24 factories of Beximco shut amid liquidity crunch

Amid a severe liquidity crisis and unpaid labour dues, troubled Beximco Group's Shinepukur Ceramics recently halted operations, bringing the total number of closed ventures of the group to 24.

The group's inability to open new letters of credit (LCs) for raw material imports has forced its factories to halt production since August this year following the political changeover.

The factory closure issue came to the spotlight as workers of the Beximco Industrial Park, which houses numerous factories, took to the streets in Gazipur yesterday for the fifth day in a row, causing long traffic congestion along the Chandra-Nabinagar Highway.

"Banks are unable to solve the LC problem," said Osman Kaiser Chowdhury, director (finance and corporate affairs) at Beximco Group. "Now the government needs to intervene to resolve the liquidity crisis and resume production."

However, Md Ruhul Amin, a central bank executive director recently appointed as the group's custodian, told yesterday evening that he had not been approached regarding these issues.

He also claimed that Beximco Group does not have any banking problems.

Beximco Group landed in hot water following the arrest of its vice-chairman Salman F Rahman, who served as private sector adviser to ousted Prime Minister Sheikh Hasina. He was also an influential figure in Bangladesh's financial sector.

Over the past four months since the political changeover in August, 23 ready-made garment (RMG) and textile production units at the Beximco Industrial Park in Gazipur have shut down due to an inability to open LCs for raw material imports.

As a result of the four-month operational suspension, the conglomerate is facing a liquidity crunch and has been unable to pay October salaries to its workers, according to Chowdhury.

He said the 23 RMG and textile factories employ around 40,000 workers, with a monthly salary bill of around Tk 80 crore. During normal operations, Beximco's textile exports were valued at $30 million per month.

While Beximco was able to pay wages for July, August and September, it currently does not have adequate liquidity to cover October salaries, he said, urging the protesting workers to wait until November 20 for the October payment.

"The total salary amount is huge. It is not possible to abruptly transfer funds from other ventures to clear these dues," he told.

Chowdhury said they previously considered declaring layoffs but were not allowed to do so by the government due to the large number of employees.

Beximco Group has Tk 23,000 crore in loans with Janata Bank, of which Tk 19,000 crore turned non-performing during the July-September quarter, according to senior bank officials.

The Bank Company Act restricts banks from lending more than 25 percent (10 percent funded and 15 percent non-funded) of their paid-up capital to a single entity.

While Beximco seeks government intervention, Md Anwar Hossain, administrator of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and vice-chairman of the Export Promotion Bureau (EPB), believes that the large group should not rely on the government to pay worker salaries.

"If Beximco cannot pay salaries, management should talk to workers to find a mutually agreeable solution," Hossain said.

He urged the company to clarify its intentions first.

He suggested the company sell its assets to generate liquidity and pay workers' salaries.

The BGMEA administrator said the government would not assume responsibility for the company. Instead, Beximco management must find a solution to resolve the labour unrest over wages.

Speaking on condition of anonymity, a top official from another venture of the group said their recent situation and the recent appointment of a receiver by the central bank sent negative signals to foreign buyers.

The official said buyers have already inquired about the reasons for the receiver's appointment.

This could affect the export performance of other Beximco ventures in the near future.

The official commented that the appointment of a receiver usually signals financial insolvency and erodes buyer confidence in the company.

Meanwhile, Beximco receiver Md Ruhul Amin said: "The liquidity crisis has emerged recently, but what about the money the group earned over the years?

"Did they actually loot the money," he questioned.

The government-appointed custodian of the troubled group said that he would soon visit the factories and meet with management to explore solutions.