Economists, businesses for second round of stimulus

Economists and businesspeople yesterday suggested that the government float a second set of stimulus packages, reasoning that the country's economic recovery from the fallouts of the novel coronavirus pandemic was still going slow.

The first set of packages, designed as low-interest loans, had significant effects, all except for the one meant for cottage, micro, small and medium enterprises for its low rate of disbursement, they said.

Therefore a second set, especially one for the small-scale businesses, is required so as to be availed and utilised by those in need to stay afloat in this time of crisis, said Ahsan H Mansur, executive director of Policy Research Institute (PRI).

However, the government should also follow in the footsteps of China, replicating its application of technological tools to expedite disbursements among the small firms, which are all in dire need of money, he said.

The packages might be mistaken for grants by many of the small loan seekers, irrespective of their financial inclusion status, thereby the government should duly devise innovative disbursement strategies, said the private think tank's researcher.

It might not be possible for financial institutions, including banks, to reach the loans to the over 8.8 million small companies present in Bangladesh but adoption of technological tools will ensure that a maximum number of entities has been reached, he said.

Mansur was addressing a virtual panel discussion on "Covid-19 and Business Confidence: Towards Economic Recovery" organised by the South Asian Network on Economic Modelling (Sanem) in collaboration with The Asia Foundation.

A second Business Confidence Index (BCI)-centric survey carried out by Sanem for the October-December quarterdeciphered the slow pace of the country's economic recovery, said Selim Raihan, executive director of Sanem.

The survey numerically represents the confidence of entities to do business.

It was stated to be at 55.24 per cent this time around in the survey, conducted among top officials of 502 companies of manufacturing and services sectors on October 12-25.

It was 51.06 per cent in the first survey, meant for the preceding July-September quarter.

Though improvement was visible in all sub-components of the BCI, when it came to sectors, leather still ranked less than 50, meaning in the range of low confidence. Other sectors placed between 50 and 60.

Moreover, cost of business is said to have increased.

Corruption, poor trade logistics, an unfavourable tax system, lack of access to finance, and ineffective management of the Covid-19 health crisis appear to be the major challenges, it said.

The second survey also found that some 72 per cent of its respondents did not get any stimulus package loan. It was 55 per cent in the first survey. The increase was blamed on disbursement delays, especially among the small firms.

Of those surveyed, only 8 per cent of micro and small units got the loan while it was 20 per cent for medium and 41 per cent for large units.

Sectors are recovering at varying paces. It is fast for garments, textile, pharmaceuticals, food processing, retail, restaurants, financial sector and information and communication technology, said Raihan.

The tempo is slower in leather, light engineering, wholesale, transport and real estate sectors, he said.

The detrimental effects were significant in case of the small-scale enterprises because they are financially not that strong, said Abul Kasem Khan, former president of the Dhaka Chamber of Commerce and Industry (DCCI).

He also suggested easing the procedure for availing trade licences, citing that the renewal processwas too complex and expensive.

Asif Ibrahim, another former DCCI president, echoed Kasem. He said the stimulus packages worked wonders for the recovery of garment exports.

Maliha Quadir, managing director of digital service provider Shohoz, said they had already regained 80 per cent of their pre-Covid-19 business volume and expected it to return to normalcy by December or coming January.

Masrur Reaz, chairman of the Policy Exchange of Bangladesh, and Faisal Bin Siraj, country director of The Asia Foundation, also spoke at the event.