The Socio-Economic Implications of Covid-19 for Bangladesh

The ferocity of the Coronavirus pandemic has affected the developed and less developed regions of the globe, both urban and rural, and the activities we all take for granted have come to a standstill. This article, however, will focus on the already-discernible impacts and longer-term implications of the pandemic on Bangladesh. The key questions that will be addressed include: What economic and social measures have been put into place so far to help the most vulnerable of society? What impact will Covid-19 have on the Bangladeshi economy? Will the country’s healthcare system be able to cope with a potentially large influx of infected patients? What position will the country be in once the pandemic is over?

Covid-19 is not only threatening the lives of people but jeopardising the livelihoods of millions around the world. Restrictions on travel have meant that airlines have significantly reduced the number of flights they operate and people have cancelled holidays, thus severely affecting a number of service industries such as aviation, tourism, restaurants and hotels. The ongoing lockdowns and pandemic responses are also having a serious knock-on effect on the job market, causing unprecedented job losses and restrictions on public life in numerous societies. Those that have been made unemployed have lost their income while people are also more generally limiting their expenditure, resulting in less trade and consumption and therefore a lower demand for goods and services, with very few exceptions. Affected governments and their central banks are wasting no time with putting measures in place to deal with the health, welfare, and economic implications of the crisis. Without doubt there will be lasting changes to the economic and political landscapes around the globe as the western world still grapples with the lethal pathogen three months into the outbreak in its own societies. Different western nations are still debating when to bring their respective economies out of the induced coma. When the current crisis will end, or what the future will look like remains uncertain, but one thing is sure, we will not be going back to the world we left on the on the night of 31 December 2019.

Turning to Bangladesh, for the last nine years the country has boasted, on average, growth rates of around 6 percent, and which even reached a peak of 8.2 percent in 2019. Strong export earnings combined with remittance income covered more than 75 percent of Bangladesh’s import bill. Improvements in key social development indicators such as education, nutrition, and child and maternal mortality made Bangladesh stand out from other countries with comparable levels of income. Mega infrastructure projects like the Padma Bridge, Metro Rail Project, Deep Sea Port, Karnaphuli Tunnel and the Rooppur Nuclear Power Plant symbolised the country’s route to modernisation. By the end of 2021, the country was set to celebrate its 50 years of independence. However, the Covid-19 pandemic has ended the optimism and euphoria in Bangladesh as well as the rest of the globe which has been pushed into a recession comparable to the Great Depression of the 1930s.

On 8 March 2020, the government’s disease control agency, the Institute of Epidemiology, Disease Control and Research (IEDCR) reported the first three cases of Covid-19 in Bangladesh. This put the country at high risk, particularly as it has a questionable reputation for managing outbreaks, the 2019 dengue outbreak is a case in point, where around 104 people died and 85,000 were infected countrywide. Covid-19 has the potential to escalate quickly from a public health issue into a full-blown humanitarian crisis for Bangladesh. The main reasons for this include the huge population size and density, the return of expatriate workers from countries with confirmed Coronavirus outbreaks, a low-quality healthcare infrastructure (limited hospital beds, ventilators, intensive care units), an insufficient number of testing laboratories, a limited supply of diagnostic kits and personal protective equipment (PPE) for health professionals, inadequate surveillance and contact-tracing facilities, disparities in rural-urban access to healthcare facilities as well as the widespread lack of awareness of how the virus is transmitted. All these factors can potentially accelerate and worsen the spread of Covid-19 in the country. If only one percent of the total population became infected with the Coronavirus, this would equate to approximately 1.65 million people, and that number could increase twofold within a week. Any escalation of Covid-19 in Bangladesh would undoubtedly overwhelm the capacity of the current healthcare system and collapse it.

When Prime Minister Sheikh Hasina addressed the nation on 25 March, she recognised the dangers emanating from the deadly and contagious virus when she stated that a global crisis has emerged and that no country has been spared. As in many other countries around the world, this announcement represented an about-face. When the virus spread exponentially from Wuhan to other countries around the globe in January, Bangladesh government ministers and officials initially played down the seriousness of the situation. On 27 January, Minister of Health and Family Welfare, Zahid Maleque assured the people of Bangladesh not to worry about Covid-19 and said, “We are working so the virus cannot enter Bangladesh. The government is fully ready to face the situation even if the virus infects anyone”. On 3 February, Zahid Maleque stated, at a seminar organised by Bangladesh Medical Association in Dhaka, that “[t]he situation at present is nothing to panic about. Even if it [the virus] comes, we’re fully prepared”. After Bangladesh confirmed its first Covid-19 death on 18 March, Zahid Maleque admitted at a media briefing that the country was now facing what amounted to a ‘war-like situation’.

So, what changed globally as well as in Bangladesh over the space of only a few weeks? In January, the virus spread from Wuhan, the epicentre at the time, to neighbouring countries like South Korea which responded with extreme measures such as cutting the country off from the rest of the world. In Bangladesh, the authorities mishandled the situation by allowing flights to continue to arrive from China and other Covid-19 affected countries. Authorities claimed screening and testing of incoming passengers at airports had increased, however, there was only one operational scanner in use throughout January and February. On 1 February, 300 stranded Bangladeshis in Wuhan were placed under a 14-day quarantine when they returned. But the same protocol was not followed for the thousands of returning expatriates who arrived in the middle of March, many of them returning from European countries such as Italy, another epicentre for the virus. More than 200,000 such expatriates have entered Bangladesh since March and the government did not put them under mandatory quarantine, but instead allowed the returnees to go home and maintain self-quarantine, without having a monitoring mechanism in place. Passenger flights continued to arrive at Hazrat Shahjalal Airport in Dhaka up until 29 March. The decision not to close airports or place returning expatriates under mandatory quarantine can only be explained with the government’s lack of appreciation for the seriousness of the situation as well as with the lack of coordination between its agencies.

With a surge in the number of positive cases, the government in a desperate bid to flatten the curve and stop the spread of the virus, decided to close all public and private offices. On 23rd of March, a ten-day national ‘holiday’ was announced to be effective from 26 March. The following day domestic air, rail, and boat services were suspended, however, other forms of public transport remained operational until March 26. An outcome of the government’s declared holiday was that tens of thousands of city dwellers left Dhaka in crammed buses and cars to go to their village homes after having possibly already been exposed to the virus. Without doubt, the mass exodus of people only helped spread the virus to remote parts of the country. The government’s disjointed efforts to curb the spread of the pandemic lacked foresight, planning and clear-cut directives to dissuade people to stay at home and adopt social distancing measures. Labelling the current crisis a holiday, which even at the time of writing the government refuses to call a lockdown, has sent out mixed messages about its importance and in the long run will be self-defeating. A lockdown for a medical emergency would have raised public awareness and promote the importance of staying at home, personal hygiene, and non-essential travel in line with WHO directives. It is most likely that the lockdown could have ‘slowed’ the rate of transmission for the virus, but without strict enforcement the near future could be ‘harsh’, particularly as Bangladesh has limited capacity to prevent, detect, and respond to public health emergencies.

Since 25 March, Prime Minister Hasina announced stimulus packages of Tk 95,619 ($11.3 billion), which equate to 3.3. per cent of gross domestic product to tackle the fallout of the coronavirus pandemic on the Bangladesh economy. The first stimulus package will provide immediate working capital for the export-orientated sector, namely the ready-made garment (RMG) industry as well as small and medium enterprises. Prime Minister Hasina stated the stimulus packages were for all people, ranging from industrialists, small traders, day labourers to rickshaw pullers, and that it would increase public expenditure, widen social safety net coverage and increase the money supply through monetary policy easing. One of the important features of the stimulus package is that the lion’s share (Tk. 77,750) will be in the form of repayable loans and not grants (or handouts). In line with the instructions issued by Bangladesh Bank, Bangladesh’s central bank, the government will allocate full responsibility of fund distribution and management of 18 stimulus packages to commercial banks. Interest free loans for large, medium and small businesses in the industrial, service and farm sectors will carry a 2 per cent service charge and a two-year repayment period, including a six months grace period. Although the stimulus package is a timely and much needed measure, of the total workforce 85 per cent operate in the informal labour sector, leading a hand-to-mouth existence. Due to the lockdown, they have completely lost their incomes and have no access to money whatsoever. How effectively the relief money will be mobilised and used will only be known in due course.

In addition, the government has committed to expand the food security of marginalised and low-income people that include the informal sector, old people and destitute women through Vulnerable Group Feeding and Vulnerable Group Development programs. According to recent estimates of the Bangladesh Bureau of Statistics (BBS), 20.5 percent of the population, or approximately 34 million people are poor. According to Dr Selim Raihan, executive director of the South Asian Network on Economic Modelling (SANEM), “During the ongoing crisis, one of the major challenges is ensuring food security for this huge population”. SANEM estimates that there are another 36 million people that are above the BBS’s official poverty line income who are ‘non-poor’, but can be categorised as a vulnerable population. With the income shock that is taking place at present, it is highly likely that a significant proportion of this vulnerable population will fall into abject poverty. The immediate task of the government is to ensure all allocated relief aid reaches the right people at the right time. To date, there is no clear indication as to the quantity of resources that are actually available, the duration of these activities and programmes, and whether they will be transparent and free from political influence.

A recent United Nations report stated that the social protection initiatives undertaken by the Bangladesh government have been limited in scope. To add insult to injury, numerous media reports have exposed the involvement of ruling party members and their affiliates with irregularities in distributing relief materials meant for the poor. This is highly problematic given that destitute people are now roaming Dhaka begging for food, which will only get worse as the days go by. The government will provide cash support of Tk. 2,000 ($24) per month to each of the 50,000 urban families, mainly informal workers such as manual labourers, construction workers, rickshaw pullers and street vendors who have been severely affected by the nationwide lockdown. Furthermore, the government is planning to provide food assistance to 12.5 million families under various programmes. Economists and researchers at the Centre for Policy Dialogue have stated that the current stimulus package for the country’s poor is not sufficient to feed the huge vulnerable population during the ongoing lockdown. If the vulnerable population is to survive through and beyond the current pandemic, then funds and resources from the upcoming budget for FY 2021 will need to be allocated.

Even before the Coronavirus lockdown, Bangladesh’s export earnings were expected to decline due to a global demand deficiency from its key export markets. Export earnings over the first eight months of FY 2020 were already said to be negative (-4.8 percent) compared to the corresponding period of FY 2019. The country’s flagship export sector, the RMG, was even said to generate negative growth figures of -5.5 per cent compared to the corresponding period last year. At present, many exporters are experiencing delays in the shipment of products while others are seeing orders being deferred. Major brands based in Europe and North America are sending cautionary signs of possible order cancellation due to economic slowdown of importing countries and ongoing lockdowns. According to the Bangladesh Garments Manufacturers and Export Association (BGMEA), Primark, Matalan and the Edinburgh Woollen Mill have collectively cancelled £1.4 billion of orders and have suspended an additional £1 billion worth. These include approximately £1.3 billion of orders already completed or were in production. Other brands such as Tesco, Marks & Spencer and Next have stated they will honour existing orders. In a recently published research report, it is claimed that western brands have invoked force majeure, since the Coronavirus crisis is an extraordinary event which is beyond the control of the contracting parties, and thereby relieving these parties from contractual obligations and liability.

The immediate impact of the widespread cancellation of orders has been catastrophic for the RMG industry and its 4.1 million workers. Layoffs may not have resulted immediately because of the government’s assistance package aimed at covering wage payments, but many workers have been furloughed without pay. Early on, there was confusion whether RMG factories remained open or were closed. Even as late as 21 March, Minister for Labour, Begum Monnujan Sufian, declared that RMG factories would continue to operate unless the government took the decision to close them, ignoring warnings from unions about the risk to garment workers. On 3 April, factory owners announced they would open their factories, and thousands of garment workers returned to Dhaka, only to find their factories closed because the owners changed their decision following widespread criticism. The government decided to close all the factories on 14 April which it extended to 25 April. As of April 27, according to industrial police officials, around 1,427 out of 7,602 export-orientated factories reopened on a limited scale. It was just a matter of time before the largest forex-earning sector which exported $40.5 billion, or 84.21 per cent of Bangladesh’s total exports for FY 2018-19, was reopened for business. As of 11 May, at least 58 workers from 38 garment units on the outskirts of Dhaka and in Chittagong have tested positive for Covid-19. Minister of Health and Family Welfare, Zahid Maleque stated that factories will be shut if they do not maintain strict health and safety rules, which would make an already fragile situation worse.

After the RMG sector, the second pillar of the Bangladesh economy is foreign remittances. Approximately 12 million Bangladeshis working across the globe transferred $16.4 billion dollars to Bangladesh in FY 2018-2019. With the current crisis, April 2020 recorded a 34-month low of $1.08 billion, down 25 per cent from the previous year. April’s inflow takes the current total for 2019-20 to $14.86 billion, which is an increase of 11.77 percent for the same period the previous year but going forward there is no denying all of this is about change. Remittances from Saudi Arabia and the United Arab Emirates (UAE), the top two sources for Bangladesh, have contracted in March and April. First, the Gulf nations, where 75 per cent of migrant workers reside, are in the process of returning many foreign workers back to their respective countries, because their economies are also taking massive hits due to declining oil prices, falling demand, and excess supply. Second, to increase the flow of remittances and deter illegal means of sending money, the government introduced a 2 per cent cash incentive this fiscal year for all remittances sent through official channels. Even this initiative is insufficient to stem the tide since, starting from the middle of February, around 200,000 migrant workers have returned to Bangladesh, with most of them arriving from Saudi Arabia, the UAE, and Malaysia, according to Building Resources Across Communities migration programme. Bangladesh’s remittance flow may plunge because of the uncertainty in labour importing countries, and this is backed up by last month’s World Bank forecast which projects a 22 percent decline for South Asia.

Despite the lockdown, the scale of the pandemic has proved that self-isolation alone will not work to contain the spread of the Coronavirus without strict social distancing measures also being applied. To date, the government’s imposition of self-isolation and social distancing measures have only been partially successful. Declaring a general holiday without communicating the reasons for staying at home and apply social distancing was a missed opportunity. Social distancing during this time can ensure that community transmission (when the source of infection is not known) does not occur on a large scale, which is the best way to prevent the health system from being overburdened. For instance, it took the authorities four weeks after the first confirmed case to ban large religious gatherings. Even so, on 18 April, thousands of mourners from different parts of Bangladesh defied the government lockdown and attended the funeral prayer of a religious leader, disregarded social distancing, and therefore created an environment that very likely encouraged accelerated Covid-19 transmission. Social distancing for marginalised communities such as the working class or the impoverished elderly can be viewed as social inequality, since these groups often live in small congested areas, crammed in one-room dwellings, sharing irregular water supply in some of the dirtiest and densest places on earth. Social distancing is therefore a luxury that only a few can afford and many see as an ‘urban phenomenon’. For the lockdown strategy and social distancing measures to be successful, the government will need to protect the vulnerable population from hunger and, furthermore, provide them with necessary and timely financial assistance as well as access to basic services and improved infrastructure.

Between January 28 and March 26, the IEDCR tested samples from 920 people, and the rate of positive cases was 4.8 percent, with 44 testing positive. In comparison, for the first 9,562 tests in the United States, the rate was 22.9 percent. Iran carried out extensive Covid-19 testing and for its first 200,000 tests, the rate of positive cases stood at 32 percent or 64,000 confirmed cases. After 27 March, the Directorate General of Health Services (DGHS) expanded its testing facilities to 16 labs across the country, as it previously had only one lab at the IEDCR. Initial testing figures signal significant under-testing, which suggests that the pandemic will bring about an indefinite state of emergency as the situation begins to rapidly deteriorate. As of 26 May, the IEDCR and the designated 41 nationwide testing facilities have tested 266,509 samples since testing began on 28 January. During daily briefings, the IEDCR provides numbers on infected cases, while the DGHS gives statistics on how many people died, how many recovered, the number of tests carried out on that day, etc. However, these numbers are meaningless as they do not provide any epidemiological insight. For instance, the IEDCR claims that community transmission is low, but this cannot be validated since there is no widespread testing based on representative population samples, hence, the low detection rate. Without testing significant numbers of the projected population of 164 million people, such an evaluation by the IEDCR is grossly inadequate and does not reflect reality.

According to World Bank data, Bangladesh has 8 hospital beds for every 10,000 people, which by way of comparison, the US has 29 beds and China has 42 per 10,000 people respectively. When it comes to intensive care unit beds, the country’s entire public system has 432, and only 110 of these are outside the capital Dhaka and 737 private ones. Italy has 4.1 doctors on average per 1,000 people, whereas official figures state Bangladesh has 0.5, and a significant number of these doctors are either abroad or not practicing. The country’s largest government medical facility, Dhaka Medical College and Hospital operates above capacity by admitting over 4,000 patients at any one time in a 2,400-bed facility. Over 500 patients apply for critical care every month, and more than 400 are never admitted due to a lack of capacity. Other numbers that also need to be considered are how many ventilators are there in Bangladesh. At the start of the pandemic, there were only 1,250 ventilators, 500 in public hospitals and 750 in private ones according to the DGHS. For a population of more than 164 million, there should be a minimum of 25,000 ventilators, however, due to a shortage in supply, Bangladesh is trialling the development of locally produced ventilators. Another area of grave concern is the non-availability of good quality PPE which increases the hazards faced by doctors and frontline health workers. The existing healthcare infrastructure is not adequate, even in ordinary situations, and will put a significant strain on the country’s health system as the outbreak continues to deteriorate.

In the past few months, Covid-19 has accelerated changes in the economy and society of Bangladesh. The country is facing an unprecedented crisis not experienced in its recent history. Initially considered a public health crisis, the Coronavirus pandemic has quickly become a multidimensional humanitarian crisis, affecting every aspect of public and social life. The economic afflictions of the pandemic have severely affected the dominant informal sector in the economy, which accounts for approximately 85 per cent of the workforce. It reveals serious underlying fragilities that pose far-reaching implications for Bangladesh, where literally within weeks of the Covid-19 outbreak millions have lost their livelihoods and will become the ‘new poor’, going hungry and becoming impoverished. Other economic woes include stagnant taxation, widening fiscal deficits, an exorbitant liquidity and solvency crisis in the financial system, and a prolonged depressed stock market. A slowdown and recession will be hitting Bangladesh, however the government will need to ensure that the health-crisis-turned-economic-crisis will not become a full-blown social crisis that will wipe out the achievements of poverty reduction that have been realised over the last decade. It is too early to know what the true impact of the Covid-19 pandemic will be and how the government will deal with these complex economic and social issues.

To conclude, although the Bangladeshi government has taken some serious measures to contain the spread of Covid-19, its response to the threat has been inadequate. Between February and March, a huge number of people entered Bangladesh from countries worst affected by Covid-19. This demonstrated that the country was not fully ready to tackle an impending epidemic. Bangladesh should have learnt from the success of Hong Kong, South Korea, Singapore and Taiwan in managing the crisis through widespread testing, raising awareness, contact-tracing, self-isolation, and early-phase treatment. The government should have also adopted a strategy centred on carrying out significant testing of suspected patients and isolate or quarantine those they had contact with to prevent further transmission of the virus. Not least due to these failures, there is now a significant risk that the uncontrolled spread of Covid-19 will overwhelm the severely underfunded and under-resourced health system, since even wealthy developed countries in Europe and North America have struggled to cope. Without a vaccine, good hygiene practices and physical distancing are the only viable means of reducing the threat and impact of the disease. In the coming months, Bangladesh has no room for failure, especially as it has neither the economic means nor the public health resources to protect its population, including its most vulnerable groups and those who are at greatest risk. If there is one thing that the pandemic has highlighted, it is that there remain numerous complexities and challenges when it comes to containing infectious diseases in large and under-resourced populations.

About the GPI

The Global Policy Institute is a research institute on international affairs. It is based in the City of London, and draws on both a rich pool of international thinkers, academics as well as policy and business professionals. The Institute gives non-partisan guidance to policymakers and decision takers in business, government, and NGOs.

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