On the backdrop of severe setback in the country’s overall trade and commercial activities due to the serious impact of coronavirus, the Dhaka Chamber of Commerce & Industries (DCCI) has urged the Government to come forward with short and mid-term fiscal and non-fiscal recovery policy plans to rescue the MSMEs.
Referring that the Micro, Small and Medium Enterprises (MSMEs) of formal and informal sectors play important roles in driving the growth of the economy and creating employment opportunities, DCCI, the country’s largest trade chamber has made the call.
“Financial strength of MSMEs becomes fragile and the coronavirus pandemic has substantially impacted MSMEs across all sectors of the economy. Many MSMEs have been passing distressed time due to limited trade and shortage of fund to maintain business operations and pay off salary of the employees and workers which causes unemployment”, said an statement made the biggest chamber, released on Friday.
Appreciating the timely leadership of Prime Minister for pro-economic decisions during this precarious situation and creating a fund of Tk.5000 crore for export oriented industries to support the salary and wages of their workforce, DCCI leaders acknowledged that the measure will surely leverage export oriented industries as deferral, cancellation and drying-up of export orders put revenue stream of these industries at risk.
“Bangladesh’s economy encompassing export oriented industries and local market orientated manufacturing, agro processing and service industries, micro, small and medium enterprises including trading businesses, transport, hotel, restaurant, grocery and informal sector comprising floating high small traders, shops have already encountered a severe blow appearing from this outbreak”, the statement said.
DCCI also urged to create a 3-year long Emergency Fund with 1% interest to support the financially stressed local MSMEs and informal sector for paying salary to their workers. MSMEs with turnover TK. 1 crore can get loan with 1% interest and 2% interest for MSMES over 1 crore turnover. Factories located in the BSCIC industrial parks across the country also need to be brought under this emergency fund for paying salary and labour wages. MSMEs should be allowed one year grace period for this loan.
Converting accounts receivable into cash will be very difficult for MSMEs as all businesses are undergoing the similar adversity. During this uncertain business time, MSMEs have liquidity shortage. In this connection, DCCI proposes to waive the interest of bank loan of impacted MSMEs for 1 year.
“In addition, to ensure funding and easy access to financing for MSMEs, we also propose to convert existing Re-financing Scheme into Pre-Financing Scheme with low interest rate and relaxing collateral requirements. As it is the dire time, Bangladesh Bank can provide direct liquidity support to commercial banks. The additional liquidity to be injected by Bangladesh Bank under direct liquidity support window needs to be tagged with Pre-financing Scheme to mobilize required funding to local businesses since downward business trend limits general banking business cycle. Moreover, bank guarantee requirement of limited liability companies registered under companies act can be exempted for next 6 months”, DCCI said.
The chamber also appreciated the measures of Bangladesh Bank for taking precautionary measures including reducing CRR and policy rate to ensure liquidity in banks as well as the business friendly moves of Central bank like EDF repayment time, loan repayment time extension initiated earlier, also recommend to reduce the SLR for next six months as well as relax the ADR ratio.
In order to reduce tax burden of MSMEs allowing cash flow in hand in some extent, DCCI proposes to defer submission of income tax of FY2019-20 for impacted MSMEs and entrepreneurs. Impacted MSMEs are to be facilitated to pay the outstanding income tax splitting into three installments adjusting with tax returns applicable for subsequent three years without any penalty.
Most of the MSMEs are located on rented office space. To give them a breathing space, we recommend to defer the payment of office and manufacturing premises rent for next six months in Governments run plots like in BSCIC, EPZ.
The body suggest to support the smooth operations of MSMEs across the board -VAT on commercial rent, electricity, gas and water bills and license renewal fees can be withdrawn for next 6 months.
“In addition, Government may waive all forms of AT and VAT for both import and local stages including food and essentials items, health, hygiene, safety instruments, medical kits and export oriented manufacturing industry for next six months which will help businesses to turn-around to the some extent”, they said.
