They also urged the government to meet the budget deficit from external sources to reduce dependency on bank borrowing
The country's business community on Saturday laid stress on a framing of sector-specific investment roadmaps with strategic action plans and comfortable corporate tax to seize the opportunity of investment relocation from China as foreign direct investment (FDI) declined sharply last year.
They also urged the government to meet the budget deficit from external sources to reduce dependency on bank borrowing.
Leading businessmen of the country made the call at a webinar, titled “Bi-annual Economic State and Future Stance of Bangladesh Economy: Private Sector Perspective”, organized by the Dhaka Chamber of Commerce and Industry (DCCI).
“FDI inflows in Bangladesh fell to $2.87 billion in 2019 compared to $3.6 billion in 2018. In the given context, to seize the opportunity of investment relocation from China, Bangladesh needs to frame a sector-specific investment roadmap with a strategic action plan. Besides, corporate tax needs to be rationalized,” said DCCI president Shams Mahmud.
The business community argued that high bank borrowing would slow private credit growth, hindering new investment.
Shams Mahmud said that more focus needed to be put on sourcing funds from external sources, thus reducing dependency on bank borrowing to mitigate the budget deficit.
“The government’s high bank borrowing may slow down credit flow to the private sector. Industries are trying hard to keep existing employment safe, and in that case banks and industries should go hand in hand,” said Hossain Khaled, managing director of Anwar Group of Industries.
The DCCI president also suggested reducing source tax for export-oriented sectors to 0.25%.
The agriculture and agro processing industry needed to be supported and remain functional with strong local-supply chain systems to ensure low-cost food security, he said.
Emphasizing the need for policy reforms, Planning Minister MA Mannan stressed a Look East policy for better regional gain. In terms of business, every door should be opened, he said. He was speaking at the webinar as the chief guest.
The government was giving priority to the agriculture sector, and to gain observer status in the Asean region, the government was making efforts, he informed the meeting.
In line with RMG and textiles, a new avenue, medical textile, had emerged worldwide, said Mannan.
He thus called upon the private sector to grab this opportunity.
On the matter of infrastructure development, he invited the private sector to come forward and held out the assurance that the government would facilitate the private sector in this regard.
M Masrur Reaz, Chairman of Policy Exchange, put stress on survival, resilience and revival for economic recovery, as global demand and supply had declined due to Covid-19.
He suggested taking short and mid-term strategies to bring the economy back from the Covid situation.
Ensure access to fund for SMEs
The Micro, Small and Medium enterprises (MSME) sector has been hard hit by the Covid-19 pandemic but banks are reluctant to disburse loans under the stimulus package to MSMEs, it was noted at the DCCI webinar.
For MSME recovery from the Covid crisis, a special re-financing scheme needed to be introduced with low-cost foreign funds and access with a minimum grace period of two years with 1- 2% percent interest rate, the chamber demanded.
It also urged a flexible, hassle-free and collateral-free loan disbursement system under stimulus packages.
Shams Mahmud called for credit guarantees in order to allow access to stimulus packages for CMSMEs.
Abul Kashem Khan, former DCCI president, said how to give the economy a full pace should be the main focus now.
He also emphasized stimulating the informal sector and also stressed that MSMEs should be given stimulus packages.
Though the budget allocation for health has increased, it should be up to 5% of GDP, said the business people who took part in the webinar.
Moreover, adequate infrastructure, medical equipment and human resources need to be maintained. Tertiary health sector functioning needed to be increased. Safety net schemes should be gradually shifted towards employment generation through small-scale credit and training, they added.
"Our informal sector accounts for 43% of GDP in Bangladesh. Pandemic has caused unemployment of around 39% workers in the informal sector. The government needs to create flexible regulations to bring informal businesses into the mainstream," the webinar concluded.