According to the World Bank, political unrest in Bangladesh in the first part of 2015 resulted in a loss of 1% of GDP.[1] A previous study by UNDP (2005) estimated the average costs of unrest as even higher during the 1990s. Though these estimates are disputed, they indicate that the economic impacts of political unrest might be significant. This note addresses the effect of political unrest through the trade channel or exports. Is there any empirical evidence that exports from Bangladesh have been reduced by recent episodes of unrest? I do not find any clear evidence that the more recent unrest in Bangladesh has had a significant impact on total exports of garments. Excess capacity and flexibility in production are parts of the reason. Nevertheless, while export volumes do not seem to have gone down, unrest may adversely affect the bargaining position of local producers vis-à-vis multinational retailers, reducing profit margins and making it more difficult to restructure the industry and initiate costly security and labour reforms.

 

[1] WB 2015; and https://bdnews24.com/economy/2015/04/12/political-turmoil-cost-bangladesh-2.2-billion-in-three-months-of-2015-world-bank