The government will disburse interest-free soft loans for two years among the export-oriented sectors from the Tk 5,000 crore stimulus package the prime minister unveiled to cope with the fallout from COVID-19.
Companies and exporters seeking to avail a loan from the fund will, however, have to pay 2 per cent service charge to banks -- a condition that was opposed yesterday by a number of garment entrepreneurs.
Most garment factories were closed yesterday although there is an option of keeping them open if there are work orders from international retailers, said an official of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
"The units that have work orders were open. But the number is very negligible," he added.
Earlier, the government's Department of Inspection for Factories and Establishment and the BGMEA said garment factories with work orders can run their units after ensuring adequate health safety measures to protect workers from the deadly bug.
However, there is little compliance by factory managements and workers and whatever did exist is waning every day, said the BGMEA official asking not to be named.
During her March 25 address to the nation, Prime Minister Sheikh Hasina had stated that the stimulus package would be used to pay workers of the export-oriented sectors.
Immediately, the finance ministry swung into action to devise a method to distribute the funds.
Managements of export-oriented companies or factories would have to provide salary sheets and workers' list and their mobile banking accounts to banks so that salaries for April can be directly disbursed, said a senior finance ministry official yesterday.
The banks, afterwards, will forward the same documents to the Bangladesh Bank for reimbursements, said the official.
The borrowers will get a six-month grace period, meaning that they will start paying back the borrowed money in instalments to the government from the seventh month of receiving the money.
The finance ministry will send a guideline in this connection to the BB within a couple of days so that disbursement can start as soon as possible.
The government has come up with the rescue package as Bangladesh's export sectors had been reeling from the impact of the coronavirus pandemic even before the presence of the virus was established in the country.
This is because economic activities in major export destinations such as the European Union, the United States and the United Kingdom have almost ground to a halt in recent weeks.
Garment comprised 84.21 per cent of Bangladesh's total exports worth $40.5 billion in fiscal 2018-19 and the sector employs more than 4.1 million workers.
As of yesterday, $2.87 billion worth garment export orders were cancelled by international retailers, according to data compiled by the BGMEA.
Some 1,041 factories having 2.08 million workers reported losing work orders for 906.68 million units of garments.
Domestic market-based industries and services sectors are also slowly feeling the effects of a 10-day government shutdown aimed at preventing the spread of the pneumonia-like virus.
Many workers in the informal sector have completely lost their incomes and they do not have any coping capacity.
If the government considers giving out the Tk 5,000 crore as loan, it will not serve the real purpose, said Shahidul Haque Mukul, managing director of Adams Apparels.
"So, we are worried. It will be very difficult to obtain the money from this fiscal package as the government will impose a lot of conditions," he told The Daily Star over the phone.
Many factory owners will not feel encouraged to take the loan for the conditions and for it being an added burden following the coronavirus-induced work losses, he said.
Garment exporters are in trouble because the international retailers have been cancelling work orders every day, said Anwar ul Alam Chowdhury (Parvez), a former BGMEA president.
So, it will be difficult for them to survive through this critical time by borrowing money from banks, Parvez said. Moreover, it will take a long time for normalcy to return in the major export destinations in the west like Europe and the US, he said.
"The government should consider these issues before taking the decision on stimulus package for the export-oriented sectors so that we can survive," Parvez said.
If it is not a grant, the government should allow at least seven years in repayment period so that exporters can adjust the loan with their balance sheets once normalcy is restored at home and abroad, the entrepreneur added.
Apart from garments, sectors such as leather, jute and ceramics are also being affected due to the global outbreak, Commerce Minister Tipu Munshi told American media outlet CNBC on Friday.
The export-oriented industries would be supported under the immediate plan while the non-export-oriented sectors would be supported from the funds to be freed up through the restructuring of the budgetary allocations and from the funds promised by the development partners.