Proposed budget has nothing-extraordinary package for generating employment although the government claims that creating new jobs will be its fourth priority in the next fiscal year.
The major job-creating sector is SMEs. SMEs hit hard by coronavirus and lac of small manufacturers and traders are out of business and by this lost their small capital and thrown out of supply chain and business credit.
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Retention and creation of new job
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Published: 12:48 AM, 28 June 2020
Retention and creation of new job
https://dailyasianage.com/news/233652/retention-and-creation-of-new-job
M S Siddiqui
According to the United Nations (UN), due to the coronavirus may leave up to 25 million or more
people out of jobs across the world. The International Labour Organization (ILO) said- more than
one in six young people have stopped working since the onset of the COVID-19 pandemic while,
those who remain employed have seen their working hours cut by 23 percent.
ILO Country Director in Bangladesh Tuomo Poutiainen said some sectors of the population such
as women, youth, older workers, migrants and self-employed persons are disproportionately
affected by the COVID-19 pandemic. The Asian Development Bank estimate that the number of
jobless people due to the pandemic could rise to 1.4 million. About 35 percent are now living in
poverty, according to a recent study of the Centre for Policy Dialogue.
Opportunities of job in informal and many formal sectors are shrinking in home and abroad. It has
been estimated that around 20 lakh Bangladeshi migrants will face possible deportation after the
Covid-19 pandemic from among the 1 crore Bangladeshis in the global job market. In the
meantime, More than 6,66,000 expatriate workers returned to Bangladesh between January and
mid-March. Most of them would return from middle eastern countries and naturally became
unemployed.
About 87 percent of the migrant workers who returned to Bangladesh due to coronavirus
pandemic lockdown have no source of income at this moment, according to a survey by
Brac. BRAC, Data Sense and Unnayan Shamannay conducted a survey last May on 962
people in 25 districts and found at least one individual from 34.8 percent of the families has lost
jobs.
The local City Bank, one of the most profitable banks in the country, announced a 10 percent pay
cut for its employees from June 2020 in the wake of massive losses. It has also suspended extra
bonuses to its employees. Many other private banks also are preparing to cut down salary costs,
which stands in stark contrast to the finance minister's optimistic calculation about private
investment.
In the proposed budget, the finance minister talked about generating one crore new jobs at
Economic Zones (EZs). The Finance Minister announced that the government set a target to
take the private sector investment to 25.3 percent of GDP in the next fiscal year from 12.7
percent in the revised budget of the current fiscal year. Achieving the investment target is
uncertain when Banks are struggling with huge business stimulus financing program.
The finance minister in his budget speech mentioned the government-announced stimulus
package of Tk20,000 crore for the SME sector alongside his announcement of some duty
measures favouring the light engineering sector - an SME sector declared the product of the
year. Proposed budget has nothing-extraordinary package for generating employment although
the government claims that creating new jobs will be its fourth priority in the next fiscal year.
2. The major job-creating sector is SMEs. SMEs hit hard by coronavirus and lac of small
manufacturers and traders are out of business and by this lost their small capital and thrown out
of supply chain and business credit.
PM earlier declare an ambitious package of financial support to business of Tk Tk 72,750 crore
for different business sectors including Tk 20,000 crore as working capital loan at low interest
rate of 9 percent of which 4 percent will be paid by the concerned industries and businesses,
while the government will subsidize the remaining 5 percent.
Another package is of Tk3,000 crore for small professional, marginal businessman etc at interest
of 9 percent. Of the 9 per cent interest, the government would provide 5 per cent a subsidy and 4
per cent would be paid by the borrower.
The challenge is the loan package is the loans offered based on bank-client relationship and at
the risk of banks for management and default. This made the SME stimulus loan unpopular
among banks. The SMEs are mostly work in informal sector and have small connection or no
relationship with banks. It means these amounts are in true sense available for few
SMEs having relationship with the banks.
According to the government data, over 78 lakh small and medium enterprises are contributing
to one fourth of the GDP. The National SME Policy 2019 has focused on enhancing the
contribution of this sector to 32 percent by 2024, which will boost employment.
The government has some strategic ways, like over 100 clusters across the country, to reach the
goal. But, the possibility for the SMEs and informal micro businesses to rebound after the Covid-
19 pandemic without meaningful support remains the question.
FM declare that a fund of Tk2,000 crore for low-cost loan support to the SMEs has been created
to be disbursed through Palli Sanchay Bank, Probashi Kallyan Bank, Karmasangsthan Bank and
Palli Karma-Sahayak Foundation (PKSF). Another fund of Tk100 crore proposed under 'Rural
Social Services Programme' is not sufficient to make a vibrant rural economy.
The private investment figure of current year has shown at a bare 12.7 percent of GDP and that
just doubles to 25.3 percent next. FM believes to the contrary of everybody that private credit will
grow by 16.7 percent, almost double of what it is today, during this time of depression.
But, the credit flow to the private sector hit its lowest growth at 8 percent in the last two months -
March and April. The reported statistics says, private investment increased only 2.39 percent in
the last four fiscal years.
Prof Mustafizur Rahman, distinguished fellow of the CPD, said private sector credit growth has
been projected to double at a time when the banking sector is under pressure of high bank
borrowing and implementation of stimulus packages. Amid this situation, private sector credit
growth will be in pressure.
If the government cannot achieve the private investment target, employment generation will
fizzle. However, allocation of Tk 3,000 crore to promote farming mechanisation and reducing
custom duty on importing parts of agriculture machinery would reduce the price of farming
equipment and generate employment, Prof Mustafiz said.
This investment in agricultural sector will hopefully create some small businesses related to
agriculture machinery will grow in the rural areas and generate employment.USA has offered the
portion of the disbursed sum as grants, which is being spent on employee retention - paying
wages. That helped a large number of American working families continue their jobs.
3. Bangladesh may allocate some fund in the next budget to distribute grants to SMEs particularly
to informal SMEs in order to retain the employments to reduce Burdon of more unemployment at
this critical situation.
The is a good news that Recently, the World Bank has proposed $300 million to the Bangladesh
Bank as support for forming a credit guarantee scheme to speed up lending by banks in high-risk
sectors, especially to SMEs, during the pandemic. Government may consider introducing
Risk/Credit guarantee schemes, where governments share potential losses in case of default.
This is a proven tools globally to address this challenge.
Government should start negotiation with the destination countries, to stop forced return of the
expatriate workers during the time of COVID-19; and through the diplomatic initiatives, visa and
work permit of the returnees should be extended for them who are unable to fly back to
workplace because of the travel restriction.
The writer is a legal economist
Email:mssiddiqui2035@gmail.com