The overall business confidence of the country is expected to show some improvement during July -September period of 2020 over that in April-June quarter earlier this year, according to a survey.
The South Asian Network on Economic Modeling (Sanem) made the projection in its survey, titled “Covid-19 and Business Confidence in Bangladesh”, released on Saturday through a virtual briefing.
The telephonic survey was conducted between July 15 and 23 this year at 303 firms across the country, of which 153 were from the manufacturing sectors and 150 from service sectors. Top managers and executives of the firms were interviewed over the phone.
Business confidence is based on a score from zero to 100. A score above 50 means the situation is improving, and a score below 50 means the situation is worsening compared to the baseline. And scoring 50 means there is no change in confidence.
The overall business status in April-June 2020 was extremely poor due to the ongoing Covid-19 pandemic and all sectors suffered. The worst performers were the RMG, leather, light engineering, wholesale and restaurants. The better performers were in pharmaceuticals and the financial sector, said Prof Selim Raihan, executive director of Sanem.
However, business confidence for July-September 2020 shows some improvement over the business status for April-June 2020 with survey findings showing a 51.05 score out of 100. It had been 29.48 during the April-June period, he said.
Sales or exports scored the highest at 55.12, while cost of doing business, a major challenge during Covid-19, scored 44.8, meaning worse, said the survey report.
On the other hand, investment scored 51.73 followed by profitability 52.81, employment 51.32 and wage 50.58, it added.
At the sectoral level, despite improvement, RMG, leather, light engineering and other manufacturing areas demonstrated Business Confidence Index (BCI) as less than 50.
Meanwhile, the major improvement is seen for textile, which scored 55, followed by pharmaceuticals 58.58, wholesale 52, restaurant 52.43, ICT 54.17 and financial sector 57.50.
How to boost business confidence
Managing the Covid-19 health crisis is extremely important for boosting business confidence, while effective implementation of the stimulus package is crucial, said Raihan.
Of the surveyed organizations, 47% opined that the stimulus package was very effective, while 40% said it was effective.
As per the survey findings, only 34% firms availed stimulus packages, while 55% did not get them and 11% did not know about them.
The reasons for not availing the stimulus package include lengthy and difficult procedures, difficulties due to bank related services and corruption. Besides, there were no packages for industry and the fund amount was not enough, Raihan added.
Former DCCI president Abul Kashem Khan suggested policy modification in expanding the coverage of the stimulus package. He also said that a strict stance against corruption was necessary.
Talking on the stimulus package, Syed Nasim Manzur, managing director, Apex Footwear, said the process was unnecessarily complex.
He emphasized the need for regular, exact and comprehensive updates about the disbursement of the stimulus package.
Major challenges in doing business
Major challenges include corruption, high cost of doing business, poor trade logistics, unfavorable tax system, government support for industry and access to finance.
As per the survey report, 88% participants opined that corruption was the main challenge, while 71% said it was management of the Covid pandemic crisis.
“Corruption in Bangladesh will prevail as long as the cost of involvement in corruption is lower than the benefits it entails,’ said Mashiur Rahman, economic affairs adviser to the prime minister.
"We should look into the source of corruption. In taking government services or advantages, people don’t have equal capacity. That is why someone tries a different approach," said Rahman.
He also put emphasis on social and moral issues to stop corruption.
Meanwhile, business people opined that the cost of doing business was eating up profitability
"Right now, the cost of doing business is a big concern. I had to use 14 micro buses to transport employees before the pandemic, but now 52 are needed. On the other hand, profitability has almost disappeared," he claimed.
He also suggested making the exchange rate for export business-friendly and using the foreign exchange reserves for reviving the economy.
Commerce Minister Tipu Munshi expressed his concern about the future uncertainty of exports but hoped that the economy would turn around by the end of this year.
On a different note, he pointed out that Bangladesh’s competitor countries in trade were formulating policies to attract FDIs deflecting from China. He requested the relevant parties and Sanem to conduct research on this issue and assist Bangladesh in formulating policies to effectively attract these FDIs.
He also said that Bangladesh had successfully managed to strike trade deals with 42 countries and the establishment of a Free Trade Agreement with 11 countries was in progress.
The minister reiterated the government’s commitment to fighting corruption.