Up until recently, the Bangladesh economy was growing at a rate of 8.2 % -- the projected rate of growth for this year was 7.8%, as estimated by the United Nations and Asian Development Bank.
The graduation from poverty happened at a staggering poverty decline to 10.5% in FY2019 compared to 31.5% in 2010, whereby 25 million people were brought out of poverty in the last decade. In this miraculous growth, the informal economy has made key contributions besides the formal economy.
Unofficially, as much as 85% of the workforce of the country is engaged in the informal economy.
Bracing for impact
Now, all these achievements and growth have come to a stall. Last week, the World Bank and IMF estimated that, in the aftermath of Covid-19, the growth rate will plunge to 3%. It is also estimated that a whopping 19 million people will be plunged afresh into poverty as a result of the pandemic.
As the economy braces for the impact of the Covid-19, in order to ensure soft landing for the economy, stimulus packages of Tk95,619 crore, equal to 3.3% of the GP of the country, was declared by Prime Minister Sheikh Hasina.
The initial stimulus packages and benefits of Tk72,750 crore, declared in the speeches of the prime minister, were mainly to address the crisis faced by export-oriented industries, service sectors, SME sectors, etc.
But, since those have been structured to be distributed through the banks, depending on the bank-client relationships with the relevant entity, in the form of loans having different interest rates and tenures, by their very nature, these benefits were addressed at the formal economy.
However, on the eve of the Bengali New year, Prime Minister Sheikh Hasina announced, among others, a package of Tk760 crore for the benefits of “rickshaw/van-pullers, motor labourers, construction workers, hawkers, hotel workers, and people engaged in other professions who have lost jobs as a result of the lockdown.”
The prime minister has been empathetic to the woes of daily wage earners and small business enterprises, which led to the announcement of this package of Tk760 crore. Viewed from any angle, this is an applaudable package. The objective of this package appears to be a noble one -- addressing the plight of those engaged in the informal economy, including small business ventures.
But, like any other financial benefit packages, the success of this particular package will also depend on the accessibility. The mechanism of distribution of these benefits has been expressed to be preparation of a list of individuals and direct transfer of cash to their respective bank accounts.
The criteria for inclusion
Now, the question is, which individuals will be eligible to be included in this list? In other words, what is the criteria for inclusion? Will a uniform criterion be applied across the country? We are yet to know more about the criteria and their application.
Still, we may, from the legal point of view, suggest how such criteria could be derived from the principles of interpretation, optimizing the ambit, and attaining the noble objective of the package, as expressed by the prime minister.
The grant package contains the words “people engaged in other professions” preceded by “rickshaw/van-pullers, motor labourers, construction workers, hawkers, hotel workers.” In interpreting this generic classification, one may resort to the principle of “ejusdem generis,” a rule often applied for statutory interpretation by the courts.
The rule denotes that when a law contains a non-exhaustive list of specific classes of persons or things, followed by a general categorization, the general statements will only apply to the same kind or persons or things specifically listed.
One would find that the list effectively includes those in the informal economy who are standing very close to the poverty line. Accordingly, relying on the principle of ejusdem generis, one may then argue that “people engaged in other professions” is intended to include informal economy actors like vegetable vendors, maids, etc. but may not include an Uber driver or a small scale entrepreneur operating through social media platforms like Facebook.
The scale of the informal sector
In Bangladesh, economic activities in the informal sector vary considerably, both in their nature and volumes. Though it may sound strange to many, the informal economy consists not only of day-labourers, maids, or vegetable vendors; a large chunk of growing e-commerce markets, start-ups, and freelance service providers, enabled by technologies like Facebook and platforms like Pathao, Sheba.XYZ, Uber, are also part of informal economy.
More than 300,000 Bangladeshi stores are being operated on Facebook, where the respective owners of these pages are earning on average between Tk10,000 to Tk1,00,000 per month. Yet, many of these F-commerce entrepreneurs are unstructured, thereby working within the informal sector, while gig workers are deemed to be “self-employed” from a legal perspective, again a part of the informal economy.
A significant number of these informal sector self-employed or freelance individuals are working full-time as the sole income-earning member providing for their families. According to an unofficial source, Pathao alone has about 300,000 riders. Anecdotally, the start-up ecosystem provides direct-indirect employment opportunities to approximately 1 million workers.
Due to the global and interconnected nature of the trades as well as the pandemic, the global supply and demand shocks will inevitably lead to the shutting down of many small e-commerce businesses and start-ups, leading to the unemployment of many.
The social-lockdown measures will drive down demands for gig workers engaged in transportations, e-commerce/food/parcel deliveries, and service sectors, leading to job and income losses of those engaged in this sector.
Though most of these workers are “self-employed” from a legal perspective, the small-scale fledgling entrepreneurs as well as gig-workers are unlikely to be eligible for working capital loans under the stimulus package of Tk20,000 crore, not only for their lack of informalities of operations or existing “bank-client” relationships, but also due to high costs associated with the loans and absence of collaterals.
It is true that some already established start-ups, which have strong foundations in terms of funds, have quickly pivoted by creating alternative verticals like grocery delivery, providing transportation to NGOs with their relief works, etc, thus continuing their operations, and generating earnings for people associated with them as much as possible.
However, even without conducting any empirical study, it can safely be assumed that the new verticals would not measure up to income opportunities created by up to 7.5 million rides per month across various ride-sharing platforms.
Without a lifeline
The estimate of the middle-income group in Bangladesh varies between 12 million and 33 million, many of whom earn only $4 a day. 20% of these middle-income populations are self-employed, amounting to 6 million people who largely operate in the informal sector. $4 per day translates roughly into Tk10,000 per month, compelling many of these individuals in this segment of population to live paycheck-to-paycheck, with very little or no savings for contingencies.
On the above backdrop, if the benefits of this stimulus package of Tk760 crore are interpreted as directed towards the like of rickshaw/van-pullers, motor labourers, construction workers, hawkers, and hotel workers, more likely than not, it will be deemed to apply only to the marginal sections of population existing near the poverty line.
If so, then it would appear that a large section of the working population -- in Bangladesh being approximately six million, ranging from small start-up entrepreneurs to freelance service providers to gig workers -- is left without any lifeline in the dire situation created by Covid-19, even under this noble package, which is likely to be inconsistent with the very objectives expressed by the prime minister.
From a non-economist’s perspective, six million is a relatively large section of the current workforce. If such a large portion of hitherto income earning population is not offered financial incentives to create or continue employments or earnings, they will have their incomes becoming lowest to nil within a short period, affecting the demands, thereby generating more unemployment in turn at medium to large manufacturing businesses, the main targeted beneficiaries of the stimulus package.
Not poor enough
ILO estimates that young persons, including self-employed, casual, and gig-workers, are likely to be disproportionately hit by the pandemic. With a conservative interpretation of the financial benefits package for the people engaged in the informal economy, many of these people will be deemed ineligible for any benefits under the social safety programs, for occupying a space in the social stratification where they are not “poor enough.”
Therefore, it is submitted that the rule of ejusdem generis in this particular case should be applied with caution. It may be argued that despite that the general wording of “people engaged in other professions” are preceded by the specific terms of “rickshaw/van-puller, motor labourers, construction workers, hawkers, hotel workers,” in this context, they should be interpreted to apply to a wider class.
If this approach is adopted, the ambit of the packaged would be widened to include various self-employed individuals and freelance service providers engaged in the informal sectors, including the gig-workers, regardless of the fact that they belong to an income group separate from that of rickshaw/van pullers, transportation workers, etc.
Support for the above interpretation may also be derived from the doctrine of reasonable classification, which requires that conferring of preferential treatment to a certain class of people is justified so long the classification is based on intelligible differentia and that differentia has a rational relationship with the object for which law or executive order has been made.
In the present context, the differentia may be deemed to be those engaged in informal sector, standing to lose income (intelligible differentia) and the objective of expanding the social safety net to the informal sector, as articulated by the prime minister in her speech is “to provide for their basic necessities ” (objectives). The basic necessities, as per Article 15 of the Constitution of Bangladesh, include the right to life, food, clothing, shelter, education, and medical care.
In the present context, it goes without saying that if “those engaged in other professions” is interpreted narrowly so as to exclude self-employed lower-middle income earning groups, the objectives of providing basic necessities of the people standing to lose jobs and income due to lockdown, will be severely frustrated.
At the same time, such an interpretation will also be open to challenge under Article 102 of the Constitution for breach of the fundamental right of equality, guaranteed by Article 27 of the Constitution of Bangladesh, for falling foul of the test postulated by the “reasonable classification” doctrine.
We also need to look beyond the immediate objectives stimulating the economy to avert Covid-19 implications. Though it may not be of the same urgency, at some point in time we have to focus on one of the country’s overarching aims of reaching the first Sustainable Development Goal of eradicating extreme poverty by 2030 and becoming a middle-income country by 2024.
Both of these goals will require job creation and improved self-employment opportunities to address increasing youth unemployment. A narrow interpretation of the classes eligible for the benefits under Tk760 crore package will not only be inconsistent with the objectives in the present context, but also with the overall SDG goals, up until recently being splendidly attained by Bangladesh, way ahead of its neighbors.
In the absence of any clear-cut guidelines as to the eligibility criteria and the mechanism for distribution of the benefits under the Tk760 crore package, it is only expected that an interpretation consistent with the empathy of the prime minister towards the daily wage earners and small business ventures rooted in ground economic reality, is adopted in implementing the stimulus package.
Otherwise, self-employed lower-middle income earning groups, who are as vulnerable as rickshaw pullers, will plunge into the depths of poverty, which they had managed to come out of by putting in uncountable hours’ worth of blood, sweat, toil, and tears.
Advocate Farhana Khan is a partner of AS & Associates and practice lead of Corporate Affairs, Admiralty and Telecommunication Sector.