Uncertainty looms large in light engineering businesses

Staff Correspondent

28 September, 2020 12:00 AM printer

Around 75 percent entrepreneurs in light engineering sector are uncertain about their business future while only 3 percent businesses have applied for stimulus packages in five months after special financial tool to recoup losses was introduced,a recent survey has revealed.   

Prime Minister Sheikh Hasina announced the first phase of stimulus package worth Tk 200 billion for supporting SME as working capital through commercial banks at 4 percent interest after incentive.

In the latest researchpublished on Sunday, Brac Institute of Governance and Development also mentioned that only 2 percent of LE enterprises ran operations and 29 percent were partially open during the general holidays amid pandemic.

Since the lockdown was lifted, 61 percent of the enterprises are now fully operating and more than 37 percent are cutting down either their business days or hours.

BIGD Senior Research Associate Atiya Rahman shared the findings of the study covering 2,000 small businesses while Monash University Prof Asadul Islam presided over the virtual meeting.

Employing over two million workers, light engineering is one of the largest sub-sectors of small and medium-size enterprises (SMEs) in Bangladesh accounting for 2 percent of country’s gross domestic product, according to the study.

In the study, BIGD also claimed thatsmall and informal enterprises are still experiencing an immense drop in their sales—about 55 percent from their pre-COVID level though the status of operation has improved.

Due to the nature of their service, the study finds that certain service sectors where physical interaction is essential, such as beauty parlors, hotels, tailoring, are facing a severe drop in sales and are on the verge of collapse.

Researchers found that enterprises with lower capital during the pre-pandemic period are less likely to operate their business at full capacity after the end of the lockdown.

Similarly, after the economy re-opened, poorer enterprise experienced a 49 percent drop while the rate is 25 percent among the richest enterprises.

It also emerged from the study that about 61 percent of the enterprises are facing a shortage of raw materials due to the supply chain disruption caused by COVID-19.

On the other hand, the financial stimulus package for SMEs announced by the government also ignited similar hope of overcoming this unnerving crisis. But the findings suggest that only 63 percent of the enterprises know about this initiative and only 3 percent applied for the support.

Enterprises which had higher profit before the pandemic or were open during the lockdown or have a higher amount of current sales are also more likely to apply for the government support.

In addition to the enterprise owners, the study also surveyed a group of men and women working for the SME sector. It appears that even though female workers are working more days and maintaining health guidelines relatively better than their male counterparts, they are still losing jobs and have the poorest income recovery.

BIGD Executive Director Imran Matin said the study shows current 'recovery' in a meaningful way and examine the actual rate of profit and revenue. Recovery starts to look very fragile.

“We need to look into each of these components and see how they are affecting the enterprises, so that we can create a well-designed intervention to help these enterprises overcome the crisis caused by the corona pandemic,”

Bangladesh Institute of Development Studies (BIDS) senior research fellowDrKazi Iqbal mentioned thatmost of the surveyed firms do not have a recovery plan and one of the ways to help firms, therefore, would be to assist in preparing recovery plan.”

Centre for Policy Dialogue (CPD) Research Director KhondakerGolamMoazzem claimed that small businesses are still struggling to make profit though economy re-opened and indicates domestic demands constraint caused by pandemic ‘hasn’t improved’.

Among others, BIGD Senior Advisor Muhammad Musharraf Hossain Bhuiyan, senior research fellow Narayan Das spoke on the occasion.