Economy progressing in right direction: DCCI

The macro economy progressed in the right direction in the last six months despite a loss of $19 billion – about 5.08% of GDP – induced by Covid-19 last fiscal year and some other losses like a 9-percentage-point increase in the poverty rate and 68% job loss among urban people, according to an assessment of the Dhaka Chamber of Commerce and Industry (DCCI).

The chamber called for reducing bureaucratic complexities to disburse loans within seven days of application and extend the moratorium period on existing loans by at least three years placing emphasis on cottage, micro, small and medium enterprises (CMSMEs).

DCCI President Rizwan Rahman placed the recommendations at a webinar styled "Bi-annual economic state and future stance of Bangladesh economy: private sector perspective" held by the chamber on Saturday.

Planning Minister MA Mannan attended the online seminar as chief guest.

Economists and experts urged the government to undertake proper initiatives to attract foreign direct investment, expand trade, reform tax, VAT, duty and tariff structure, help develop skills of the people, improve backward linkage industry, ensure financial inclusion, utilise the capital market for long-term financing, ensure access to finance for small and cottage industry, and develop strong negotiation skills and diversify products to meet the challenges likely to arise after the country's graduation from the list of the least developed countries (LDCs).

Most of the panellists at the webinar emphasised accelerating the vaccination drive before full swing operation of economic activities to recover the losses caused by Covid-19.

Planning Minister MA Mannan said the government is fully aware of the threat of the Covid-19 on the economy. He expressed hope that the economy would reopen fully after the ongoing vaccination programme when about 80% of the population would come under the coverage of vaccines.

"Hopefully, we will overcome it after the vaccination. We are at the final stage of the vaccination drive. If we can maintain it and achieve the target of inoculating 70-80% people, the economy will hopefully open fully at the end of this year."

He further said the government will continue its attachment with the private sector for framing out a better policy regime for policy reforms, tax reforms or tariff structure reforms.

The government is focusing on better living, better values of life, more freedom, more democracy and independence of people, he added.

Dr Mohammed Forashuddin, former governor of the Bangladesh Bank, stressed increasing the existing Tax-GDP ratio that currently stands at only 10% whereas it is 18% in Nepal.

Referring to the fact that Vietnam has pushed Bangladesh out of its second position in terms of RMG exports, he suggested the government to follow the success models of Vietnam, Nepal and Sri Lanka to improve export performance.

Dr Zaidi Sattar, chairman of the Policy Research Institute (PRI), emphasised a tripartite partnership among the public, private sector and non-public sectors to recover the economy from the Covid-19 shocks and to meet the post LDC-graduation challenges after.

Depending on the strong macroeconomic strength, the Bangladesh economy is performing quite better than the other countries in the world despite going through a tough time due to Covid-19.

Because of prudent and sustainable macroeconomic management the economy of Bangladesh did not shrink, he observed.

Citing Vietnam's example, he said Vietnam's export is dependent on foreign manufacturers and their export basket is diversified.

He advocated for a sustainable trade policy having equal treatment, especially for non-garment sectors.

He also reiterated the need for rationalising the current tariff structure and incentive policy.  

Dr Binayak Sen, director general of the Bangladesh Institute of Development Studies (BIDS), said the country has no up-to-date data on poverty, employment or human development.

A lack of data actually affects the quality of policy formulation, he mentioned.

He further said the rate of poverty in Bangladesh considering $1.9 PPP (purchasing power parity) is lower but the rate is very high considering $3.2 PPP.

A large number of people are living between the two poverty lines, which is why a large number of new poor are arising.

He, however, was hopeful that the poverty rate would come down after the lockdown.

While designing a stimulus package, priority should be given to cottage and small sectors, he said, adding that a social protection system for the urban community is also important.

He also underscored the importance of removing inequality in education. For accelerating private investment, domestic tax structure is an issue, he identified.

Dr Nazneen Ahmed, country economist of UNDP Bangladesh, said, "The government and people cannot go for unlimited lockdown for the sake of the economy. So, we have to go for mass vaccination and abide by the health advisories."

"In this volatile situation, access to finance including financial inclusion for the CMSMEs is more important."

She said economic recovery from the adverse impact of Covid-19 depends on how Covid-19 is addressed. "It is necessary to consider how to speed up the vaccination process and how to reduce waste in the health sector."

"In the liquidity management system, we have to give small investors access to finance. To facilitate women entrepreneurs including their financial inclusion, e-commerce can be a potential platform," she added.

Professor Mohammad Abdul Momen, director of the Institute of Business Administration at Dhaka University, said a comprehensive vaccination would help to achieve a golden line. "If we can maintain it, the economy will be back in full force. It would not only help the recovery but also ensure some additional achievement."

He emphasised product diversification, strengthening G2G diplomacy to avail GSP+ facilities after the graduation.

Rizwan Rahman who presented the keynote at the event and said the economy has been progressing more or less in the right direction for the last six months despite manifold Covid-led challenges.

He said the public and private sectors need to work hand in hand towards the road to recovery to achieve the economic transformation of Bangladesh targeted in 2026 and 2041.

He further said the overall economy fell into a crisis due to the rapid spread of Covid-19 across the world. The GDP size reduced to $364 billion against the target of $374 billion, he noted, adding the poverty rate rose by 9 percentage points to 29.5%. 

The country's economy, trade and investment are going through a very challenging time, Rizwan observed.

He also said, "Bangladesh is going to graduate from the LDC status in 2026 and we have only 5 years in hand to take preparations. It is estimated that the country may lose $4-6 billion in export earnings following its LDC-graduation."

In order to boost internal revenue generation, he suggested full automation of tax, VAT and customs assessment, return and credit.

He also asked for relaxing the terms and conditions of repayment and collateral will help increase credit demand from the private sector.

CMSMEs are going through a very tough time, he said. For the survival of CMSMEs, he suggested providing collateral-free loans, devising a comprehensive policy framework, reducing bureaucratic complexities and extending the moratorium period to at least 3 years.

He also underscored the importance of faster approval of loans for CMSMEs, most likely in seven days from the time of application.