Daily News Recap Wednesday October 22, 2014 Analyst: Faiza Farah Tuba [email protected] Industry BTRC mulls new spectrum for faster mobile internet The telecom regulator is preparing the 700 megahertz spectrum band to release it next year to the mobile operators, which will enable them to deploy higher-performance broadband services over greater distances than the services they offer today. As some of the bandwidth in the band is occupied by an internet service provider (ISP), the regulator is going to rearrange it so that it can be allocated smoothly to the mobile operators. As a result, the operators will be able to roll out service networks with less equipment or investment for more people, according to analysts. In line with suggestions from International Telecommunication Union, a UN body, Bangladesh will allocate the 700 MHz band for fourth generation mobile technology, known as long term evolution (LTE), which provides faster data transfer than the current 3G technology. A segment of the frequency was allocated to AlwaysOn Network Bangladesh, an ISP, at a location that it is impeding functionality of the rest of the band. Bangladesh Telecommunication Regulatory Commission had allocated 6 MHz spectrum (6 uplink and 6 downlink) free of cost to AlwaysOn in July 2006 for five years. The regulator has decided to allocate the 700 MHz band to the mobile operators, it will ask AlwaysOn Network to surrender its current spectrum, Md Sarwar Alam, company secretary of BTRC, said. The 700 MHz band is consistent for use with mobile operation, not for the ISPs, he added. “We are trying to allocate a different band to the AlwaysOn network so as not to hamper its business and equipment. We are still searching for a suitable bandwidth,” another BTRC official said. The regulator does not want to scrap the ISP's current equipment, said the official. Reaz Shaheed, managing director of AlwaysOn, declined to comment on the matter. BTRC found that AlwaysOn is providing services to a mere 13,000 customers through 46 base stations; it would be far more efficient if the spectrum was given to the mobile operators. Once the ISP's allocation is cancelled from the 700 MHz band, the regulator will be able to arrange a 45 MHz bandwidth in the band, which is good enough for the mobile operators, said another BTRC official. But if the ISP's spectrum cannot be replaced from the valuable band, the regulator will have only 25 MHz bandwidth for the mobile operators. Last year, the regulator allocated 2,100 MHz band for 3G networks to mobile operators through an open auction. TIM Nurul Kabir, secretary general of Association of Mobile Telecom Operators of Bangladesh, said the regulator should consult with the industry before releasing any new spectrum, which will be beneficial for both parties. The government should also maintain international standards in spectrum allocation, he added. News Source: http://bd.thedailystar.net/business/btrc-mulls-new-spectrum-for-faster-mobileinternet-46774 1 Daily News Recap EU retailers urged not to pull out of Bangladesh apparel sector A senior European Commission official has urged the retailers and brands to stay engaged in Bangladesh and not to pull out orders from the small and medium factories, employing 1.5 million workers. Director (GSP) of the DG Trade of the European Commission, Sanda Gallina, made the call in her closing statement in an outcome document titled “Implementation Review and Stock Taking of Progress” on Monday. The document also urged early adoption of rules and regulations for Bangladesh Labour Act with highest priority, including rules on unfair labour practice, implementation of National Tripartite Plan of Action (NAP), enactment of Export Processing Zones (EPZ) Act and further improvement of freedom of associations and collective bargaining in EPZs. On Monday, the European Union, the United States, Bangladesh and ILO met in Brussels in order to take stock of the progress on the actions outlined in the Sustainability Compact adopted on July 8 last year. In the session, speakers appreciated Bangladesh’s commitment towards fulfilling the actions outlined in the Sustainability Compact and expressed satisfaction over the progress that Bangladesh has made in last more than one year. The parties said if Bangladesh can recruit 189 inspectors within December 2015 as recommended by the PSC, it would be a big achievement in terms of strengthening the government’s ability to regulate the RMG sector on its own. Bangladesh placed the progress on the occasion of the Sustainability Compact Follow up meeting held on Monday in Brussels. Bangladesh, the European Union, the United States and the ILO recognised the progress made by Bangladesh since the launch of Compact in July last year in areas of labour rights, occupational safety and responsible business conducts. Since the inception of sustainability compact, Bangladesh amended Labour Act 2013, upgraded the Directorate of Inspection for Factories and Establishments to a Department (DIFE), over 236 trade unions get registered in RMG Sector since January 2013, allowed duty-free import of fire safety equipment and fabricated building materials, launched publicly accessible database of RMG factories at DIFE and conferring the rights to strike to workers’ Welfare associations in EPZ areas. Commerce Minister Tofail Ahmed in his statement stressed on taking the actions to improve the occupational safety, working condition and labour rights in Bangladesh, according to an official release issued here yesterday. He also said the government has increased the minimum wage to Tk5,300 for RMG workers that has been implemented from December 1 last year. Among others, BGMEA President Atiqul Islam urged the buyers and retailers no to cancel their orders in the factories located in shared buildings. He also urged the buyers and retailers to consider raising prices of the apparel items. A 12-member delegation comprising Senior Commerce Secretary Hedayetullah Al Mamoon, Labour and Employment Secretary Mikail Shipar, Foreign Secretary Md. Shahidul Haque and representatives from BGMEA, BKMEA, Bangladesh Employers Federation, Accord and Alliance attended the session. News Source: http://www.dhakatribune.com/business/2014/oct/22/eu-retailers-urged-not-pullout-bangladesh-apparel-sector 2 Daily News Recap Economy Economic growth to accelerate 6.2pc The economy may grow by 6.2 percent this fiscal year thanks to strong domestic demand and a revival in private investment activities and remittance flow, the World Bank said yesterday. The economy's natural capacity is sufficient to achieve growth of more than 6 percent, Zahid Hussain, a lead economist of the WB's Dhaka office, said. “And, it will not require a huge jump in investment.” But to achieve the targeted 7.2 percent growth, the country would have to raise the stagnant investment-GDP ratio to 35 percent from the present 28.7 percent. “An investment boom is required for taking the investment-GDP ratio to that level,” he told reporters while making a presentation on the economy at his office in the city. He spoke after Johannes Zutt, WB's country director for Bangladesh, unveiled the Bangladesh Development Update. Hussain said the country would have to complete the Dhaka-Chittagong and Dhaka-Mymensingh highways, double-tracking of Dhaka-Chittagong Railway, the Padma bridge, the Dhaka metro rail project and the two Bibiyana gas field-based large power plants to increase the investment-GDP ratio by more than six percentage points. Even 8 percent GDP growth is possible if the projects can be completed, he said. This fiscal year, agriculture is expected to grow by 2 percent, down from last fiscal year's 3.3 percent. Industry will grow by 9.5 percent against 8.4 percent last fiscal year and services sector by 6.1 percent from 5.8 percent, according to the World Bank estimates. The Washington-based multilateral lender also said the poverty incidence, based on national poverty line of $1.13 per capita per day, is projected to decline from 31.5 percent in 2010 to 24.47 percent by 2014. This “remarkable progress” in poverty reduction is attributable to a decline in population growth rate and the changing age structure, increases in labour income, internal and external migration, improved connectivity and the government's targeted safety net programme. “The expected decline in the poverty rate is not a result of any survey -- rather, it is based on assumption. But, it is realistic,” Hussain said. On the WB's assumption, the lead economist argued that the dynamism of the economy has remained the same or even better compared to the performance it showed between 2000 and 2010 when poverty was cut by 1.74 percentage points annually. The WB also said the income of the bottom 40 percent is likely to have continued to increase because of increased employment and wages. The WB also warned of some risk factors facing the economy, with domestic factors dominating the risks to near-term outlook. A resurgence of political unrest, even if it is not as ferocious and as long as experienced in the last half of 2013, is the principal risk for the near term. “This will depress private investment, push up inflation and potentially put reserves under pressure.” It said lack of visible progress in upgrading labour and safety standards in garment factories could trigger loss of preferential access to the European Union markets. The inability to reopen job opportunities in the Middle-East clouds the sustainability of remittance growth 3 Daily News Recap prospects. “These are high impact risks, particularly when combined with the possibility of a protracted slowdown in advanced economies.” The WB said even if all the conditions are growth friendly, growth may still elude Bangladesh unless there is confidence about political stability and policy continuity. The global lender said the deterioration in state banks' financial solvency could challenge fiscal sustainability and constrain the availability of resources for public investment. An oil price shock from heightened geopolitical tensions in the Middle East, or a protracted slow growth in trading partner economies, would adversely affect inflation and the balance of payments, it said. The WB report however said Bangladesh's closed capital account limits its vulnerability to global financial volatility, but a large depreciation of the Indian rupee could strain deepening and diversification of Bangladesh's exports, particularly in garments, footwear and light manufacturing. The WB said the country is well-known as a case of growth governance conundrum, adding that the governance environment may have been barely adequate thus far to cope with an economy breaking out of extreme poverty and low growth. “Bangladesh needs to create a system of governance that can successfully manage the interactions between the state and a well-functioning globally integrated economy.” It said managing such an economy requires inputs that markets do not easily provide: infrastructure, security, rules, standards, certifications, training and so on. “These can be provided only by professionally competent and well-funded government agencies operating in a system that decentralises power to identify problems, work out solutions and monitor performance.” The report said the non-elected state institutions—higher judiciary or the higher echelons of civil bureaucracy or the Election Commission or the Anti-Corruption Commission and other watchdogs, need total confidence of the public. “Without restoring the credibility of these institutions, governance will not grow out of patronage politics,” the WB added. News Source: http://bd.thedailystar.net/business/economic-growth-to-accelerate-6-2pc-46770 Old treasury bonds likely to be ploughed back in circulation The government is likely to reissue the old treasury bonds for the buyers, stopping the issuance of new ones, officials said. The officials concerned felt that the old treasury bonds would have certain psychological impact on the buyers because of their higher yield curves. Sources at the finance division told the FE that preparatory work was at the final stage for putting the bond on sale. Currently, country's treasury-bill and-bond market does not go by market forces (demand and supply). Primary dealer (PD) banks, the major buyers, participate in the market each Tuesday as per auction calendar. The PDs purchase bills and bonds either for business purposes as a result of excess idle money or as a condition of maintaining statutory liquidity ratio as per the banking rules. There is provision that individuals could also purchase bonds with denomination of Tk 10 million. But they hardly buy through the banks as the returns are lower than that on the other prevailing products on the money market. Each auction has a target 4 Daily News Recap of realizing a fixed amount for funding budget deficit. And if the bonds earmarked for a particular auction remain unsold, the central bank on its own purchases the remainder. Such intervention backfires-it increases inflationary pressures on the economy. However, finance division officials said the old long-term bonds that have impressive yield records in the past in terms of its attaining interests would attract buyers. These bonds usually mature in 15 and in 20 years. But, many officials familiar with such type of trading told the FE that this government move would hardly help develop the bond market. They argued that there existed varying rates for different types of bonds in the country, leading to higher sales of lower- denomination prize bonds, and family and other saving certificates. The government offers 5-6 percent rate of yield on the treasury bills that mature in a year while it pays 11-12 per cent of the same for the long-term bonds matured in 15 and in 20 years. However, the finance division officials hold the hope that the re-issuance of old bonds would attract the potential buyers as its serial number will be shorter. They noted that longterm bonds like the 15-year and the 20-year ones are less popular among the institutional buyers and the individuals for their long maturity periods although they receive yields every six months. The profit accrued from the bonds is simple in nature--obtained every six months. "The old long-term bonds have very good yield curve, maintaining upturns. So, seeing their potentials, buyers will get attracted to it," said an official working with the Cash and Debt Management Committee of the finance division. However, the finance division in its latest meeting discussed the issue in detail and formed a 5 -member committee to prepare a report on it. The committee, which had October 15 deadline for submitting the report, prepared the draft report but the officials concerned advised further improvement upon it. Sources at the CDMC said its next meeting would approve the issuance and the bond be sold from the next auction calendar. Gani, who is now on leave-preparatoryto-retirement, told the FE that this move is good as it is being practised in many countries, including India, Pakistan and Sri Lanka. But as regards bond-market development, Mr Gani said this would actually not help develop bond market as the rate of interest is poor in comparison with the other saving instruments available on the market. "If we adjust the returns with the inflation, the real earnings from the bonds will be much low," commented the banker, who had worked with the government treasury on behalf of the Bangladesh Bank for long. News Source: http://www.thefinancialexpress-bd.com/2014/10/22/62401 5 Daily News Recap Weaker yen bites into exports to Japan Exports to Japan dropped by 4.36 per cent during the first quarter of the current fiscal year, the first in five years, as industrial tragedies and yen devaluation ate into export earning. Shipment to the market of the Asian economic giant amounted to $230.72 million in JulySeptember of the current fiscal year (2014-15), compared with $241.26 million a year earlier, the government data said. Apparel and footwear are the major items being exported to the Japanese market and shipment of garment items reached $159.57 million, marking a 0.44 per cent negative growth in the same period. Exporters attributed the recent tragic industrial accidents and last year's political turmoil to the decline. But a trade analyst said devaluation of Japanese currency against US dollar and a hike in consumer tax in the country have impinged on Japan's imports. In the clothing segment, woven export fell by 4.79 per cent with the earnings at $90 million, although knit products witnessed 5.17 per cent growth during the first quarter, according to official data. Bangladesh's apparel export to Japan reached $572.27 million in 2013-14 fiscal year, from just a $74.37 million five years ago. Similarly, footwear products fetched $ 27.29 million during the first quarter of current fiscal, which was $36.04 million in the corresponding period of the last fiscal. In 2013-14 fiscal, Bangladesh earned $138.24 million by exporting leather goods and footwear to Japan, posting a 65.35 per cent growth. Bangladesh witnessed an impressive growth in the Japan market in the last couple of years. The country made merchandise shipments worth $862.07 million in FY 2013-14, $ 750.26 million in FY 2012-13, $ 600.52 million in 2011-12, $ 434.12 million in 2010-11 and $330.55 million in 2009-10 respectively. Abdus Salam Murshedy, managing director of Envoy Group, said the negative growth in apparel export to Japan is the reflection of recent political turmoil and industrial disaster in the sector. "Japan is a very potential market for us as they import high-end products," he said adding entering this market means Bangladesh has the capacity to meet the international standards. Echoing Mr Murshedy, Md Shahidullah Azim, vice president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said the Japanese buyers are at a 'wait and watch' position due to the safety and compliance issues. But he expressed the hope that with the improvement of the safety in the country's $24 billion apparel sector, Bangladesh's export to Japan will increase in the coming days. "Due to last year's political instability, many buyers have shifted their orders to other competiting countries, especially to India and Vietnam," said Nazmul Hassan, former vice president of Leather Goods and Footwear Manufacturers and Exporters Association of Bangladesh. He, however, said, Japanese buyers will come back if Bangladesh can improve security and port efficiency as they are very much conscious about lead time. Khondaker Golam Moazzem, additional director of Center for Policy Dialogue (CPD) said the Japanese currency lost its value by 5.0 per cent against the greenback in July to October period, making Japanese import costlier not only for Bangladesh, but also for other countries. Moreover, the Japanese government has recently increased the consumer tax rate, which has also affected the consumers purchasing capacity and resulted in a slow demand, he added. News Source: http://www.thefinancialexpress-bd.com/2014/10/22/62302 6 Daily News Recap Per capita income reaches to $1,190 The per capita income of Bangladesh is now $1,190 in the current fiscal year 2013-14, which is $146 higher than earlier. The Cabinet Division made the disclosure in its report, prepared with the supports of all of the ministries and divisions, published on Monday. The report was placed in the regular cabinet meeting at the secretariat with Prime Minister Sheikh Hasina in the chair. According to the report, the annual inflation of Bangladesh has now declined to 6.97% from the previous 8.06%, reducing around 1.09%. The reserve of foreign exchange rose into $21.5bn in the fiscal year 2013-14, the report said. The overall revenue collection showed an 8.35% growth at the end of FY 13-14, while the foreign currency reserve totalled $21.5 billion at the end of FY 13-14 with a 40.44% growth. The exchange rate remained stable in the last fiscal year while the point-to-point inflation rate came down to 6.97% in FY 13-14 from 8.06% in FY 12-13. The ADP utilisation rate in FY 13-14 reached to 93.11% with expenditure of TK59,580 crore. Some 239 development projects were completed in the last fiscal out of the earmarked 242 projects, Cabinet Secretary M Musharraf Hossain Bhuiyan said. He said in the last fiscal, the expenditure in the social safety net programmes increased to TK 26,654 crore, the agricultural production increased alongside the progress of use of ICT, the mobile phone users increased to 11.62 crore up till June 2014, the internet users increased to 3.89 crore while tele-density increased to 77.91%. The cabinet secretary also said there has been marked improvement in the health, education, communication and power sectors in the last fiscal. He said some 69 State Owned Enterprises (SoEs) turned out to be profitable in FY 13-14, while 19 became loosing concerns including the Bangladesh Petroleum Corporation (BPC). The report also recommended the government to further strengthen on inter-ministerial meetings to expedite policy and programmes, capacity building of the implementing agencies to help ADP utilisation alongside extensive monitoring, taking more initiative to fill up the vacant posts, load management of power and tackle misuse, imparting training to more volunteers for tackling natural disasters, creating more awareness about controlling food adulteration and extending the e-tendering activities. State Minister for Labour and Employment Mojibul Haque Chunnu told the Dhaka Tribune though the prime minister expressed satisfaction over the progress report, she asked the authorities concerned to fill up the vacancies of the administration shortly to speed it up. She also asked the high officials of the ministries and divisions to enhance monitoring on implementation of the annual development programmes and projects as 100% achievement may turn out. Musharraf said the report also recommended holding public hearings in other district level public offices including the deputy commissioners to upazila level public offices to hear the problems of mass people and solve them immediately. News Source: http://www.dhakatribune.com/income/2014/oct/20/capita-income-reaches-1190 7 Daily News Recap Capital Market Early settlement of higher-priced placement share dispute ruled out Legal experts are skeptical about immediate settlement of the much-talked about 'higher priced' placement share dispute in the apex court as it, according to them, is burdened with a large number of other pending cases. The long legal dispute is awaiting the final hearing in the Appellate Division of the Supreme Court (SC), they said. "The Appellate Division is now dealing with other pending cases that are older than this legal dispute. The court is yet to start hearing on the placement share dispute. It might not be possible to hold the hearing this year," a legal adviser of the petitioners said. "We are expecting that the apex court will hear it next year, disposing of this long legal dispute. We, however, will move the court to hold the hearing and settle it as soon as possible," he said. Some investors filed a writ petition with the High Court (HC) claiming that they had to count loss of a 'substantial amount of money' as the IPOshare price was set at much lower than what they paid for pre-IPO placement shares of a listed company. For redress, they first approached the Bangladesh Securities and Exchange Commission (BSEC). After failing to get positive response from it on their application and complaint, submitted on February 18, 2013 and March 5, 2013, they filed the writ for legal resolution. A HC bench on May 19, 2013 directed the securities regulator to dispose of the investors' complaints, which were earlier placed to the regulator, within one month 'without fail'. On June 23, 2013, the BSEC in a letter directed the company-Orion Pharma Ltd-to take necessary steps to settle complaint and application of three investors-cum petitioners-Romana Rouf Chowdhury, Nasreen Jamir and Zakia Rouf Chowdhury-in line with the HC order. After getting the BSEC's directive, the company went to the Appellate Division seeking stay on the HC order. On June 26, 2013, the Chamber Judge of the Appellate Division stayed operation of the HC order, a lawyer concerned said. According to their claim, the three investors separately bought a total of 2,20,000 placement shares of Orion Pharma at Tk 100 each including premium worth Tk 90 each in 2010. Later, the company's initial public offering (IPO) proposal got approval with an offer price of Tk 60 including premium of Tk 50 per share. "As a result, the investors together counted loss of Tk 8.8 million," AKM Abdul Quayum, legal adviser of the petitioners, told the FE. In their complaints, submitted to the BSEC, the investors brought allegations of deceit, among others, through over-valuation of assets. They demanded return of the additional money with due interest. When contacted, Md Ferdous Jaman, company secretary of Orion Pharma Ltd, said, "The legal matter is pending with the Appellate Division. We will fight in the apex court as there is no scope to return the money received against the placement shares under the Company Act." News Source: http://www.thefinancialexpress-bd.com/2014/10/22/62329 8 Daily News Recap CSE starts fair today to spread online trade Chittagong Stock Exchange is set to launch a two-day fair today to popularise online trading among local and foreign investors. Online trading will attract more local and foreign investors into the capital market as it is more convenient, Syed Sajid Husain, managing director of CSE, said at a press meet at its Dhaka office yesterday. The port city bourse will organise the fair at Engineering Institute in Dhaka, where 17 brokerage firms will showcase the online trading process. Investors can open beneficiary ownership accounts at the fair itself. A series of awareness programmes will be organised for investors on how to avert risk in investing in the stockmarket, Husain said. “We want to spread the online trading system globally.” “We can truly realise the dream of a Digital Bangladesh and online trading will help CSE to start a derivatives market.” M Abdul Mannan, state minister for finance and planning, will inaugurate the fair at 10 am. Mobile operators Grameenphone and Robi will join the fair to provide internet services. A total of three IT solution providing companies and two internet service providers will also participate. News Source: http://bd.thedailystar.net/business/cse-starts-fair-today-to-spread-online-trade46775 9 Daily News Recap LBSL’s research reports are also available on Bloomberg LANB <GO> http://lankabangla.duinvest.com Disclaimer This document (“the Report”) is published by LankaBangla Securities Ltd (“LBSL”) for information only of its clients. All information and analysis in this Report have been compiled from and analyzed on the basis of LBSL’s own research of publicly available documentation and information. LBSL has prepared the Report solely for informational purposes and consistent with Rules and regulations of SEC. The information provided in the Report is not intended to, and does not encompass all the factors to be considered in a best execution analysis and related order routing determinations. LBSL does not represent, warrant, or guarantee that the Report is accurate. 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