Holding on to hope amid drawn-out adversity
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The planning commission revised upwards its estimate to 29.4 per cent in June. Extreme poverty doubled to 20.5 per cent.
The highflying growth of the economy nosedived, posting 5.2 per cent in the last fiscal year, down from its historic high of 8.15 per cent a year ago.
The official growth figure is higher than the forecasts by multilateral lenders such as International Monetary Fund, World Bank and Asian Development Bank and local think-tank Centre for Policy Dialogue (CPD).
Whatever be the growth numbers, Bangladesh’s economy has performed better than India’s. Asia’s third-largest economy shrank 23.9 per cent in the three months to June this year from that a year earlier, reports Bloomberg.
“There was a massive disruption to life and the economy. It will take time to make up for the loss. However, good things are that the economy did not see any contraction,” said Arif Khan, chief executive officer of IDLC Finance.
Entrepreneurs, top executives and economists said the Tk 1 trillion-plus stimulus package unveiled by the government for industries, businesses and agriculture played a key role in boosting confidence of entrepreneurs, who saw their revenue plummet as the lockdown brought economic activities to their knees.
Businesses responded to the new reality starting from working from home using digital platforms to paying attention to improving efficiency. Many had to cut operational costs, jobs and salaries and sacrifice profits to withstand the unprecedented health and economic emergency.
“We have seen the hardest time of our business. We have seen how worst and devastating the situation could be. The catastrophe came all of a sudden for which we were not prepared,” said Md Fazlul Hoque, managing director of Plummy Fashions.
Hoque recalled businesses holding a meeting at the Metropolitan Chamber of Commerce and Industry in Dhaka on March 8 on how to find alternative sources for raw materials and other goods to ensure smooth supply as China, a key supplier, was battling with the deadly virus.
“The news broke in the evening and we went into lockdown by the end of the month. We had been in deep trouble in April and May. From that situation, we have made a huge turnaround.”
“It is not that the coronavirus situation has improved but at least, the garment sector has made a turnaround,” the entrepreneur said, adding that the support from the government to garment entrepreneurs to pay wages to workers at lower cost helped the sector fight back.
Shams Mahmud, president of the Dhaka Chamber of Commerce & Industry, said the private sector was protected because of a bold move of the government as it introduced low-cost stimulus packages and a re-financing scheme to support vulnerable large, cottage, micro, small and medium enterprises.
“Almost all major export sectors are becoming operational and export growth is gradually picking up,” said Mahmud, also the managing director of Shasha Denims.
Rubana Huq, president of the Bangladesh Garment Manufacturers & Exporters Association, said the Covid-19 caused unprecedented disaster in the form of cancellation of orders and revenue loss.
“The industry is rebounding strongly.”
Citing export data, she said the growth is apparently V-shaped, a recovery pattern that involves a sharp rise back to a previous peak after a sharp decline.
“Yet, there is no scope for complacency since the recovery from the pandemic is faltering,” said Haq, also the managing director of Mohammadi Group.
Not all export sectors are doing well.
The exporters of leather goods and footwear, one of the leading sectors, are bearing the brunt of the pandemic. Leather goods and footwear export dropped 25 per cent year-on-year to $428 million in the first eight months of 2020.
“We are selling goods at reduced prices and profits only to stay afloat and retain markets,” said Md Saiful Islam, president of the Leathergoods and Footwear Manufacturers & Exporters Association of Bangladesh.
WHAT WENT WRONG
However, much of the worse could have been avoided had there been adequate planning and timely response from the health ministry to control the spread of the virus.
The disease, which originated in Wuhan, China in December 2019, was not taken seriously by public health officials, so the preparation to tackle the disease in terms of increasing the testing and tracing capacity was poor.
“We were into a denial syndrome for a short period,” said Fahmida Khatun, executive director of the CPD. “The lockdown was also imposed without any proper planning.”
Rather, corruption and anomalies relating to the purchase of protective gears and testing materials were exposed.
While there has been appreciation for the stimulus package, support for the poor, including the new ones, was inadequate. There was also complaint of irregularities and food and cash aid going to the wrong hands.
“Support for the marginalised was very inadequate compared to their need,” Khatun said.
Rizwanul Islam, a former special adviser for the employment sector at International Labour Office in Geneva, said the cash transfer scheme came very late, was too small in amount and failed disastrously in its implementation.
“What should have been in the hands of the poor in April was inaugurated in May, and by July, only a small proportion of the target number was reached,” he said.
LESSONS LEARNED
The pandemic taught doing office from home is very much possible and tasks could be accomplished without physical contacts. Businesses also had to look for ways to cut costs.
“We have learned how to function digitally. A country like Bangladesh has functioned digitally. It is proved that people can work using digital platforms without physical contact,” said Azam J Chowdhury, founder and chairman of East Coast Group.
“Digital platforms and the purchase of goods by people helped the economy remain functional.”
“We have lost huge business in the last six months. However, what we achieved is bigger than that,” said Syed Almas Kabir, president of the Bangladesh Association of Software and Information Services.
“There has been a realisation that ICT is vital for life. This is the biggest achievement.”
Rupali Chowdhury, president of the Foreign Investors’ Chamber of Commerce & Industry, said fixed costs of a company should be kept at a sustainable level to survive as there is a sharp decline in demand.
During the pandemic, the areas in the public healthcare system that need to be improved have been identified. Accountability and recognition of doctors and healthcare professionals should be ensured.
She said overall, the Covid-19 testing capacity and the management of patients has improved compared to the initial days.
According to Chowdhury, the return of the economy to the pre-Covid-level would be possible when consumers can come out of their fear of the coronavirus.
She said consumers are still spending only on essential items. “The world will come to normalcy as soon as vaccines are available.”
Yasir Azman, CEO of Grameenphone, said the loss during this Covid-19 pandemic is immeasurable.
“But, together, we are stronger in the recovery journey. We are now more digital savvy and adapting to new uses of technology. The transformation is supposed to happen after two to three years. It is happening now in many ways.”
“It’s a demanding situation we are into and that requires collaboration and leadership to navigate through.”
Tanvir Ahmed Mishuk, managing director of Nagad, a mobile financial service, said, “Our best lesson is to manage resources in the best possible way in every aspect.”
“In order to face current challenges, everybody needs to adopt technology as fast as possible.”
LOOKING FORWARD
Despite the sign of recovery, there are uncertainties and risks. Remittance inflows increased in recent months, but CPD’s Khatun said there is a caveat.
“Many migrant workers might be returning home. I am not sure whether this will continue. The number of people going abroad has slumped.”
Revenue collection remained low until July while the government’s development expenditure fell 17.6 per cent year-on-year in the first month of the fiscal year.
Zahid Hussain said the economy is recovering relative to the ebb reached during the March-May period.
“But the recovery is uneven and uncertain. The non-vulnerable middle class and the rich appear to be benefiting most from the recovery implying further deepening in inequalities.”
“At lower levels, the work has recovered, but incomes are far behind and the health and poverty pains remain deep as well as pervasive.”
The recovery is likely to continue, said Mostafa Kamal, chairman of the Meghna Group of Industries.
“We urge public agencies to help us and speed up the process of approval for investment and business.”
Selim Raihan, executive director of the South Asian Network on Economic Modeling, said the quality of institutions matter in handling the crises such as the Covid-19.
“The countries that performed better than Bangladesh in handling the health hazard and resultant economic crisis have better institutions. Therefore, reforms in critical institutional domains are very important.”
Aameir Alihussain, managing director of BSRM, sounded caution.
He said people appear to have relaxed and are not wearing masks when they step outside their houses.
“If a second wave comes, economic activity will decline and many companies will not be able to survive. Then it will be tough for the government to afford another stimulus.”