SANEM and The Asia Foundation found the results in the fourth round of a nationwide firm-level survey with 500 business entities
About 69% businesses did not get funds from the stimulus package announced by the government to tackle the effects of Covid-19, while 9% do not even know of the packages, according to a recent survey.
The South Asian Network on Economic Modeling (SANEM), in collaboration with The Asia Foundation, found the results in the fourth round of a nationwide firm-level survey with 500 business entities from April 6 to 18.
SANEM Executive Director Selim Raihan, also a professor of economics at Dhaka University, read out the survey findings at a webinar on Sunday.
Only 22% of businesses received funds from a stimulus package and the ready-made garment sector got 58% of the total incentives, the survey found.
The transport sector got 5%, wholesale traders 6%, and retailers got 9%.
But the ICT sector did not get any incentives, according to the study.
Economist Zahid Hussain and Dhaka Chamber of Commerce and Industry (DCCI) President Rizwan Rahman joined the webinar as panellists.
The panellists said that there should be more attention to the cottage industries and micro and small entrepreneurs.
“If they do not survive, achieving the country’s middle-income status will not go far,” they added.
Only one-fifth of the surveyed firms availed the stimulus packages, majority of which are from the manufacturing sector. Among the industrial sectors, 58% of the RMG firms received the stimulus package, whereas this rate is 40% for the textile and 30% for the leather industry.
Also, it is the large firms who had greater access to the stimulus package — 46% of the surveyed large firms received funds from the stimulus package in contrast to 30% medium firms and 9% small firms.
The firms who acquired the packages identified problems such as lengthy procedure, difficulty related to bank services, lack of information or difficulty in understanding the procedure, as major problems encountered.
Those firms which could not avail the stimulus packages identified the lack of packages for the respective industry, lengthy procedure, the fact that the package is not a grant, and difficulty obtaining information as obstructions.
The survey findings point out several important policy directives.
First, the government should undertake a sectoral approach to gauge the needs and identify the necessary policy measures for the worst affected industries such as leather and tannery, light engineering, transport, retail, restaurants, food processing, etc.
Additional incentives like a lowered interest rate for a longer period, increased and eased up duty drawback facility, increased export cashback facility, expanding the reach of the Export Development Fund etc., could be taken up for such sectors.
Second, small and medium enterprises (SMEs) should be a priority in channelling the loans and stimulus packages.
Also, effective implementation of the stimulus package is critically important. An assessment is urgently required on the stimulus package implemented so far, the study suggested.
Dr Zahid Hussain congratulated the research team for the much-needed initiative of collecting and sharing information on the state of business confidence.
He urged the research team to further explore the influence of Covid-19 protocol compliance on the extent of recovery.
The former lead economist of the World Bank’s Dhaka office pointed out that large firms often have more influence and power, leading to better bargaining power and hence, better access to stimulus packages.
Rizwan Rahman stressed on the importance of the upcoming national budget and its role as a critical policy response to reshape business confidence.
The president of DCCI acknowledged that the pandemic has constrained economic growth and private sector investment in Bangladesh.
“As a result, the budget is currently far behind the revenue target, and this will eventually lead to pressure mounting on existing taxpayers,” he said.
To avoid corruption amid such scenarios, he suggested that it is important to achieve full automation in tax collection.
He further suggested that the central bank and monetary institutions must formulate strict guidelines for the banking sector to ensure that loans are disbursed to SMEs.
Increasing digital attachment for SMEs is also required for rehabilitation and recovery from the pandemic, he added.
The DCCI president also highlighted the importance of building local business confidence in order to increase the inflow of foreign direct investment.
He also recommended that law enforcement must play an important role in ensuring that safety protocols are maintained as the economy progresses towards reopening.