Md Jashim Uddin, the president of the SAARC Chamber of Commerce and Industry, spoke with the media about various topics such as business, politics, and the economy in Bangladesh.
He has also served as the president of FBCCI, the leading business organization in the country, and is currently the chairman of Bengal Commercial Bank.
Jashim Uddin, during speaking to Bengali daily, Bangladesh Pratidin, highlighted that interest rates on loans have surged from 9% to 15%, making business operations tough. Despite price hikes, the demand for fuel isn’t being met, and the imports of machinery and raw materials have reduced. The energy crisis and attacks on factories have severely impacted businesses, with some owners struggling to pay salaries.
Question: Given the current situation, both small and large businessmen cannot repay loans and provide salaries and allowances to their employees. How do you view the dire conditions and the suffering of businessmen?
Jashim Uddin: This hardship for businessmen did not start today. It has been building up for a long time. Since the COVID era, we have been facing one issue after another. Due to the post-COVID Russia-Ukraine war, global prices have risen, and a dollar crisis has emerged. These factors are behind today’s predicament. Bangladesh is suffering in two sectors: first, the banking sector; second, the energy sector. I have been discussing these two issues since my time as FBCCI President. In a country like Bangladesh, we need to import capital machinery, raw materials, and many essential items. Almost all of our fuel needs to be imported. When the dollar’s value increases, prices rise. Electricity and energy have reached a poor state. Many believe that the problem emerged after August 5, but we have been dealing with this issue since previous governments.
When the economy worsened due to COVID, Bangladesh Bank issued a circular stating that no one would be classified as a defaulter if loan installments were not paid for nine months. To take loans from the IMF, the repayment period has gradually been reduced by Bangladesh Bank, currently standing at 90 days. But the economic situation hasn’t improved.
Many businessmen tell me sometimes that they were better off during COVID and would prefer to go back to that time. This means the situation now is worse than during COVID. Due to gas and electricity, we cannot operate factories. There was worker unrest for two months. How can I pay the bank’s money? The biggest issue is that if one entity in a group of companies becomes a defaulter, the entire group is declared a defaulter. We discussed this with the Bangladesh Bank Governor for a long time. A law has been passed for this purpose, but it has not been implemented, nor has a solution been reached.
The law must be implemented. Low- and middle-income people are struggling under inflationary pressure. The Governor of Bangladesh Bank believes that raising interest rates will reduce inflation. As a businessmen, I do not think raising interest rates will curb inflation. More than 80% of the country’s people are in the informal economy, and 70% of people do not even go to banks. So how will raising interest rates affect them? Instead, we need to import raw materials, capital machinery, and energy. When interest rates rise, goods become more expensive, and inflation increases.
I think the opposite is happening because inflation is driven by many items. Among these many items, only playing around with interest rates without addressing other areas will not reduce inflation. The main area to address inflation is the supply chain. In Saturia, a farmer is selling eggplants at 60 taka per kilogram. After exchanging hands, the price rises to 75 taka, and in Dhaka, the eggplant costs 150 taka per kilogram. Is there any issue with bank interest here? So, this is a supply issue. These areas need to be addressed. If interest rates rise, there will be no competition in the global market.
Higher interest rates mean we’re running factories using LPG, CNG, and diesel because we can’t get gas. The cost is increasing. We are losing competitiveness in export markets alongside the domestic market. Over the past few months, consumer goods imports have decreased by 27%. Imports of machinery and raw materials have decreased.
Question: You’re discussing the increase in interest rates, which will impact loan repayment. You have mentioned that many businessmen have become defaulters in the past three months. What is the way out from here?
Jashim Uddin: We are not in a normal situation right now. This situation didn’t develop in a day; it has been building for a long time. You can’t fix it in one day. The repayment period for loans has been reduced from nine installments to three. Starting next year, if businessmen fail to repay one installment a month, they will become defaulters.
If one entity of a group is a defaulter, then imports of the entire group are halted, preventing them from doing business. Compliance must be implemented gradually. The situation needs to be managed gradually. For that, bring down the installments to at least six from nine. As the situation improves, reduce the time gradually. Publicize the list of deliberate defaulters. 95% of businessmen repay bank loans.
If they didn’t, how would banks grow so large? If we don’t get gas, electricity as per demand, or can’t import raw materials, how will we repay bank loans? Businessmen are hemorrhaging. These issues need to be solved through discussion.
Question: It seems from your words that businesspeople are backed up against the wall, is that true?
Jashim Uddin: Absolutely. I took a loan from the bank at 9% interest to set up a factory. Now the interest rate is almost 14%. Recently, Bangladesh Bank has again raised the policy interest rate. This means the interest rate will increase by another 1%. The interest rate of non-bank financial institutions has reached 15-16%. How will we survive? When I set up the factory, the government assured me of gas, electricity, and fuel, which they now can’t provide.
There’s also no assurance that they will be able to provide it. Because everything now relies on imports. In the US, 60% of energy is produced from coal, while in India, it’s about 80%. Despite having coal, we haven’t used it. Where will the 2-3 billion dollars needed for monthly fuel imports come from? We need a roadmap for the energy sector. BAPEX’s capacity should be increased, and coal should be extracted and used.
Question: How do you view the current government’s initiatives regarding the energy sector?
Jashim Uddin: The interim government is managing day-to-day activities. There should be a roadmap for energy imports. I believe an elected government will be able to plan for this. People have high expectations from the head of the government. Dr. Muhammad Yunus has a unique popularity among everyone. We hope it will be good if the current government makes various reforms, as a party government can’t make reforms. The election system, separating the policy and implementation divisions of the National Revenue Board, increasing the tax-GDP ratio, and reforming Bangladesh Bank are necessary. To increase revenue, we need to broaden the tax base rather than raising the tax amount. Those who pay VAT and tax are the only ones bearing the burden! This has been ongoing for a long time. We hope that to expand the tax base, the Revenue Board needs restructuring. Many people are capable of paying taxes. They should be brought under the tax net. Then businessmen will not suffer. Small businesses are struggling with VAT and tax. If there are 100 shops in a market, only 20 have EFD machines. The remaining 80 do not have to pay VAT. Those who do are in trouble. We need to eliminate this disparity.
Question: The government has undertaken several reform initiatives, and you have also spoken about reform at various times. What should the government prioritize in reform?
Jashim Uddin: The current government should prioritize organizing Bangladesh’s democracy. Our biggest issue is that one government cannot hand over power to another government. To ensure this, the Election Commission needs to be fixed. If democracy is organized, accountability will be ensured.
Question: Many say there is a lack of democracy among businessmen, as evidenced by no voting in the FBCCI elections!
Jashim Uddin: As FBCCI President, I had sent a letter to the Ministry of Commerce to prevent further registrations of trade associations. We have 42 business sectors and around 460 associations. There is a provision that there should be one association per sector. In each sector, there are over 10 associations. Why did this happen? At one time, there were eight nominated director positions. In the 80-member board, there are now 37 to 38 nominated director positions. I had proposed reform. A law was passed in 2022, which has yet to be implemented. Many associations lack good governance. We’re sitting with associations in our pockets. Genuine stakeholders cannot reach FBCCI. The same person is becoming a director year after year. We need to bring in new leadership. I believe it would not be right to hold the next FBCCI election without reforms. If not reformed, the same thing will happen as before. Reforms are needed for those conducting business. Genuine businessmen need representation. We need to eliminate pocket associations and ensure democracy. The right person needs to be elected.
Question: Previously, businessmen were inclined towards politics, and politicians also utilized businessmen. Are businessmen under a certain pressure as a result?
Jashim Uddin: Certainly. Businessmen entered politics out of distress because they had contributed to many politicians. They thought, “Why am I not entering politics?” Thus, our businessmen entered politics, and politicians ventured into business. Even among businessmen, many became ministers. We need to go back to the original system. Business should be conducted by businessmen, and politicians should do politics.
Question: Is there really a syndicate in the market?
Jashim Uddin: Many businessmen left the field because of arrests during the One-Eleven period. Now, people do business in consumables. The impact of a 27 percent reduction in consumables imports is bound to show up in the market. When there's a shortage, prices go up. The consumable business still follows traditional methods, which need reform. Sales outside of dealerships should be stopped. The traditional system allows for a lot of manipulation. The supply chain needs reform, as goods change many hands before reaching the market. We need to work in these areas and implement models like in Europe and America.
Question: Why did bureaucrats become a type of politician in recent times?
Jashim Uddin: Bureaucrats would make such introductions in their statements that even politicians wouldn't do. When formulating policies, there should be discussions with businessmen, as it is the businessmen who implement them. It would be easier if our opinions were considered before making policies. Many policies were imposed on us by bureaucrats. Before the budget, the Revenue Board would hold meetings with us, but our demands were disregarded. This means they would stage a drama with us. We hope that this drama by the NBR will stop in the current reality. This is our expectation from the interim government.
Question: In which direction is the country's ready-made garment industry heading?
Jashim Uddin: Buyers lost confidence after the attacks and vandalism in garment factories on August 5. They said, "What's the use of ordering at low prices if the goods aren’t delivered?" Out of this fear, some buyers have moved to China, India, Pakistan, and Vietnam. If we can stabilize, those orders will return.
Question: Amidst all this, what gives you hope?
Jashim Uddin: The Bengali is a nation of heroes. In 1971, we had far fewer resources than now, yet we achieved independence. Our youth have brought a change with hope, shedding blood to create an equitable society, which must not go in vain. I hope the current government will hand over power to a political government through acceptable elections, carrying out significant reforms so that we don't fall into darkness in the future.
Question: In the changed situation, many businessmen have been accused in murder cases. People from various professions, including journalists, have been involved in lawsuits. Some were not even in the country at the time of the incident. How do you view this?
Jashim Uddin: The government itself has said that it was wrong to accuse people indiscriminately. Some people have named businessmen, industrialists, and journalists in these cases from behind the scenes to take advantage. This causes them to be mentally distressed. Business activities are threatened, and uncertainty arises regarding employee salaries. The government should look into this. Arrangements should be made to release innocent individuals as quickly as possible. Given the situation in Bangladesh, you never know when you may be apprehended. There is political party backing behind these cases. I hope that parties will take action against those who instigate these cases.
Source: Bangladesh Pratidin
BDST: 1129 HRS, NOV 01, 2024
MSK
