‘Economic recovery uncertain amid second wave of coronavirus’

The second wave of coronavirus has pitched the economy into uncertainty again. Economic recovery was in full swing in the second half of the past financial year. There was an increase in exports. Imports had increased too, particularly in capital machinery and raw materials. But the second wave of coronavirus from April has rendered that economic recovery uncertain. The economy is now limping along. Whether the economic revival process will survive this second wave or not, depends on how scientifically we tackle the coronavirus crisis.

Until the coronavirus vaccine is fully administered, there is little chance of the economy returning to normal. Private sector investments are lackluster. The government itself has said it will take another year for everyone to be vaccinated. That means there is little possibility of the economy being normalised before a year. Bangladesh’s economic recovery is also linked with the strengthening of the economy in countries of the developed world. The US economy is quite strong now and the European economy is on the way there too. But the world is now divided into two. On one hand there are the countries which have almost completed the vaccine drive. Then there are the countries where vaccines haven’t been given or only a negligible percentage of the population has been vaccinated. Bangladesh is in the second category. Business can grow among the countries where vaccines have been given to reduce the health risks. Bangladesh may fall back in that case. So it is hard to say that Bangladesh’s economy will bounce back to its position.

There have been many surveys over the past year. All the surveys show that the number of poor people has increased. Whether it is 20 million, 15 million or 10 million (two and a half crore, two crore or one and a half crore), just looking around will reveal that the number of poor has increased. Many people have become jobless, the earnings of many have reduced. But these new poor have not received government recognition. If a problem is not recognised, how can it be resolved? This is reflected in the various stimulus packages and cash assistance programmes. The new budget had no allocation for the new poor.

Big entrepreneurs received funds from the government’s stimulus package to tackle the coronavirus crisis. But these funds were more important for the smaller entrepreneurs who are at the risk of being wiped out by the impact of coronavirus. These include cottage industries and small enterprises. Around 80 to 85 per cent of the funds allocated for the small and medium industries has been released. Most of this went to the medium industries because the entrepreneurs at highest risk of being wiped out, do not have tax identification numbers (TIN) or trade licences. They are in the informal sector and the banks did not want to take a risk with them.

The state of business is not improving and so the banks did not want to risk providing loans to these enterprises which were on the brink of extinction. The government can come up with an alternative plan. The small enterprises in crisis in the remote parts of the country can be provided with one-time capital grants given through non-government organisations (NGOs).

Employment will remain uncertain for as long as the economy is not restored to normalcy. Many have changed their professions. For example, a teacher is now selling vegetables to survive. Many have returned to the small towns and villages after losing their employment. A survey shows 10 per cent of the people have returned to the villages. Over the past year the agricultural sector has done better than expected. Those who have now returned to the villages will put pressure on the agricultural sector. Coronavirus has now spread to the villages. So work in the agricultural sector has become a challenge. The rural economy must be kept vibrant at any cost.

The government intermittently imposes all sorts of restrictions to curb coronavirus and this puts the urban-based transport workers, hawkers and small businesses into a fix. But employment in the IT-dependent work areas has increased. The e-commerce platform has increased. Thousands of young people are now working as deliverymen. But there are fraud companies too. They must be brought to book. Such companies destroy people’s trust in e-commerce and can have a negative impact on new areas of employment like e-commerce.

Corruption in government projects is nothing new, but it had been hoped that in a calamity like coronavirus, equipment would be procured in time and through the correct process. But that did not happen. Even in a World Bank-funded project, equipment was procured at two to three times the actual price. The project officials have changed even in such critical times. Over the past few years there have been changes in government purchase. Flexing muscles to get tenders has stopped. But the big contractors resort to unethical means to ensure supply at inflated costs. Items that cost Tk 10 are bought for Tk 100.

There is a phrase making rounds nowadays -- budget literature. The type of policies and pledges made by the finance minister in his budget speech is budget literature. Then on the other side there is the allocations to various sectors. The heading of the budget was – Bangladesh on the way forward with priority to life and livelihood. As budget literature, that is perfect. The finance minister in his budget speech correctly enunciated the priorities. Throughout the budget there was mention of the priorities for the Covid crisis, health, education and agriculture sectors.

But the priorities in allocation did not match the budget literature. The sector-wise allocations this remained in the same old conventional framework. Salaries and allowances, interest, transport, infrastructure – all these sectors topped the list of allocations. But the sectors that should have been prioritised during the coronavirus pandemic, such as health, social safety, agriculture, education, were not even in the first four or five priorities of allocations. Additional allocation was required in the health sector during these coronavirus times. There was need to spend more than before on education and social safety.

This budget gave big concessions to the big businessmen. For example, corporate taxes have gone down, there have been all sorts of VAT exemptions. Local production has been encouraged in the name of ‘Made in Bangladesh’. If products are manufactured for the local market, there will be tax cuts. That is ‘Made for Bangladesh’. Only big corporate establishments will be able to make such investments in the formal sector. There is hardly any exemptions for the small entrepreneurs in the non-formal sector. The consumers have ostensibly been given VAT concessions, but are they actually getting such perks?

The finance minister hasn’t been as generous as last time in giving the scope of whitening black money. He has given this scope to whiten black money by paying high tax rates and fines. That is lesser of the evil. This time scope has been given to invest in the industrial sector with 10 per cent tax. But there is no specific definition of the industrial sector. The definition given by Bangladesh Bureau of Statistics (BBS) differs from that given by others. That is why, when black money is being whitened, it is the tax officers who will determine what the industrial sector encompasses. This creates an opportunity for ‘bargaining’ between the black money owners and the tax officials.

In present times it takes Tk 10 million (Tk 1 crore) to set up a small manufacturing establishment. That gives the big black money owners an advantage. This is an opportunity opened up for those who are unable to siphon money off overseas.

Not much revenue comes in from black money, but all governments have created this scope for a particular class. This is a disincentive for honest taxpayers.

Finance ministry officials justify the low allocation in the health sector, saying that this sector can’t spend the allocations and that is why it is not given bigger allocations. But even other sectors can’t spend the allocations made for development projects. If it can’t spend during a calamity, when will the health sector ever gain the competence to spend? Coronavirus has revealed the true state of the health sector. It is worse than we had imagined. This crisis in the health sector is crippling the entire economy. That is why a full plan must be drawn up for the health sector and allocations made accordingly.

We are not giving much thought to the education sector during coronavirus. Yet we are on the brink of a long-reaching crisis in the education sector. With schools closed for one and a half years, within a few years we will have a society of little educated youth. Many children have dropped out of studies and have started working. The little student who had just learnt to count, has forgotten all that. The one who learnt to recognise letters of the alphabet, has forgotten that too. Rural students can’t enter the digital classroom. There is need for a national dialogue on the means to overcome the prevailing crisis of the education sector.

I would divide the scoring into three. Firstly I would give 6 out of 10 in tacking the disaster. Secondly, 4 out of 10 in policy-wise assistance. Thirdly, 3 out of 10 in sensitivity towards the problem.