Economic crisis may trigger series of debt defaults: ICCB president

Bangladesh recorded one of the fastest growth rates in the world in the past few years with a stable economic performance that has helped to reduce poverty and social inequalities. But the economic downturn caused by the ongoing Covid-19 pandemic is likely to trigger a series of corporate and household debt defaults, International Commerce Chamber Bangladesh (ICCB) President Mahbubur Rahman said on Monday.

He made the remark while presenting the Executive Board Report at the 25th Annual Council of the ICCB, held virtually on the day. 

Quoting an ILO (International Labour Organisation) report, Mahbubur Rahman said Bangladesh is now faced with battling both the pandemic and its economic fallout. In such a situation, economic risks are not only limited to short term, but also extend to major future productivity losses both through labour and capital.

Mahbubur said, "In Bangladesh there are around 7.8 million enterprises and 90% of them are micro (including cottage) enterprises. This sector contributes around 25% to the GDP, amounting to around $79 billion. The high cost of doing business is affecting the SMEs."

"Besides, many SMEs have been suffering tremendous setbacks in terms of production, marketing and sales. The SME sector generates 30% of the total employment in the country as well," he added.

Bangladesh's graduation from the LDC status by 2024 will lead to the loss of trade preference in major export destinations and loss of other preferences. So, Bangladesh must focus on FTAs with major trading countries, he further added.

Meanwhile, the Executive Board Report observed the pandemic has created a massive economic contraction that will be followed by a financial crisis in many parts of the globe, as nonperforming corporate loans accumulate alongside bankruptcies. Sovereign defaults in the developing world are also poised to spike. This crisis will follow a path similar to the last crisis and it will hit lower-income households and countries harder than their wealthier counterparts.

The G20, along with the WHO, IMF, World Bank Group, United Nations and other international organisations, are mobilised to take active steps to overcome the pandemic, and the International Chamber of Commerce (ICC) is collaborating as a trusted business adviser with many of these engaged stakeholders.

As part of this campaign, the report reads, the ICC has released a call to action encouraging governments to ensure that stimulus efforts flow rapidly into the real economy and provide direct and immediate support to MSMEs and their workers to ensure their continued operation. Given the cross-border nature of supply chains, such stimulus and safeguard measures should be taken in a coordinated manner at both the national and international levels.

Countries around the world are implementing economic and fiscal policy stimuli, including emergency tax measures to support their economies under the Covid-19 pandemic. In this respect, the ICC has highlighted a number of key tax measures that the governments can take to "Save Our SMEs" and relieve cash flow stress during the crisis period.

In the meantime, the council approved the Auditor's Report of 2019 and appointed an auditor for the year 2020.

Also, they paid tribute to business icon Latfiur Rahman, founding member and vice president of the ICCB and a number of personalities including former ICCB executive board member Waliur Rahman Bhuiyan, OBE and Eminent Lawyer Barrister Rafique-Ul Huq; renowned educationist Niloufer Manzur, wife of Apex Group Chairman Syed Manzur Elahi and national professors Dr Jamilur Reza Choudhury and Prof Anisuzzaman.

The Annual Council was attended by ICCB Vice President Rokia Afzal Rahman, Apex Group Chairman Syed Manzur Elahi, DCCI President Shams Mahmud; CCCI President Mahbubul Alam; BIA President Sheikh Kabir Hossain; NCCI President Tareq Rahman and many others.