Tk 20,000cr fresh stimulus needed for small businesses

A fresh stimulus package of at least Tk 20,000 crore is needed specifically for the survival and revival of cottage and micro enterprises (CMEs) as those are most vulnerable to the Covid-19 fallout, said Md Jashim Uddin, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI).

And at the same time, the disbursement of the Tk 23,000 crore fund meant for the cottage, micro, small and medium enterprises (CMSMEs) should be completed as soon as possible so that the affected units can resume operations, he said. "The proposed new fund of Tk 20,000 crore would be only for the CMEs and the banks and other disbursement channels should be made aware for quick disbursal of this fund so that they can enjoy the benefit during this time of crisis," Uddin also said.

A portion of the fund should be counted as grants for the CMEs, he said. Some 15 per cent of the CMSMEs across the country have closed down and 50 per cent are struggling to survive during this time of crisis.

Uddin is scheduled to sit in a meeting with the chief executive officers (CEOs) of banks to discuss the progress of the disbursement of the stimulus money among the CMSMEs.

Some 70 per cent of the money has been disbursed so far from the first stimulus fund of Tk 23,000 crore for CMSMEs in more than one year.

The chief of the FBCCI also said the local business chambers and trade bodies can also be used for disbursement of the fund as most of those units are registered with the local trade bodies.

The businesses would be greatly benefited from the corporate tax cut of 2.5 per cent across the board, Jashim Uddin told The Daily Star over the phone.

However, the FBCCI demanded withdrawal of the 5 per cent Advanced Income Tax (AIT) and 4 per cent VAT. The finance minister did not withdraw these and thereby business operation costs will increase, he said.

Although the corporate tax cut at 2.5 per cent will have a positive impact on the revival of the businesses, the AIT and VAT will remain a burden, he said.

Some local industries will grow because of the tax holiday in the proposed budget while other sectors will face difficulties, he said.

For instance, even two years ago the import of dredging machinery used to enjoy 1 per cent duty as it was counted as capital machinery.

However, since last year the government imposed 31 per cent duty on import of dredging machinery although it is capital machinery and very vital to excavating rivers.

Many private companies have been involved in importing dredgers to excavate the rivers to ensure water flow.

Uddin said not a single dredger was imported last year due to the high import duty and the government kept the 31 per cent import duty in the proposed budget for fiscal 2021-22.

The government has a target to increase the private investment and GDP ratio to 25 per cent from 23 per cent in the proposed budget by improving the business environment during the pandemic.

It would be a bit difficult to achieve the target only with some tax benefits to business and if the government wants to achieve the target of 25 per cent, it needs to do some more, he said.

Uddin is expecting more investment from both domestic and foreign entrepreneurs with a focus on electronic goods and home appliances as a lot of benefits have been provided to them in the proposed budget.