Incentive would have been better: SANEM

Providing incentive for fuel sector would have been more substantial than price hike; the financial aid would cater benefits for people of all walks of life, according to SANEM in its recent observation.

The research organisation said the current fuel price will put an impact on the price of daily essentials which would create a big burden for the poor.

The South Asian Network on Economic Modelling on Wednesday came up with the observation at a webinar titled, “Covid-19 and business confidence in Bangladesh: Findings from the 6th round of a nationwide firm-level survey.”

It shed light on fuel price hike, inflation, falling remittances and the new Covid-19 wave which are emerging challenges affecting the economic recovery in Bangladesh. The survey was conducted nationwide on 500 firms from October 10 to October 27.

Various sub-sectors of manufacturing, and service sectors such as garments, textiles, leather and leather products, pharmaceutical, food processing, plastics, electronics, light engineering, retail and wholesale business, hotels and restaurants, financial institutions, ICT institutions, construction sector, transportation sector, etc. were included in the survey.

The executives of the firms under survey were asked about business costs, sales, profits, investment situation, employment, salaries, loan receipts and future business prospects.

Presenting his keynote paper at the webinar, SANEM Executive Director Selim Raihan said the current fuel price will hit daily essential products that would create an extra pressure on the poor people in the country.

“It was not tough for the government to come up with financial assistance to the fuel sector since it provided incentive packages for different industries to overcome the pandemic shock,” opined Selim, also professor of Economics Department at Dhaka University.

According to the survey, the major difficulties facing the firms during their recovery phase include lockdown and stringent measures (73 per cent), consecutive waves of Covid-19 (56 per cent), decline in sales and exports (48 per cent), increase in input price (37 per cent), supply chain disruption (33 per cent) and decline in product demand (31 per cent). In case of availing stimulus packages, 25 per cent firms attempted to avail it in the sixth round as those firms did not get any package in the earlier round (fifth round of the survey).

Of 25 per cent firms, only 2 per cent pursued incentives during the 5th round while the problems they encountered include lengthy procedure, bank-related services, understanding procedure, insufficient amount, and even bribery, etc, while in the 6th round, the problems were also similar, find the survey.

To observe business environment, SANEM has constructed another index namely Enabling Business Environment Index (EBI). The index shows that the business environment has become slightly worse than the previous round. The score moves down to 52.8 from 53.5.

While the situation of overall business environment declined slightly, Covid-19 management and transport quality -- two indicators of EBI -- have improved. To cope up with the Covid-induced shock, 46.2 per cent firms have received loan.

Amongst them, 77.5 per cent got it from formal sector (like banks) and 22.5 per cent from informal sectors (like friends and relatives, co-operate society etc.).

However, the loanees had difficulty in getting loan from bank or non-bank financial institutions as they went through complicated paperwork, collateral problem, lengthy procedures, bank-client relationship and difficulty in understanding the procedure, etc.

In case of vaccination, 87 per cent of respondents (employers) have taken at least one dose of vaccine. The situation has, however, improved in the fifth round.