Bangladesh’s recovery from Covid-19 and the role of the private sector

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The Covid-19 pandemic has once again proven that the market is subject to distortions and asymmetries that erode its ability to be an efficient or fair mechanism for allocating resources. There is therefore little alternative to strong state intervention in this regard. The rationale behind this idea also calls for transparency, accountability and greater stakeholder participation in policy design and implementation.

Needless to say, state intervention may not bring significant benefits in terms of social welfare if there is no strong institutional commitment to stakeholders. The institutional flaws that derail such engagement in the Bangladeshi landscape need to be analyzed from a historical perspective and addressed accordingly.

Numerous studies have shown that the pandemic has exacerbated income and wealth inequality, i.e. the rich have become richer and the poor poorer. It would be unreasonable to assume that Bangladesh is an exception. The South Asian Network on Economic Modeling (SANEM) found that the top poverty rate increased from 21.6% in 2018 to 42.0% in 2020, while the bottom poverty rate increased from 9.4 % in 2018 to 28.5% in 2020. Several studies have shown that there has been a decrease in earnings in formal and informal professions. On the other hand, according to the Bangladesh Bank, around 13,881 people have become millionaires in the last year, a finding also shared by international observers such as Wealth X. The union of these opposing realities is corroborated by the estimate consumption of co-efficient Gini which fell from 0.31 in 2018 to 0.33 in 2020.

The situation of inequalities calls into question the overall management of the recovery plan and other cash transfer programs. Whether the recovery process is robust and inclusive enough to address poverty and inequality requires further investigation. Short- and medium-term approaches focusing on the distribution of income and wealth are needed to improve the situation overall. However, without broader stakeholder engagement representing workers in the industrial and agricultural sectors at the local level, these approaches can prove counterproductive.

In the current pandemic context, the role of the private sector in economic development in terms of equity in the distribution of income and wealth, access to health and housing and capacity building, must be reassessed.

The private sector in Bangladesh exudes more confidence than ever. According to the SANEM survey on the Business Confidence Index (BCI), in 2021 the ratio of confident companies increased to 60.67% in the last quarter (October-December) against 52.31% in the previous quarter ( July-September). The rebound in business confidence indicates the revitalization of favorable conditions for the private sector and the relative increase in yields.

The recent upsurge in COVID cases in the United States and Europe, mainly due to the Omicron variant, may evoke some tension within the business world. The streak of business confidence in the coming days largely depends on the nature and extent of health policies adopted by countries in North America and Europe in response to this “new wave”. The successful implementation of mass vaccination programs may also be a determining factor in this regard.

A deceleration in global growth in 2022 and 2023 has been projected by most forecasts. However, according to IMF forecasts, Bangladesh’s economy is expected to grow by 6.6% in 2022. The AfDB has also raised the 2022 forecast for Bangladesh with cautious optimism – regarding the advent of Omicron . Thus, hopes for a rather robust economic recovery for Bangladesh are high.

Given the implications of rising inequality and poverty and the gradual recovery of businesses, it is imperative that the private sector also shares some of the burden of the recovery process and provides impetus to the development of livelihoods and skills. livelihoods of workers employed in industry and agriculture. Improving workplace safety and security, comprehensive health insurance coverage for workers, improving the wage structure to increase workers’ real wages, etc. must be priorities for the private sector.

The government can accelerate this process by designing regulations and incentives to redirect some of the private sector investment towards human capital development and other areas of need, although in this scenario the private sector needs to focus more on long-term national gains and sustainability.

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Omar Raad Chowdhury is a research assistant at the South Asian Network on Economic Modeling (SANEM).

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