The effects of the covid-19 pandemic go beyond health implications to include vital socioeconomic factors. Measures to reduce the spread of the pandemic, such as movement restrictions, partial shutdowns and social distancing, have had an immediate impact on labour-intensive jobs. Factories, farms, retails, tourism, transportation and marketing chains have been the most affected. Meanwhile, Bangladesh has also weathered a series of natural disasters since the onset of the pandemic.
The economic response has been swift, largely through measures, popularised as “packages,” to stimulate various segments of the economy. However, a diagnosis of the economy shows that, while the general economy has withstood the headwinds of the crisis, many jobs have been lost. This article focuses on relatively quick ways to bring jobs back to pre-pandemic levels.
How the MSME and informal sectors have taken the hardest hit
The informal sector in particular has taken a nosedive. In Bangladesh, some 84% of the 60 million-strong labour force still engages in some form of informal self-employment or “low-income” employment, such as subsistence farming, daily wage construction, transport services or urban street hawking. These jobs are disproportionately skewed towards the low-skilled, low-income segment of the population. Workers and entrepreneurs from this segment come from households with low savings, limited access to liquidity and no health insurance.
Some 51 million workers, including seasonal agriculture workers, are engaged in the informal economy. In the Bangladeshi labour market, there is strong overlap between the MSME (micro, small and medium enterprise) sector and the informal sector. Low-income and/or labour-intensive jobs, which represent most of those in the informal sector and a significant share of MSMEs, have been most affected. While many of these jobs have returned as the economy has picked up, some job losses have been permanent. For example, the hospitality sector has suffered the most as a result of the pandemic and there have been severe impacts on jobs associated with the sector.
A snapshot of the impacts on jobs
According to estimates by the Centre for Research and Information, “permanent” job losses are as high as 6 million, which would nearly double the unemployment rate. This sudden increase in unemployment as a result of covid-19 restrictions, floods and other natural disasters has created a subsection named the “new poor.” These are people who have fallen back below the poverty line as a result of an income loss caused by covid-19 and other, natural disaster-related, economic disruptions. The poverty rate has spiked by 22 percentage points. The new poverty will also reduce as the economy renormalises.
Setting priorities for the track to recovery
The first order of business is to bring jobs back to pre-covid-19 levels. Policy-makers have announced a combination of fiscal and monetary stimulus measures – collectively amounting to more than USD 14 billion (4.3% of gross domestic product). The stimulus is the largest economic response in the history of Bangladesh and is quite comprehensive in nature as it is targeted to reenergise, and inject much-needed liquidity into, the most critical sectors.
As the impact of the stimulus is debated in different quarters, one point is certain: a jobless recovery will put the progress of the past decade at risk, especially in the context of a country with a high youth population. Along with smart implementation of the stimulus packages, smart spending is required to create low-skill, low-income jobs, which are critical to inclusive growth for the recovery period. Some key points focused on job creation, many of which are already under partial implementation, for policy-makers are as follows:
1. Provide additional incentives to labour-intensive subsectors in which Bangladesh could fill domestic demand, and export excess supply where applicable. The agriculture sector, including the livestock and fisheries subsectors, stands out as the largest contributor to total employment, at 41%, while contributing only 13.7% to gross domestic product. In addition, if domestic demand is met, there is an opportunity to export produce. Other relevant high employment-generating sectors include construction, medical goods and equipment manufacturing, food processing, transport and logistics, retail trade, pharmaceuticals and health care.
Figure 1. Bangladesh’s agro-economy: share in employment and gross domestic product (%)
Source: National Accounts 2019, Labour Force Survey 2016/17; Bangladesh Bureau of Statistics
2. Identify and accelerate labour-intensive infrastructure projects and renew their timeline. Resource mobilisation through reprioritisation can help fast-track labour-intensive public infrastructure projects such as Padma Multipurpose Bridge, Dhaka Metrorail, Karnaphuli Underwater Tunnel and Dhaka Elevated Expressway, to name a few. Local government bodies should be pressured to expedite urban and rural infrastructure projects including road repair, street light installation and irrigation facility maintenance. Employment-oriented local government programmes such as food-for-work and full-wage local job schemes can be utilised to get these projects going.
3. Provide immediate access to finance for informal sector MSMEs that don’t have access to banks. While stimulus packages have been announced to reenergise this sector, anecdotal evidence suggests implementation of policies has been sluggish. Most informal MSMEs continue to struggle with access to finance. Government can leverage the rural development financing institution Palli Karma Sahayak Foundation along with banks, and channel additional funds to refinance businesses through partner microfinance institutions to their existing MSME clients. An integrated strategy of digital finance services, formalised banking incorporation and shared risk in loan provision can be implemented through the disbursement.
4. Refocus skills development programmes to train health care workers and upskill returning remittance workers. Demand for trained caregivers is already at a peak in developed economies, as a result of their ageing populations, and this will only increase as the world recovers from the pandemic. There is also scope for upskilling our agriculture workers. Demand from African countries for skilled agriculture workers is an opportunity for Bangladesh. The government has already committed to providing loans to returnee migrant workers to pursue viable income activities. These subsidised loans along with upskilling training programmes and technical support will help establish new MSMEs locally.
5. Fast-track the Amar Gram, Amar Shohor initiative to promote localised economic activity and job creation. Pushing the decentralisation agenda can be an underlying target of the stimulus. As part of the agenda, farm mechanisation can be effectively enhanced. This will have a multiplier effect on the development of local economies.
Table 1. Key industries to consider for policy-makers: a qualitative analysis
A window of opportunity to attract global market players
Now is the ideal time for Bangladesh Investment Development Authority to aggressively follow India and Vietnam and actively woo global producers to come to our economic zones as they relocate manufacturing facilities from China, from where many are set to move in post-pandemic times. Vietnam has already tapped into a section of this investment. Bangladesh can also get involved, especially in attracting labour-intensive units, within the next year. The government should aim for the completion of three economic zones by the end of the year. A revamped “Brand Bangladesh” marketing strategy can be followed. There are already good prospects for investment, and the government is very well positioned to tap investments from China, the European Union, Japan and the US.
The short-term agenda will have long-term impacts
Job creation and inclusive growth must be the centrepiece of the recovery workstream. Otherwise, the demographic dividend that we have been enjoying could quickly turn into a demographic liability. As health safety concerns and social distancing define the near future of work, policy-makers must take into account the new normal and a working population that is young and less skilled, with a limited safety net. Bangladesh has surprised many with its resilience to covid-19, and its development record in the past decade has been praiseworthy. Sectoral targeting, smart investment and efficient implementation in the coming year will be crucial not just for immediate recovery but also for the long run, as Bangladesh solidifies its position as a middle-income country.
Photo ©️ Mahmud Hossain Opu