The Business Standard (TBS): Large business and public sector institutions are doing good but small business, low-paid workers and middle-class are not. Why are some sectors doing good and others not?
Abul Kasem Khan (AKK): During the Covid-19 pandemic, we have seen mixed results in the industry. While some sectors have recovered from the disastrous primary impact of the crisis, others are largely feeling the hit still now, especially the small and medium businesses.
There are various reasons for it. The first reason is that the small and medium scale businesses are mostly working out of the purview of banking sectors. As a result, they cannot take loans that easily. They are not getting the facilities of banks. Secondly, for them getting the benefits of the stimulus package is difficult because the process of getting this is not that easy.
Moreover, most probably small enterprises do not have the necessary skills or expertise to avail the benefits. In bigger enterprises, they have sufficient financial and account departments. In this respect, I would say they are privileged. Small and new startups and individual enterprises lack in this regard. Another reason is sustainability. Big businesses have cash flows, subsidiaries and other means to sustain a crisis.
TBS: How good was the 1st stimulus package and what should be on the focus of the 2nd stimulus package?
AKK: As the economy is still in the recession, demand has been much low and they cannot maintain the cash flow. They are in need to be helped most. Even we are seeing many reports that find out the same issue.
Nevertheless, the first stimulus package has largely been effective in recovering the economy. But formulating the second stimulus package would be more important. The mistakes or lacking in the first package should be mended in the second one. For example, the loan taking process should be a little easier.
Secondly, we should emphasize more on those who are still not included in the banking system. They are not dependent on the bank and are operating from self-collected capital. The focus of the second stimulus should be to incorporate these small and medium scale businesses and enterprises. The process of opening an account, creating trade licenses should be easier.
To recover from the recession, demand must be generated. Some incentives for both the customers and business are recommended.
TBS: We usually see a budget deficit but now we have seen a budget surplus. Do you think it is the inefficiency of the public finance management?
AKK: The main reason for budget surplus is that full implementation of the projects is not done. Although it is quite understandable given the current situation. Particularly no one to blame. Many projects are delayed, public finance is not properly utilised.
While many countries in the world including some developed ones are still in the recession, fortunately Bangladesh's economy is recovering fast. The initiatives the Bangladesh government has taken were very welcoming. The recovery process has started. The deficits in the past initiatives should be taken care of through both fiscal and non-fiscal policies, trade licenses, and taxation policies.
TBS: As an industry leader, what do you recommend and what is your overall assessment?
AKK: Corporate tax rate in our country is much higher compared to the neighboring countries. Moreover, income tax is also high. For economic development and prosperity, employment generation is a must. Creating employment opportunities and sustaining them are the biggest challenge right now. Many people have lost their jobs in the pandemic period. While some have got jobs back, there are still many who are unemployed or working below their standard jobs.
The government should reduce tax to further generate demand. To increase investment and demand, people should have the money to spend in the first place. Rethinking and restructuring the economic policies.
Crises come with opportunities. To avail it, the government should rethink and revisit its economic policies to adjust to the new normal. Doing business should be easier.
Abul Kasem Khan is the Chairperson of BUILD.