Bangladesh would face a huge challenge in creating jobs owing to inadequate domestic financing, global recession, fall in export demand and spooked business confidence, said an economist yesterday.

"On the other hand, the slow pace of domestic demand, destruction of capital base, high interest and limited access to finance are obstacles to generating self-employment," said Sayema Haque Bidisha, research director of the South Asian Network on Economic Modeling (Sanem).

She was speaking at a virtual discussion on "Covid-19 and the Challenges of Labour Market in Bangladesh".

During the keynote presentation, Bidisha, a professor of economics at the University of Dhaka, said the challenges of employment against the backdrop of Covid-19 can broadly be related to major avenues such as fall in domestic demand, fall in global demand, the increase in labour supply due to returning migrants, restricted productive activities and slow pace of private investment.

With depressed global growth and infection rate still being high, attaining 8.2 per cent growth and desired private investment will be quite challenging, she said.

"With lockdown and added stress from school closures and lesser access to childcare facilities, female labour force participation can fall further."

Bidisha called for relaxing conditionality and interest rate on loans, channelling funds through microcredit agencies rather than formal banking channels and separating loan schemes for returning migrants, women entrepreneurs and youth.

Greater diversification of export is needed by providing incentives to potential sectors such as leather, chemical, pharmaceutical, IT, nursing and robotics for the absorption of workers, Prof Bidisha said.

She suggested a careful re-designing of incentives conditional on protecting the rights of the workers and creating a separate fund for providing loans to those who might get laid off in the coming months.

Employment generation has been a problem for the past decade while employment elasticity of growth has been declining and remained low, said Selim Raihan, executive director of the Sanem.

He said that in the short- to mid-term, the future looks bleak and the depressing effects on employment and wages may continue. The government's policy response related to the current labour market challenges has been weak and inadequate.

"One major challenge is the lack of information and lack of up-to-date data on the labour market. The existing social safety net programmes are unable to address these growing challenges."

He recommended that under the current crisis, the government should go for an enlarged deficit budget to spend high on social safety net programmes in general, and labour market-related programmes in particular.

Ahsan H Mansur, executive director of the Policy Research Institute, said deficiency of data is a major challenge to research on the labour market.

Currently, the country is facing three challenges: containment of Covid-19, issues of unemployment and livelihood, and supporting the recovery of the economy, he said.

As the economy has opened up, there has been a slow upward movement, Mansur said. 

"However, it seems a sub-optimal point will be reached in this way. This depends on the response from the government and the private sector."

Mansur expressed his concern about investments, saying the private sector is not going to invest unless the situation gets better.

"While there should be investments in the public sector, there is the issue of resources."

He underscored the importance of a focused recovery strategy. Attracting investments deflecting from China should be a part of Bangladesh's recovery and post-recovery strategy.

According to Mansur, stimulus packages for big business are being disbursed quickly but there has been a delay in disbursing the stimulus packages for SMEs.

This needs to be addressed as soon as possible, said the former senior official of the International Monetary Fund.

Tuomo Poutiainen, country director of the International Labour Organisation, stressed public employment programmes.

He said that stimulus should not only be for business and liquidity but also should have a focus on jobs and employment.

Poutiainen highlighted the need to invest in micro, small and medium enterprises, especially concerning the rural economy.

"It is important to emphasise SMEs and self-employment so that it can activate the labour market and boost the economy."

Prof Shamsul Alam, a member of the General Economics Division under the Planning Commission, said that many things are depending on the overall situation of the spread of the infection.

Labour productivity has increased both in rural and urban areas, he said. 

While enrollment in technical and vocational education and training (TVET) programme was 1 per cent in 2009, it rose to more than 16 per cent in 2018-19. Structural changes have also taken place in the composition of employment.

Monitoring and evaluation of the stimulus package are also necessary, he said.

He said the Seventh Five Year Plan did not generate employment as expected.

Sanem's Chairman Bazlul Haque Khondker said there has been very little fiscal response from the government to tackle the economic challenges of the pandemic.

"Other countries have initiated a much more aggressive fiscal response," he said, pointing out that social protection issues related to the labour market need to be in the discussion.

Imran Matin, executive director of the Brac Institute of Governance and Development, brought to attention the movement of labour in the ICT-based market and said collection of data on the labour market should also take this into account.

As the future outlook perceived by most of the people is uncertain, it is going to affect business confidence and labour dynamics, he said.

"The uncertainty is not just about income but also infection. The interdependence of this perception and real economic trends are critical."