Is duty-free facility enough to boost export to China?

On June 16, 2020 China declared duty-free export facilities for the least-developed countries (LDCs), including Bangladesh
on 97 per cent of their tariff line. The media reports that followed mentioned that China was going to provide duty-free
export benefits to an additional 5,161 products from Bangladesh, taking the total number of products to 8,256, including
the items admissible under the agreement of the Asia Pacific Trade Agreement (APTA).

The media reports gave a clear sense of prediction that with such a duty-free facility, exports from Bangladesh to China
are going to be boosted in the near future at a significant level. People expect to grow our exports to the Chinese market,
the most populous and the second-biggest economy in the world.

However, that expectation needs to be evaluated based on ground reality. We need to think first on whether the extension
of the duty-free facility will help grow our exports. Then based on the proper evaluation, we should fine-tune the strategy
and the government policy to enhance Bangladesh's exports to the Chinese market.

When China first declared the LDCs package of the duty-free facility in 2010, it covered about 61 per cent of their tariff
line. Bangladesh availed such facility. Since the scheme was implemented, Bangladesh has been enjoying duty-free export
facility on 5,054 products in China.

China extended the facility covering about 97 per cent of the tariff line in 2013. However, it attached a condition of signing
a 'Letter of Exchange' by the beneficiary LDCs to avail the facility. Signing such a letter of exchange practically meant that
any other benefits availed under any regional trading arrangements had to be sacrificed.

China and Bangladesh are the members of the APTA and both countries are availing duty benefits for each other's
products. So, Bangladesh needed to sacrifice APTA benefits if it wished to avail the Chinese-extended package for the
LDCs. The fourth round of trade negotiation under the APTA, which started in 2006, completed in 2017 where all the
member countries offered greater concessions than before to the other members.

The APTA is a preferential trading arrangement where the members do allow duty concessions ranging from 5 per cent to
100 per cent on a certain percentage of the tariff line for the products to be exported from the other members.

China, following the fourth round of the APTA negotiation, allowed duty benefits to 2,191 products under 'General
Concessions' applicable for all other members and for 181 products under 'Special Concessions' applicable for the LDC
members (Bangladesh and Laos) and it was implemented on July 1, 2018.

In the Chinese offer under the APTA, duty concessions for most of the products given under the 'General Concessions'
were 35 per cent while the same was 100 per cent for most of the products under the 'Special Concessions'. Moreover,
many of the products under the 'Special Concessions' were from the textile and leather sectors, which are considered
more sensitive.

Bangladesh, as an LDC, is entitled to duty concessions for the products under both concessions.

Major export items from Bangladesh to China include jute and jute products, plastic products, rawhide and skins, frozen
fish like crabs and live eel fish, sesame seeds and cotton waste products.

Bangladeshi exporters are entitled to export most of the products to China duty-free since 2010. Additionally, duty
benefits are enjoyed since long for many products from Bangladesh to China under the third round of the APTA
negotiation. Because of the fourth round of negotiation, Bangladesh enjoys duty benefits at different rates for 2,372
products.

Despite all the duty benefits, exports to China are not growing much. According to the Export Promotion Bureau (EPB),
total export to China was worth $791 million in fiscal year 2014-15, $808 million in FY16, $949 million in FY17, $695 million
in FY18, $831 million in FY19 and $557 million in July to May period of FY20.
Exports declined in the FY20 because of the Covid-19 pandemic. But the reasons for very little export growth or even
decline in the remaining years are not understood. While Bangladesh's exports to the other countries, including the US
and Europe showed very impressive growth over those years, the same to the Chinese market looked pathetic. That reality
proves that duty-free export benefits, though helpful is not the major factor for boosting exports. Rather, other factors,
including price competitiveness play a vital role.

An analysis of the export trend to China reveals that most of the export items from Bangladesh do vary a lot. The export
amount for most of the products is very fluctuating. It is true for all the time even if one excludes the very abnormal fiscal
year of 2019-20. There was good growth for some items in a year or two before they slid in the following year. The only
exception is ready-made garments, which showed consistent positive growth over the years, whatever little it be.

Before July 1, 2020, all the potential export items from Bangladesh were not entitled to duty-free entry into China. It
happened as the extended offer from China covering 97 per cent products from the LDCs came in 2013 subject to signing
a 'Letter of Exchange' and Bangladesh was not in a position to ink it sacrificing the duty benefits available under the APTA
negotiations.

Facing such a situation, Bangladesh requested China to bilaterally consider granting duty-free status on 17 products. The
products included underpants and briefs for men and women, swimwear and tracksuits, sacks and bags made of polythene
and polypropylene for packing articles, duster cloths, footwear soles made of rubber, textile and plastic, lead-acid
accumulator, clothing accessories made of leather, plastics as packing materials, tobacco stripe and maize cereal.

China responded that out of the items requested, one (maize cereal) is not included in the package offered duty-free for
the LDCs and the remaining 16 products could be allowed once Bangladesh signed the 'Letter of Exchange'.

Now with the recent declaration from China on allowing duty-free to 97 per cent products without sacrificing any duty
benefits available under the regional trade agreements such as the APTA, the 16 products can be exported to China
without any duty. Any other products under the package are entitled to the duty-free facility from now on to the Chinese
market.

An analysis of the export status of the 17 products reveals that there were no exports of at least five products -- clothing
accessories made of leather, plastic as packing materials, tobacco, maize cereal and accumulator -- in the last three years.
Moreover, the remaining products had very little amount of export to China.

Products having either no actual export or very insignificant amount of export at present are most likely not to have
substantial exports even after its duty-free status. Thus, it can be very logically assumed that the recent declaration of
China on allowing duty-free export facility for Bangladeshi products is not enhancing Bangladesh's exports there. If it
grows, it will be for other reasons.

China is called the 'Factory for the World.' In terms of quality consideration, their products are so cheap that anyone can
hardly dare to challenge them. Many of the products made in Bangladesh are also made there.

China is the top exporter in the world for so many products, including footwear and ready-made garments. Still, they
produce a lot of products which Bangladesh does produce and export. So, it will be very challenging for Bangladesh, along
with other developing countries, to capture a substantial share of Chinese domestic markets as long as China keeps its
price competitiveness and produces those products.

The good news is that with its impressive economic growths over the years, China is moving forward to the higher value
chain of economic activities. Chinese producers are gradually facing the higher cost of doing business and many of them
are relocating to the other countries with cheap labour and reasonably good infrastructure.

In consideration of that reality, Bangladesh needs to emphasise framing policy positions accordingly to lure Chinese
investors. More and more foreign direct investment from China should be the focus of our export development strategy.

With the establishment of factories in Bangladesh, the Chinese investors, on the one hand, can have available and cheap
labour as required and on the other hand, the manufactured products could be exported to China with duty-free facilities.
That will also benefit Bangladesh with greater employment generation as well as export growth. Thus, the utmost efforts
should be given on the proper development of infrastructure, both physical and non-physical to attract foreign investors,
especially from China.

Moreover, approval and facilitation should be provided to Chinese investors interested to establish the ready-made
garments factories outside the export processing zones and special economic zones. If those are done properly,
Bangladesh's export to China will grow at the expected level with the utilisation of the recently declared duty-free facilities.

Pandemic to cause an economic whiplash: BB

All major economic segments of the country will face deep trouble this year due to the ongoing economic fallout
brought on by the coronavirus pandemic, according to a central bank report.

Although the government had set a GDP growth target of 8.20 per cent for this fiscal year citing a V-shaped
recovery, the central bank's projections have given an indication the economy may face deep trouble in the days
ahead.

"Undoubtedly, the year 2020 would be critical and challenging for all of us. The stimulus packages alone may
not suffice to address all sorts of damages made by COVID-19 on our economy," said Fazle Kabir, governor of
the central bank.

He came up with the remark at the central bank's annual "Financial Stability Report" for 2019, which was
released on Tuesday.

Kabir went on to urge all the stakeholders of the macro-financial system to extend their concerted effort to the
fullest extent.

The government has so far announced several stimulus packages worth Tk 103,117 crore, which is nearly 3.7
per cent of the country's gross domestic product, to cushion the possible economic shocks from the global
coronavirus pandemic.

The economic whiplash by the rogue virus across the globe is likely to affect the domestic economy considerably
in the coming days.

However, a considerable level of stability and resilience was observed in the financial sector of Bangladesh with
a few exceptions.

In the wake of the pandemic, the vulnerabilities and uncertainties that have hit the global macro-financial
landscape may pose some unconventional challenges for the Bangladesh economy in the days ahead as well.

A low level of external debt and low and stable inflation was favourable from a financial stability point of view.

Despite the depreciation of the taka to some extent and a moderate output gap, the overall domestic
component appeared to be quite stable with apparently no threat for the financial system.

The stable scenario might be altered, especially if the real economy is severely affected by the coronavirus attack
resulting in lower output growth and rising inflation.

Besides, the economy may face some challenges due to the implementation of mega projects.
Over the last couple of years, the government has emphasised the implementation of mega projects including
that of the Padma bridge, Ruppoor nuclear power plant and metro rail to foster economic growth to the next
level.

A significant part of the financing for such projects has, however, come in the form of foreign currency-
denominated loans from the development partners and multilateral organisations.

As a result, there is a gradual accumulation of foreign debts that need to be repaid in instalments from the near
future.

While the number and size of these projects are increasing, there is a probability that such short and long-term
debts may pose some pressure on the balance of payments if remittance inflow experiences slow growth due
to coronavirus.

Higher growth of remittance inflow due to cash incentives declared by the government, the decline in oil price
and the overall slow growth of import helped improve the external sector balance in 2019, the report said.

However, a constant fall in oil price could be a possible source of stability threat for Bangladesh as it might shrink
remittance inflow from the oil-exporting countries.

Trading peer nations' real GDP growth, inflation in import partners and unemployment in top inward remittance
partners worsened last year compared with 2018.

The external economy scenario is likely to be worse this year due to the pandemic, which might slow down
export earnings and remittance inflow as most of the trading and remittance partner countries have severely
been affected too.

Despite recent improvements, proper monitoring of rescheduled loans amid the pandemic remains a critical
challenge for the banking industry.
Most of the banking sector indicators might be affected due to the impact of the pandemic.

However, the bulk amount of the government's stimulus credit package augmented by the central bank's
refinancing schemes should help the banking sector in combating the ill effects.

Allowing a higher proportion of institutional government funds to be deposited in private commercial banks
might have caused the change as these deposits were shifted mostly from the state lenders to them.

This recent stance improved the overall liquidity situation in the private commercial banks. The higher liquid
asset holding should enable the banks to better manage their future liquidity issues amid the pandemic.

Default loans in banks stood at 9.3 per cent of the outstanding loans in 2019, down from 10.3 per cent in 2018.

The amount of classified loans increased Tk 420 crore year-on-year to Tk 94,330 last year.

The decline in the default loan ratio last year could partially be attributed to stringent supervision by the central
bank, improved monitoring from banks and restructuring of loans under a new policy aimed at reducing debt
servicing burden of good borrowers.

Despite the recent improvement, proper monitoring of rescheduled loans amid the pandemic will be a critical
challenge for the banking industry.

Banks rescheduled defaulted loans amounting to Tk 52,770 crore last year, up from 127.35 per cent a year
earlier.

The ongoing economic meltdown could severely affect the debt-servicing capacity of the borrowers and the
performance of the rescheduled as well as regular loans might be hampered.

The BB has already extended necessary policy support to help the borrowers and banks and minimise the impact
of the ongoing coronavirus outbreak.

Deposit growth in banks stood at 11.3 per cent last year, up from 10.5 per cent a year earlier.

The deposit growth in the banking sector, however, might decline soon due to the impact of the coronavirus
outbreak.

This might happen due to weaker economic activities accompanied by lower demand for labour in the
remittance-originating countries.

Bedsides, demand for holding excess cash may also increase due to uncertainty associated with the pandemic.

The stress testing carried out by the BB revealed that the banking sector would be resilient to different shock
simulations.

But the significant amount of loans concentrated among a few borrowers and a considerable level of default
loans in some banks and non-bank financial institutions could pose a risk to the overall financial stability.

Strict compliance with the guidelines on large loans and single borrower exposure would help reduce risks on
banks' exposure to large corporates or a specific group, sector or region.
13pc people lost jobs due to Covid-19 pandemic: BIDS survey
About 13 percent people have become unemployed in the country due to Covid-19 pandemic, according to a
survey of Bangladesh Institute of Development Studies (BIDS).

The survey titled "Coping with COVID -19 and Individual Responses: Findings from a Large Online Survey" was
conducted on 30,000 people, covering all divisions and districts.

BIDS conducted the survey from May 5 to 29, 2020. It was unveiled on Wednesday at a virtual conversation
titled "In the Shadow of COVID - Coping, Adjustments, Responses" organised by BIDS.

It noticed expected and significant negative effects on employment, income and expenditures of people,
especially those from low-income groups.

As per the report findings, 19.23% of participants with income less than 5,000 taka reported that their income
was reduced by 75%, while 23.31% participants with income between 5000-15000 taka reported an income
reduction by 50% relative to last month's income.

Meanwhile, SME entrepreneurs in the rural areas are being hit the hardest due to the impact of Covid-19, as
their revenue has dropped by 67% in 2020 compared to the previous year.

However, the average reduction of revenue for all SMEs is 66% in 2020 compared to 2019.

According to a survey titled "Covid-19 and SMEs: Understanding the Immediate Impact and Coping Strategies"
annual revenue was reduced by 67% in 2020 compared to 2019, which is 66% for all SMEs sectors.

BIDS conducted the survey on 375 enterprises and 360 workers, from April 26 to May 10, 2020. The report was
also unveiled on Wednesday.

As per the findings of the surveyed entrepreneurs, 76% goods produced by the entrepreneurs remain unsold.

Economic activities were not completely shut down during the lockdown, while only 16% of SMEs were open.
However, it was 38.24% in cases of handicrafts and rural SMEs were opened by 11.40%, the report showed.

According to a survey, Bangladesh will have 16.4 million new poor in 2020 as the income of working class in
urban and rural areas have fallen sharply due to the lockdown to stop the spread of Covid-19 pandemic.

A research paper titled "Poverty in the time of Corona: Short-term Effects of Economic Slowdown and Policy
Responses through Social Protection" conducted by Binayak Sen, research director of BIDS estimated the figure
on Wednesday.

Under a post-lockdown optimistic scenario, the country's overall poverty is to increase by 25.13%, where rural
poverty will be 24.23% and urban poverty will be 27.52%.

"We ran several scenarios -- representing successive severity of lockdown -- under the 'wealth plus labour status'
approach. In a scenario where there is an 80% drop in income for labour class in urban areas and 10% drop in
income for labour class in rural areas in the 'hard lockdown' exercise, we would have 16.4 million new poor,"
Binayak said in his presentation.
"If we consider a 25% higher poverty line, then an additional 16% to 20% of population would be in poverty in
rural and urban areas. If we update our age-old poverty line accordingly, it will result in a much higher poverty
where rural poverty would be 45%, and urban poverty would be 36%," he added.

South Pole warming 3 times faster than rest of Earth

The natural warming trend was likely boosted by manmade greenhouse gas emissions
and could be masking the heating effect of carbon pollution over the South Pole
The South Pole has warmed three times faster than the rest of the planet in the last 30 years due to warmer
tropical ocean temperatures, new research showed on Monday.

Antarctica's temperature varies widely according to season and region, and for years it had been thought that
the South Pole had stayed cool even as the continent heated up.

Researchers in New Zealand, Britain and the United States analysed 60 years of weather station data and used
computer modelling to show what was causing the accelerated warming.

They found that warmer ocean temperatures in the western Pacific had over the decades lowered atmospheric
pressure over the Weddell Sea in the southern Atlantic.

This in turn had increased the flow of warm air directly over the South Pole -- warming it by more than 1.83°C
since 1989.

Authors of the research said the natural warming trend was likely boosted by manmade greenhouse gas
emissions and could be masking the heating effect of carbon pollution over the South Pole.

"While temperatures were known to be warming across West Antarctica and the Antarctic Peninsula during the
20th century, the South Pole was cooling," said Kyle Clem, a researcher at Victoria University of Wellington, and
lead study author.

"It was suspected that this part of Antarctica... might be immune to/isolated from warming. We found this is
not the case anymore," he told AFP.

The data showed that the South Pole -- the most remote spot on Earth -- was now warming at a rate of around
0.6C (1.1F) a decade, compared with around 0.2°C for the rest of the planet.

The authors of the study, published in the Nature Climate Change journal, attributed the change to a
phenomenon known as the Interdecadal Pacific Oscillation (IPO).

The IPO cycle lasts roughly 15-30 years, and alternates between a "positive" state -- in which the tropical Pacific
is hotter and the northern Pacific is colder than average -- and a "negative" state where the temperature
anomaly is reversed.

The IPO flipped to a negative cycle at the start of the century, driving greater convection and more pressure
extremes at high latitudes, leading to a strong flow of warmer air right over the South Pole.
Clem said that the 1.83°C level of warming exceeded 99.99% of all modelled 30-year warming trends.

"While the warming was just within the natural variability of climate models, it was highly likely human activity
had contributed," he said.

How will the global economic downturn affect the Bangladesh

economy?
The Covid-19 pandemic has caused unprecedented economic loss, which was more severe in the first half of
2020 than was earlier anticipated. The International Monetary Fund (IMF) World Economic Outlook Update
(June 2020) has projected negative global growth of a higher magnitude (-4.9 percent) in 2020. This is due to
several factors. First, there has been a major downturn in GDP growth, particularly in the second quarter of
2020, especially in the advanced economies (-8 percent), the oil-exporting countries such as Saudi Arabia (-6.8
percent), and the Middle East (-4.7 percent). China will grow at 1 percent only, while India's growth will contract
by 4.5 percent. In 2021, positive global growth is projected, but it will still be below the 2019 level.

Consumption and services have also declined sharply due to declines in output (20-25 percent), with consumer
expenditure declining by around one-third, according to the Organisation for Economic Co-operation and
Development (OECD) in June 2020. On top of this, the pandemic has caused huge unemployment—around 305
million full-time jobs across the world—with the youth and women being more disproportionately affected.

According to the World Trade Organisation (WTO), global trade will experience considerable negative growth (-
13 percent) due to the pandemic, which will contribute to the projected negative global growth as well. Finally,
prices of almost all commodities have declined sharply, especially crude oil prices, declining by half, from USD
60 per barrel of oil in October to December 2019, to USD 30 per barrel of oil in May 2020.

How will this impact Bangladesh? Bangladesh's GDP growth, which has averaged around 8 percent during the
past few years, has been disrupted by the outbreak of Covid-19. The incidence of poverty has also increased,
and over two million people could be added to the ranks of the poor in 2020. The reported number of
unemployed people now ranges from 10 million to 15 million, compared to 2.7 million in 2017.

Economic growth in Bangladesh, until the beginning of the pandemic, has been helped largely by four major
drivers of growth—export earnings, especially from the ready-made garments (RMG) industry, remittances sent
by migrant workers, growth in the agricultural sector, and expansion in cottage, micro, small and medium
enterprises (CMSMEs). The first two are largely affected by external factors, although domestic factors can also
play their part.

The RMG sector is the biggest source of foreign currency earnings for Bangladesh. Manufacture and export of
RMG accounts for 13 percent of the GDP, and employs around four million people. Together with the knitwear
sector, it contributed over 84 percent of total export earnings during the last financial year. Due to the global
recession, growing trade tensions between the US and China and decline in oil prices, overall exports, including
that of RMG products, have been declining. Total export earnings and export earnings from the RMG sector
amounted to USD 30.18 billion and USD 25.71 billion respectively during July 2019 to May 2020, which is 18
percent and 19 percent lower, respectively, compared to the same period during last financial year.

The industry has been facing a severe crisis, with mass cancellations of orders (around USD 3 billion), a virtual
freeze on new business, delayed shipments, and heavy reliance on import of fibres and other raw materials from
China. As a result, about one-quarter of the total number of factories are struggling to cope or survive, leading
to huge unemployment (around two million), a projected decline in exports from March to May 2020 of around
USD 5 billion and unsettled liability of about USD 2 billion.

In the face of these challenges, the government has undertaken several measures to protect the sector.
However, it is quite unlikely that the sector will be able to produce at its pre-pandemic levels in the next six
months or so. More critically, even if it does, will it be able to export at or near the pre-pandemic level to the
major countries of export— USA, UK, the European Union, India, Japan, Canada, Australia and China—which are
all hard hit by the global economic downturn and are experiencing huge unemployment and the resultant
decline in consumption? Under such unfavourable conditions, it would not be reasonable to expect that our
exports will rebound to its pre-pandemic level or even close to it in the next six months or so.

Around 12 million Bangladeshis work abroad, including around 800,000 women. Annually, around 0.5 million
seek jobs outside. Over time, there has been considerable increase in the amount of annual remittance. The
remittance, the second biggest source of income for Bangladesh, has helped the economy by boosting foreign
exchange reserves. It has helped to reduce poverty at the national, household and individual levels as well.

Bangladesh received USD 18.20 billion remittances in the fiscal year (FY) of 2019-20, compared to USD 16.42
billion in FY 2018-19. However, due to the outbreak of the pandemic in major destinations for Bangladeshi
migrant workers (Middle Eastern countries, USA, UK, Malaysia and Singapore) and the drastic fall in global crude
oil prices affecting the Middle East countries, growth in remittances will quite likely slow down. The pandemic
is pushing our migrant workers into unimaginable vulnerabilities. Tens of thousands of workers have already
been sent back to Bangladesh. To deal with the problem of the returnee migrants, the government has
undertaken several measures to protect them.

The greatest challenge would be for countries, where Bangladeshi migrant workers were in employment before
the pandemic, to revive their economies to the pre-pandemic level. It is highly unlikely that, given reduced
economic activity, the price of crude oil will rebound to its pre-pandemic level in the foreseeable future. It is not
clear how long it would take for such economies to rebound to their usual economic activities and create
demand for migrant workers. Thus, until such time, the migrant workers will have to wait to get jobs overseas.

Given the adverse affects of the global economic downturn on our export earnings and inward remittances, our
foreign currency earnings are highly likely to be reduced, which will make it difficult for Bangladesh to achieve
its desired level of economic growth.

Banks in Bangladesh have the lowest capital base in South Asia

The capital base of Bangladesh's banking sector is much weaker than in peer countries -- a situation that not
only highlights its frailty but also the heightened vulnerability amid the coronavirus pandemic.
Capital adequacy ratio (CAR) is the reflection of all financial indicators of banks, including the ratio of defaulted
loans, the capability of keeping provisioning against regular and classified loans and the actual situation of
corporate governance.

The CAR is a measurement of a bank's available capital expressed as a percentage of risk-weighted credit
exposures.

Banks in Bangladesh maintained the CAR at 11.60 per cent last year, way less than 17 per cent in Pakistan, 16.5
per cent in Sri Lanka and 15.1 per cent in India.

This means the banking sector is weaker than the lenders in neighbouring nations. But banks would be in a
better position to tackle the ongoing economic fallout brought on by the coronavirus pandemic if they could
manage a strong capital base.

"Capital adequacy is the topmost component of the CAMELS rating for banks. And this reflects the overall
financial health of lenders," said Salehuddin Ahmed, a former governor of the Bangladesh Bank.

CAMELS -- which stands for capital adequacy, asset quality, management, earnings, liquidity and sensitivity -- is
a recognised international rating system used to rate financial institutions as per six factors represented by its
acronym.

The high volume of defaulted loans is the main reason behind the lower CAR in Bangladesh, according to Ahmed.

Banks have to keep a large amount of provisioning against the defaulted loans that ultimately hit the capital
base. This has also tarnished the image of the sector among foreigners and the lenders of the outside world will
show reluctance in doing business with local banks as well, he said.

The BB took initiatives to implement the Basel III guidelines by 2019 as part of its effort to bolster the banks'
capital base.

Basel III is an internationally agreed set of measures developed by the Basel Committee on Banking Supervision
in response to the global financial crisis of 2007-09 to improve regulations, supervisions and risk management
within the banking sector.

As per a roadmap unveiled by the BB in 2014, banks were supposed to push up the minimum CAR to 12.5 per
cent by December 2019 from 10 per cent then.

Of the 58 banks, 43 met the standard by the deadline. As of December, the CAR of foreign banks was 24.45 per
cent, private banks' 13.62 per cent and state banks' 4.99 per cent, data from the central bank showed.

State-run banks are largely responsible for the lower CAR in the banking sector.

"This is not the real picture of the CAR as the indicator would have worsened further if banks had followed the
rules and regulations on loan classification and provisioning properly," said Ahsan H Mansur, executive director
of the Policy Research Institute of Bangladesh.
Defaulted loans had not increased too much in the banking sector last year because of the central bank's relaxed
rescheduling facility and special permission given to regularise defaulted loans, he said.

Banks have widened the capital base on the back of the relaxed loan rescheduling policy, which allowed
defaulters to reschedule classified loans with a down payment of 2 per cent of the outstanding amount instead
of existing 10-50 per cent.

The central bank also allowed banks to reschedule a large amount of defaulted loans by granting special
permissions on a case-to-case basis.

Last year, a record Tk 52,770 crore was rescheduled. Of them, Tk 13,284 crore has turned sour again, BB data
showed.

This means nearly one-fourth of the rescheduled loans slipped into the bad category again.

Defaulted loans stood at Tk 94,313 crore at the end of 2019, up 0.42 per cent year-on-year.

Banks should now start preparing to improve the capital base as there will be an uncertainty in the days ahead
due to the twists and turns of the pandemic, said Mansur, also a former official of the International Monetary
Fund.

"The financial health of banks will deteriorate in the coming days if the economy faces more storms," he ADDED.

The weak CAR has indicated that the financial health of the banking sector in the neighbouring countries is
stronger than Bangladesh, said Syed Mahbubur Rahman, managing director of Mutual Trust Bank.

"The CAR would have been 15-16 per cent if the state banks could maintain the requirement as per the Basel III
guidelines," he added.

Green economic recovery from corona pandemic

The ongoing economic recession due to coronavirus pandemic has created opportunities for countries to
replace the standard growth path with the green growth. There is a renewed effort in many developed and
developing countries to adopt a green recovery path in the backdrop of economic recession due to Covid-19.
This is about reviving the economy through investment on green technology which will not degrade the
environment and exhaust natural resources, but will create jobs. The pattern of growth will rely on investment
in the environment as a major driver of economic development. This is opposed to the currently followed
growth pattern that destroys environmental resources and emits carbon dioxide (CO2).

Thus, as countries have planned stimulus packages for economic recovery, global leaders have now called for
green recovery. The impact of Covid-19 has been devasting on the lives and livelihoods across the world as the
economy slowed down. This has reduced emission of CO2 significantly. However, as the economies across the
world have started to reopen CO2 emission has also started to increase. Clearly, with faster pace of economic
recovery, carbon emissions will also pick up faster. Therefore, many countries have proposed for green recovery
by cutting carbon emission while reviving the economy.
Several European countries have put a "European Green Deal" at the heart of corona recovery efforts. The
recovery fund of the European Commission amounts to about USD 848 billion so far. This will be invested in
coronavirus recovery as well as green programmes to create jobs. The European Union announced that 25
percent of its budget will be reserved for climate action. But whether the recovery package will also set aside
25 percent for climate spending is unclear till now.

Denmark has set its ambition to cut carbon emissions by 70 percent from 1990 levels. It also aims to export
clean energy by 2030. Despite coronavirus, the government of Denmark announced its strategy in May 2020 to
meet its climate targets including generation of wind power, carbon capture and storage, and improving energy
efficiency. The country will also create new jobs by making green investments. Germany has planned a stimulus
package worth USD 146 billion till June 2020. This package has a number of green plans. About 38 percent of
the stimulus has been allocated for future friendly Germany. It aims for energy transition for a sustainable path.
The UK government has also taken initiative to explore green recovery by establishing five working groups who
will evaluate recovery measures.

Among the Asian countries, China and South Korea have taken major plans towards green economic recovery.
China has introduced the "new infrastructure" concept which will include low-carbon transport, 5G and ultra-
high voltage electricity transmission. The country has made a six-year plan during 2020-25 for a low-carbon
stimulus package amounting to USD 1.4 trillion. It may be recalled that China's stimulus package amounted to
USD 586 billion during the Global Financial Crisis (GFC) in 2008-09. Of this, about USD 221 billion was for green
investments.

South Korea has announced its ambitious "Green New Deal" climate plan to revive its economy from Covid-19.
The country plans to invest USD 10.8 billion by 2022 through this deal to boost green energy sector and create
thousands of jobs. Under this new plan the country will reduce its dependence on coal and increase renewable
energy production to 20 percent by 2030. During GFC in 2008-09, about 80 percent of the Korean stimulus
package was allocated for green projects and create about one million jobs in environmentally friendly fields.

In the past, during the GFC in 2008-09 several countries provided stimulus packages for investment in green
infrastructure such as public transport, energy efficient public buildings, renewable energy, smart grids, water
and sanitation, pollution control, green technology investment and green research and development.
Unfortunately, carbon emission after the GFC went back to the pre-GFC period. Investment in traditional
infrastructure and increase in consumption resulted in higher CO2 emission and air pollution.

At present while green plans are being laid out along with stimulus packages, many contradictory policies are
also being pursued parallelly. One of the most harmful as well as debated one is the subsidy on fossil fuels. In
its recent proposal for corona recovery, though the EU is expected to exclude investments in high-polluting
infrastructure, there are concerns that this proposal may also include spending on fossil-fuel. South Korea, on
the other hand, has kept allocation from its economic relief package for the polluting industries such as aviation
and shipbuilding. China will rely on coal for economic recovery which has created concerns among
environmentalists.
So, countries will have to make their commitments firm and transparent if they really want to follow a green
path. It has been estimated that the removal of fossil fuel subsidies in emerging and developing countries will
not only reduce global greenhouse gas emission by 10 percent by 2050 but also increase efficiency of these
economies.

Bangladesh is the worst victim of climate change. Given the massive and widespread nature of the impact there
should be initiatives at the national level. This will mostly be in areas of strategising, planning and designing
efforts to combat the negative impact of climate change and also in resource allocation for the cause.

Bangladesh also has to adopt a green economic path in order to reduce the burden of future environmental
cost. It can make a gradual shift towards green growth through investment in the environment for economic
recovery and sustainable growth, decent job creation and poverty reduction. There can be a number of areas
for intervention to adopt a green growth policy in the context of Bangladesh. These include: green infrastructure
such as energy efficient buildings; green energy generation, such as solar energy; energy saving measures for
housing; water management, water desalination, treatment of wastewater, solid waste infrastructure to
support, clean water; secure alternative water sources, such as rain water; coastal area development and
management; reforestation; environment related R&D; public transport, railways, foot and bike paths.

A list of fiscal measures may include tax incentives for investments on energy efficient building; support for
energy efficient bulbs; fiscal benefits for installation of solar panels in private buildings; low interest rate for
loans to support low carbon technologies; tax rebate for environmentally friendly cars; measures to increase
energy efficiency in industry and agriculture; allocation for protected areas and cultural heritage; support for
environmental research and development.

Bangladesh's stimulus package to deal with the impact of Covid-19 amounts to about 4 percent of its gross
domestic product. However, there is only an insignificant stimulus for green recovery. The central bank has
doubled the size of its refinancing scheme from Tk 200 crore to Tk 400 crore for entrepreneurs who intend to
take up green projects. Apart from this no other distinct allocation has been made for green recovery. In fact,
large entrepreneurs which are eligible to receive loans from banks at a lower interest rate may well include the
polluting industries. This requires close monitoring of the environment authorities. Though Bangladesh is a
negligible emitter of CO2, it should plan for a greener economy to prepare for the future. And now is the time
when fiscal measures are being undertaken to build back the economy.

Where next for our industry beyond Covid-19?

Three months after most of the major global markets of Bangladeshi garments entered a lockdown period and
closed many of their shops, we are beginning to get a better picture of how the industry might look as we move
beyond Covid-19.

The most obvious thing to state right now is that it does not look like we will return to business as usual any
time soon. In fact, it is looking more and more like we will all be operating in a very different environment once
the dust settles.
Among our customers—brands and retailers—a few trends have become obvious. The first is that there has
been an obvious move towards online sales during lockdown. Online clothing sales have rocketed for the likes
of H&M and Inditex. Both these major retailers say they expect large swathes of this shift towards digital to be
permanent.

Another, arguably more significant trend, is the industry talk of moving towards a more sustainable industry.
There is a renewed push towards slower fashion and the discussion about the environmental problems
associated with fast fashion have once again been reignited.

On social media, the hashtag #BounceBackBetter has been trending for several weeks. Influential bodies in our
industry have been saying that now is the time for the industry to change and that Covid-19 has brought forward
many conversations which should have been happening anyway. We are producing too much clothing and we
have to slow down.

These are reasonable points, although there are social issues for Bangladesh here which cannot be ignored.

What does all this mean for Bangladesh ready-made garment factories? The short message is that only the
strong will survive. We have all spent the past few months licking our wounds as orders have dried up and
customers have failed to pay their bills. That's unfortunate but there is no changing it now; we are all in the
same boat so we just have to roll up our sleeves and get on with it.

What is important is what we do collectively as an industry. There are a number of changes I see. Firstly, I think
we may see a move towards lower minimum order quantities (MOQs). Our customer base is shifting, becoming
increasingly seamless and responding faster than ever to the demands of their own customers—the public. As
suppliers, we have to be ready to respond—to be more nimble, agile and flexible in our offerings. The ability to
respond rapidly to demands for small, niche lines could be vital in the new landscape.

Secondly, I see a move towards even shorter lead times. Pressure on our RMG sector is already immense but,
in future, it will more than ever be a buyer's market. Things are not going to get easier beyond Covid-19. A
rationalisation of the industry at our end is inevitable, and suppliers will have to respond accordingly. Those
who survive in the new landscape will be the cream of the crop.

Thirdly, as consumers re-assess their priorities in the post-Covid-19 world, it's likely that elements of
discretionary spending will be challenged. As more companies realised their staff can work from home, less
people will go to office. Hence, there will be less dressing up. People are not attending events now and therefore
there will also be less appetite for new clothes. When the less is more, there will be high demand for better
products, demand for the clothes long last with more sustainable footprints. We were already seeing pressure
on suppliers to adopt more sustainable technologies prior to Covid-19 and now I expect we will see a speeding
up of this process. Just last week, we saw the rapidly growing online brand, Zalando, announcing that it was
adopting Science Based Targets. Where do most of Zalando's carbon emissions come from? Of course, it is in
supply chains. When brands say they want to reduce their emissions, it has huge implications for us as suppliers.
They can't do it without our support.
Fourthly, though lockdown in the western cities are gradually being relaxed, the protective lifestyle will not go
away very soon as the risk of reinfection of the virus will always loom large. Hence, personal protective products
will take a permanent and prime place in the shelves of shops. So, factories should include these types of
protective apparel in their product categories. There is no doubt that the apparel manufacturers who will
experiment and explore diversified PPE production will have more opportunities in the post-Covid-19 world.

Fifthly, manufacturers must change the ways they used to think. The pandemic has proved "remote working" is
realistic. That means a garment factory in Gazipur or Naranyanganj can easily hire a designer, brand marketer
or sales manager in Paris or Barcelona, pay only a freelance rate and start to build a direct business. Technology
during this pandemic showed that no one has a monopoly to communicate. This means that many people in the
middle will become obsolete. A small factory with almost no investment overseas can reach out and engage
with a brand in Europe, USA or Japan, and use technology to build and earn trust. This was previously thought
impossible. It was thought that one had to have a big budget to physically be present to build a reputation or
earn trust in overseas markets.

Sixthly, the pandemic has shown that physical location is irrelevant, more relevant are skills and expertise. So,
garment factories will need to invest in soft skills such as in design thinking, marketing, branding, etc. Apart from
the hard skills of producing good garments, they will need even more people who can communicate as who
communicates best will win in the race of business now.

Seventhly, the next few months will be very tough for our sector and factories will close. Workers will lose their
jobs. We must all support one another in these most challenging of times. More difficult than ever will be
forecast volumes because consumers' behaviours will be unpredictable in the rest of this year and even in the
next. So, brands and retailers together with suppliers need to find smart ideas on how to further decrease lead
times with calculated risk. Therefore, to survive and to be successful it's essential to have close cooperation and
partnership between the buyers and manufacturers. Problems need to be solved together and successes should
be shared together. Only then it will be possible to be powerful and flexible.

Finally, what will emerge in 2021 will almost certainly be a more compacted industry. We may all have to revise
our growth plans, if we are being realistic. But who knows—maybe it will also be an industry in which
sustainability is truly embedded into operations rather than just be an afterthought. Covid-19 has brought the
worst of times to our industry but, believe it or not, there are more important things in life than this dreadful
disease—most notably, the future of our planet.
Beza’s one-stop service defies pandemic jitters

Although the coronavirus pandemic is a major obstacle for carrying out regular activities in both the public and
private sectors, Beza's One-Stop Service (OSS) Centre alleviated the situation by providing easy access to
information, application processing and other services to investors at home and abroad.

The Bangladesh Economic Zones Authority, or Beza, also considers this facility as a means to improve the ease
of doing business in the country.

The OSS Centre offers 125 services, of which 37 will be delivered by Beza within the yearend while the remaining
88 will be provided by other departments concerned through the OSS.

Out of the 37 services designated to Beza, the organisation is providing 19 through an online platform. However,
the 106 other OSS services are delivered manually.

Ever since the OSS was first launched in October last year with an aim to improve the ease of doing business in
Bangladesh, the centre has helped its clients secure a total of 49 project clearances, 6,219 import permits, 1,184
export permits, 386 visa recommendations, 136 work permits, and 11 trade licences, according to a senior
official of the OSS Centre.

"With just a few clicks, investors can now get as many as 19 major approvals from the OSS online platform,
which is a good example of how to ensure public safety amid the pandemic," he said.

However, the remaining 18 services to be delivered by Beza will be added to the digital platform by the end of
the year. The services in question were set to be added by September but the process has been delayed by the
Covid-19 outbreak.
Previously, for a potential entrepreneur to carry out the formalities needed to start a business had to pinball
from one desk to the other at numerous government offices.

This meant that starting a business in Bangladesh was a painstakingly time-consuming and expensive task,
requiring the approval of 16 applications at most.

But in a bid to streamline the process, Beza plans to provide all 125 of these services under 27 categories by
September 30 on the OSS portal launched in October last year.

The initiative is a part of the government's target to pull in $20 billion in foreign direct investment at
Bangladesh's economic zones by 2030.

By ensuring the quick delivery of its services without having to jump through all the bureaucratic hoops, the
centre has made the use of speed money redundant, the OSS official said.

For example, the issuance of visas for business purposes typically necessitates communication between the
foreign and domestic embassies, ministries and a tremendous amount of paperwork.

Now, foreign investors can use the OSS platform to inform Beza beforehand and secure visas upon arrival.

Meanwhile, getting work permits usually requires the applicant to physically deal with a number of government
offices. But now, interested individuals can avail the permit from Beza through the OSS.

Accessing bonded warehouse facilities, such as duty-free imports of raw materials needed for future export-
oriented production, previously took up to a whole year but thanks to the OSS platform, it now takes around a
month.

Earlier, Beza Executive Chairman Paban Chowdhury said the OSS will create a welcoming environment for
investors so that their first impressions about Bangladesh will be positive.

He also said that the OSS Centre is a great benefit for investors as the services it provides will only increase from
here on and will remove any potential hassles an investor could face when completing certain formalities.

However, some departments of the OSS Centre are yet to introduce an online platform for their respective
services and so, it will take Beza some more time to process those applications, Chowdhury added.
An expansionary monetary policy or nothing

At times of recession, it is all too tempting to axe jobs or go for pay cuts for self-preservation.

If all companies think this way, then it puts the economic locomotive that would pull the nation out of the crisis
grind to a halt, and in fact, give rise to a chicken and egg situation.

It has a fierce reverse-hit to the industrial production as workers usually buy the majority of products from the
market since they outnumber the other segments in society.

The demand for products declines due to the purchasing power of workers when they lose jobs or saw a salary
cut.

Factory owners are finally forced to squeeze the production when goods are stuck in the market that contracts
their profit further.

German philosopher Karl Marx depicted the matter in his essay titled "Wage, Labour and Capital" in 1849.

The ongoing financial recession brought on by the coronavirus pandemic has also created the same
consequence for the economy.

Bangladesh has never faced such an economic fallout, meaning the central bank in a tight spot as it draws up
the monetary policy statement (MPS) for fiscal 2020-21.

The MPS is scheduled to be unveiled in the last week of July.

"We are in a difficult situation due to the twists and turns of the pandemic," said a central bank official.

Most likely, the Bangladesh Bank will take on an expansionary monetary policy stance that the other nations
have already adopted, he said.

The new MPS should give all-out effort to boost the dwindling demand, which has been hit hard by the financial
meltdown.
The government has set a GDP growth target of 8.2 per cent and an inflationary target of 5.4 per cent for this
fiscal year.

The central bank will try to achieve both the targets by implementing the new monetary policy, the official said.

Ensuring the target of the private sector credit growth is highly important for the next fiscal year as it will
become a driving force in generating jobs and demand.

The credit growth stood at 8.86 per cent in May, which is much lower than the target of 14.8 per cent for fiscal
2019-20.

Although the central bank has yet to release the data of the credit growth for June, the existing trend has given
an indication that the BB is far away from the target.

The central bank will not set a target for the private sector credit growth that is lower than in the just-concluded
fiscal year, in order to give a boost to the confidence of businesspeople.

"Setting private sector credit growth will not create anything. Rather, the central bank should give attention to
implementing the stimulus packages properly to revive the economy," said Ahsan H Mansur, executive director
of the Policy Research Institute of Bangladesh.

The BB will have to inject a large amount of reserve money (RM), or high-powered money, into the financial
market to address the ongoing crisis, he said.

The RM is the base level for money supply and it is also the high-powered component of the money supply. The
broad money, which is multiple of RM, depends on the volume of the RM as well.

Both the government and the central bank have announced a number of stimulus packages involving more than
Tk 103,117 crore, which is 3.7 per cent of the country's gross domestic product, to help industries, exporters,
farmers and SMEs ride out the crisis.

The majority of stimulus packages will be implemented by the central bank.

"This has added extra pressure for the central bank and banks as the government has taken little fiscal measures
to mitigate the recession," said Mansur, a former senior official of the International Monetary Fund.

In addition, the government has set a borrowing target of Tk 84,980 crore from the banking source for the
current fiscal year.

The government should borrow more from the central bank to give a room to the private sector, Mansur said.

The central bank had fixed 12 per cent RM target and 13 per cent broad money for fiscal 2019-20. Both the
targets may be widened to a large extent for this fiscal year.

Inflation will not increase alarmingly in the days to come in the wake of the demand fall. But the food inflation
may go up as the ongoing floods have already washed out many paddy fields, Mansur said.
"The price of the staple is maintaining an upward trend. So, the government should immediately take an
initiative to import one million to two million tonnes of rice in order to control inflation."

There is uncertainty about when the global economy will make a turnaround, so the central bank should focus
on the local economy.

The industries dedicated to manufacturing goods for the local market should be given importance. The SME
sector will play a crucial role in boosting the economy where a large number of workers are employed.

If SMEs get back its tempo, the economy will be able to enjoy its momentum.

But Zahid Hussain, a former lead economist at the World Bank's Dhaka office, said lenders would not feel
encouraged to give out loans to the SME sector at 9 per cent.

Banks will make little profit against their SME lending as the operational cost is high, he said.

The central bank should rethink about the interest rate cap on all lending products as operational cost and risk
vary based on the characteristics of different sectors, he said.

Hussain also criticised the government, saying it had almost completed all the tasks of the central bank while
unveiling the budget for fiscal 2020-21.

The targets on inflation, GDP and credit to the public sector are usually set by the government during the budget
sessions.

But this time, it also unveiled a credit growth target for the private sector, which is highly unusual, he said.

As per the medium-term macroeconomic policy statement of the government, the credit growth in the private
sector was set at 16.7 per cent.

"If all works are done by the finance division, then the central bank will have nothing to do," Hussain said.

The BB may not follow the target set by the finance division, said a central banker requesting anonymity to
speak candidly on the matter.

Remodel business plans to revive exports: experts

With a slump in demand for commodities among the Western consumers, Bangladesh needs to remodel its
business plans to revive exports in the time of Covid-19, which has severely affected the global economy,
economists said.

Maybe the traditional fast fashion garment items or basic apparel products are not adequate for Bangladesh to
remain competitive in the global markets, they said.

Bangladesh needs to grab new markets for supplying products like personal protective equipment (PPE), masks
and healthcare-related items such as bed sheets and isolation sheets for hospitals.

As the pandemic has created a market of billions of dollars for these products worldwide, the local exporters
need to utilise this opportunity for the revival of export earnings, the experts said.
Earnings from merchandise exports in the immediate past fiscal year fell 16.93 per cent year-on-year to $33.67
billion because of Covid-19, which has affected production and dampened demand.

The receipts from exports in fiscal 2019-20 is 25.99 per cent below the annual target at $45.50 billion, according
to data from the Export Promotion Bureau (EPB).

The export earnings in fiscal 2018-19 were recorded at $40.53 billion.

In June, the last month of the fiscal year, earnings were $2.71 billion, which is 31.15 per cent below the monthly
export target of $3.94 billion.

The fall in export earnings was mainly because of a decline in garment shipment that contributes 84 per cent to
the total national exports a year.

In fiscal 2019-20, garment exports fell 18.12 per cent year-on-year to $27.94 billion. Of the earnings from
garment, $13.90 billion came from knitwear shipment and $14.04 billion from woven.

However, knitwear export dropped 17.65 per cent and woven 18.58 per cent last fiscal year, according to the
EPB data.

The global economy is stumbling at best with reopening even in countries that have brought the spread of the
virus somewhat under control, said Zahid Hussain, former lead economist of the World Bank's Dhaka office.

However, the virus keeps striking back even in those countries and it is quite clear now that the global economic
recovery will be slow and protracted until efficacious vaccines and therapeutics are available, he said.

"This is true generally and particularly for the US and Europe, Bangladesh's largest markets for exports."

Under such circumstances, the best Bangladesh can do is damage control, that is, contain the loss of existing
exports and take advantage of demand created by the virus for products like masks, PPEs, ventilators, various
pharmaceutical products and digital services, Hussain added.

"Containing the loss of existing exports requires building confidence in our ability to deliver on time in these
difficult times."

This in turn requires easing regulatory hassles that cause inordinate delays in time to import and export. The
efficiency of the trade logistics system needs considerable enhancement.

"The existing production system in garments and pharmaceuticals may need to be reconfigured to take
advantage of the opportunities created by the need to combat the virus," Hussain told The Daily Star.

There is growing demand for masks, sanitisers, PPEs and so on, while demand for digital services is also rising.
It is not easy to start a new product line or a new business in Bangladesh because of regulatory complexities
and bureaucratic red tape. These need urgent attention, he said.

The government should do everything it can to make sure that the duty-free and quota-free access of 97 per
cent of Bangladeshi products to the Chinese market crosses the finish line.
"Not just that. We should expedite the building of the special economic zone dedicated for Chinese investors in
Chattogram."

Joint ventures with the Chinese will be critical for exploiting the opportunities opened by the duty- and quota-
free access, Hussain said.

"Most important of all, we have to deploy everything needed to control the spread of the virus. Without success
on this front, it will be hard to restart the engine of the economy in both the domestic and external markets."

The conduct of business will continue to be disrupted as long as the spread of the virus is out of control, as is
the situation currently in Bangladesh, Hussain said.

Ahsan H Mansur, executive director of the Policy Research Institute (PRI), echoed the views of Hussain.

Mansur also said the devaluation of local currency against the greenback can be an important factor for a quick
rebound of export as peer countries like Vietnam are taking this advantage.

He also called for producing garment items with manmade fibre and reducing lead time.

"We need to redesign and remodel our business plans as everything is depending on demand from customers,"
he said.

The country manager of a renowned European buyer of apparel items said he has been placing increased volume
of work orders in Bangladesh now as almost all of his company's outlets in Europe and the US have already
reopened.

"I have placed more than $400 million worth of new work orders after the lockdown in Bangladesh. I have placed
work orders in our every supplying factories," said the European buyer asking not to be named.

Arshad Jamal Dipu, chairman of Tusuka Fashions Ltd, a leading garment exporter, said he saw a silver lining in
work orders from October onwards as buyers are coming back.

Moreover, Bangladesh can receive a good quantity of work orders being shifted from China, he said.

But the government needs to ease the conditions in receiving loans from bailout packages and offer incentives
so that small and medium enterprises can cope up with the fallouts of the Covid-19, Dipu said.

Commerce Minister Tipu Munshi said the government has set a target to grab new markets for PPEs and masks.

"We are trying to import PPE fabrics from India quickly as the demand for this item soared worldwide and
Bangladesh is turning into a major manufacturer and supplier globally," Munshi told The Daily Star over the
phone.

"We are closely observing the market demand so that we can take quick decisions," he said.

Rubana Huq, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said the
decline in garment export during last fiscal year in actual amount is $6.18 billion, which is around one-fifth of
the total export.
"A closer look reveals that out of the $6.18 billion lost exports, $1.06 billion was lost in the first half of the year
and the remaining $5.12 billion in the latter half. We lost $4.33 billion just in three months. This shows the
severity of the pandemic's impact on the industry," Huq said.

Digital financial inclusion could help economic recovery

Bangladesh has embraced a wide range of financial inclusion since 2010 by allowing a vast population to open
an account with an initial deposit of Tk 10 to Tk 100 as the government looked to bring the unbanked under the
umbrella of the banking sector.

As of March 31, banks opened 2.13 crore accounts for those who receive allowances under social safety net
schemes, farmers and extremely poor.

But now a question has arisen: how much a role is the financial inclusion playing in tackling the ongoing
economic maelstrom brought on by the global coronavirus pandemic?

The International Monetary Fund has recently said that the countries whose financial inclusion agenda is strong
and vibrant could absorb the shocks smoothly.

This is good news for Bangladesh given the gigantic number of accounts under the financial inclusion, which is
20 per cent of total accounts of 10.66 crore in the banking sector.

But the IMF research paper -- The Promise of Fintech: Financial Inclusion in the Post-COVID-19 Era -- has also
given a message that the traditional inclusion will be unable to address the crisis.

There will have a requirement of digital financial inclusion to address the pandemic-stricken economy. Such
financial system also helps people maintain social distancing to avoid the deadly pathogen.

Although the Bangladesh Bank does not have available data on how many of the 2.13 crore accounts opened
under the drive are active, there has been a strong indication that the majority of them are inoperable given the
amount of deposit trend with the accounts.

The outstanding deposit in the accounts stood at Tk 2,385 crore as of March.

A tiny portion of the accounts is used to receive farm loans while the government makes social safety net
payments to the extreme poor, underprivileged populations and freedom fighters through the accounts.

The number of accounts under the financial inclusion programme has been increasing over the years, but the
trend has failed to put a substantial impact on the economy, said two officials of the central bank who are
working on the matter.

For instance, in the first quarter of the year, the marginal people opened 7.95 lakh accounts, which were hardly
used.

As per the government and the central bank instruction, these accounts can't be rendered dormant. Banks treat
an account inactive if they are not used for six months in a row.
The accounts will remain inoperable in the coming days if the account holders don't use them digitally like they
use the accounts of mobile financial service (MFS).

But this is a tough job as 89.12 per cent of the accounts have been opened by state-run lenders, which have not
brought their all branches under online coverage.

The higher-ups of the central bank should take an initiative promptly as the post-pandemic-era will be
completely different from the current stage, said a BB official.

People from all walks of life who are settling transactions through banking channel are increasingly opting virtual
banking to protect themselves from the deadly virus. This will form as a habit and the majority of the customers
will carry out banking from home.

The IMF in its publication gave an anecdote about the future digital financial inclusion and lending scenario.

In a remote location in a low-income country, a woman wakes up early in the morning and dials her mobile. She
is borrowing a very small amount digitally to buy vegetables from the local market.

During the day, she will sell her inventory at her shop located on the outskirts of the town. Some customers will
pay her using a mobile wallet and others with cash.

She will transfer the cash onto her phone at the shop next door, where the merchant is also a mobile money
agent.

At the end of the day, she will be able to pay back the loan and keep the profit on her mobile wallet. She can
use mobile money to pay for the gas she uses to cook dinner, as the utility company has recently connected its
payment system to the mobile money infrastructure.

Such a digital inclusion is also possible in Bangladesh in one year or two if required measures are taken right
now, several central bankers say.

The accounts under the financial inclusion programmes will have to be linked to mobile phones like the
operational system of MFS accounts. The clients have to be given a scope to operate the accounts through
mobile phones.

The existing MFS agents could help them deposits and withdrawals and the government should provide subsidy
to them to do so, said the central bankers.

The IMF paper found that adoption of digital payments is significantly and positively associated with growth.

During the pandemic, technology has created new opportunities for digital financial services to accelerate and
enhance financial inclusion, amid social distancing and containment measures, it said.

During the crisis, smooth access to government electronic systems that are well-integrated with digital financial
services platforms such as fintech firms and digital banking are proving to be critical in providing wide-reaching
policy support promptly and without contact to the public.
If they are not easily accessible or not well-integrated, fiscal support announcements -- no matter how large --
will fail to reach the most vulnerable and needy, the paper said.

The government has provided funds to the garment sector under a stimulus package and the wages to the
workers have been paid through MFS channel.

It should widen the digital financial inclusion for implementation of the total stimulus packages worth more
than Tk 103,000 crore.

Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, echoed.

"The gigantic number of accounts could be enlisted with the agent banking as well to expedite the digital
financial inclusion," he said.

The central bank is thinking about how to give a boost to digital financial inclusion to keep up with the time, said
Md Anwarul Islam, general manager of the Financial Inclusion Department of the central bank.

The move will be easier if state lenders embrace online banking in the quickest possible time.

Is the $41b export target a mountain too high amid pandemic?

Aiming high is always a welcome attribute. But, sometimes, in its quest, one ends up setting targets so high
that it just seems hopeless.

And looking at the $41 billion export target the government announced yesterday for the current fiscal year,
one gets a feeling of futility.
In announcing the target, the government seems to have ignored the elephant in the room: the global
coronavirus pandemic, which is still raging on and with no end in sight.

Unless a vaccine is available for the rogue pathogen, the global economic locomotive would not be chugging
along as before.

So this begs the question, would there be demand for such volumes of goods between July this year and June
next year.

The target is 21.75 per cent higher than the export earnings of $33.67 billion logged in for last fiscal year,
when normalcy prevailed for at least half the time.

But this fiscal year started on the back foot and how long this continues is absolutely uncertain.

As usual, the government would rely on apparel, which typically accounts for 85 per cent of the country's
yearly export earnings, to pull off the goal, which is $5.5 billion lower than fiscal 2019-20's target of $45.5
billion.

Commerce Minister Tipu Munshi announced the new goal during a virtual meeting featuring senior
government officials, lawmakers, trade body heads and exporters.

According to Munshi, the decrease in global demand for various products following the coronavirus outbreak
was taken into consideration while setting the target.

"The target is achievable as it is not overly ambitious."

Since stores in the US and the EU have started to reopen, export orders, especially for garments, are on the
rebound, Munshi added.

Export revenue in the apparel industry witnessed a year-on-year decline 18.29 per cent in March, 82.85 per
cent in April and 61.57 per cent in May as economies were under lockdowns in a bid to curb the spread of
coronavirus.

However, as restrictions were slowly being lifted and a state of normalcy returned to the global supply chain,
export earnings picked up as receipts of $2.71 billion were recorded in June, just 2.5 per cent less than what it
was during the same period the previous year.

Besides, following the coronavirus outbreak, shipments of personal protective equipment such as surgical
masks and isolation fabrics have risen considerably.

The fact that Asian markets like China, Japan and India have shown great promise for Bangladeshi products
was also a driving factor behind the new export target.

At the meeting, the commerce minister also set a $7 billion target for the services sector in the current fiscal
year. Earnings from the offshore services sector were 9.46 per cent higher at $6.39 billion.

"So, our target for the ongoing fiscal year is $48 billion, which is 19.79 per cent higher than the total real
export value of the year before," Munshi said.
Sector-wise targets for major items sectors were declared at the meeting. The target for earnings from
garment shipments was fixed at $33.78 billion, up 20.88 per cent from the real export value of $27.94 billion in
fiscal 2019-20.

The jute and jute goods industry was handed a $1.16 billion target, up 32.26 per cent from its earning the year
before.

"The export target is achievable but many consider it to be a challenging prospect. We also have the
opportunities to succeed in this regard," said Salman F Rahman, the prime minister's adviser on private
industry and investment.

Certain sectors could exceed targets by exploiting new export opportunities in the global supply chain, he
added.

Bangladesh's over-reliance on the garment sector for export receipts is a fact that cannot be denied, making
the diversification of the country's export basket a crucial task.

In this regard, the government continues to incentivise the shipments of new and innovative products.

Rahman went on to suggest that exporters should tap into potential markets like China, adding that the IT,
pharmaceuticals and light engineering sectors are good options to diversify.

The adviser also informed that he would hold discussions with the central bank governor on another stimulus
package for the workers of export-oriented industries.

So far, Tk 8,000 crore has been disbursed from the Tk 30,000 crore stimulus package aimed at facilitating
recovery for large units that have been adversely impacted by the coronavirus fallout.

"If needed, the government can increase the amount," Rahman said.

The government is also considering whether to set aside Tk 5,000 crore from the Tk 20,000 crore stimulus
package to form a credit guarantee insurance scheme for loans going to small-and-medium enterprises,
Rahman added.

Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association, agreed that the
export target is attainable as apparel shipments, particularly to the US and Canada, are on an upward trend.

American imports of Chinese garment products slumped 52 per cent due to the pandemic and this could be an
opportunity for Bangladesh to grab more market share, Huq said.

Shafiul Islam Mohiuddin, a former president of the Federation of Bangladesh Chambers of Commerce and
Industry (FBCCI), urged the government to tackle harassment faced by the business community.

Saiful Islam, president of the Leathergoods and Footwear Manufacturers & Exporters Association of
Bangladesh, said that policy support from the government will be vital to expanding the country's export
basket. He called for improving the efficiency of Chittagong Port.
The FBCCI has coordinated with the Bangladesh Bank for disbursing loans from the stimulus packages, said
Sheikh Fazle Fahim, president of the country's apex trade body.

While placing new orders, buyers are offering prices that are at least 15 per cent lower than the past
shipments, said Mohammad Hatem, vice-president of the Bangladesh Knitwear Manufacturers and Exporters
Association.

"Considering the situation, this is a year of survival, not making profits," said FBCCI Vice-President Siddiqur
Rahman.

Almas Kabir Khan, president of the Bangladesh Association of Software and Information Services, said his
organisation is working hard to increase exports of IT products.

Earnings from the export of general merchandise in the immediate past fiscal year fell 16.93 per cent year-on-
year to $33.67 billion following the coronavirus outbreak, which severely affected production levels and
caused the demand for numerous commodities to collapse.

Export receipts in fiscal 2019-20 were 25.99 per cent lower than the annual target of $45.50 billion, according
to data from the Export Promotion Bureau (EPB). The merchandise export earnings in fiscal 2018-19 were
$40.53 billion.

In June, the last month of the previous fiscal year, export receipts stood at $2.71 billion, down 31.15 per cent
from the monthly target of $3.94 billion.

The fall mainly stemmed from the drastic decrease in apparel shipments. The garment industry contributes 84
per cent to the national export annually.

In fiscal 2019-20, garment exports fell 18.12 per cent year-on-year to $27.94 billion. Of the sum, $13.90 billion
came from knitwear shipment and $14.04 billion from woven product shipments.

However, knitwear exports declined 17.65 per cent and woven 18.58 per cent.