ZCZC
BSS-41
SANEM-SURVEY
Gradual improvement in overall business status in last four quarters: SANEM survey
DHAKA, May 2, 2021 (BSS) – A gradual improvement in the overall business status has been observed over the last four quarters in the country despite the COVID-19 pandemic, said a survey.
The South Asian Network on Economic Modeling (SANEM) presented today the results from the 4th round of a nationwide firm-level survey in collaboration with The Asia Foundation. The survey results, conducted over April 2021, were disclosed through a webinar moderated by Dr Selim Raihan, Professor, Department of Economics, University of Dhaka, and Executive Director of SANEM.
The event was graced by eminent panellists, including Dr Zahid Hussain, Economist, and Rizwan Rehman, President, Dhaka Chamber of Commerce and Industry (DCCI). During the webinar, Kazi Faisal Bin Seraj, Country Representative in Bangladesh, The Asia Foundation, delivered the welcome remarks, said a press release.
SANEM and The Asia Foundation jointly took the initiative to measure the state of business confidence in Bangladesh based on a quarterly nationwide firm-level survey since July 2020. The survey explores the outlooks and expectations of the business community amidst the ongoing pandemic.
The 4th round of the survey covered 253 firms from the manufacturing sector and 250 firms from the services sector. In the manufacturing sector, firms from RMG, Textiles, Chemicals and Pharmaceuticals, Leather and Tannery, Light Engineering, and Food-processing were included. In the services sector, the study covered Wholesales, Retails, Restaurants, Transport, ICT and Telecommunications, Financial Sectors, Real Estate, etc.
During the presentation, Dr Selim Raihan mentioned that the 4th round of the survey, which marks the completion of one year of the ongoing nationwide firm-level survey, has been timely in assessing how the leading sectors of the economy have evolved during the pandemic.
The survey included sections on the firm’s profile and the firm’s outlook on six thematic areas: profit, investment, employment, wages, business cost, and sales/export orders. It also included sections on the firm’s experience of stimulus packages, overall business environment situation in the country, etc.
Based on the survey responses, from each round survey, three indices were calculated – (i) an index derived from present quarter data called – Present Business Status Index (PBSI); (ii) an index on the anticipation of business conditions in the next quarter – the Business Confidence Index (BCI); and (iii) an index on the overall business environment – called Enabling Business-Environment Index (EBI).
All three indices range from 0 to 100. The closer the score is to 100, the better the business confidence or the present business status and vice versa. An index value of 50 would indicate ‘no change’, while a score higher than 50 would indicate some improvement in the scenario, and a score less than 50 would indicate a worsening situation.
In terms of the PBSI (year) indicator, a gradual improvement in the overall business status has been observed over the last four quarters. For instance, the overall PBSI (year) in April-June 2020 (compared to Apr-Jun’19) was only 26.44, which increased to 40.55 in January-March 2021 (compared to Jan-Mar’20).
The survey also included a detailed section on the stimulus package. Only one-fifth of the surveyed firms availed the stimulus package. The majority of the stimulus package recipient firms are from the manufacturing sector (82.7% of all firms). Amongst the industrial sectors, 58% of the RMG firms received the stimulus package, whereas this rate is 40% for the Textile and 30% for the Leather industry.
The participating firms in the fourth round were also asked about their perception of Bangladesh’s current economic recovery. As observed, before the current upsurge of COVID-19, 34 per cent of the firms had an expectation of strong economic recovery.
However, with the onset of the second wave of the pandemic, only 2 per cent of firms expect a strong economic recovery, and 68 percent fears a weak economic recovery. A close observation on BCI and PBSI (quarter) indices reveals a clear gap between the firm’s expectations and realities over the quarters. In this regard, the ratio of the BCI and the PBSI (quarter) scores were taken from each round of the survey at the firm level.
The survey findings point out several important policy directives. First, the government should undertake a sectoral approach to gauge the needs and identify the necessary policy measures for the worst affected industries such as Leather and Tannery, Light engineering, Transport, Retails, Restaurants, Food processing, etc.
Additional incentives like a lowered interest rate for a longer period, increased and eased up duty drawback facility, increased export cashback facility, expanding the reach of the Export Development Fund etc., could be taken up for such sectors. Second, SMEs should be a priority in channelling the loans and stimulus packages. Also, effective implementation of the stimulus package is critically important. An assessment is urgently required on the stimulus package implemented so far.
Third, Enabling Business-Environment Index (EBI) shows that an improved business environment helps firms perform better, even during the pandemic. Higher EBI, perhaps, indicates lesser indirect and implicit costs borne by industry. It also represents lower business risks. Therefore, the government must improve the overall business environment to lower such implicit/indirect cost of business operation.
Last but not least, as this study showed, there has been a sequential change in the gap between expectations and reality for the firms. Since the pandemic has now taken a path more predictable than before, expectations formed by the firms now are more aligned to reality. The firms would be more responsive to policy changes now than before – a window the government can capitalise.
During the panel discussion, Dr Zahid Hussain observed three important issues which emerged from the presentation. Firstly, he pointed out that recovery across the economy has been experienced to some extent. However, the recovery has not been uniform across all sectors. Time and again, it has been evident that large firms are at an advantage compared to micro and small firms.
DCCI President Rizwan Rahman shared his gratitude towards SANEM for shedding light on a crucial sector of the economy through its continuous research and timely initiatives.
He stressed on the importance of the upcoming national budget and its role as a critical policy response to reshape business confidence. The president of DCCI acknowledged that the pandemic has constrained economic growth and private sector investment in Bangladesh. As a result, the budget is currently far behind the revenue target, and this will eventually lead to pressure mounting on existing taxpayers.
To avoid corruption amidst such scenarios, he suggested that it is important to achieve full automation in tax collection. He further suggested that the central bank and monetary institutions must formulate strict guidelines for the banking sector to ensure that loans are disbursed to small and micro-enterprises.
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