“But honourable Prime Minister Sheikh Hasina’s timely announcement of Taka 5,000 crore package for paying salaries and allowances of the workers and employees of the industries will save their lives… For this, our entire industrial sector, including export-oriented industries, express heartfelt gratitude to the Prime Minister,” said BGMEA President, Dr. Rubana Huq.
Coronavirus pandemic has impacted nations and economies across the globes in varying degrees. If the fallouts of the pandemic have been rather catastrophic for many, it has not been so severe for some. And a lot depend on the Governments and the leaderships that lead the nations!
Though a pandemic of unprecedented proportions and of equally catastrophic implications, many leaders with vision were perhaps able to gauge the insinuations of the same well in advance and put in place interventions to save precious lives, try bring economies back on track and revamp industries and sectors with timely support – be it fiscal, policy or both. Bangladesh, in particular has been rather fortunate to have a visionary leader in Sheikh Hasina as its Prime Minister, who took all possible measures in her capacity as the premier of the country to revive the economy and industries, especially the RMG sector, which is considered the lifeline of Bangladesh’s economy.
Taka 5,000 crore stimulus package
To start with, even as Bangladesh was coming to terms with the pandemic, the Prime Minister in March first rolled out a massive Taka 5,000 crore stimulus package for export-oriented industries to fight the impact of Coronavirus.
“I’m declaring a stimulus package of Taka 5,000 crore for export-oriented industries which could only be used for paying salaries and allowances of their workers and employees,” she said in her address on the eve of Independence and National Day 2020.
Immediately after the premier’s announcement, BGMEA President Dr. Rubana Huq in a video message expressed her heartfelt gratitude to the Prime Minister for declaring the stimulus package. In the message, Rubana said the readymade garment (RMG) industry was going through a critical time, and lakhs of workers were facing risk (of losing job) due to COVID-19 across the globe.
“But honourable Prime Minister Sheikh Hasina’s timely announcement of Taka 5,000 crore package for paying salaries and allowances of the workers and employees of the industries will save their lives,” she said, adding, “For this, our entire industrial sector, including export-oriented industries, express heartfelt gratitude to the Prime Minister.”
Package of US $ 8,573 million in April again
Further, in April, Sheikh Hasina announced stimulus packages to the tune of Taka 72,750 crore (US $ 8,573 million) to counter the adverse effects of Coronavirus on the country’s economy.
“Earlier I declared Taka 5,000 crore (emergency) incentive package for paying salaries and allowances of export-oriented industry workers and employees, and today I am announcing four fresh financial stimulus packages of Taka 67,750 crore,” she said, in a nation-wide, televised address from her official Ganobhaban residence adding that with the fresh allocations, the total amount of financial assistance would stand at Taka 72,750 crore, which is nearly 2.52 per cent of GDP.
“I hope our economy will rebound and we can reach near the desired economic growth, if the stimulus packages — the previous and the fresh ones — are quickly rolled out,” she said.
The Premier said the Government has simultaneously taken up four programmes under the work plan which are to be implanted in ‘immediate, short and long’ phases to increase public expenditure mainly through employment generation, introduce stimulus packages and widen social safety net coverage
The first of the four packages involve Taka 30,000 crore to be provided to affected industries and service sector organisations as working capital through banks as low-interest loans. She said the commercial banks would provide the amount as loans from their own funds to concerned industries and enterprises on the basis of bank-client relations and the Government would pay half of the interest amounts to banks as subsidies to the affected enterprises, which would pay the rest of the interest.
Under the second package, small and medium enterprises (SMEs), including cottage industries, would get Taka 20,000 crore as working capital. Hasina said a mechanism would be devised to send the amount to the SMEs as low-interest loans through banks which identically disburse amounts to the SMEs on the basis of bank-client relations while the Government would bear the greater share of the interest amount while the other package was meant for enhancing Bangladesh Bank’s Export Development Fund (EDF) to grow from US $ 3.5 billion to US $ 5 billion to facilitate raw material import. The Premier said this last package would result in adding up Taka 12,750 crore (US $ 1.5 billion) to the EDF while its interest rate would simultaneously be brought down to 2 per cent.
Overall, the Government announced 20 incentive packages worth Taka 1.1 trillion to combat the COVID-19 pandemic and reverse the economic slowdown it caused. The first stimulus of Taka 50 billion was given to the export-oriented garment sector to pay their workers during the crisis. The package for the months of April to June was announced on 1 April as the owners took out the loan with a 2 per cent service charge from commercial banks and paid their staff. The fund was empty before the repayments were made for June, prompting the Government to add another Taka 25 billion to it. But the BGMEA and BKMEA appealed for more financial support from the Government to pay their workers from July to September.
The Government arranged a loan for the owners to clear the salaries for July from Taka 300 billion fund created for the industries and services sector. It later injected another Taka 30 billion into the fund.
Extending stimulus for industries to Taka 40,000 crore; cutting lending rates
Bangladesh Bank extended the stimulus package fund for industries and services sector affected by the COVID-19 pandemic, from Taka 33,000 crore to Taka 40,000 crore.
On 5 April this year, Hasina announced a Taka 30,000 crore stimulus package, as working capital for the pandemic hit industries to revive the country’s economic activities. Then on 23 July, the size of the stimulus package was extended by Taka 3,000 crore to Taka 33,000 crore as wages for the workers of export-oriented industries.
Three types of industries – A, B and C – located in Bangladesh Economic Zone Authority (BEZA), Bangladesh Export Processing Zones Authority (BEPZA) and Bangladesh Hi-Tech Park Authority, are now eligible for loans facilities as working capital under the extended Taka 7,000 crore stimulus funds, according to the Bangladesh Bank circular.
On 12 April, the central bank launched the stimulus package, allowing banks to get an interest subsidy of 4.50 per cent on disbursed loans, while end-users (borrowers) will get at 9 per cent interest rate. The Bangladesh Bank later formed a refinance scheme of Taka 15,000 crore for lenders to implement the stimulus package. Under the scheme, banks will get funds in the form of working capital at 4 per cent interest from the central bank, while clients will get it at 9 per cent.
The initiative was taken to support the affected foreign and joint venture industries under such authorities in order to strengthen their financial capabilities to continue production and employment.
Meanwhile, given the existing situation, the central bank also decided to reduce interest rate on EDF loans at 1.75 per cent chargeable to eligible borrowers. The Bangladesh Bank slashed the interest rate on loans from the export development fund (EDF) from 2 per cent to 1.75 per cent to help exporters fight the devastating impact of the pandemic.
On 7 April, the central bank reduced the interest rate for loans under the EDF to 2 per cent.
“Given the ongoing situation due to COVID-19, it has been decided to reduce interest rate on EDF loans at 1.75 per cent chargeable to eligible borrowers; for disbursements until 31 March, 2021. The new rate will be effective immediately,” said a BB circular issued on the day.
In accordance with the decision, authorised dealers (ADs) shall make interest payments to Bangladesh Bank at 0.75 per cent; the remainder 1 per cent as before will be retained by ADs as their interest income, said the circular.
“Global retailers have reduced prices of apparel products due to the pandemic. In the given context, the reduced interest rate on loans from the EDF will help manufacturers to retain the competitiveness,” said SM Khaled, Managing Director of Snowtex, who added that the cut in interest rate will reduce the cost of opening a back-to-back letter of credit (LC) and it will increase the profit margin.
Though the rate is very small, it means a lot for manufacturers as apparel exporters have to take a huge amount of money from EDF to pay the suppliers of raw materials as they buyers pay bills within 90 days, said Khaled.
Intervening to reinstate the cancelled work orders
It is a well-known fact that Bangladesh apparel sector had to face largescale order cancellations from global buyers in the wake of the breakout of the pandemic. However, it is apparently the intervention of country’s Premier, which helped reinstate a significant volume of the cancelled orders.
“The Prime Minister spoke with her counterparts from different countries to ensure that they do not break our export supply chain,” underlined Foreign Minister Dr. AK Abdul Momen while claiming that Hasina’s efforts have helped Bangladesh regain 40 per cent of the export orders that were cancelled due to the pandemic.
Dr Momen also said Bangladesh has achieved the highest GDP growth among all Asian counties during the pandemic period and said the World Bank and IMF had predicted that no country would be able to maintain GDP growth more than 3.38 per cent amid the pandemic but Bangladesh achieved 5.2 per cent.
“It’s a huge success,” said the Foreign Minister.
There’s no denying that the current Government led by Sheikh Hasina has perhaps been able to ward off the worst of the consequences of the COVID-19, thanks to the host of the steps taken by the authorities – whether it’s the bailout package for industries, signing trade agreements or formulating policies to bring in more FDI – to keep the country’s economy and development on the track.
Simplifying policies to attract FDI and signing new trade agreements
At a time when companies are looking at moving their manufacturing base from China, Bangladesh has decided to simplify its foreign FDI policy to lure entities seeking to move out of China. A team has been formed under the leadership of Prime Minister’s Principal Secretary Dr Ahmed Kaikaus to make the necessary recommendations for a simplified FDI policy and taxation system.
“The Government has directed the National Board of Revenue (NBR) to make the FDI more lucrative through some amendments in the policy. A high-level committee has already been formed to formulate a set of recommendations,” maintained a senior Finance Ministry official.
Senior NBR officials — including Member (Tax Policy) Syed Golam Kibria, Member (VAT Policy) Masud Sadique and Second Secretary (Customs Policy) Mehraj-Ul-Alam Samrat — are part of the panel.
Meanwhile, even as Bangladesh is inching closer to moving into the big league of developing nation from the current status of an LDC (which would shorn the country of the trade privileges that it currently enjoys and hit apparel exports significantly) that might further amplify the issues faced by the economy ravaged by the pandemic already, the country is preparing to sign a string of trade agreements to minimise the implications.
First in line in this direction is a preferential trade agreement (PTA) between Bangladesh and Bhutan, which is expected to be signed in the month of December. “We are preparing to sign the PTA with Bhutan on 6 December. It will be a remarkable deal. It will also be the first PTA in nearly 50 years,” said Commerce Secretary Md Jafar Uddin.
Another PTA is also expected to be signed with Nepal this year.
Bangladesh has demanded zero-duty benefit on export of 140 products to Nepal as both the Governments look towards finalising a preferential trade agreement (PTA) soon, underlined the Commerce Secretary.
Apart from these two, Bangladesh is also currently in negotiations with a few other countries to finalise FTAs. For instance, a joint study is ongoing over signing a proposed Comprehensive Economic Partnership Agreement (Cepa) between Bangladesh and India while the Government is also considering signing a free trade agreement on trade in goods or a comprehensive economic partnership agreement with Japan as well depending on the response of the East Asian country.
Though a non-conventional destination, Japan in last few years, has emerged as a very prospective market for ‘Made in Bangladesh’ apparel products. The third largest apparel importer and the fourth largest apparel market in the world after China, USA and Germany, Japan with its population of 127.1 million and US $ 36,194 per capita GDP, is one of the most promising export hubs in Asia for Bangladesh.
Meanwhile, in another positive development, Indonesia is also said to be actively looking towards finalising the Indonesia Bangladesh Free Trade Agreement (IBTA) with Bangladesh to boost bilateral trade.
Given the array of steps undertaken by the Government, one has to acknowledge and appreciate the visionary leadership of Prime Minister Sheikh Hasina, who is leaving no stone unturned to make sure Bangladesh, the second biggest apparel exporter globally, remains in the contention, no matter the pandemic-induced challenges.