Private sector is reacting but is that enough?

As the world nears its 100th day of the Covid-19 pandemic, the numerous layers of the governments across the globe are unveiling in front of our eyes.

The last decade has seen a radical shift in the style of governments, with far-right ideologies and populist leaders grappling with the global politics, including Western countries like the US, the UK and South Asian giants like India.

The coronavirus pandemic has been the sternest of tests for the global governance structure, with stock markets plummeting to the nadir, and political leaders scrutinised for their pragmatism and decision-making. The nexus of social media, coupled with weakened public trust has contributed to the creation of an unprecedented panic throughout the world.

So far, Covid-19 has affected around two million people globally and has taken over 120,000 lives. The International Monetary Fund has officially declared that the global economy is already in recession, as bad or worse than the one in 2009.

The response to a possible recession has also been noticeable. Financial institutions across the world have shown readiness in addressing the recession.

The Bank of Japan, the European Central Bank and the Federal Reserve Bank have already announced massive liquidity injection to overcome the liquidity crunch that generally accompanies a massive shock of this magnitude.

Furthermore, the US Congress has announced a fiscal package of more than $40 billion in response to the crisis created by the spread of coronavirus.

In comparison, Bangladesh has been a newly affected country, with official records suggesting 1,012 people tested positive for the virus as of now. In the face of global meltdown and panic, Bangladesh has not been an exception, with the export-oriented RMG sector badly hit by cancellations of orders and hold-off notices.

With cancellations amounting to $1.5 billion only in the RMG sector already, the actual economic consequence of this pandemic cannot be ascertained as of now. But it is evident that a break in the supply chain in the early days, and a subsequent compression of demand – in fact complete cancellation of orders from the Western market – has effectively left at risk the lives of 4.1 million workers directly dependent on this sector, and millions of others indirectly dependent on the economic influx created by it.

This collapse is likely to have a domino effect on other industries, with the overall economy suffering a recession. The pandemic has therefore opened the vulnerabilities of our economy, highlighting our lack of investment diversity and over-dependency on a single sector.

The panic has been evident in the reaction of the government. While it would be too early to evaluate the performance of the government regarding its reaction to a global crisis affecting almost every country in the world, the unpreparedness of the public sector in Bangladesh has been rather easily perceivable, with a visible lack of coordination, impulsive decision-making and inadequate stocking of protective gears and test kits.

What is more evident is the government's response to the economic crisis looming, rather than the pragmatism to handle the spread of virus. The prime minister's bold and proactive decision-making has resulted in a stimulus package of Tk727.5 billion to cushion the impact of the novel coronavirus outbreak.

The stimulus package consists of five separate incentive packages targeting different business sectors. Tk300 billion has been provided to the affected industries and service sector organisations in working capital through commercial banks as loans. The interest rate of this lending facility will be nine percent, out of which 4.5 percent interest will be paid by the organisation concerned and the remaining 4.5 percent will be provided by the government in the form of subsidy.

Tk200 billion has been provided to the SMEs in working capital through banks. The interest rate of this lending facility will be nine percent, out of which four percent interest will be paid by the beneficiary and the remaining five percent will be provided by the government in the form of subsidy.

A bailout package of Tk50 billion has been introduced by the prime minister, and several initiatives have been taken by the Bangladesh Bank to reduce the pressure of the pandemic. This is certainly a bold initiative by the government deserving accolade to support the business sector in this challenging time.

However, the government's impulsiveness in containing the spread of the virus was evident in its decision to declare 10 consecutive public holidays (including weekends) prior to imposing any travel restrictions. The aftermath of such hasty decision-making was comprehensible, with thousands of people leaving the capital in a bid to enjoy the general holidays.

A police order was imposed on April 6 to restrict the flow of people in and out of Dhaka only after a huge influx of workers into the capital sparked fears of contagion amid the coronavirus outbreak.

A similar precedence of impulsive decision-making was witnessed through a direction by the DGHS to medical professionals to provide services even without PPE, which was later cancelled after a social media outcry on the issue, and the address by the prime minister to the nation in which she reaffirmed the availability of sufficient PPE for medical professionals.  

What is evident through all these decision-making is that the government's response to face the economic crisis looming around has been proactive, but on containing the virus has been more reactive by nature.

As our limitations and vulnerabilities become clearer with time, it is evident that the government on its own will not be able to defeat this disease alone. Therefore, the response of the private sector in battling the coronavirus has become evermore important.

This coordinated effort between the public and private sectors has been a global phenomenon, with the White House requesting companies like Walmart to help with drive-thru testing, French luxury powerhouse LVMH – which owns Louis Vuitton, Bulgari, TAG Heuer, Tiffany, Dom Pérignon and many other high-end brands – venturing into the hand-sanitiser sector, and the NHS in the UK getting into an agreement with the private healthcare sector to reallocate almost its entire national hospital capacity to the NHS at cost.

The initial response from the private sector in Bangladesh has been heartening. But such initiatives require an organisational planning, and structure, to ensure the response is synchronised.

While profit maximisation has been a sole determining factor in the decision-making process of the directors, it is time to take a step back and address the concerns raised by the pandemic, and show signs of responsible capitalism.

Amidst an existential crisis, it is fated that businesses will fail to satisfy the interests of all stakeholders as always, and will have to look beyond shareholder primacy, to identify the needs of the current times, and react accordingly. While the ways in which the private sector can contribute is effectively endless, primarily, this might be achieved in two ways.

Firstly, by ensuring that the transmission of the virus is kept to its bare minimum, with early precautionary response from the companies to reduce the short-terms risks of employees. It is comprehensible that a complete halt of economic activities might add fuel to the panic, but it will significantly reduce the long-term costs to businesses and the economy.

And secondly, it is high time that private healthcare service providers collaborated with the government to provide healthcare services for the affected group of people. The capacity of our government hospitals is highly inadequate, and therefore calculated preparations from private hospitals is necessary to prevent a catastrophic medical emergency.

The impact from international trade will further increase and might require further incentives and intervention from the Bangladesh Bank. However, it is imperative for the government to realise that like most other times, this time, private initiatives will not be able to curb the crisis that looms in the lives of the people and the economy.

Primarily because of lack of coordination and inability to reach necessary scale, private initiatives will only be able to complement the actions of the government if properly facilitated. Therefore, the vast network of resources available to the government in all cities, towns, upazilas and villages should be integrated to facilitate these private initiatives.

Private sector initiatives can complement the government's action, but it is the government which must act, and quickly so to reduce the devastations caused by the pandemic.

The author is a Barrister at Law from the Honourable Society of Inner Temple, and currently works as an Associate at The Legal Circle