Government support is the crying need of the ICT sector now

This year started with quite disturbing news for the whole world.

The coronavirus pandemic that started from China did not remain confined to that country, but rapidly spread outside, starting from Europe and Iran and now to the US and Canada, which is one of the main target markets for the ICT companies of Bangladesh, especially the companies who are doing outsourcing.

At the time of writing, the 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 been closed in most of the countries and those who have symptoms of COVID-19 have been asked to quarantine themselves.

But above all, the most adverse effect that is awaiting us in the coming days is the worldwide economic failure and people of the middle and lower-middle income countries like ours will be the ones who will suffer the most. 

After the rebirth of the ICT industry of Bangladesh in 2009, the industry is now also passing the toughest time like the other sectors.

An industry where 95 per cent of the people are young and below the age of 35 is going to be hampered seriously due to current pandemic.

If we segment the work dimension of our ICT industry, we can find three sectors where our ICT companies are currently contributing. 

Of the 800 active companies, 175 are now working in the international market, according to the Bangladesh Association of Software and Information Services (BASIS), meaning 24 per cent of the total industry is dependent upon the foreign market.

The other 600-plus companies are now working in the local market, catering to both the private and the public sector.

Among those who are working in the local market, 41.3 per cent companies are dependent purely on the private sector market, while 56.7 per cent are working in both the public and private sector market.

Recently, BASIS surveyed its members regarding the effect of coronavirus on their business and the result we have got is very much alarming.

It has been reported that most of the companies won't be able to run their operations for more than two or three months if the situation continues like this.

Another problem that the IT companies face more often is not getting proper loan support from banks.  As the whole industry is doing intellectual work, the banks are yet to address this intellectual property as an asset.

As a result, the ICT companies are now facing a serious cash crisis as they are not getting loans like the garment and other industries.

In March alone, it has been reported that the companies who are working in the local market have lost 52 per cent of the work orders and those in the international market have lost 35 per cent. 

In the last three months, already the companies have lost 74 per cent of their international buyers because most of the companies are working in the EU and the US, the two regions badly affected by coronavirus.

No doubt the situation will be much more adverse in the coming days.

In short, it can be said that the companies working in the international market won't have any work order for at least the next six months until the situation improves. 

The scenario of the local private market is not comfortable either. Companies are predicting that the work orders will shrink by as much as 61 per cent in the next three to six months. 

Some 69 per cent of the ICT companies surveyed said they can run for a maximum one to two months under this adverse condition, while 24 per cent said they can survive for a maximum of three to four months. Only 7 per cent companies can run for more than four months.

The clients are now 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 the rest of the payment of the projects they have already 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 big challenge on employee retention and the sustainability of the ICT industry will be a challenge. 

Besides working capital shortage, a serious dearth of cash flow, 30-50 per cent revenue loss, uncertainty in clients' bill payment, the additional cost of arrangement for a home office (devices, internet and cost management) and so on will hamper financial sustainability, which may lead to bankruptcy for many companies.

Communication with the client is getting impossible for the companies who are working in the local market, as everything is shutting down or being locked down.

Under this adverse condition, the companies have no option other than to cut their overhead and operational cost. 

It has been found out that companies are planning to cut down 51 per cent of their current resources on an average in the next three to six months. 

It means that the country is going to see half of its highly talented and skilled resources getting unemployed, which will be a serious hit towards the implementation of Digital Bangladesh.

For the survival of the most promising industry of the country, which has a direct blessing from the Honourable Prime Minister, the government support is the crying need now.

BASIS, which is the apex trade body of all the ICT associations of Bangladesh, is now working hard to make the government understand the seriousness of the issue and the struggle under which the companies is going through. 

It has already requested the government for financial support to pay the salary of the employees, a portion of the operational costs (house rent, electricity bill, office rent etc.) for at least six months, which will help survival amidst this situation. 

Besides, it is high time that all foreign software is banned for at least three years, which will help the local companies to sustain and grow in this tough situation.

The value-added tax on the local software should also be exempted for at least up to 2024.

The government has also declared a loan facility for the export-oriented industries at 2 per cent interest. The companies will not get this loan directly; rather, it will go directly to the employees' bank accounts.

There is another loan facility for local companies at an interest rate of 4 per cent under the small- and medium-sized enterprise category.

Already some banks have assured BASIS that they will give loans to its members of up to Tk 1 crore without collateral.

This will be a short-time solution for many companies, but if the crisis continues for more than three months, then it will be not enough.

The companies will need more support at that time to sustain.

Besides, the government has a plan to implement more than 2,600 e-Governance service in the next few years.

The procurement of these services should also be made faster.

Rather than giving one project to one company, joint venture companies should be given preferences so that many more companies can get work from the government, which will increase the capacity of many companies as well.

In a nutshell, it can be summarised that the main mandate of the present government by which they came into power back in 2008 is to digitalise Bangladesh by 2021 and a developed country by 2041.

It's the IT and IT-enabled service (ITES) companies that will be the main partner of the government in materialising the vision of Digital Bangladesh.

No doubt that all the sectors have been affected due to the storm of coronavirus and asking for support from the government.

But the government should give special emphasis on the IT and ITES companies. If they can't survive due to the storm of coronavirus, who will build Digital Bangladesh?

If the government can back up the software companies for the next six to 12 months, I can guarantee you they will give at least 10 times the return over the next decade.

The author is a director of BASIS and managing director of Dream71 Bangladesh, a software company