Hossain Khaled, DCCI president goes to great lengths to explain why the current situation is detrimental to business in Bangladesh
By Wafiur Rahman
Photo: Din M Shibly
The ongoing political unrest has started to take its toll on the Bangladeshi economy. It has been near impossible to transport goods from one place to another, demurrage costs are piling up, resulting in higher expenses. Unpaid wages remain another problem and this may aggravate further. It is in times like this when they look for their brethren to stand beside them and help them to sustain. Hossain Khaled, President of Dhaka Chamber of Commerce and Industry, and also the Managing Director at Anwar Group of Industries, is of the opinion that businesses should be kept out of all this. With businesses and industries unable to operate as much as they can or would want, it is a testing time for everyone involved in it.
What is your assessment of the businesses facing loss due to the current political unrest?
If we look outside Dhaka and Chittagong, the situation is very bleak and disheartening. There is an estimated and accumulated loss of over Tk. 2000 crore a day, through losses in revenues, share prices, etc. Alternative methods of operating a business lead to increased costs and other expenses. Since our economy is import-dependent and export-oriented, this does leave a holistic mark on business.
The only winner in this scenario is the government, which is benefitting from the goods that are lying idle in the ports, unable to be transferred across the country to their respective destinations. The government is not losing revenue, but rather gaining from customs duty and other taxes, which are putting an increased burden of costs on businessmen.
If we look at the small and medium enterprises (SME) which employ 60-70% of the workforce, we can see that the unrest is affecting the domestic market, as small stores and medium industries are operating on a less-than-full capacity. Stores are opening, but business is not being made. Thus it is not possible for them to pay their employees’ wages, utility bills and let alone loan repayments. For the past two months, most of the banks have witnessed increased overdue and constant loan reclassifications. But sadly, there has been no scope for interest refinancing, so loans and their interest rates remain the same.
How do you think businesses can sustain during this period?
We all know that businesses in Bangladesh operate with slim margins nowadays. So this prolonged political impasse is effectively killing businesses. But the majority of the damage being done is in the loss of image in the global market. As Bangladesh has exporting prospects, we are losing our credibility to suppliers and buyers worldwide if those goods are not cleared at the ports.
Losing buyers’ confidence is something which would be difficult to regain. Once our export orders get shifted to neighbouring countries, it would be very difficult to retrieve orders after that. In the case of RMG for example, Sri Lanka previously lost the market due to their civil war. But now times have changed and they are picking up the pace. Additional competitor countries include India, Cambodia, Laos and Vietnam.
It may be a bleak statement but fact remains there that we do not see any light at the end of the tunnel. No initiatives have been taken thus far to sustain economic growth. But they need to be taken. All the political parties must come to a consensus that the economy should be kept above everything else. If it gets affected by the current stalemate, then we are seeing the result.
We need a stable policy guideline and prudent exercise of law in order to bounce back. As far as government supports are concerned, they must provide their support to businesses. For businesses to survive, it is important to keep the cost of doing business in check. In that perspective, if the government, the central bank, the ministry of finance and the national board of revenue can step up with a coordinated initiative to reduce interest rates, things just might look bright again. For example, in the SME sector, if they can waive 50% of the fixed VAT they have to pay, this could do wonders for the development of the industries.
As a result of the ongoing turmoil, the numerous land and sea ports that are being used to stock the goods of manufacturers are overstaying their storage duration, since they cannot move it. If 50% of that accumulated demurrage cost is waived, it could help businessmen to survive during these testing times. So if import duties, advanced trade VAT and other costs could be reduced, the government would not lose out on revenue collection.
How can trade bodies (e.g DCCI/FBCCI) be of help to the economy at this stage?
As a trade advocate, or trade body, I understand that limitations of the trade bodies are there. Our responsibility is to advocate business and trade, and also to identify various bottlenecks that are detrimental to the development of business and industries. Our job is also to identify different areas of economic development and thrust sectors. We focus on business, not politics.
In order to grow businesses, we need conducive business and political environment, something which will cultivate further businesses and provide stability and safety to people and their resources.
Will this unrest cause further negativity in the investment prospects?
It has already affected prospects. But this is not only for the unrest, but other factors are also involved, such as infrastructural bottlenecks. The government is not encouraging in providing new electricity and gas generated industries. As the Bangladeshi economy is largely dependent on manufacturing industries, this has been negative so far. The core element of such industries is power and energy resources, if that is not provided, there is not much potential investors can do.
Cases have been observed for the past two years where inability to provide or maintain power generation has resulted in collapse of industry. They were unable to run more than 15-20% of their full operational capacity. Huge bank loans that were sought made things difficult, as they faced hard times in repaying premium interests, let alone loan repayments. The political unrest of 2014 must not be allowed to affect foreign direct investment (FDI), as it would greatly affect domestic investors, not to mention expecting foreign ones.
How do you think foreign investors perceive all this? How far will it be detrimental to the investment climate?
As part of a basic theory of economics, any investor would want their investments to be safe, anywhere across the globe. Investors often seek for prospects outside of their home countries as the foreign investment opportunities are great. If those opportunities are not there or at risk, then they would naturally hesitate.
It is not that scope of investment is not high, but we need to scope for our needs as well. Everything will not happen one fine day. Our FDI currently stands at $1 billion. By 2030, we need to increase our overall investment figures. Our contribution to the GDP needs to increase from 30% to 42%. As mentioned earlier, this will not happen one fine day, but that growth needs to be gradual.
Do you think 2nd/3rd generation businessmen/entrepreneurs are facing a more difficult scenario than their predecessors, or an easier one? In any case, why do you think so?
It is basically two sides of the same coin. Most businesses in Bangladesh are family businesses, with the second generation currently (and mostly) taking the helms. In the post-independent period, there was a lot of opportunity to do business. Till the late 1990s, businesses were laid to established foundations. The objective of the 2nd generation is to improve present business potential. But as competition has increased, the scope of profits has also come down. They are managing processes, which is an important step. Investments are happening in that aspect, in information technology for example. With newer businesses opening up, most people are emphasising on lean management, for a leaner and neater organisational structure.
Can technology be of any help in all this (Corresponding online, emails, etc)?
All businesses are the biggest beneficiaries of information technology. Tech will play a strong role in the years to come. New investments in lean management are the first step towards this direction. Professional businesses are gearing up for this, as a lean organisation understands customer value and focuses its key processes to continuously increase it. They will eventually transform their businesses to become more professional and more tech-savvy over time.
What is your opinion about the 3rd generation businessmen of this country? Can they take the economy forward?
In a country of over 160 million, 65% of the population is youth-centric. They are the backbone of our economy. In order to capitalise on such strength, businesses will have to generate new employments. New business opportunities and developments will come from this demographic dividend. They are the reason why China and India are earmarking Bangladesh as a developing economy.
Given their skill level and easily-trainable nature, our human resources will have to be utilized effectively. They need training as well as empowerment. We must help them to become independent entrepreneurs. Out of the three million who annually enter the job market, two million are successfully recruited, but one million remains unemployed. In order to generate employment for that one million, emphasis must be put on their training and SME development. That way both the population and an industry can mutually be benefited from each other.
How can the government help in ensuring smooth and safe business environment hereon?
It is their responsibility to ensure conducive business environment for both domestic and foreign investors, not to forget a stable law and order situation. It is a fact that red tape bureaucracy eats up 2% of our GDP growth, so such bottlenecks must be addressed and eradicated for the betterment of business. The high costs of doing business must also be addressed, as Bangladesh is earmarked as one of the most promising among developing economies. This needs to be worked on.
Where do you see the future of business in Bangladesh a decade from now?
The motto of DCCI is that ‘the best of Bangladesh is business.’ From that perspective, I can assure you that we have a future in business, if we gear towards ethical business, in an improved and balanced economic situation or environment. We should focus on our agriculture sector, which strives to feed the 160 million. Our manufacturing and services sector holds immense economic potential, as their progress has been more than noteworthy.
The government has identified twelve thrust sectors, which include pharmaceutical industry, shipbuilding industry, agro, information and communication technology, food packaging and other industries. So as they progress naturally to higher standards, we can safely say that the future of Bangladesh lies in business.