‘Bangladesh ready to face future challenges’

Developing linkage industries alongwith free-trade agreements and preferential trade agreements can help Bangladesh tackle some of the post-LDC challenges, Shams Mahmud, the Vice-President of Bangladesh Philippines Chamber of Commerce & Industry (BPCCI), tells The Business Post’s Talukder Farhad in an interview. The Shasha Denims Limited managing director had served as the President of Dhaka Chamber of Commerce & Industry (DCCI) in 2020. He talks about the country’s export, budget, LDC graduation, stock market, and the overall economy in the interview  

How will the post-LDC graduation challenges, coupled with the pandemic-induced uncertainties, affect Bangladesh’s exports?

The rising cost of doing business in other countries will help us grow our competitiveness, which will boost our exports.

We have already invested in new technology, building renovations, and green factories in the RMG sector. This means the sector won’t need large scale investment in the future. We will reap the benefits in the future.

In short, we are ready to face any challenge that lies ahead. We are not getting much-needed policy support from the government, especially in research and development. 

We need to develop linkage industries in the economic zones to cut our import dependence. For example, an active pharmaceutical ingredient is being set up in Munshiganj.

In addition to the generalised system of preferences, we have to do free trade agreements and preferential trade agreements with other countries to tackle post-LDC challenges. Well-performing sectors, such as pharma and agriculture, should be considered while inking these agreements.

As a businessman, what are your expectations from the next budget?

The upcoming budget should be the one for starting the groundwork for LDC graduation. The government is already considering the kind of support it will provide to some sectors.

We also need to look at how to reduce project costs. Increasing project costs will put pressure on the exchange rate. Imports will rise, which will affect inflation. As a result, the lower-middle-class will feel the pinch. 

The next budget should provide guidelines on how to reduce project costs. For example, the third terminal of the Dhaka Airport project’s implementation is going ahead of schedule. Other development work will be done with the money that is being saved. That’s a good thing. 

What future do you see for Bangladesh-Philippines bilateral trade?

There is a massive demand for Bangladeshi medicine in the import-dependent Philippines market. Square Pharma is already setting up a factory there. We expect the pharma sector to top the bilateral trade.

There is also demand for RMG and electric equipment, but we don’t have direct flights. If we can do this, products can be delivered quickly, especially agricultural products. Currently, if you want to go to the Philippines, you have to go through Malaysia, Singapore or Thailand.

What can be done to help the SME sector offset the pandemic’s impact?

SMEs contribute more than 80 per cent to our internal economy. The cottage and micro sector doesn’t need much skilled workforce unlike the RMG sector. This opens up massive employment opportunities. In other words, the cottage and micro sector plays a significant role in the internal economy and money circulation.

If the cottage and micro sector cannot do well, then there is no employment. Only proper policy support can take this sector forward.

We can talk about the RMG sector as an example. Twenty-five years ago, it was also a micro sector with 100-200 workers working in small factories. But policy support and incentives have made this sector a large industry. A small sector can become a big industry with proper and timely support from the government.

Implementation of the incentive package for CMSME has been disappointing. What do you think can be done to help them?

Incentive package loans are being released through banks. In the case of formal institutions, it is easier to get these loans because they have a credit history. But the bank transactions of small enterprises are very low.

Banks don’t have small enterprises’ credit history. Lending to such enterprises without a credit history is risky for banks.

Dhaka Chamber had suggested giving loans to cottage and micro sector companies through microcredit institutions or NGOs to address this problem. There has been some progress. A proper database of these small enterprises will help them get better service.

Digital transactions should be considered credit history for cottage and micro-business owners, but this initiative has not been taken yet. Bringing it under the framework will be of great help to small entrepreneurs. 

Recently, some banks have been offering small loans through mobile banking. This is a good initiative that can potentially resolve the issue of credit history (which will help small entrepreneurs approach banks for big loans).

What’s the importance of the capital market in our expanding economy? What’s your advice for listing companies on the share market?

The current Bangladesh Securities and Exchange Commission is doing a lot. There are some rules about listing that not all companies can always follow. Many companies lose interest in the capital market as raising funds is a long and complicated process, unlike bank loans.

In addition, a listed company has to follow many procedures in case of new investments. Many foreign investors turn away because of the lengthy process. In contrast, foreign investors can easily invest in a non-listed company.

On the other hand, bank loans are available at 9 per cent interest, where a listed company has to pay at least 10 per cent dividend. These factors are taken into account when companies are listed. 

The market has not matured yet. We are still learning. It would have been better if the present commission had taken steps earlier. We hope to get the benefits in the future. As many new bonds are being issued, the benefits are yet to come.