Government support may be the crying need of the ICT sector now
This season started with quite disturbing news for your world.
The coronavirus pandemic that started from China did not remain confined to that country, but rapidly spread outside, beginning with Europe and Iran and today to the united states and Canada, which is one of the key target markets for the ICT companies of Bangladesh, especially the firms who are doing outsourcing.
At the time of writing, the full total number of confirmed cases of COVID-19, spanning 210 countries and territories, stood at 2,249,717 and the fatalities 154,271.
Borders have already been closed in almost all of the countries and the ones who've symptoms of COVID-19 have already been asked to quarantine themselves.
But above all, the most adverse effect that's awaiting us in the coming days is the worldwide financial failure and people of the center and lower-middle income countries like ours will be the ones who will suffer the most.
Following the rebirth of the ICT industry of Bangladesh in '09 2009, the industry is now also passing the toughest time just like the other sectors.
An industry where 95 % of the people are young and below age 35 is going to be hampered seriously because of current pandemic.
If we segment the task dimension of our ICT industry, we are able to find three sectors where our ICT companies are contributing.
Of the 800 active companies, 175 are actually working in the international market, in line with the Bangladesh Association of Software and Information Services (BASIS), meaning 24 % of the full total industry is dependent after the foreign market.
The other 600-plus companies are actually working in the neighborhood market, catering to both private and the public sector.
Among those people who are working in the neighborhood market, 41.3 % companies are dependent purely on the private sector market, while 56.7 % are working in both public and private sector market.
Recently, BASIS surveyed its members about the effect of coronavirus on the business and the result we have got is very much indeed alarming.
It has been reported that almost all of the companies will not be in a position to run their operations for more than several months if the situation continues like this.
Another problem that the IT companies face more regularly is not getting proper loan support from banks. As the complete industry does intellectual work, the banks are yet to handle this intellectual property as a secured asset.
Due to this fact, the ICT companies are now facing a serious cash crisis because they are not getting loans just like the garment and other industries.
In March alone, it's been reported that the firms who will work in the local market have lost 52 % of the task orders and the ones in the international market have lost 35 %.
In the last 90 days, already the firms have lost 74 % of their international buyers because most of the companies will work in the EU and the united states, both regions badly damaged by coronavirus.
No doubt the problem will be more adverse in the coming days.
In short, it usually is said that the firms employed in the international market won't have any work order for at least another six months until the situation improves.
The scenario of the local private market isn't comfortable either. Companies are predicting that the work orders will shrink by as much as 61 per cent in the next three to half a year.
Some 69 % of the ICT companies surveyed said they can run for a maximum one or two months under this adverse condition, while 24 % said they can survive for no more than 3 to 4 months. Only 7 per cent companies can run for more than four months.
The clients are actually cancelling their current work orders and there is no chance of acquisition of new clients now.
The companies are also afraid that they may not get all of those other payment of the projects they have invested in.
The operational costs like paying employee salaries, office rent, office expenses and other overhead costs will become a burden.
This will create a huge challenge on employee retention and the sustainability of the ICT industry is a challenge.
Besides working capital shortage, a significant dearth of cashflow, 30-50 per cent earnings loss, uncertainty in clients' bill payment, the excess cost of arrangement for a home office (devices, internet and cost management) etc will hamper financial sustainability, which might lead to bankruptcy for most companies.
Communication with your client gets impossible for the firms who will work in the neighborhood market, as everything is shutting down or being locked down.
Under this adverse condition, the firms have no option apart from to cut their overhead and operational cost.
It has been found out that companies are preparing to cut down 51 % of their current resources on the average within the next three to half a year.
It means that the united states is going to see half of its highly talented and skilled resources getting unemployed, which will be a significant hit towards the implementation of Digital Bangladesh.
For the survival of the very most promising industry of the united states, which has a direct blessing from the Honourable Prime Minister, the federal government support may be the crying need now.
BASIS, which may be the apex trade body of all ICT associations of Bangladesh, is currently working hard to help make the government understand the seriousness of the issue and the struggle under that your companies is going through.
It has recently requested the federal government for financial support to pay the salary of the employees, some of the operational costs (house rent, electricity bill, office rent etc.) for at least half a year, which can only help survival amidst this example.
Besides, it is about time that foreign software is banned for at least 3 years, which will help the neighborhood companies to sustain and grow in this tough situation.
The value-added tax on the neighborhood software also needs to be exempted for at least up to 2024.
The government in addition has declared financing facility for the export-oriented industries at 2 % interest. The companies won't understand this loan directly; rather, it'll go directly to the employees' bank accounts.
There is another loan facility for local companies at mortgage loan of 4 % beneath the small- and medium-sized enterprise category.
Already some banks have assured BASIS that they can give loans to its members of up to Tk 1 crore without collateral.
This is a short-time solution for many companies, if the crisis continues for more than three months, then it'll be not enough.
The companies will need more support in those days to sustain.
Besides, the government includes a plan to implement a lot more than 2,600 e-Governance service in the next few years.
The procurement of the services should also be made faster.
Instead of giving one project to 1 company, jv companies ought to be given preferences in order that many more companies can get work from the government, which will improve the capacity of several companies as well.
In a nutshell, it is usually summarised that the key mandate of the present government where they arrived to power back 2008 is to digitalise Bangladesh by 2021 and a developed country by 2041.
It is the IT and IT-enabled service (ITES) companies that'll be the primary partner of the government in materialising the vision of Digital Bangladesh.
No doubt that the sectors have already been affected as a result of storm of coronavirus and requesting support from the government.
But the government should give special focus on the IT and ITES companies. If they can't survive because of the storm of coronavirus, who'll build Digital Bangladesh?
If the government can back up the program companies for another six to 12 months, I could guarantee you they will give at least 10 times the return over another decade.
