The government has announced a support package to help mitigate the economic impact of Covid-19. There may be a debate on whether this multi-dimensional support package is adequate, and one may argue on which aspects of the package should be prioritized.
I am not going into this discussion. Instead, I focus on implementation. Irrespective of its size and the relative importance given to its various components, the support package has a purpose and the critical question is: How would we know that the objectives of the package are being met?
Let us consider the case of support to small and medium-sized enterprises (SMEs). The government intends to provide them with subsidized loans. To start with, we need to have a rough idea of how many such enterprises need loans and in what amount. Not everyone’s needs can be met, but we need an idea of how much of the financing need can be satisfied.
Based on this understanding, specific targets can be set for the volume of loans to be disbursed, as well as the time frame for disbursement. For example, we may want a certain amount to be disbursed in the month of May, a certain amount in June, the rest in the following months, and so on.
The question of sector-based or region-wise distribution may also come up. While the novel coronavirus or Covid-19 may negatively affect all SMEs, there could be some sectoral and locational variations in the impact.
It must be decided whether the target allocation of loans will take such variations into account. If so, the loan disbursement targets will need to be further specified along sectoral and locational lines.
Providing loans is not the ultimate objective; it is merely a means to an end. Loans are to be provided for specific purposes -- such as keeping the wheels of production running and ensuring that the workers employed in these businesses retain their jobs and incomes.
It may be unrealistic to expect that production or employment levels will quickly revert to the pre-corona levels. Notwithstanding the support to be given, some loss of production, sales, and employment may be inevitable, at least in the short term.
We must decide how much of a reduction in production, sales, and employment we are willing to accept. Accordingly, production, sales, employment, and wage targets should be set in the support package for the small and medium-sized business sectors and reflected in specific performance indicators.
For example, we may expect the support package to help restore production to 50% of pre-corona levels in July, 60% in October, and so on. If we are more/less optimistic about the post-corona recovery, these targets will be higher/lower. Similarly, targets should also be set for sales, jobs, and wages.
One of the major goals of the incentive package for the garment industry is to ensure that workers receive wages during the time the factories are closed. Here, too, there is a timeline consideration. For how many days do we want to guarantee wage payments -- one month, two months, or longer?
Once this is decided, the next step is to ensure that the wage payments are indeed reaching the workers. It is being said that the wages will go directly to the workers’ bank accounts through digital transfers. But what about those who do not have such accounts? Alternative foolproof payment methods will need to be devised for such workers.
Then comes the matter of resuming production. Let us suppose that the risk of coronavirus infection is reduced to such an extent that factories reopen after two months. If so, the next question is related to the expected recovery in demand or orders from overseas buyers. If we are truly fortunate, most, or all, of the previous demand will be restored.
But the specter of global recession suggests that we cannot be so optimistic and will have to accept a partial recovery of demand. In this case, we need to have a system whereby the government can assess how the demand for garment products is evolving, based on real-time information from the garment industry. Accordingly, it can decide whether the incentive package needs to be expanded, and to what extent.
The monitoring measures discussed in this article require two types of information. First, we need information on the current situation. Such information will be used for two purposes: To appropriately design the support package and to set the baseline needed to track implementation progress.
Much of the information required for these two tasks may already exist in government or be available in the private sector. However, in some cases, we may need to collect additional information to fill in our knowledge gaps. This would require quick, but well-designed, surveys.
The second type of information included in such a monitoring system will be on implementation progress against the pre-defined targets. This will help us verify whether the incentive package is delivering the expected results. If the results are below expectations, further investigation may be carried out to understand the underlying issues.
For example, we may find that the amount of credit disbursed to small and medium-sized businesses or industries is below target. This could be for several reasons.
Banks may not have enough liquidity -- a risk that some experts have already pointed out. Or it could be that the banks are struggling to complete the formalities of lending, especially to new customers with whom they have no prior relationship.
There may be problems with loan demand too. Many SMEs may not be interested in borrowing for a variety of reasons. Even if they need a loan, SMEs may be discouraged by the onerous loan application and processing formalities of the banks, or they may find the various terms and conditions associated with the loan unacceptable.
Even if loans are disbursed as expected, the target outcomes in terms of production, sales, or employment recovery may not materialize. Again, there could be various reasons for this.
Enterprises may find it difficult to obtain the required raw materials, the demand for their products may not be as expected, or there could be other problems in the investment environment that may discourage or hinder them.
Once such problems are identified, appropriate corrective actions may be taken. Good monitoring systems not only help verify if the expected result of a stimulus program is being achieved, but also trigger corrective actions by providing clues about the underlying reasons for implementation-failures.
A relevant question: Where would the information needed for such a monitoring system come from? The first source is the government itself. Various government agencies collect a lot of relevant information on a regular basis. But there will be areas for which new information will have to be collected.
This is particularly true for people working in the informal sectors, who are bearing the brunt of the coronavirus outbreak, and for whom a large part of the support package is earmarked. Special types of surveys will be needed to obtain baseline data as well as the information to verify the extent to which they are benefiting from the support packages.
Many actors in the non-governmental sector of Bangladesh, especially in NGOs, universities, and research institutes, have experience in conducting such surveys. In some cases, there is scope to leverage technology: For example, those who use mobile phones can provide immediate feedback on the effectiveness of the support packages.
Some such exercises have already been carried out. For example, a telephone survey of more than 5,000 households in villages and urban slums were conducted in the first two weeks of April by the Brac Institute of Governance and Development in partnership with the Power and Participation Research Centre.
This has provided invaluable information on how these households have been affected, how they are coping, and what support they need. In the era of the novel coronavirus, when the scope of direct communication is limited, the logic of data collection through long-distance methods is even stronger.
One thing is clear from the above discussion -- the importance of data. Data is essential for program design and implementation even at normal times; these are critical and crisis situations. To cope with the current crisis, we need to have a good idea of the real situation, so that the right action can be taken, and the effectiveness of the actions assessed.
We need to collect this information promptly. This is a big challenge. The government, business sector, NGOs, research institutes, universities, and many others -- all have a role here. What is needed is the participation of all, but in a concerted manner.
Anyone can gather the information they need from their own vantage points, but it must be compatible with an overarching monitoring system. First and foremost, it is the government who must take the initiative to ensure such coordination and cooperation.
The government should be complimented for coming up with the support packages. But these need to be designed well. And then there is the question that is on everyone’s mind: Will these be implemented? Monitoring and evaluation are critical to implementation.
There is a saying -- “what gets measured, gets done.” This is true in normal times. It is more so in these extraordinary times.
Syed Akhtar Mahmood is an economist, previously with an international development agency. He writes from Maryland, USA. A slightly different version of this article was originally published in the Bonik Barta on April 13, 2020.
