Business recovery confidence grows stronger: Sanem survey
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Business recovery confidence grows stronger: Sanem survey

Economy

TBS Report
16 February, 2021, 03:10 pm
Last modified: 16 February, 2021, 09:20 pm

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Business recovery confidence grows stronger: Sanem survey

Confidence among entrepreneurs is rising but at a slow rate

TBS Report
16 February, 2021, 03:10 pm
Last modified: 16 February, 2021, 09:20 pm
Photo: Collected
Photo: Collected

About 16% of entrepreneurs are confident about a strong recovery in January-March of the current fiscal year, which was only 4% in October-December, says a survey of the South Asian Network on Economic Modeling (Sanem).

Moreover, about 15% of entrepreneurs are anticipating a weak recovery in this quarter, which was 26% in the last quarter, according to the survey.

Sanem compiled the report based on a study on more than 500 businesses in the manufacturing and service sectors.

Its Executive Director Professor Dr Selim Raihan presented the report on the third round of the national firm-level survey titled "Covid-19 and Business Confidence in Bangladesh" at a webinar on Tuesday. Business leaders were present at the event.

Dr Selim said the survey conducted in January found that 71% of entrepreneurs were confident about some sort of recovery and the rate remained unchanged compared to the October study.

About 40% of entrepreneurs were moderately confident about recovery, slightly lower than October's 41%, he said.

He said business confidence was increasing but the growth rate was falling in recent times due to reduced demand in the external sector, sluggish recovery of domestic demand, and weakness on the supply side.

Asif Ibrahim, chairman at the Chittagong Stock Exchange, said the pandemic had largely affected business profitability and costs, and the second wave was still a concern for survival and cash flow management amid order cancellations and repayments related to the government's stimulus packages.

He said large firms had performed better than small ones since they had better access to finance and easier bank-client relationships.

Abul Kasem Khan, managing director of AK Khan Telecom Limited, described the tax system as a major bottleneck for businesses in Bangladesh.

He said tax at source does not allow for any adjustment and refund, causing small and medium enterprises (SMEs) to suffer.

Arshad Jamal, vice-president of the Bangladesh Garment Manufacturers and Exporters Association, said SMEs in the readymade garment sector are at greater risk since low-risk factories receive more orders.

Saiful Islam, president of the Leathergoods and Footwear Manufacturers and Exporters Association of Bangladesh, said export volume had increased at the cost of profitability caused by lower unit prices and higher costs of sales.

This has further put sustainability, access to finance, and bank-client relationships at risk, he said.

Farzana Khan, general manager at the SME Foundation, said several SME entrepreneurs were struggling to survive, employees were not laid off, and a basic salary was being provided.

Nonetheless, many new entrepreneurs emerged during the crisis and there has been a product diversification trend, she added.

Large firms most confident

About 76% of large firms are anticipating some sort of recovery in the current quarter, while it is 68% among micro and small firms, the survey report said.

Dr Selim linked recovery to the degree of distribution of stimulus declared by the government to combat Covid-19 and said, "About 22% of firms surveyed received benefits from the packages, while it is 46% for large firms and 10% for micro and small firms."

He said more than 58% of RMG firms received stimulus while it was only 4% in ICT. The restaurant sector received no money.

The survey, which analysed 14 sectors, said about 86% of firms receiving stimulus described a lengthy process as the reason for poor implementation of the packages. Only 7% had no complaint in this regard.

About 38% of recipients had no complaint about bribes in stimulus disbursement while 18% complained about it. The remaining 44% declined to comment on the matter.

In contrast, about 19% of entrepreneurs who were deprived of the packages blamed bribes while about 11% did not raise any question in this regard.

About 77% of non-recipients complained about the lengthy process. About 88% of non-recipients did not ask for stimulus assistance as the money was not distributed as grants.

About 83% of entrepreneurs complained that their sectors were not eligible for stimulus.

Dr Selim said as the stimulus was not being distributed equally among all sectors and firms of all sizes, recovery had not been observed equally.

Six indicators to measure business confidence

Sanem prepared the Business Confidence Index (BCI) using six indicators – profitability, investment, employment, wage, business cost, and sales, including exports – to forecast the level of business confidence in a quarter by comparing data of the previous quarter.

Dr Selim said the BCI score in January-March of the current fiscal year was 57.9 out of 100, which was 55.24 in the last quarter and 51.06 in July-September.

He said confidence is worst when it is 0 and best when it is 100 while a score of 50 on the BCI indicates that there are no changes in confidence.

Explaining the indicator, he said confidence among entrepreneurs is rising but at a slow rate.

The report said investors are most confident about profitability when the BCI score is 62.65 and they are least confident about the cost of business when the score is 51.74.

The financial sector came up as the most confident about recovery with the highest BCI score of 67.71, followed by 62.33 in pharmaceuticals and 61.33 in ICT.

On a yearly basis, RMG, leather, pharmaceuticals, and ICT were observed to have experienced deteriorating business confidence while there had been marginal improvements on a quarterly basis in sectors such as RMG, textile, leather, pharmaceuticals, and transport.

Bangladesh / Top News

grow / business

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