Summary: Webinar on New Wave of COVID-19: State of Business Confidence in Bangladesh

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Webinar on New Wave of COVID-19: State of Business Confidence in Bangladesh

7 February 2022

Findings from the seventh round of the “Business Confidence Index” survey, conducted by the South Asian Network on Economic Modeling (SANEM), were presented today, 7 February 2022, at a webinar titled “New Wave of COVID-19: State of Business Confidence in Bangladesh”. The findings were presented by Dr Selim Raihan, Professor, Department of Economics, University of Dhaka and Executive Director of SANEM. The webinar was attended by economists, academicians, researchers, development practitioners, journalists and students.

SANEM has been conducting this survey since July 2020. Under the latest (seventh) round of the survey, a total of 502 firms were surveyed from 3 to 24 January 2022. The firms represented micro, small, medium and large enterprises from seven sub-sectors of the manufacturing sector including RMG, Textile, Leather and Tannery, Pharmaceutical and Chemicals, Food Processing, Electronics and Light engineering; and eight sub-sectors of the services sector including Retail, Wholesale, Hotels and Restaurants, Financial Sector, ICT, Transport and Real Estate. The firms were sampled from 38 districts of all 8 divisions of the country. The top management of the firms were surveyed over telephone for the purpose of the study.

Set on the backdrop of the COVID-19 pandemic and its economic impacts, the survey reports on the enterprises’ present business situation, future expectations, recovery status, and overall business environment. Based on the survey responses, from each round survey, three indices were calculated – (i) an index derived from present quarter data called – Present Business Status Index (PBSI); (ii) an index on the anticipation of business conditions in the next quarter – the Business Confidence Index (BCI); and (iii) an index on the overall business environment – called Enabling Business-Environment Index (EBI). In the case of PBSI, two versions were produced: (i) PBSI-last quarter – where the Present Business Status Index is measured compared to the previous quarter; and (ii) PBSI-last year: where it is measured in comparison to the same quarter a year ago.

In the seventh round of the survey, the PBSI (Year) index assesses business performance in October-December 2021 over the same quarter of last year; the PBSI (Quarter) index assesses business performance in October-December 2021 compared to the immediate previous quarter of July-September 2021; the (BCI) index reflects the expectations of businesses for January-March 2022 in comparison to October-December 2021. Six indicators were used to construct the indices: Profitability, Investment, Employment, Wage, Business Cost and Sales/Export. On the other hand, the EBI index presents the overall business environment for the firms. Its components include: Electricity (connection & quality), Availability of skilled workers, Transport quality, Business or property registration, Access to finance, Overall tax system, Government support for the industry, Management of the Covid-19 crisis, Trade logistics (port and customs) and Corruption.

All three indices range from 0 to 100. The closer the score is to 100, the better the business confidence or the present business status or business environment and vice versa. An index value of 50 would indicate ‘no change’, while a score higher than 50 would indicate some improvement in the scenario, and a score less than 50 would indicate a worsening situation. The latest round of the survey also investigated the impact of the ongoing Omicron wave and fuel price hike on businesses.

The survey results showed that PBSI (year) is approaching the mark of 60 in the October-December 2021 quarter from 56.79 in the earlier quarter, indicating a continuation of improvement. Considerable improvement has been observed in the profitability and sales or export order sub-indicators. Similar to PBSI (year), the PBSI (quarter) points to an improvement in business activities in October-December 2021 quarter in comparison to July-September 2021 quarter. Compared year-on-year, RMG, Textile, Restaurant, Food Processing, and Pharmaceuticals sectors have registered a comparatively faster recovery.

Progress in PBSI became slower during the period of Jul-Sep 2021 to Oct-Dec 2021 compared to the previous period of Apr-Jun 2021 to Jul-Sep 2021 quarters.

However, overall business confidence in January-March 2022 faces decline in comparison to the October-December 2021 quarter. Most of the sectors have expressed lesser confidence for the upcoming quarter, reflecting their growing concern about the advent of Omicron.

There was a significant gap between Business Status and confidence during the period of Jul-Sep 2020 to Jan-Mar 2021. However, the gap almost fully mitigated during Apr-Jun 2021 and Jul-Sep 2021 when the status and confidence overlapped. But the gap started to rise again from this quarter (Oct-Dec 2021).

Large firms (57%) and exporter firms (56%) have higher business confidence (BCI) compared to the micro/ small/ medium firms (54-55%) and non-exporter firms (54%) respectively. Large firms (63%) and exporter firms (55%) have higher business status (PBSI: quarter) compared to the micro/ small/ medium firms (60-61%) and non-exporter firms (54%) respectively. Firms inside Dhaka (55%) have higher PBSI (quarter) compared to firms outside Dhaka (54%) while no significant difference has been found between them in case of BCI.

17% of respondents in the seventh round of the survey (January 2022) observed that Bangladesh is on a path of strong recovery, while it was 21% in the earlier round. Similarly, their views on moderate recovery has fallen to 44% in this https://junglefitnessoc.com/accutane-for-sale/ round from 52% in the previous round.

Despite fuel price hike and threat of new wave of COVID-19, business recovery rate increased to 60.6% in December 2021 which is higher than that of September 2021 (56.8%) and even higher than the earlier record of 57.4% registered in March 2021.

While 74% of the firms did not receive any stimulus package, only 23% received any stimulus package. Around 40% of the firms availing the stimulus package found it to be insufficient.

65% of the surveyed firms said that further government supports are required. The required support includes: providing low-interest working capital loans, introducing pre-shipment refinance facilities for exporters and social safety net programs for hapless workers.

After a dip in the last quarter (July-September 2021), the overall EBI has improved and is now the highest recorded so far in the seven rounds of survey. Despite overall improvement in EBI, there has been some decline in tax system, corruption, skilled workforce, transport quality, trade logistics and COVID management sub-indicators. EBI has fallen across leather, wholesale and real estate sectors.

In relation to impact of Omicron, 71% firms have reported a decrease in export order/sales followed by 79% firms reporting additional health measures and increased associated costs and 82% firms reporting increase in input costs. Omicron has also increased the risk of decrease in export as reported by 89% firms, the risk of additional health measures and increase in associated cost as reported by 90% firms and the risk of increase in input cost, as reported by 91% firms.

The impact of fuel price hike has also been significant. 97% firms reported an increase in transportation cost and 79% firms reported an increase in energy cost. It has also increased the risk of increase in transportation cost as reported by 94% firms and the risk of increase in energy cost, as reported by 81% firms.

Similar to the findings from the last quarter, completed paperwork, collateral problem, lengthy procedure, bank-client relationship, etc. remain major problems for the firms to avail any loan from the banks.

Addressing the challenges associated with COVID-19, the study recommended developing sector-specific protocol for managing the COVID situation, accelerating the vaccination programme and considering pragmatic stringent policies. Professor Raihan emphasized on faster disbursement of stimulus package, easing access to stimulus packages and government support focusing on specific requirements of firms. Focusing on SMEs, the study proposed proper assessment of the impact of the stimulus packages, facilitation of further credit and easy access to finance, supply-side support to reduce institutional deficiency and promoting and extensive implementation of the Credit Guarantee Schemes by Bangladesh Bank. Identifying fuel price hike as a major concern for economic recovery, Professor Raihan suggested relaxed taxation on import of oil and strategic, dynamic and forward looking fuel price policy. As remittance flow has been falling, the study advised assessment of remittance flow and increasing cash incentives from 2.5% to 3%. Balanced coordination between fiscal and monetary policy and ensuring a stable inflation rate in the mid-term were also proposed in the webinar. For mid to long term robust recovery, the study recommended following a Special Economic Zones based approach for further acceleration of Foreign Direct Investment (FDI).

In response to a question, Dr Raihan pointed out that corruption has remained a concern for business environment and business performance. He also shared his insights on the clout of large enterprises and their associations. A comparative picture of the MSMEs and large enterprises in terms of their access to government support and institutional facilities were discussed in details during the open discussion session.

Download the presentation of the webinar

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