As old players disappear, small businesses step up to fill the commodity import gap

Summary:

• Imports and LC openings were monopolised by some big players
• The Monopoly collapsed after 5 August
• LC approvals for others have now eased
• over 30 companies have resumed imports, filling the boid
• no risk of shortages during Ramadan, traders say

Small and medium importers in Dhaka and Chattogram, who once struggled to open letters of credit (LCs) because of a market monopoly, have now stepped in to fill in the gap in the commodity supply chain since October, significantly increasing their imports.

At least 30-40 companies, many of which had previously scaled back or halted imports altogether, have revamped their business activities, especially ahead of Ramadan.

These companies are now actively importing consumer goods, ensuring an uninterrupted supply of essentials such as sugar, edible oil, chickpeas, and pulses – a market that the S Alam Group had dominated for years.

Smile Food Products, a concern of Abul Khair Group that started operations last year, imported 1,992 tonnes of crude soybean in July this year, 2,579 tonnes in August, 3,372 tonnes in September, and 1,486 tonnes in October, according to the National Board of Revenue (NBR).

The company had imported only 1,081 tonnes of soybean during July-November in 2023, and that too solely in October.

Company officials say the group has already acquired four edible oil refineries – one previously owned by the now-defunct Messrs Ilyas Brothers and three by SA Group – in a bid to capture the consumer goods market.

Mahbub Kamal, director of Smile Food Products, said, "We have increased our investment in importing consumer goods."

Bankers and business owners recount how the influence of S Alam Group on the banking sector forced many banks to prioritise it until its stranglehold started loosening after 5 August.

Data from the NBR highlights the extent of S Alam Group's decline. The group, which imported 25,080 tonnes of raw sugar in July and 35,420 tonnes in August, has failed to bring in any sugar since then. Similarly, after importing 18,900 tonnes of crude soybean oil in July, the group has halted imports of the product altogether.

The shortage of raw materials has crippled S Alam's production facilities for sugar, oil, and steel, leading to near-total shutdowns between October and November.

Mostafa Kamal, chairman of Meghna Group of Industries (MGI) and the country's largest commodity importer, dismissed concerns about a potential crisis, saying "the absence of S Alam Group's imports will not affect the market".

Kamal pointed to new entrants like Abul Khair Group, another industrial giant, which has stepped up to meet the country's demand after a gap of several years.

More LCs, more imports

For the past 5-7 years, Abul Khair Group, which was one of the top importers, had reduced its imports of consumer goods. However, in the last four months, the group has returned to its former strength.

According to information from banks handling the group's import LCs, it has imported a significant amount of essential consumer goods, including wheat and oil, over the past 3-4 months. In anticipation of the upcoming Ramadan, the group has further increased its import of essential goods.

Ali Tareq Parvez, zonal head (Chattogram) of NCC Bank, said Abul Khair Group's import activity since August has undoubtedly surpassed that of other importers in the country.

Rezaul Karim, owner of Reza Enterprise, a consumer goods importer from Chattogram's Khatungaj, said they were unable to import goods in recent years due to the dominance of "controversial business groups".

"Banks would pay no attention to businesses like ours," he said, adding that the company has recently imported essential items, targeting the upcoming Ramadan, which will be supplied to the market in phases.

Other companies in Khatunganj that have recently increased their imports include City Commodities, Messrs Koli Traders, Zaman Enterprise, Khatunganj Trading, Din Company, AM Trading, Sri Matri Bhandar, and Khan & Sons.

Additionally, companies such as Dhaka's Crown Group, Akij Group, North Bengal's Nabil Group, and Jashore's Sheikh Brothers have also ramped up their imports.

Sabbir Ahmed Chowdhury, manager of Standard Bank's Khatunganj branch, said since the change in government, imports by small, medium-sized importers have increased at the branch.

"Over the past five to seven years, imports by small and medium-sized importers had largely come to a halt as some banks were providing import facilities to certain industrial groups in the country," Sabbir said.

"This allowed those groups to engage in monopolistic business practices, putting pressure on genuine importers and businesses."

Haradhan Nag, proprietor of Sri Matri Bhandar, said, "Over the last two to three months, we have resumed imports as we used to before. During this time, we have imported 4,000 tonnes of white peas and 2,000 tonnes of chickpeas.

Although concerns arose about whether the group's downfall might lead to product shortages and price increases due to its market monopoly, industry insiders say there is no likelihood of a negative impact on the relevant product markets

"We are in the process of importing at least another 6,000 tonnes of peas and 4,000 tonnes of chickpeas ahead of the upcoming Ramadan."

He said Sri Matri Bhandar has opened LCs worth $4.3 million for chickpea imports since August. During the same period, it is set to import $4.1 million worth of peas.

Paritosh Dey, owner of King Traders of Khatunganj, said the company's imports had nearly come to a halt over the past three to four years.

Recently, the company has opened LCs worth $7 million for chickpeas, $4 million for peas, and $5 million for lentils to ensure supply through Ramadan, he added.

Rashed Ali, proprietor of City Commodities, said, "In 2022, I approached several banks to open an LC for importing chickpeas worth $323,000. None of them issued an LC. As a result, I had to reduce imports.

"However, I am now importing wheat, chickpeas, peas, lentils and fruits through the Askar Dighi branch of Islami Bank."

Will closure of S Alam factories affect the market?

Importers and business owners say S Alam's factories began halting production in October after failing to import raw materials following the fall of the Awami League government on 5 August.

On 24 December, S Alam Group announced the closure of eight sugar, steel, and bag factories. Group officials informed the media that they were forced to shut down the facilities due to a raw material shortage caused by their inability to open import LCs.

The closed factories are S Alam Refined Sugar Industries, S Alam Bag, S Alam Cold Rolled Steels Limited, Infinity CR Strips Industries Limited; steel sector companies NOF, Chemon Ispat, S Alam Steel, and Galco.

TBS has found that although no formal closure announcement was made, the group's edible oil factory has been out of production since November.

Although concerns arose about whether the group's downfall might lead to product shortages and price increases due to its market monopoly, industry insiders say there is no likelihood of a negative impact on the relevant product markets.

While the group's import halt after 5 August initially caused minor supply shortages, banks are now operating more independently, enabling genuine importers to bring in products. This has increased market supply, and prices of most essential goods have already decreased, they explained.

Taslim Shahriar, DGM of Meghna Group, said the government has already reduced tariffs and taxes on several essential commodities. The supply of goods has increased, stabilising the market.

"Even during Ramadan, there is no concern about a potential price rise," he assured.

Ashish Kumar Nath, deputy manager of S Alam Group, said their factories began shutting down one by one due to a raw material shortage after August. With no prospects of importing raw materials, the factories were officially closed to minimise losses.

Speaking on condition of anonymity, an employee who lost his job at S Alam Group said unlike other industrial groups in the country, S Alam does not have labour-intensive operations. Most of their businesses are import-dependent trading companies.

The group's major investments are in the oil, sugar, and steel sectors, but the employee said these companies primarily import raw materials, refine them, or alter the thickness of steel before selling them in bulk markets.