On August 8, 2020, in a webinar, findings of a survey conducted jointly by SANEM and The Asia Foundation, on the state of confidence of the business community of Bangladesh in the context of the socio-economic crises engendered by the COVID-19 Pandemic, were presented.  Mr. Tipu Munshi, MP, Honorable Minister, Ministry of Commerce, Government of the Peoples’ Republic of Bangladesh adorned the event as the chief guest. Dr. Mashiur Rahman, Economic Affairs Adviser to the Prime Minister, Government of the Peoples’ Republic of Bangladesh was present in the event as the special guest. Dr. Selim Raihan, Executive Director, SANEM, and Professor of Economics, University of Dhaka, moderated the webinar and presented the findings of the survey. The Asia Foundation was represented by Mr. Kazi Faisal Seraj, Bangladesh Country Representative of Bangladesh. The panelists in the webinar were: Mr. Abul Kasem Khan, Managing Director, A.K. Khan Telecom Limited, Mr. Asif Ibrahim, Chairman, Chittagong Stock Exchange, Ms. Nihad Kabir, President, Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI), Mr. Syed Nasim Manzur, Managing Director, Apex Footwear Limited, and Dr. M. Masrur Reaz, Chairman, Policy Exchange of Bangladesh. Around 90 participants from a joined the webinar.

In his opening remarks, Mr. Kazi Faisal Seraj thanked all involved in the survey. He reiterated The Asia Foundation’s commitment to sustainable development.

The survey findings were presented by Dr. Selim Raihan. He started by explaining the background of the survey and said that this survey will be conducted for another three rounds over this fiscal year (FY2020-21), once in every upcoming quarters.  This survey will present a thorough scenario of the state of business confidence in Bangladesh in the aftermath of the COVID crisis. He explained the methodology of the survey; it was ensured that the sampling of the survey was nationally representative and covered the major sub-sectors of both manufacturing and servicing sector. Firms were categorized into micro, small, medium and large based on their sizes (as per the National Industrial Policy 2016). Between July 15-23, 2020, top managers/executives of the firms were interviewed over the phone. In total, 303 firms were surveyed across the country: 153 manufacturing firms and 150 service sector firms.  22 districts and 8 divisions were covered in the survey.

Firms were asked on their experiences and expectation on six major indicators: profitability, investment, employment, wage, business cost, and sales/export. Survey responses were scored on a scale of 0 to 100, where 0 indicates much worse, 25 indicates worse, 50 indicates no change, 75 indicates better and 100 indicates much better, in terms of business confidence.

SANEM constructed three indices based on the Survey responses —Present Business Status Index (Yearly), Present Business Status Index (Quarter) and Business Confidence Index (Next Quarter). The PBSI (yearly) scores shows the present business status in Bangladesh in April-June compared to the situation a year before (i.e. Apr-June 2019). PBSI (quarter) shows the present business status in Bangladesh in April-June 2020 compared to the situation in the past quarter (i.e. January-March 2020). BCI shows the business confidence in this quarter (July-Sep) compared to April-June 2020. All three indices are scored between 0 and 100. In all these indices, a score above 50 means situation is improving, and a score below 50 means situation is worsening compared to the baseline. The higher the score, the better the situation.

The survey findings indicated that—

• The overall business status in April-June 2020 was extremely poor. All sectors suffered. The worst performers were the RMG, leather, light engineering, wholesale, and restaurant. The better performers were the pharmaceutical and financial sectors.

• The business confidence for July-September 2020 shows some improvement over business status in April-June 2020. The improvement is visible in all sub-components of BCI (Business Confidence Index). But still, the overall BCI score is poor (51.06).

• At the sectoral level, despite the improvement, RMG, leather, light engineering, and other manufacturing industries demonstrate BCI less than 50.

• The major improvement is seen for textile, pharmaceutical, wholesale, restaurant, ICT and financial sector as their BCIs are found to be above 50. These sectors are expecting slightly better situation in this quarter (July-Sept) compared to the last quarter (Apr-June).

• Management of the COVID-19 health crisis is extremely important for boosting business confidence.

Effective implementation of the stimulus the package is critically important, Dr. Raihan pointed out. Among the respondents, 34% of the firms availed assistance from stimulus package while 55% did not do so and 11% did not know about the stimulus package. In identifying the reasons for not availing the stimulus package the survey found that among those who did not avail the stimulus package, 84% said that there was no stimulus package for their industry, 82% said that the incentive package was not a grant, 80% reported lengthy procedure, 78% reported difficulties due to banking related services, 63% reported difficulty in understanding the procedure, 38% thought the offered amount was negligible and 23% said they were asked for bribes.

However, among those who did avail assistance from the stimulus package, 47% reported it to be very effective, 40% reported it to be effective and 7% found it neither effective nor ineffective. On the other hand only 4% found it to be ineffective and only 2% said it was not effective at all.

SANEM also asked the respondents regarding the overall business environment in the country. 88% of the respondents have identified corruption as a major challenge of doing business. 70% of the respondents found management of the COVID-19 crisis unfavorable for business. Other major challenges includes, issues in trade logistics (port and customs), insufficient government support for the industry, problems in overall tax system, problems in accessing finance, issues in business or property registration, quality of transport, availability  of skilled workers and electricity. Reforms in these critical areas have remained long overdue, Dr. Raihan remarked. There is a need for undertaking effective steps for reforms in these areas, he added.

Discussing the findings of the survey, Mr. Abul Kasem Khan suggested policy modification in expanding the coverage of the stimulus package. He also said that a strict stance against corruption is necessary.

Mr. Asif Ibrahim said that while exports have shown some improvement, there is no reason to be overly excited. Many retail stores in the USA and UK, who bought garments from Bangladesh, have gone bankrupt. This will affect export. He pointed out that many small and medium enterprises have not been able to avail the stimulus package due to their shortcomings in governance structure as bargaining capacity has played a role in this regard. He also said that some steps taken by the Stock Exchange Commission have been helpful in restoring confidence in the capital market. He also proposed the establishment of a database for the identification of areas of fiscal support.

Ms. Nihad Kabir said that the problems in doing business persisted before the Covid-19 situation and it will also continue to do so in the future unless the weaknesses are remedied. The announcement of the stimulus package gave the business community relief but later mixed messages regarding the implementation affected the confidence. While implementing expansionary monetary policy, inflation has to be taken into account, she added. She pointed out that small and medium enterprises need to be differentiated, as they are not comparable; giving priority to the small enterprises in the banking system is necessary. Ms. Kabir also suggested deregulation as unnecessary regulations obstruct businesses.

Mr. Syed Nasim Manzur said that fall in export due to the pandemic had an effect on the supply side which in turn affected the demand side too. Pointing out that the cost of doing business has increased, he said that except food and pharmaceuticals, all sectors have been endangered due to COVID-19. The inconsistency in the timing of lockdown in Bangladesh with the lockdown in other countries has exacerbated the situation, he added. He emphasized the need for regular, exact, and comprehensive update about the disbursement of the stimulus package. Sharing his personal experience with the audience, he said that the process to avail the stimulus package is unnecessarily complicated. A dashboard of COVID-19 response management would be helpful, he remarked. He also suggested making the exchange rate export and remittance friendly. Transfer measures, such as paycheck and rent assistance have been successful in incentivizing consumption in many countries. Bangladesh can implement similar measures, he said. He also said that to tackle corruption exemplary actions must be taken, otherwise, maintaining trade growth of Bangladesh would be difficult.

Dr. M Masrur Reaz said that the survey is really comprehensive in timing, methodologically robust with the right variables, and will help evidence-based decision making even after the COVID-19 situation. There was a communication gap in designing the stimulus package which has stalled proper disbursement of the package. Such confidence surveys can close this gap. Dr. Reaz suggested a 3 by 3 approach, with 3 phases and 3 dimensions, to tackle the economic impacts of the pandemic. The 3 phases are protection through health crisis management, the resilience of livelihood, enterprise and employment, and revival with sustained recovery. The 3 dimensions are supply-side management, demand-side management, and investment de-risking with a consistent policy. On the supply side, it is important to increase the market level and firm-level capability and to diversify the supply chain. Tariff modernization has to be introduced to address problems in border clearance. Addressing the demand side, he said that market diversification, assistance for returnee migrants are important to retain demand. A modern regulatory framework is needed for a sustained recovery in business confidence. The COVID-19 situation shows the need for long-standing reform in policy, he added.

Dr. Mashiur Rahman, in his speech, shed light on the present corruption situation of Bangladesh. He said that, corruption in Bangladesh will prevail as long as the cost of involvement in corruption is lower than the benefits it entails. While the stimulus package has been well designed and efficient, complexities exist in availing the stimulus package, he said. He suggested that Bangladesh Bank and other relevant government agencies cautiously monitor the disbursement of the funds. Financial assistance from the stimulus package has been availed by those who had maintained a functional relationship with the government, banks and the concerned authorities, he remarked. Banks are restricted in their interest in imparting credit only to the seasoned customers, he remarked. Dr. Rahman reiterated the urgency of dissolving unnecessary regulatory frameworks for the facilitation of doing business. He pointed out that the tax system needs apt reforms to develop a better performing economy. He further stressed on the assessment of sector-wise cost-benefit of prevailing tax reliefs, as such assessments would help to formulate future policies regarding tax incentives. Dr. Rahman also emphasized on the self-regulation of the business community.

Honorable Minister Mr. Tipu Munshi, MP, in his speech, congratulated SANEM and The ASIA Foundation for conducting the survey. He expressed his concern about the future uncertainty of the exports. Previously, Bangladesh targeted around 48 billion dollars of export this year. This target may not be attainable due to the current pandemic situation, he explained. However, he expressed hope about the rejuvenation of the economy. On a different note, he pointed out that Bangladesh’s competitor countries in trade are formulating policies to attract FDIs deflecting from China. He requested concerned parties and SANEM to conduct research on this issue and assist Bangladesh in formulating policies to effectively attract these FDIs. He also said that Bangladesh has successfully managed to strike trade deals with 42 countries and establishment of a Free Trade Agreement with 11 countries are in progress.  Mr. Tipu Munshi reiterated the government’s commitment to fighting corruption.

In closing remarks, Dr. Selim Raihan thanked all and expressed hope that the survey results would be useful in making policy decisions.