Generous stimulus packages, wage support for export sectors and loan payment deferrals helped large businesses to some extent overcome initial shocks of the pandemic. Business leaders expect some incentives to continue in the New Year to accelerate the recovery. Abul Kashem talked to chamber and association leaders to get their outlook for 2021
Loan moratorium needs to be continued next year
Sheikh Fazle Fahim, president of Federation of Bangladesh Chambers of Commerce and Industry (FBCCI)
While many around me are dying from Covid-19, I think living in good health is the greatest achievement of the passing year. This is the biggest expectation that people and the economy and trade will be saved from Covid-19 in 2021.
The government will provide the necessary support to ensure a normal life and livelihood of people. If the Covid-19 situation is brought under control and the necessary assistance is provided by the government, I hope that trade and employment in the country will revive in the upcoming year.
We held long-term discussions with the government on business, investment, and employment security after the outbreak of Covid-19 in Bangladesh. In this context, the government has announced a large-scale incentive package.
The government has decided that businessmen will not be declared defaulters even if they do not pay loan instalments. It seems that this moratorium facility needs to continue all through the next year.
Hopefully, the moratorium will continue. But everything depends on the Covid-19 situation. To ensure the supply of credit to businessmen, the government has taken steps to increase liquidity in banks in addition to the incentive packages and brought down the interest rate on bank loans to a single digit.
We expect to get all the necessary assistance from the government to keep businesses running at a normal pace in the upcoming year. I hope the government will formulate a business-friendly tax and value added tax (VAT) policy in the next budget to attract new investments and reap the benefits of the existing investments with an emphasis on job creation.
Though initially, there was a lacking in the preparation of providing healthcare facilities, now the situation has improved. I hope the quality of healthcare services will improve next year.
We want a 10-year business plan
Mahbub Alam, president of Chattogram Chamber of Commerce and Industry
In the new year, there are two expectations – to get rid of Covid-19 and to have the assurance of life and livelihood. I am expecting major changes in tax policy, trade policy, business policy and foreign policy from the government to ensure livelihood in 2021.
The existing VAT law has fixed a single VAT rate of 15%. Hopefully, next year's budget will break it down into several slabs. It is almost impossible for small and medium enterprises to pay 15% VAT. The VAT rate should be reduced for them.
There can be separate slabs for corporate entities. And for large companies, VAT rates should be different.
The income tax rate should be brought down to one digit. Many are showing interest in paying income tax as the tax rate has been reduced to 10% this year. If it is reduced further to a single digit, tax coverage will increase.
The government should announce a business policy for at least five to ten years. Then businessmen from home and abroad will understand what the government wants to do in the next 10 years. They will be able to invest after making their plans in accordance with the government's policy.
A good understanding between businessmen and the National Board of Revenue is required. If the tax policy changes every year, traders find themselves in trouble.
We hope attracting foreign direct investment (FDI) and increasing exports will get the utmost importance in next year's foreign policy. It is necessary to declare a lucrative incentive for this.
I hope the government will work hard to reduce the cost of doing business in the upcoming year. For this, the lack of coordination between different ministries and departments has to be eliminated.
In particular, we hope the cost of doing business will be reduced by maintaining fulltime co-ordination between the industries minister, the finance minister, the commerce minister, the shipping minister, the state minister for power and energy, the housing and public works minister, and the labour minister.
Do not let gas and electricity prices go up
Mohammad Ali Khokon, president of Bangladesh Textile Mills Association (BTMA)
I am looking forward to the success of the Covid-19 vaccine and its availability in 2021. If the vaccine proves effective, we will be able to return to business easily.
The international economy and trade situation will be better. I hope the positive impact of this will turn the economy of Bangladesh around as a whole, including the textile sector.
Next year's business situation depends on the coronavirus situation. However, at the beginning of 2021, there is a fear that the second wave of Covid-19 will have a negative impact. The UK has already announced a fresh lockdown. If Europe follows the same path, production and exports of the textile sector will be disrupted. So, to get rid of Covid-19 is the most effective tonic for next year.
Our business-friendly prime minister announced various incentive packages at the beginning of the pandemic, and those have reassured businessmen. That is why we are also trying our best to run businesses by retaining employment. The prime minister has already directed the finance ministry to come up with new incentives to address the impacts of the second wave of Covid-19.
We want the government to set the terms of the incentives in a way that meets the purpose of the incentives. As a single sector, Bangladesh has the highest investment in the textile sector. I hope that the incentive packages will play a supportive role in protecting the interests of this sector.
I expect that taxes will not be increased in any sector in the upcoming year. Rather, I hope that tax rates will be reduced in different arenas. But the most important thing is that the price of gas and electricity should not increase in any way in 2021. Due to the Covid-19 pandemic, it has become difficult for industrial organisations to survive. In this situation, a slight increase in the price of gas and electricity will cause a great disaster.
Need a fresh wage support package for four months starting from January 2021
Rubana Huq, president of BGMEA
It was a year of trepidation and angst. Having cancellations of orders worth $3.18 billion and waking up to daily nightmares of discounts, deferment of shipment and payments, and endless discussions had become a part of our routine.
As much as the brands had suffered, we had suffered more. The 4.1 million people engaged in the sector faced uncertainty. Entrepreneurs who had built their factories with the hope of expansion and future growth faced a dark forest of the unknown.
Eventually, when the brands had considered reinstating orders and when 90% of the orders were reinstated, we still had to face the back-to-back liabilities of $1.96 billion, which remain unpaid because of either non-payment by buyers or for their bankruptcies.
This year, the growth of RMG from January to November stands at 17.64%. Despite the growth in August and September, the second wave has pushed the sector back by multiple folds now.
The export growth remained negative in November and December. While November had -2.66% growth, it was -5.64% for the first 20 days in December.
The challenges that we face today are the uncertainties over the placement of orders from the buyers' end, the challenges of obtaining working capital for the SMEs, the bankruptcies of brands and a lack of protection at our end, and the deferred payments and discounts.
Challenges also include the dip in the consumer index this year. In Europe, consumption had dropped by 13% while it was 16% in the USA in November. We suffered a dip of 5.19% in the price.
Had the prime minister not announced the stimulus packages in March, the majority of the factories would have faced closure. Had the bureaucrats not supported the private sector, we would have been in dire straits.
At this point in time, we need a fresh wage support package for four months starting from January 2021 at a 2% service charge. This should also include a 60-month payback period with a moratorium of 12 months.
At the same time, an extension of the current package tenure for five years and an extension of the moratorium for up to 12 months would be of immense help for the sector.
This temporary assistance will help the sector go to the next level as we do foresee ourselves excelling by June. By contrast, our other competitors, including Ethiopia with its political instability, Cambodia with its loss of GSP and Vietnam with its limited production capacity, will not be in a better position.
So, temporary support will revive the industry and take it to a far superior platform, which would help us with a thrust of product diversification, recycling and value addition. Also, it will help us prepare for the fourth industrial revolution and in the process, our workforce will be prepared with better skills.