Fresh Wave of Covid-19

Business confidence deteriorates: study

Staff Correspondent | Published: 23:58, May 02,2021


The Business Confidence Index score in Bangladesh deteriorated by 16.51 points in April from that in January due to disruption in business activities caused by the onset of the second wave of Covid-19, according to a survey.

The South Asian Network on Economic Modelling presented the results from the 4th round of a nationwide firm-level survey in collaboration with The Asia Foundation.

In a webinar, SANEM executive director Selim Raihan on Sunday disclosed the survey results, conducted in April 2021.

According to the report, the BCI score changed from 57.90 in the third round to 41.39 in the fourth round.

‘This deterioration can be rightly attributed to the anticipation of disruption of business activities caused by the onset of the second wave of the pandemic. The fall was consistent across all sub-sectors for BCI,’ it said.

SANEM and The Asia Foundation jointly haven taken the initiative to measure the state of business confidence in Bangladesh based on a quarterly nationwide firm-level survey since July 2020.

The 4th round of the survey covered 253 firms from the manufacturing sector and 250 firms from the services sector.

Three indices including Present Business Status Index (PBSI), Business Confidence Index (BCI) and Enabling Business-Environment Index (EBI) were calculated based on the survey.

All three indices range from 0 to 100. The closer the score is to 100, the better the business confidence. An index value of 50 would indicate ‘no change’, while a score higher than 50 would indicate some improvement in the scenario, and a score less than 50 would indicate a worsening situation.

The report showed that the business cost indicator worsened over the survey periods.

Sector-wise comparisons revealed that firms from textile, pharmaceuticals, ICT, and financial sectors fared better than others in almost all rounds of the survey.

Analysis of PBSI and BCI with respect to different dimensions such as firm sizes and export status revealed that large firms performed significantly better than the micro, small and medium enterprises in all rounds of the survey.

The survey found that only one-fifth of the surveyed firms availed the stimulus package and the majority 82.7 per cent of the package recipient firms were from the manufacturing sector.

Amongst the industrial sectors, 58 per cent of the RMG firms received the stimulus package, whereas this rate was 40 per cent for the textile and 30 per cent for the leather industry.

It showed that 46 per cent of the surveyed large firms received the stimulus package in contrast to 30 per cent medium firms and 9 per cent small firms.

Economist Zahid Hussain said that the firms that have greater enterprise-level capacity to abide by COVID-19 protocols, including wearing of masks, maintaining hygiene, working from home, are expected to perform better than other firms.

He mentioned that this was also a possible explanation behind why firms in the financial sector, garment, ICT, pharmaceuticals had fared better than firms in other sectors.

Zahid also said that large firms often have more influence and power, leading to better bargaining power and hence, giving them better access to stimulus packages.

Rizwan Rehman, president of the Dhaka Chamber of Commerce and Industry, stressed the importance of the upcoming national budget and its role as a critical policy response to reshape business confidence.

To check corruption by tax officials, he suggested that tax collection should be fully automated.

The DCCI president said that that the Bangladesh Bank and other monetary institutions should formulate strict guidelines for the banking sector to ensure that loans are disbursed to small and micro enterprises.

He also recommended that law enforcement agencies must play an important role in ensuring that safety protocols are maintained as the economy progresses towards reopening.

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