Stricter lockdown preferred with aid for the poor, SMEs

Dr Ahsan H Mansur is the executive director at the Policy Research Institute

The lockdown will definitely have a negative impact on the economy. Now it is a matter of our own choice whether we will increase the transmission of Covid-19 by moving around or curb the infections by enforcing a strict lockdown.

In my opinion, implementing a two-week lockdown has become necessary at this time. And it must be a strict lockdown. The government has to tell everyone in advance that they have to stay at home for two weeks, so they need to prepare for that.

Such a lockdown may have a negative impact on the economy, but if the businesses are reopened before Eid observing the impact of the lockdown on the health situation, this loss will be remedied to a large extent.

However, it is true that many poor people cannot afford to eat for two weeks without any work. In this case, the government has to take the responsibility of delivering their food.

Necessary products like rice, pulses and potatoes have to be supplied to the slums and other residential areas where poor people live. However, relief cannot be distributed among people by forming queues like it was done during the previous lockdown. Increasing the gatherings of people for distributing food from specific centers will make it difficult to meet the infection control target.

Many people talk about cash assistance to maintain the purchasing power of the people. The real situation is that the shops have to be closed if a full lockdown is to be observed. As a result, cash will be of no use.

The government has enough manpower to enforce the lockdown in an orderly manner. It has Police, Army, and Ansar forces. Young volunteers are also ready to respond to the government’s call. If the issue of Covid-19 is really given the highest priority, the government must do its utmost.

The government needs to use all of its capacity to implement the lockdown as much as possible. In countries like India, France and Italy, the police are enforcing the lockdown with sticks in their hands. In the interest of public life, law enforcement agencies should be stricter here as well.

It is true that the government may not be able to finance the lockdown due to low tax collection. However, the government has many options to extract resources.

In conclusion, I would say that a strict lockdown will do some harm to the common man. Trade and commerce will also suffer some losses. But they are already suffering losses. Considering this, the option that will cause a lesser loss is a strict lockdown for two weeks.

There will be an opportunity to measure the damage when everything is opened at the end of the lockdown. The revival of the economy may then require the announcement of large stimulus packages.

Dr Fahmida Khatun, executive director, Centre for Policy Dialogue

Last time too, the lockdown was not enforced in a planned manner. It was not strictly followed either.

Economic activities have remained rather sluggish due to the coronavirus. Many businesses have suffered losses due to declining production as well as declining sales.

Hit by a fresh blow amid the struggle to recover from this wound, people have become anxious. They are now somewhat reckless to survive with their family. Livelihood is taking precedence over health concerns.

Several days of a stringent lockdown is very important considering the current health risks. But, poor people burned through their savings during the previous lockdown. Small-scale industrial and commercial enterprises are yet to recover from previous losses.

In order to implement the new lockdown in this situation, the government has to provide food and cash assistance to protect the lives of the poor people.

Many of the incentive packages and support initiatives announced by the government last year amid the pandemic were not implemented. And the incentives and support initiatives were not enough either.

In order to implement the new lockdown, measures must be taken in phases. Food aid and cash transfers need to be made for the poorest of the poor.

And for low income people, arrangements have to be made to distribute rice, pulses and other daily necessities at low prices in the open market. In times of crises, open market activities play a very effective role in the livelihood of the urban poor.

At the same time, the scope and reach of the government’s social security programmes should be increased. In order to increase transfer of funds in rural areas, employment generation programmes should be undertaken soon.

Last year, 5 million families were promised Tk2,500 each, but the full amount was not distributed. There were people on this list who didn’t need this help. Again, many who needed money could not be included in the list.

A transparent list needs to be made to manage the assistance from the government. There is an issue of allocation here. There is also the issue of proper management.

And for those who are running a small business, the amount of incentive needs to be increased.

Due to various conditions, the distribution of incentives through commercial banks is not gaining momentum. These conditions need to be relaxed. Non-bank microfinance institutions should also be included in the distribution of incentives.

In conclusion, I would say that neither the health nor the economy is being protected through the ongoing relaxed lockdown. During a half-hearted lockdown, some sectors remain open and some are closed. If such lockdowns last for a long time, some sectors suffer in the long run. This leads to inequality.

If health protection is guaranteed in a short-term lockdown, the countrymen may be willing to accept it for a short period of time.

Some sectors need assistance to implement a whole-hearted lockdown.

There will not be much shortage of government funding to manage all this assistance. Moreover, foreign aids also being promised.

But, first of all, the management of the health and financial sectors needs to be improved. And a balanced use of resources must be ensured.

Dr Monzur Hossain, Research Director, Bangladesh Institute of Development Studies

I think the government and the people of the country are not capable of affording a complete lockdown for a longer period. Any lockdown for a longer tenure will impact the livelihoods of the poor people negatively. The impact would be worst on the cottage, micro, small and medium enterprises (CMSMEs) sector.

One of our surveys suggests that about 50-60 percent production in the CMSME sector was reduced in the two months’ lockdown last year. Despite some limited scale of operations in the previous lockdown, more than 96% of CMSMEs were impacted.

A complete lockdown will definitely create more losses for all of the CMSMEs and other small businesses by reducing production, sales and profitability.

Now the question is how long the lockdown will sustain. I think a lockdown for seven days will not be enough to control the infection. A strict lockdown for at least two weeks is scientifically required to control the pandemic to some extent.

If so, some support measures would be required for the poor and the people engaged in the CMSME sector.

Stimulus announced for CMSMEs in the last year has so far been disbursed by below 75 percent. And most of the pie went to relatively larger/medium sized enterprises. Cottage, micro and small firms were largely deprived of the stimulus package due to the lack of effective communication with banks.

The shortcomings of the disbursement process of the stimulus for the cottage, micro and small enterprises are yet to be overcome. It was highly recommended to involve NGOs and MFIs in the disbursement of the stimulus to reach out to small enterprises.

Despite recommendations from experts and economists, any positive decision in regard to the involvement of NGOs and MFIs is yet to be made.

Now as a complete lockdown is coming, more loans under stimulus would be required to be distributed among small businesses, even for enterprises that received the loan previously. The moratorium period of the principal and interest payments of the previous loan for the CMSMEs needs to be extended for at least one more year. Otherwise, small businesses will fall into grave difficulties that will also delay the recovery of the overall economy given that CMSMEs are the engine of growth.

The government has to emphasise a faster implementation of the existing stimulus packages and announce more packages for small businesses. The fund size was Tk20,000 crore last year, and the same amount of stimulus should be announced for another year.

Experience from last year shows that entrepreneurs readjusted a lion’s share of the deferred payment of the wage and other bills during the recovery phase. It is a very positive sign for labour engaged with the CMSMEs. I hardly believe that they would be able to adjust their losses without support if the lockdown continues for more than two weeks.

They need some additional support to pay for house rent, utility bills and food, if the lockdown continues for longer.

The CMSME sector is supposed to recover faster due to their dynamic capabilities and huge demand for the products they produce. We observed that about 80% of such enterprises had recovered by December last year. Unfortunately they again fall into an uncertain business situation. That is why the government should extend continued support for them.

Dr Sayema Haque Bidisha, Professor of economics, University of Dhaka

The middle and lower-middle classes suffered the most in last year’s lockdown as businesses and industries remained closed. During October-November, they began recovering from Covid-19 losses. But the impacts on the economy would be worse as infections are rising now. Recovery will also take additional time.

Loan is a big part of the government's Covid-19 stimulus packages. Although this loan has some positive aspects, small traders are under a bit of pressure to repay it. They were thinking of overcoming the previous losses by having good sales on Pahela Baishakh and Eid-ul-Fitr.

In this situation, in order to impose a new lockdown, small traders have to be provided with the necessary funds for survival. Considering the income of the people, food and cash assistance should be provided to the extreme poor while food and daily essentials should be provided to the low-income people at low prices. Also, to help the lower middle income people maintain their purchasing power, the prices of daily commodities have to be controlled in the market.

It goes without saying that the coronavirus crisis has been worsening lately due to the carelessness and indifference of the people as well as the government. The situation has reached such a stage that there is no alternative to lockdown in terms of saving lives. In this situation, everyone has to take responsibility to deal with the future crisis.

It may not be possible for the government alone to reach out to everyone. It has to join hands with representatives of various social organisations, non-governmental organisations, and the private sector to tackle the pandemic in the future.

The shop owners’ association may take responsibility for feeding the employees under it. In the same way, owners in all sectors, including apparels, should arrange some common medical facilities for their workers. In this case, the government also has to impose some obligations.

Some sectors are fully closed during strict lockdowns. The income of workers in some sectors, such as ride sharing, beauty parlours, salons, hotels, and restaurants, completely stops during lockdowns. The government has to identify these sectors and arrange special allowances or loans for them.

A small but strict lockdown will help reduce coronavirus infections. After that, if the economy is reopened, some rules have to be followed for the long term.

All types of meetings and seminars had been held online since last year's lockdown. Almost all government and private offices had operated virtually. All meetings and seminars will have to be arranged online for at least the next six months.

Long-term monitoring of the adherence to hygiene rules in residential hotels, resorts, and restaurants is needed. Masks should be made compulsory everywhere, including in shops and offices.

Online shopping is rising. To make this sector more popular, the government has to provide incentives for some services, such as delivery. People of all echelons, including government officials, have to make some compromises to tackle the pandemic.

Government officials have received Pahela Baishakh allowances. Eid allowances will perhaps be paid in the future. The present situation is not favourable when it comes to celebrating Baishakh or Eid.

In this situation, the allowances of top-ranking employees could have been spent on other purposes. Apart from that, if it was made compulsory to use this money to buy products of local small entrepreneurs, that could have played a role in reviving the economy.