to the lead times needed to establish
reliable new long-term supply chains. If the situation had
worsened, however, he believes buyers would have reduced
their commitment to Bangladesh, perhaps turning to India as
an alternative.


6. (SBU) American Chamber of Commerce-Bangladesh Executive
Director Gafur told Econoff that people accept the state of
emergency and appointment of a new Chief Advisor. He
predicts it will take time for any problems or resistance by
the general public to arise. Reflecting the earlier general
state of uncertainty in the business community, he said
AmCham had been considering postponing their annual US Trade
Show, set for mid-February, due to exhibitors' unwillingness
to participate. Renewed business optimism means they many not
have to reschedule after all, Gafur said.


7. (SBU) Businesspeople in other sectors also support the
state of emergency. Habibullah Karim of Technohaven, a
computer software developer, told Econoff the business
community welcomed the end of political agitation. "This
should have been done a long time ago," he said. Mohammed
Mahtab Uddin, whose business interests include publishing and
ceramics manufacturing, expressed anger at the political
stalemate and at corruption. He thinks fixing the voter list

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and preparing for elections will take many months but that
people will give the new Chief Advisor the time he needs.
The people are "fed up" with the Bangladesh Nationalist Party
and the Awami League, he opined, and would welcome a third
option, but no one has the funding or "muscle" to compete
against the two parties.

Comment
--------------


8. (SBU) The business community grew increasingly alarmed
at the prospect of prolonged political agitation and civil
unrest as a one-sided election appeared inevitable. Although
adept at coping with chronic governance and corruption
problems, blockades and nationwide strikes risked long-term
damage to the economy, and the business community was willing
to support almost any solution that could restore political
stability and normal commercial activity.
BUTENIS