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LightCastle BCI 2019-20 Launching Event Keynote Presentation

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LightCastle BCI 2019-20 Launching Event Keynote Presentation

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LightCastle Partners’ annual flagship publication titled ‘The LightCastle Business Confidence Index 2019-20’ gauges the business sentiments of private sector leaders across several sectors, that have a notable contribution to the country’s economy. The industries to feature in this study were purposefully determined to include sectors that had the highest level of contribution to the country’s GDP.

LightCastle Partners’ annual flagship publication titled ‘The LightCastle Business Confidence Index 2019-20’ gauges the business sentiments of private sector leaders across several sectors, that have a notable contribution to the country’s economy. The industries to feature in this study were purposefully determined to include sectors that had the highest level of contribution to the country’s GDP.

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LightCastle BCI 2019-20 Launching Event Keynote Presentation

  1. 1. LightCastle Business Confidence Index 2017- 18 Presented By: Zahedul Amin Director, Finance and Strategy LightCastle Partners LightCastle Business Confidence Index 2019-20 LightCastle Business Confidence Index 2019-20
  2. 2. Our Partners 1
  3. 3. Bangladesh in a Nutshell 2
  4. 4. BCI 2019-20 Overview 3 • Business Confidence Index 2019-20 was formulated based on the opinions of 59 CXO members across key private sectors with highest contribution to the GDP • Using Harmonized Expectation Indicator (HEI), the 2019-20 BCI score was -19.27 (Range -100 to +100). The overall score was +43 in 2017-18 and +39 in 2016-17 • Key problem areas on a macro level were the diminishing export receipts and reduced foreign remittances. On a meso level, depleted demand, curtailed capacity and inadequate infrastructure were highlighted as the major bottlenecks. • The Top 3 industries to hold the most promise was found to be the Pharmaceuticals sector, Agriculture and Agro-processing sector, and the IT and ITES sectors, owing to the structural and competitive strengths of these industries and alignment with anticipated changes in consumer lifestyle. • As a way forward, the economy can rely on low public debt to GDP ratio and foreign exchange reserve while reviving the economic wheel. On an industry level it is important to diversify export revenue streams in order to reduce the high dependency on RMG sector. For sustainable employment opportunities, it is necessary to develop the capacity of the laid off workforce and redirect them towards new employment opportunities in high prospect sectors.
  5. 5. The Economy in the Midst of a Turbulence • Structural fault lines have impeded growth pre-pandemic • The pandemic has exacerbated the already slowing economy in 2020 • Demand and Supply side shocks have jolted the economic progress • The ‘new normal’ will stem the growth momentum in 2021 and beyond 4
  6. 6. WHERE Are We? Job Creation/Protection Key to Economic Revival • Protection of MSMEs key to retaining jobs across the economy • Credit Guarantee schemes to ensure effective deployment of stimulus packages • Investment and systems level changes in healthcare key to reviving confidence • Growth in consumer spending key for a turnaround 5
  7. 7. WHERE Are We? The Twin-Engines in Disarray • Apparel export will revive but the pandemic has led to mounting losses • Remittances to decline due to tectonic shift in the international oil market 6 28,094 28,150 30,615 34,133 27,949 2015-16 2016-17 2017-18 2018-19 2019-20 Export of RMG (In Million US$) Source: BGMEA & EPB
  8. 8. WHERE Are We? Looking Beyond the Pandemic • FDI inflow key to diversifying the economy • Health of the banking sector will dictate the momentum for recovery • Double down on the secondary sector and contribute to job creation • Skill-development for outgoing migrant worker 7
  9. 9. In the Midst of a Turbulence Outline METHODOLOGY AND CONFIDENCE LEVEL ECONOMIC AND SECTORWISE INSIGHTS CHALLENGES AND WAY FORWARD 8
  10. 10. Methodology 60 CXO Members Harmonized Expectation Indicator (HEI) 9 Divided into Different Sectors
  11. 11. Sector Coverage 1 0
  12. 12. Sector Coverage 11
  13. 13. The Confidence Index Has Nosedived 12 Source: Business Confidence Survey conducted by LightCastle 2019-20
  14. 14. Fresh Investments and New Jobs Expected to Dwindle 13
  15. 15. The Apparel Sector is Recovering Gradually 14 • Order cancellations and postponements have severely battered the sector • Supply chains disruptions have been mitigated to some end and some orders are returning to Bangladesh RMG Export Receipts Comparison between FY19 and FY 20
  16. 16. Percentage Change in Commodity Prices From Jan-April 2020 • Supply chain disruptions have led to a decline in prices at the farm-gate level during the ‘general holiday’ • Decline in rural incomes have led to lower demand for agro-inputs and produce • International commodity prices have declined due to global recessionary phase Agro-processing Hit Hard by Supply Chain Disruptions 15
  17. 17. Pharmaceutical Sector at the Pole Position 16 • Supply chain disruptions had impacted raw material sourcing from China and India • Sales had declined but has the potential to reap medium term benefits due to the pandemic Source: EPB 82,109,595 89,174,529 103,458,264 129,947,285 135,785,917 2015-16 2016-17 2017-18 2018-19 2019-20 Export of Pharmaceuticals (In Million US$)
  18. 18. Leather & Footwear Suffer in the Domestic and International Markets 17 • Domestic demand has suffered due to lock-down and cautious discretionary spending • International market expected to rebound but recovery will be gradual. 714,012,530 777,839,960 809,691,010 879,407,485 755,882,156 2015-16 2016-17 2017-18 2018-19 2019-20 Export of Apparel (In Million US$) Source: EPB
  19. 19. • Demand for essentials have increased at the expense of non-essential products • Sales expected to rebound but growth trajectory is expected to be flatter • Players exploring digital as an alternate channel for growth FMCG Sector on a Roller Coaster Ride 18 24, 41% 19, 33% 3, 5% 2, 4% 10, 17% PROSPECTS OF SALES IN THE NEXT SIX MONTHS Higher Lower Much Higher Not Applicable Same / No change Source: Business Confidence Survey conducted by LightCastle 2019-20
  20. 20. Financial Sector at the Heart of the Recovery Plans 19 Non-Performing Loan (NPL) Ratio • The banking sector suffers from high NPLs predominantly due to poor corporate governance • The sector will play a critical role for delivering the stimulus package of the government
  21. 21. Power Sector Facing Overcapacity 20 • Demand has declined due to pandemic • Proper energy distribution and development of SEZs critical for meeting surplus demand • Possible non-renewal of PPAs of existing quick rentals and other CCGT based power plants • Demand for Electricity 8,500- 9,000 MW • Supply of Electricity 23,548 MW • Pre-Covid low usage rate resulted in Tk 90 billion (US$1.1bn) capacity payments to idle power plants in FY 18- 19
  22. 22. ICT has a Glimmer of Hope 21 • ICT sector has been growing at a steady pace backed by consistent policies • Deal flow expected to rise due to business automation across the globe • Lack of skilled human resources key bottleneck to steady growth
  23. 23. Declining Demand and Lack of Funding Impair Growth 22 64% Restricted Access to Funding 27% Inadequate Infrastructure 39% Diminishing Demand 37% Policy Inconsistency 33% Pessimistic Perception
  24. 24. Promising Sectors for the New Decade 23 Source: Business Confidence Survey conducted by LightCastle 2019-20
  25. 25. Historical Comparison of the Promising Sectors 24 Promising Sectors SI BCI 2019-20 BCI 2017-18 BCI 2016-17 1 Pharmaceuticals ICT & ITES Power & Energy 2 Agro-Processing Agro-Processing ICT & ITES 3 ICT & ITES Pharmaceuticals RMG 4 Logistics Power & Energy Pharmaceuticals 5 Digital Financial Services Leather Goods (Footwear) Leather Goods (Footwear) Moved Up Moved Down Neutral New Entrant Source: Business Confidence Survey conducted by LightCastle 2016-17, 2018-19 and 2019-20
  26. 26. • Low Debt to GDP ratio and Forex Reserve to provide cushion • Consider deferment of LDC graduation • Move up the value chain in RMG export • Diversification of the export basket to focus on labor intensive sector • Effective deployment of stimulus funding, particularly geared towards MSMEs • Worker retraining schemes to laid-off workers Recommendation and Way Forward 25
  27. 27. Contributors 26
  28. 28. LightCastle Business Confidence Index 2017- 18 Presented By: Zahedul Amin Director, Finance and Strategy LightCastle Partners LightCastle Business Confidence Index 2019-20 Thank you!

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