Businesses are becoming more optimistic of a turnaround sooner than later | The Daily Star
12:00 AM, August 09, 2020 / LAST MODIFIED: 01:54 AM, August 09, 2020

Businesses are becoming more optimistic of a turnaround sooner than later

Finds a survey by SANEM and The Asia Foundation

Businesses are progressively becoming confident of a comeback from the brutal blow dealt by the global coronavirus pandemic, found a recent survey.

Conducted by the South Asian Network on Economic Modelling (SANEM) in collaboration with The Asia Foundation among 303 firms representing manufacturing and services sectors, the survey found that the overall confidence score increased to 51 this quarter from 29.48 the previous quarter.

The survey responses are measured on a scale of 0-100.

A score in the range of 0-50 means a deterioration of business confidence and a value above 50 indicates an improvement, said the survey report that was unveiled yesterday.

The survey was carried out to assess the state of confidence of the business community of Bangladesh in the context of the socio-economic crises engendered by the Covid-19 pandemic, SANEM said.

Despite the improvement, businesses complained about increasing cost of doing businesses and they put corruption, problems of trade and logistics and weak management of the coronavirus crisis as three major challenges of doing business.

"Management of the health crisis is extremely important for boosting business confidence," said SANEM Executive Director Selim Raihan while presenting the findings of the study at a webinar.

Corruption has emerged as the biggest challenge for doing business, he said citing that 88 per cent of the firms put corruption as the number one challenge.

"It should be handled firmly," he said.

The SANEM developed three separate indices based on the survey among 153 manufacturing and 150 service sector firms from all divisions to understand the level of business confidence among entrepreneurs in Bangladesh. 

The indexes compared business confidence in three scenarios: the response in the April-June quarter with a year earlier and with the previous quarter; and the July-September quarter with the immediate past quarter.

Researchers considered six indicators -- profitability, investment, employment, wage, business and sales/export -- for developing the Business Confidence Index (BCI).

The overall business status in the second quarter of the year was extremely poor as reflected in the index score of 26.44 compared with the same period of 2019.

"All sectors suffered. The worst performers were garment, leather, light engineering, wholesale and restaurant. The better performers were pharma and financial sector," said Raihan, also a professor of the Department of Economics at the University of Dhaka.

This quarter, businesses seem more confident than the last quarter, he said.

"The improvement is visible in all sub-components of BCI, but still, the overall BCI is poor," he said adding that business confidence continued to be low in the garment, leather, light engineering and other manufacturing sectors as the BCI showed a score of less than 50 for these sectors.

Overall profitability of garment, leather and tannery and light engineering continued to deteriorate. However, there had been improvements in employment prospects, according to the survey.

The major improvement is seen for textile, pharma, wholesale, restaurant, ICT and financial sectors as their BCIs are above 50, he said.

SANEM also looked into the efficacy of the government's stimulus packages amounting to Tk 103,117 crore to support the businesses in recovering from the economic fallout of the pandemic.

While 87 per cent of firms termed the stimulus effective for them, 55 per cent of the firms said they did not avail the low-cost fund.

"Effective implementation of the stimulus package is critically important. Major challenges include lengthy procedure, difficulty in bank-related services, and difficulty in information. All these need to be sorted out effectively," Raihan added.

Abul Kasem Khan, managing director of AK Khan Telecom, suggested policymakers consider giving stimulus to small and medium enterprises that were still unbanked.

"Corruption is very alarming. It is not acceptable at this situation," he added.

Commerce Minister Tipu Munshi expected an improvement in business activities this quarter compared with the previous one.

He said the export target for the current fiscal year could be achieved if the pandemic can be snuffed out around the globe within the next four months.

"Everything will depend on the situation of the export destination countries and their supply chains."

The commerce ministry is working to bring in investments that are shifting out of China to other countries.

"We have huge manpower to utilise in the industries. We need to know what type of facilities we should provide them to bring investment in Bangladesh."

Munshi went on to stress the need for a comprehensive study on how to attract the businesses and investment that were shifting from China to other countries.

There is no reason to be happy with the recovery in export receipts for just one month, said Asif Ibrahim, chairman of Chattogram Stock Exchange.

Exports fetched $3.9 billion in July, up 44.4 per cent from the previous month and 0.60 per cent from a year earlier, according to data released by the Export Promotion Bureau. This is the first month since the pandemic took hold globally that Bangladesh's export receipts posted a growth.

"It is an important time for us as fresh export orders usually come at this time of the year. We need to see whether orders are coming," he said, adding that some firms that used to buy from Bangladesh have become bankrupt.

There were huge amounts of unsold stocks of goods in the US and Japan and firms there are getting rid of their stocks at discounted prices, said Syed Nasim Manzur, managing director of Apex Footwear.

"It is not time yet to say exports are recovering."

Manzur went on to urge the policymakers for proper management of the COVID-19 health crisis for regular life and the economy to return to normal.

"The management of the pandemic should be done in one place. It should be done centrally," he added.

Mixed messages and signals regarding the pandemic have created a negative effect among businesses, said Nihad Kabir, president of the Metropolitan Chamber of Commerce and Industry (MCCI).

"The announcement of stimulus packages gave comfort to businesses. But we did not see that comfort when it comes to implementation," she said.

Various countries tied up stimulus packages with employment protection to give livelihood support, said M Masrur Reaz, chairman of the Policy Exchange of Bangladesh.

"This could be done here too," he said.

Mashiur Rahman, economic affairs adviser to the prime minister, and Kazi Faisal Seraj, country representative of The Asia Foundation also spoke.

 

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