Export sector reopens. Then why not SMEs? 

Nusrat Jahan employed 19 people in her cottage industry "Jahan's" that used to tailor Panjabi, frock, tops.

Because shops are closed everywhere due to the lockdown and there is no demand for attires, Nusrat has had to shut her small workshop. This means 19 people have no income now.

Around 60 workers, including some widows and physically-challenged ones, are facing the same fate as the small boutique and toy factory in Munshiganj district that they worked in remains shuttered for the same reason.

These are the ventures that helped the domestic economy and the informal sector jobs stay afloat overcoming the preliminary shocks induced by the Covid-19 pandemic last year.

The current lockdown, stricter than previous such restriction measures, however, has kept thousands of such small, cottage and micro enterprises across the country, throwing millions out of jobs.

At the peak of the ongoing Covid-19 wave, the government has allowed export-oriented factories to run amid the strict lockdown and only they would accompany emergency services and essential product businesses in the field.

Meanwhile, cottage, micro, small and medium enterprises (CMSMEs) with their largest base in the grassroots and maximum employment contribution are not allowed to reopen their factory gates or sales outlets.

Even though the reopening of the apparel industry will help the export sector stay in business, the domestic economy will nosedive further due to a prolonged closure of SMEs, causing erosion in incomes of both workers and small entrepreneurs, industry insiders and economists have warned.

"Worse consequences in income and employment are obvious. But, the extent of the damage can only be known after research," said Dr Hossain Zillur Rahman, an economist and executive chairman of the Power and Participation Research Centre (PPRC).

"Those who are close to the power circle and create pressure could get some policy decisions in their favour. The reopening of RMG factories is an example of this," he said, adding, "But, what wrong has the domestic industry done?"

Mirza Nurul Ghani Shovon, president of National Association of Small and Cottage Industries of Bangladesh (Nascib), said, "No doubt, export is the lifeline of the manufacturing economy and catering to the orders is their crying need.

"But letting the CMSMEs keep rolling will practically not make a big difference in tackling the pandemic as small firms having 10-50 workers did not learn Covid-19 safety less than their larger counterparts."

"We would request the government to allow us to come back in production, of course, ensuring health measures, as the situation of small businesses is worse than we think."

In their joint study in April this year, the PPRC and Brac Institute of Governance and Development (BIGD) found that the economy achieved a limited income recovery, though fragile, from the shocks of last year's first round of shutdowns on the back of rural resilience, showing 1.9% rise in income.

Their next study, forth in a series since the coronavirus outbreak in March last year, will dwell into the impact of the latest wave of infection and lockdown on the economy, Dr Hossain Zillur said.

 Pushed to the wall

Small businesses are the worst sufferers since the very beginning of the pandemic, but they are subject to repeated closures while big businesses got the most support, regretted Chasi Mamun, president of SME Forum – a platform of small and medium entrepreneurs.

Suma Akter, owner of Dekhi Food Product that had over 30 workers before the pandemic, reopened her small businesses after two previous rounds of shutdown, but she doesn't know if she would be able to reopen them for the third time.

Another small entrepreneur in a Narayanganj village is left with no cash in hand to restart his business this time as he finds no way to repay Tk6 lakh in bank loan.

At least half of the small industry actors have gone broke in business due to a series of disruptions, Nascib President Shovon estimated and added, "The situation is deteriorating gradually as resilience is reducing."

Right now, amid the lockdown, hundreds of thousands of small firms are unable to pay their workers and the marginal working families are suffering income losses, he further said.

Citing national statistics, Nascib President Shovon said as the around78 lakh small firms are contributing to 70-80% manufacturing jobs, the sector should be treated based on their employment contribution instead of the GDP contribution of one-fourth.

The government allocated less than one-fourth of its trillion-taka stimulus package of subsidised loans for small businesses last year and most of it has been already disbursed, according to the central bank.

Shovon said grass-roots level businesses have never been in such a dire need for deferring their loan installments and the government should give them a hand through restructuring their existing small and medium debts for a considerable period, even if it needs state subsidies.

Ali Zaman, president of Bangladesh SME Owners Association, said most small firms did not avail the support due to the cumbersome process, while the small-cap subsidiaries of large business groups have taken a sheer size of the loans with ease.

Like Shovon, Zaman feels that small firms are neglected and left behind both during financial assistance, and allowing their activities to run amid health emergencies.

"Alongside export-oriented factories, non-exporter SMEs too should be allowed to run as they need to pay their workers," Zaman said.  

Small firms need moratoriums to pay back loans, pay utility bills on top of their need for fresh finances and many requests related to these remain unaddressed, they said, while the large businesses manage to get theirs approved.

 Voice muscle matters

Large businesses have a stronger voice as their representation in policy offices is much higher against virtually none from small businesses, said Ali Zaman. He urged for easing financial burden on small entrepreneurs.

Also, prominent economists at a webinar on Thursday pointed out the growth and large scale sector-bias of the government that have been reflecting through stimulus loan disbursement, and the priority while reopening the economy after lockdowns.

Prof Rehman Sobhan, chairman of Centre for Policy Dialogue (CPD), called for examining the bias through the lenses of political economy.

He was commenting on a report entitled "Governing COVID-19 in Bangladesh: Realities and reflections to build forward better" released by the Brac Institute of Governance and Development and the Accountability Research Centre.

Dr Ahsan H Mansur, executive director of think tank Policy Research Institute, said the government should give a devoted ear to the less organised vast sector of small businesses as they are huge in number, employ more people and contribute to the GDP even more than agriculture sector.

He told The Business Standard that after 5 August, the government should reopen the economy, lifting the ongoing restrictions as livelihood is being hurt too much.

To address the health risk, he suggested stronger administrative monitoring and also community engagement to enforce social distancing, wearing masks and maintaining hygiene everywhere.

"With occupational recovery concentrated on unskilled sectors, 'new poor' and women caught in emerging poverty trap due to vulnerability of the 'meso-economy' including the CSME sector, a targeted and 'big-push' is necessary," the PPRC-BIGD study said in April, calling for an urgent national CSME recovery action plan.     

PPRC chief Dr Hossain Zillur has stressed that the economic reopening must be based on a well-coordinated and comprehensive plan.

"The government is taking steps but those are either half-hearted or contradictory, often failing whatever good intention they have," he said.

As a result, small businesses, which are said to be the key area for a sustainable recovery, feel left out and neglected each time.

Global experiences show how governments' support helped small industries revive and recover as the Covid-19 pandemic has taken its toll on small- and medium-sized enterprises and entrepreneurs globally.

In its SME and Entrepreneurship Outlook 2021, the OECD acknowledges SMEs and entrepreneurs as fundamental in driving the recovery. Member countries, including Australia and France, have taken up rescue packages to help SMEs survive, and in many cases thrive, during the pandemic.

The club of rich countries sees that the pandemic has also created new opportunities for SMEs, which are important engines of growth and accounting for 99% of businesses in OECD countries.

Unctad also recognises MSMEs as the backbone of the global economy, accounting for two-thirds of employment globally and between 80% and 90% of employment in low-income countries.

Because of their smaller size, MSMEs are more flexible to adapt to new environments such as the one created by Covid-19, the global body said, calling on governments to offer policy support and priorities to these sectors to power a stronger recovery from the pandemic.