The economic downturn caused by Covid-19 or coronavirus is widespread worldwide. This is not the only issue of Bangladesh and it is not a problem of any single sector. That is why, the economic damage caused by the pandemic is far-reaching. Thus plans need to be made for the next three years by means of a three step recovery programme to deal with the economic losses from corona.
The three step recovery plan of the economy may take the following structure:
- Prevention phase (from June 2020 to June 2021)
- Recovery phase (FY 2021-22) and
- Progress phase (FY 2022-23).
PREVENTION PHASE (FROM JUNE 2020 TO JUNE 2021): The main goal of this period is to minimise the economic losses as much as possible to keep the industry and trade alive and to save the lives and livelihoods of the people by reducing the health risks. It must be acknowledged that economic activity or life will not return to normal until a vaccine for the Covid-19 virus is discovered, or an effective drug is readily available. We don't know when that time will come.
To survive, people need employment and livelihood. Economic activities cannot be stopped indefinitely. For this reason, at this stage of resistance, it is necessary to proceed in a planned way so that economic activities can be started gradually while keeping the health risks as low as possible. In this phase the following steps can be taken.
- Extensive corona test opportunities in different parts of the country,
- Increase corona-related medical facilities in various public and private hospitals. In this regard, the most important is to introduce oxygen facilities in Corona treating hospitals, supplying adequate PPE, masks for doctors, nurses and other health workers. Expanding corona treatment facilities may allow us to gradually open up economic activities.
- Different industries and service sectors need to develop plans to reduce health risks at their respective workplaces.
- Food aid and cash support should continue for the extreme poor and poor. In addition, assistance should be given to lower middle income people in crisis, especially those who have lost job.
- As the health risk in agriculture is relatively low, agricultural production should be given top priority. To maintain good production, emphasis should be on timely delivery of improved seeds, fertilizers, pesticides and irrigation facilities to the farmers. Also support to maintain the supply chain of agricultural products is urgent and therefore, transportation facilities for marketing of agricultural products need to be maintained. Besides crop agriculture, the supply chain of poultry products, livestock, dairy and fisheries should be maintained.
- About 98 per cent of Bangladesh's industrial and commercial enterprises are cottage industries and micro-enterprises. Health risks are relatively low in rural cottage industries. Therefore, the economic activities of cottage industries can be started first. For that, these companies need to be provided with easy supply of raw materials and safe supply chain and transportation facilities for marketing their products. Then, gradually other industries will open. Informal micro, small and cottage industries that cannot avail incentives through banks, should be supported through NGOs and organisations already working with underprivileged people. In addition to 200.0 billion taka stimulus for micro, small and medium enterprises, Bangladesh Bank has already allocated Tk 30.0 billion to be disbursed through various NGOs to the informal sector entrepreneurs. Government has also allocated another Tk 20.0 billion to assist migrant workers, unemployed youth and rural population through specialised banks like Palli Sanchay Bank, Expatriate welfare Bank, Karmasangsthan Bank and Palli Karma-Sahayak Foundation. These funds need to be disbursed with easy conditions.
- The bouncing back of export-oriented industries will depend on the demand for our products in foreign markets. Diplomatic efforts must be made to ensure that international brands and buyers do not cancel their orders and pay the price of the ordered products properly. This is especially true for the ready-made garment sector. However, factories in production should strictly maintain health protocols.
- The budget for 2020-21, will be adopted and implemented during this phase. The economic challenges posed by the corona virus must be prioritised in the budget for the fiscal year 2020-21. In 2020-21, revenue growth will decline, the revenue earning may even decline in absolute term. Because the economic activities have shrunk, income of a large number of taxpayers may decline, income from VAT, import duty, supplementary duty etc., will be lower too. However, the government expenditure will be more for various stimulus packages, subsidies, relief activities, expansion of social safety-net programmes etc. In some heads there is a possibility of decline in expenditure, such as support to some development projects which may be postponed for a year, entertainment and foreign tour expenditures, amount of cash subsidy etc. I would like to have the following suggestions in the preparation of the budget for the financial year 2020-21.
- Allocation should be raised for purchasing of emergency medical supplies (adequate PPE, masks, oxygen facilities etc.). Allocation is needed for health screening system in various important offices, courts, ports, airports etc.
- A fund should be allocated for universal Corona Vaccination so that immediate action may be taken once the corona virus vaccine is available (free or at a subsidised rate).
- Allocations to the social security programmes need to be increased. In this case, food assistance as well as cash assistance should be allocated for at least six months. Allocations should be made to programmes such as the 100-day employment generation programme. Under all the programmes, there should be an allocation to create employment in various emergency voluntary work including maintaining emergency supply chain.
- Fund needs to be made available for refinancing of various stimulus packages. Specialised programmes need to be adopted for online training of women entrepreneurs and new entrepreneurs. Unnecessary incentives should be avoided (especially, in providing cash subsidy). More attention is necessary for micro, small and medium industries.
- Tax-free income limit should be Tk400,000. We also need to reduce the corporate tax.
- To encourage online shopping, internet-based education, training and office activities, cost of internet should be reduced through fiscal measures. Fiscal incentive is needed to make smartphones and laptops accessible by general people.
- Borrowing from foreign sources may rise. Initiatives should be taken to release the already agreed foreign credits.
- Government needs to encourage supply chain financing, especially for agricultural products.
- The production costs of Quick Rental Power Plants may be lower this year as price of oil has drastically declined in the international market. As these power plants can buy oil directly from the international market, they would be able to supply electricity at a lower cost. In that case, the electricity bill for the life-line consumers (low electricity using consumers) may be reduced for next one year.
- During this phase of fighting Covid -19, we need to be flexible to respond quickly to the needs of changing realities.
- RECOVERY PHASE (FY 2021-22): This recovery phase will begin when a virus vaccine or an effective medicine is available. The phase is expected to begin in July 2021. However, the phase may start earlier if we are lucky, and may even be delayed if the antidote or the medicine is not available in the market by the anticipated time. The following issues need to be taken seriously when the recovery phase begins.
- We need to allocate fund to vaccinate all people (specially support will be needed for poor people).
- We need to monitor the status of the enterprises that have taken credit from various stimulus package. Banks should be encouraged to provide proper guidelines, especially to enterprises struggling to bounce back.
- We have to encourage new entrepreneurs and businesses at this stage. Skill enhancing training programmes should be expanded for workers of various industries. Small and medium enterprises should have easy access to loans from banks and other financial institutions. In this connection, regulations on number of guarantors, requirement of documents etc., need to be made easier, especially for the women entrepreneurs.
- The importance on agricultural production and food supply has to be continued. Efficient supply chain management should be encouraged so that prices of essential food items remain affordable throughout the country. At this phase, we need to put effort to export agricultural and agro-processed food to different countries.
- A comprehensive diplomatic process will be necessary to expand market for Bangladesh's products in different new regions.
- At this phase we may practise 6 working days a week.
- Government should encourage corporates to join public private partnership (PPP) for improvement of universal health care system.
- At this phase people should be encouraged to use domestic products. People should also be encouraged to enjoy their holidays within the country.
- The government needs to speed up implementation of development projects, including mega projects.
- More allocation should be dedicated to social security programmes, education and rural infrastructure development.
- Technological innovations need to be encouraged.
PROGRESS PHASE (FY 2022-23): The economy should move faster than the pre-COVID situation at this phase, so that we can cover the loss incurred during the pandemic. The following issues should get priority at this stage.
- Implementation of various projects including mega projects.
- Training for developing skilled manpower.
- Expanding market by supporting expansion of online platforms and mobile financial services. New fintech facilities will enable rural producers to access city markets.
- Higher investment in health and education sectors should get priority. Developing infrastructure in these sectors as well as building efficient manpower should be target of investment. Skills of teaches, especially at primary and secondary schools, need to be enhanced thorough various programmes. Education and health equipment should be made available at the remote areas.
- We may need to seek international cooperation to remain on track for achieving sustainable development goals.
- Small and medium enterprises should get support to expand their markets beyond border. In addition to export of ready-made garments, leather and leather goods, footwear and other regular products, support should be given to expand export of other products including pharmaceutical products.
- We need to encourage various technological developments. Where possible, the use of indigenous technology, especially, in agriculture may contribute towards expanding productivity at a lower cost. Innovation and start-ups in agriculture and ago-processing should be supported.
- We must be tough on corruption at all levels.
- All efforts should focus on utilising country's limited resources.
Prompt action, need-based allocation of resources, and flexible regulatory support together with people-centric endeavours at all administrative and political levels will surely allow Bangladesh to bounce back from Covid-19 economic crisis.
Dr Nazneen Ahmed is Senior Research Fellow, Bangladesh Institute of Development Studies (BIDS).