MCCI for continuation of energy subsidies

The Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI) has requested the government to continue the subsidy on the energy sector so that the private sector can stay afloat amid the double blow dealt by the coronavirus pandemic and the Russia-Ukraine war.

The pandemic hit the economy in 2020, its second wave came in 2021, and Bangladesh is yet to recover from it fully.

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At a time when the economy was trying to return to its high growth trajectory, the war emerged out of nowhere, derailing the recovery and dealing a major blow to businesses.

"The government can think of continuing the subsidy in the energy sector at least by another year considering the double effect," said Md Saiful Islam, president of the MCCI.

He made the request while speaking to reporters at the office of the country's oldest trade body.

"If the energy prices go up, it would increase the production costs and reduce the competitiveness in the export market," he said.

On the other hand, if the subsidy is withdrawn in line with the conditions of the International Monetary Fund IMF), it will impact the inflationary pressure within the country as well, he said.

The multilateral lender has laid out 20 conditions recently for Bangladesh with its $4.7 billion loan programme. The conditions include reducing subsidies.

A number of officials of the finance ministry recently said the subsidy for gas and electricity will be increased by Tk 17,000 crore to Tk 40,000 crore in the revised budget.

"We are going through an unusual situation so the government can think if it can extend a relief to businesses at least for one year," said Islam.

About the recent economic situation, the entrepreneur said the foreign exchange reserve slightly rose in the last eight weeks.

"Export and remittance receipts are also rising while foreign assistance is also flowing in. So, the pressure on the balance of payments might be easing in the upcoming days."

Foreign currency reserves stood at $32.45 billion on February 22, down nearly 30 per cent from $45.84 billion a year ago, Bangladesh Bank data showed.

"Nevertheless, businesses should have a clear direction about how the energy prices would be adjusted as the government has announced that it would make a gradual adjustment in the prices of energy," said Islam.

"Then it would be better for businesses to make plans."

Islam said the MCCI is well aware of the challenges facing the country.

"We also know that the government will not be able to offer much support after the graduation of Bangladesh to a developing country from the group of the least-developed countries in 2026."

"So, we are focusing on policy support for the ease of doing business in the long run."

"Every country in the world is providing policy support to their businesses. But it is meagre in our country," he said, adding that policy support can reduce the hassles for entrepreneurs.

The MCCI chief pointed out that local businesses need to take several licences and the process of getting licences and having them renewed is a complex task.

"In rural areas, getting trade licences and renewing them is like a nightmare. But there is no binding anywhere in the world that that a trade licence has to be renewed every year," he claimed.

For the ease of doing business, the government should issue all licences related to the environment and fires for five years, Islam said.

"In the meantime, government agencies will carry out inspections and will revoke licences if any breach of laws is detected."

About the import restrictions maintained by the government, the MCCI president said it is a good step if it can restrict the inflow of luxury items.

"But if the step impacts the import of raw materials and capital machinery, it would be a matter of concern because raw materials are used in import-substitute industries. Then it may give a spike to the import of finished products."

He said though the central bank has put no restriction on the import of raw materials, in reality, banks can't open letters of credit until they have adequate dollars.

"So, it takes longer to import raw materials."

During the media briefing, MCCI Vice-president Habibullah N Karim and Director Syed Tareque Md Ali were also present.