As many as 71 per cent of the businesses surveyed think Bangladesh is on the right path to economic recovery from the wallop dealt by the pandemic, a disclosure that will go some way towards quashing fears of a prolonged recession in the country that has been on a tremendous growth momentum before coronavirus arrived on these shores.
The survey styled “Covid-19 and Business Confidence in Bangladesh: Towards Economic Recovery” was conducted by the South Asian Network on Economic Modelling (SANEM) in association with the Asia Foundation.
More than 502 firms were surveyed across the country in October.
“Although business confidence for the next quarter has improved slightly, it is clear from the study those businesses are still quite sceptical of the future,” said Selim Raihan, executive director of Sanem, while unveiling the findings of the survey in a webinar yesterday.
Some 41 per cent of the survey respondents think the recovery would be moderate.
More than 55 per cent of the survey respondents think that the business prospects will improve in the last quarter of 2020.
In the July-September quarter, the Business Confidence Index (BCI) was 51.06, which is projected to improve 55.2 in the following quarter.
While there is a small improvement in the BCI, firms are afraid of the second wave of coronavirus cases, Raihan said.
Meanwhile, the sectors are experiencing recovery at varying paces.
Faster recovery is taking place in the garment, textile, pharmaceuticals, food processing, retail, restaurants, financial, and information and communication technology sectors, according to the economist.
But the leather, light engineering, wholesale, transport and real estate sectors are experiencing a slow recovery.
SMEs STRUGGLE TO ACCESS STIMULUS FUNDS
The survey findings also showed the SME sector are struggling to access funds from the government’s Tk 20,000 crore-stimulus package announced on April 13 to help them stave off the fallout from the pandemic.
As per the guideline from the Bangladesh Bank, cottage, micro, small and medium enterprises (CMSME) can get working capital at a 9 per cent interest from the package. Of the interest rate, 4 per cent will be borne by the borrowers and 5 per cent by the government.
About 72 per cent of the surveyed firms said they are yet to receive any funds from the package. Some 9 per cent of the surveyed SMEs said they were unaware of the stimulus package.
The study found 8 per cent micro and small firms received funds from stimulus packages, which is 20 per cent in the case of medium firms and 41 per cent for large firms.
The survey respondents blamed the lengthy process, complexities in bank-related services, difficulty in understanding the procedure, insufficient amount and bribe for being unable to avail funds from the stimulus package.
Banks have so far disbursed about 29 per cent of the funds from the stimulus package.
Last week, in a bid to ensure full implementation of the stimulus package, the banking regulator instructed the lenders and non-bank financial institutions to fulfil their respective loan disbursement target within this month instead of the previous deadline of October.
“Banks are just not interested in providing loans to the SME sector,” said Ahsan H Mansur, executive director of Policy Research Institute, at the webinar.
Besides, loans tend to be disbursed based on the bank-client relation and the SME or new entrepreneurs get left out.
The banks themselves are dilly-dallying in implementing the BB directive in providing funds to SMEs, said Mansur, also the chairperson of the SME-focused Brac Bank.
The reason being, the operational costs and the risks in lending to the CMSMEs are high.
“The government has put a 9 per cent bar on the lending rate. As a result, banks are not interested in providing loans to the sector,” Mansur said.
SECOND STIMULUS PACKAGE NEEDED
Mansur, also a former economist of the International Monetary Fund, said the government can think of announcing a second round of stimulus package.
There is no liquidity shortage in the banking sector and there are big foreign exchange reserves, too.
This should be much focused and more fine-tuned.
“Now, the focus should be given on the SME sector as they need more support to recover,” Mansur said, adding that the big companies are already arranging for financing from abroad.
“The SME sector is the backbone of the industry and plays an important role in the supply chain. So, the government should focus on the sector,” said Abul Kasem Khan, a former president of Dhaka Chamber of Commerce and Industries.
He called for a review to make access to funds for the SME easy and extend the areas of coverage as well as the deadline for the sector.
The rural economy needs to be made for vibrant for there to be a recovery in the truest sense as those who lost jobs for the pandemic and the returning migrant workers are based there, said M Masrur Reaz, chairman of the Policy Exchange of Bangladesh.
“If we cannot make the SMEs strong, we would not be able to restore the lost jobs. That is why regulations for SMEs should be relaxed.”
Reaz also called for finding out non-traditional sources for foreign direct investment and inter-regional investment.
Before the announcement of another round of stimulus packages, the government should conduct an independent assessment of its existing packages, Raihan said.
“Effective implementation of the stimulus package is critically important,” he added.
