Daily News Recap
Sunday
December 28, 2014
Analyst:
Salma Yeasmin Xinat
[email protected]
Industry
Housing gloom pervades the supply
lines
The prevailing sluggish business trend in the housing and real estate sector has left an adverse
impact on its backward linkage industries as the demand for their products and prices have
fallen while production costs have gone up. Former acting president of Real Estate and Housing
Association of Bangladesh (REHAB) Maj Gen Md Abdur Rashid said many sub-sectors were
affected by the sluggish real estate business. REHAB Senior Vice President Liakat Ali Bhuiyan
said in last six months the total apartment sales declined to 10,000 units from 22,000 units earlier. Such a fall in the housing business affected many backward linkage industries, including
steel and re-rolling mills, cement, tiles, sanitary, sands, cables, ready-mix and bricks.
Former president of Bangladesh Steel Mills Owners Association Mizanur Rahman Babul said
due to the low demand for their products and higher production costs attributed to electricity,
more than 130 mills had to stop their production. He said production of iron, mild steel (MS) and
other types of rod dropped by 20 per cent to 3.2 million tonnes over the first three quarters of
the current year from 4.0 million tonnes in the corresponding period of last year. The price of
MS products also dropped by Tk 6,000 to Tk 6,500 per tonne. He said during the heyday of real
estate business many steel mill owners expanded their production lines with borrowed money,
but following the sudden fall in sales their capacity was remaining unutilised. The cement manufacturing industry is also facing trouble due to the dull housing business. Senior Vice President
of Bangladesh Cement Manufacturers Association Abdul Khalique Parvez said until November
last the demand for cement fell to 14 million tonnes from 20 million tonnes in the corresponding
period last year.
He said due to reduced market price and declining demand many mill owners curtailed their
manufacturing capacity. As per market sources, price of cement has also fallen. Like cement
and steel rod products, the demand for brick, sand, tiles, sanitary wares, cables and other products have also declined in the market, sources said. When contacted, a senior banker said
housing loans from banks and non-bank financial institutions (NBFIs) fell significantly and currently there was no sign of a reversal. Former acting president of the REHAB, Maj Gen Md Abdur Rashid, said if the government provided incentives and took some measures relating to
financing facilities the sector could be revived. Brick business is also in trouble due to higher
stock and declining demand. Secretary of Bangladesh Sand Mining Association Shah Jahan
said their supply fell drastically. He said: "We are currently supplying sand to the old projects
and new orders have fallen by more than 50 per cent." Secretary of Bangladesh Sanitary and
Tiles Merchandising Association Afsar Uddin Khan said demand for their products was falling
every year. He said their main buyers were from the real estate and housing sector, but the
market demand in the last two years declined by more than 60 per cent.
News source: http://www.thefinancialexpress-bd.com/2014/12/28/73085
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Daily News Recap
BD draws world
attention in telecom, ICT in 2014
The country's telecom and ICT (information and communications technology) sectors passed a
significant year in 2014 achieving remarkable progress in technology and services, reports
BSS. Bangladesh Telecommunication Regulatory Commission (BTRC) data shows that the
growth in mobile users was robust in the outgoing year as it reached at close to 120 million at
the end of November when the number of landline phone subscribers was over 10 million. The
cellular phone operators have brought all 64 districts under "3G" coverage. Some 45 million
people are using internet when around 0.60 million free-lancers are working in the IT sector,
generating nearly US$300 million from outsourcing in the past 11 months until November. Another project is going on to develop 55,000 free-lancers to expedite income from outsourcing. A
report of the Washington-based global IT research organisation Information Technology and
Innovation Foundation (ITIF) noted that use of ICT products among the mid-income people of
Bangladesh increased by 81 per cent while 167 per cent among higher income people and 52
per cent among lower income group.
The rapid expansion of telecom and ICT-based services has also opened a new horizon for the
unbanked people in the country through the innovative mobile banking services. Currently
around 25 million registered customers of mobile banking are transacting nearly Tk 3.23 billion
daily through 0.51 million registered agents across the country. Both mobile and land phones
and internet are also being used for providing people with some basic but essential services like
telemedicine, online birth registration, online TIN (tax identification number) certificate, online
application for passport and information about market prices and obtaining orders from buyers
and sellers. Bangladesh was elected member of the International Telecommunication Union
(ITU) Council for the second times, and won the Global ICT Excellence Award and ITU eGovernance award.
On October 27, Bangladesh was elected the member of the ITU Council for the second consecutive term for the Asia Pacific region in a strong competition. The country secured the 7th position, bagging 115 votes among the 13 Council members from this region elected for a four-year
term. A total of 18 countries took part in the election for the Asia and the Oceania zone, held at
Bussan City of South Korea. The country also won global ICT award for its advances in information and communication technology. A committee of the World Information Technology and
Services Alliance (WITSA), comprising experts from 80 member-countries, selected the awardees in recognition of their innovative work in the information technology sector. On June 10,
Bangladesh won ITU e-Governance award, which is commonly known as WSIS award. The
WSIS Award is a global recognition with regards to creation, distribution, use, integration of
ICTs in economic, political and cultural activities in the country.
News source: http://www.thefinancialexpress-bd.com/2014/12/28/73053
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Daily News Recap
Bangladesh Bank is set to embark on a two-step programme to ensure that the loan situation of
BB cranks up vigilance on large borrowers
the sector's large borrowers do not go out of hand. The decision was arrived at a board meeting
last week after analysing the banks' large loan portfolio. “The large borrowers have become a
threat to the health of most banks,” said a BB official preferring not to be named. For instance,
the central bank's most recent stress tests found that one state-owned commercial bank, 18
private commercial banks and four Islamic banks would be in a precarious situation if their top
three borrowers defaulted. Furthermore, the sector's capital adequacy ratio may drop 2.69 percent to take it below the critical 10 percent. At present, the banking sector's CAR is a little over
10 percent. “Banks have become hostage to a number of big borrowers,” said Nazrul Huda, a
former deputy governor of the central bank. Many of the large borrowers have been lobbying for
long-term restructuring of their loans and the banks too are in favour of the move, as it prevents
their default loan portfolios from ballooning.
While it is true that many of the large borrowers have been affected by the global recession and
the political instability, many have taken irregular facilities, according to Huda. “Steps to recover
these loans through restructuring are required. On the other hand, those who took illegal leverages need be identified and legal action taken against them,” he said, while citing the successes of neighbouring India as an example. Subsequently, the central bank is set to form a highpowered panel led by one of its deputy governors this week to closely monitor the performance
of the large borrowers and devise a mechanism to restructure their risky loans. Restructuring is
different from rescheduling in that a brand new repayment package would be suggested -- instead of simply extending the loans' maturity period -- after analysing the borrower's assets and
liabilities as well as the health of his/her businesses.
Sadiq Ahmed, a member of the BB board, said the economy has been growing at a
“respectable pace” of 6 percent per year and the government wants to increase the rate to 7
percent and beyond. But for that, a healthy and stable banking sector is critical -- and the loan
servicing capabilities of the large borrowers are central to that. Since they pose special risks to
the health of the banking sector, BB will pay special attention to them, said the former World
Bank high official. About the need for restructuring, Ahmed said: “The board members are mindful that in a market economy unforeseen circumstances can adversely affect the business of
borrowers and in extreme circumstances bank loan restructuring might become necessary to
set the business on a viable path.” In that regard, the board members agreed that it was best to
have a well-defined loan restructuring policy that will provide the business case for restructuring
instead of case-by-case ad-hoc decisions based on connections, he added.
“The board will also watch the full compliance with single/group borrower exposure limits as per
Bangladesh Bank policy, because of the special risk posed by large borrowers to the health of
the banking sector.” Many of the sector's large borrowers happen to be the largest borrowers of
a number of banks. Instead of each bank extending restructuring facility to the borrower separately, Huda suggested that the banks should get together and jointly analyse the loan portfolio
to propose a suitable restructured package. Huda stressed that restructuring must be offered in
such a way that it not only ensures loan recovery but also prevents repetition of the scenario.
The central bank last rolled out restructuring scheme in 2002 but no borrower was able to avail
the facility.
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Daily News Recap
As of September, the sector's top 20 borrowers account for around Tk 43,000 crore, which was
8.7 percent of the total loans then. Of them, one borrower, who has a range of business interests, owes around Tk 7,000 crore, which is the highest. On the second spot is another conglomerate, which owes more than Tk 6,000 crore. The next three slots go to a commodity businessman from Chittagong and two real estate businessmen. The five borrowers account for 60 percent of the loans. Meanwhile, loan defaults have swelled by Tk 16,708 crore in the first nine
months of the year, a development which has put the central bank in a state of great worry. “It is
a matter of concern,” said Atiur Rahman, Bangladesh Bank governor, at a meeting with chief
executives of all banks in mid-December.
At the end of September, the total defaults stood at Tk 57,290 crore, which is 11.60 percent of
the total outstanding loans, according to central bank statistics. On December 31, 2013, it was
Tk 40,583 crore, which was 8.93 percent of the total outstanding loans at the time. “While the
non-performing loans are particularly problematic for public banks, the incidence is also on the
rise for private banks,” Ahmed said. “We discussed this challenge and agreed to take necessary
actions to stem the tide of growing non-performing loans for both public and private sectors.”
News source: h p://www.thedailystar.net/business/bb-cranks-up-vigilance-on-largeborrowers-57331
BTRC decides to go
slow against Ratul,
Kay Telecom
The telecom regulator has decided to form a committee to analyse the cause and effect of licence cancellation of two IGW operators on account of huge arrear dues as the operators have
strong backup of the ruling party. Bangladesh Telecommunication Regulatory Commission officials said that the commission decided to go slow about license cancellation of Ratul Telecom
and Kay Telecom which have outstanding dues worth Tk 200 crore. Ratul Telecom is partially
owned by wife and daughter of former state minister Jahangir Kabir Nanak while Kay Telecommunications Ltd was previously owned by ruling party lawmaker Shamim Osman of Narayanganj. ‘We will form a committee to analyse the impact of cancellation of the licenses and the
chance to realise the money through the action. Because of the ruling party affiliation of the two
companies, the commission decided to take cautious approach in dealing with the two companies,’ a senior BTRC official told New Age.
He said if the licenses are cancelled then the collection of dues will be more difficult as the
BTRC will lose regulatory control over the companies. ‘Our aim is to recover the government
money. We are considering filing cases under Public Demand Recovery Act without cancelling
the licenses of the two companies,’ he said. A senior official of the telecom ministry said earlier
in December the ministry had approved a BTRC proposal to cancel the license of the two companies. ‘BTRC requested for our permission to cancel the license of Ratul Telecom and Kay
Telecom and we approved it in early December saying BTRC can initiate the process of cancelling the license,’ he said. BTRC officials said apart from Ratul and Kay, there were some other
IGW operators—Bestec, SM Communication, Vision Tel and Telex Limited— who owe the
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Daily News Recap
government Tk 523 crore in revenue sharing. They said all the six operators were out of service
because of non-payment of dues. BTRC in September last year blocked operation of 10 IGW
operators but later allowed four of them to continue as they started paying dues in instalments,
they said.
News source: http://newagebd.net/80669/btrc-decides-to-go-slow-against-ratul-kay-telecom/
#sthash.klWZdscC.dpuf
2014: A year of
RMG transformation
RMG owners have termed 2014 a transforming and learning year for apparel industry as the
year has witnessed a lot of remedial works to turn the industrial sector compliant to ensure
workers’ rights and safety. Following the Rana Plaza building collapse, which killed 1,135 workers, and Tazreen Fashions fire incident, people across the globe raised question about the
RMG workers’ rights and safety, plus electrical and structural integrity. Following the two deadliest incidents, global buyers focused on safety issues and formed Accord on Fire and Building
Safety in Bangladesh and Alliance for Bangladesh Worker Safety to promote safety standards
in the country’s RMG sector. Accord and Alliance used to source products from those factories
they completed inspection. The buyers’ platforms found less than 2% factory risky to labourers’
safety.
Garment factory owners claimed that they had done a lot of remedial works as per the recommendations of Accord and Alliance. The recommendations helped them transform the factories
and acquire knowledge about the safety issues and requirements. “The year 2014 was viewed
as a transformational year. It was also a challenging year for the RMG sector to revive from
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Daily News Recap
trouble it faced, and I think we have been able to turn around,” BGMEA Vice-President Shahidullah Azim told the Dhaka Tribune. There were a lot of challenges including propaganda over
safety issues following the Rana Plaza disaster, said Azim. “We have done a lot of remedial
works. We have overcome a crucial time. In the past, RMG owners did not have proper
knowledge about the remedies, which had been acquired through recommendations that came
after inspection of the factories by the buyers’ platforms,” Vidiya Amrit Khan, a BGMEA director,
told the Dhaka Tribune.
RMG people have to concentrate on advanced technology to boost productivity, renewable energy and green technology for sustainable development and infrastructure development to implement the upcoming big volume production, added Amrit, also a director of Desh Garments
Limited. “We are very hopeful about a vibrant RMG future since apprehensions as regards
RMG have disappeared. RMG owners and the government have to do everything in right earnest to meet the export target of $50 billion by 2021,” She added. Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) former first vice-president Mohammad
Hatem:“Challenges for the next year are to complete the remedial works and more concentration on new market exploration especially in China, South Korea, Japan and Russia.” Special
attention would be paid to negotiate with those potential countries to ensure duty-free access of
Bangladesh’s RMG products to their markets, said Hatem.
Since the world concentrates more on compliance issues, Bangladesh has to carry out the remedies as per the instructions of Accord and Alliance, said Mustafizur Rahman, executive director, CPD. If the remaining tasks are carried out as soon as possible, it would be an opportunity
for Bangladesh and buyers would place orders, added Mustafizur. Commenting on the RMG
transformation that the factory owners claim to have done, the CPD official said: “It will take
time to turn around but the process has started.” To achieve the $50bn export target he urged
the government and RMG factory owners to focus on non-traditional market exploration. Though the BGMEA claimed that it had made a lot of progress, the buyers’ platforms said
a lot more still needs to be done.
The RMG sector witnessed transformation this year and had made a lot of progress in terms of
workers’ safety but there are some challenges ahead, M Rabin, managing director of Alliance
for Workers’ Safety in Bangladesh, told the Dhaka Tribune. The challenges include implementation of remedial works within the stipulated time frame, relocation of factories, fund management for relocation of small and medium factories and the buy of genuine fire safety equipment
as they are totally dependent on import, said Rabin. Stressing the need for quick implementation of remedial works and relocation, he said: “If the implementation is delayed, it will hamper
production.” The Alliance managing director added that gas, electricity and other utility services
are mostly needed to facilitate production. Bangladesh earned $24.49bn from RMG export in
the last fiscal, which is over 81% of the total export earnings and it contributes over 10% to
GDP. The ready-made garment sector has 4 million workers, of which 80 are women, mostly
from rural areas.
News source: http://www.dhakatribune.com/business/2014/dec/28/2014-year-rmgtransformation#sthash.mGDLUR1M.dpuf
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Daily News Recap
RMG export earnings grow 5% despite all odds in
2014
Despite several challenges faced by the apparel industry, export earnings from the RMG sector
rose by nearly 5% to US$22.25bn in January-November this year compared to the same period
last year. According to the Export Promotion Bureau (EPB), Bangladesh fetched $22.25bn in 11
months of 2014, which was $21.22bn in the previous year. The knitwear export during the period stood at $11bn with a rise of 6.723% from the previous year’s $10.4bn. Woven products
earned $11.15bn growing at 3.05% as the previous year’s figure was $10.8bn, EPB data
showed. “The ready-made garment export has witnessed slow growth this year as it witnessed
belated impacts of Accord and Alliance’s inspection coupled with political unrest, but this growth
was expected and realistic,” Abdus Salam Murshedy, president of Exporters Association of
Bangladesh (EAB), told the Dhaka Tribune. “Bangladesh needs to wait two to three more years
to get the robust growth as some of the factories are still facing the challenges,” said Salam,
also former president of Bangladesh Garment Manufacturers and Exporters Association
(BGMEA).
He said the next year will be a challenging one as remediation work is still underway. In 2013,
Bangladesh’s RMG sector faced several accidents, including the deadliest Rana Plaza collapse, which killed over 1,135 workers, intensified political violence and repeated labour unrests. These incidents has also affected the sector in 2014. According to the BGMEA, a good
number of factories has faced music from the Accord and Alliance inspection over noncompliance issues regarding workers safety, causing adverse impact on the export earning.
After the Rana Plaza disaster, a total of 220 small and medium factories faced shutdown while
Accord and Alliance closed 29 factories following their inspection.
The RMG manufactures and exporters, however, expected bright days for the apparel industry
in the new year. “Export earnings will start to grow in the first quarter of the next year, as a number of new factories will contribute to the export basket from the next year,” BGMEA Vice President Shahidullah Azim told the Dhaka Tribune. Azim, however, put importance on infrastructural
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Daily News Recap
development to cope up with the new production demand saying infrastructure deficit, if not
improved, might hamper the supply chain in the country, causing sluggish growth. “Bangladesh
is losing competitiveness in the global market while our competitors are getting stronger due to
the government’s extended support,” said Azim. To be more competitive, Bangladeshi RMG
sector also needs cash incentives and policy support from the government, he said. BGMEA
has set an export target of $50bn by 2021 to mark the 50 years of Bangladesh Independence.
Bangladesh government has set an export target of $26.9bn from the RMG sector for the fiscal
year 2014-15. As per BGMEA data, over 40 lakh workers are employed in the industry and 80%
of them are women mostly from the rural area.
News source: http://www.dhakatribune.com/business/2014/dec/28/rmg-export-earnings-grow-5despite-all-odds-2014#sthash.VKB6qN6Y.dpuf
Economy
Customs duty on
4,610 products reduced for SAFTA
members
Customs duty (CD) on a total of 4,610 products have been reduced for SAFTA (South Asian
Free Trade Area) member-countries under an agreement to bring down the tariff rates to the
range between zero and five per cent by 2016. The Customs wing of the National Board of Revenue (NBR) issued a Statutory Regulatory Order (SRO) recently by reducing the CD on import
products under the SAFTA list for the calendar years 2013 and 2014. With the recent SRO,
importers having SAFTA Rules of Origin Certificate (ROO) will be able to enjoy a reduced duty
on import of the products from member- countries. The reduced rates of CD will be considered
effective retrospectively for products imported in January-December periods of both 2013 and
2014. The SAFTA is a regional co-operation agreement signed among the member-countries
of the SAARC that comprises Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, Sri
Lanka and Afghanistan. The main objective of the agreement is to strengthen intra-SAARC
trade cooperation.
The agreement was signed on January 06, 2004 at the 12th SAARC Summit in Islamabad and
it entered into force on January 01, 2006. The agreement outlines a 10-year schedule for trade
liberalisation, which aims at reducing and eliminating customs duties on cross-border trade.
According to the schedule, customs duties on all products should be lowered and the rate
should not be above 5.0 per cent. The cut was aimed to enhance trade facilities among the
SAARC member-countries. With issuance of the latest SRO, dated December 17, 2014, the CD
on basic raw materials and capital machinery has been lowered to 2.025 per cent and 1.35 per
cent for 2013 and 2014 respectively. The base-rate of the products was 6.0 per cent that was
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Daily News Recap
reduced to 2.7 per cent in phases earlier up to l 2012 for SAFTA countries.
The CD on intermediate goods, raw materials and chemicals has been set at 6.2625 per cent
for 2013 and 5.175 per cent for 2014, from 7.35 per cent in 2012. However, the base rate of CD
was 13 per cent for the products in 2006. The CD on finished and luxury goods, that fall under
the higher slab of duty, has been lowered to 11.5625 per cent and 9.375 per cent for 2013 and
2014 respectively. The CD rate was 13.75 per cent in 2012 coming down gradually from the
base rate of 25 per cent. A senior official said as per the agreement, SAARC member-countries
would reduce the customs duties for their member-countries every year that would continue
until 2016. Importers and exporters will enjoy the reduced rates in the SAFTA membercountries while other countries will have to pay duty at normal rates for the products, he said.
The official said, before issuance of the SRO, importers were paying CDs at the last reduced
rate in 2012 for import of products.
He said importers, having SAFTA ROO certificate, would be able to claim refund of the paid
taxes after the SRO was published. The list of products under reduced CD for 2015 has already
been prepared and is awaiting consent of the Law Ministry, he added. The official, however,
expressed his doubt over significant outcome from the SAFTA as non-tariff barriers are high
among major countries. He said the SAFTA list does not contain major cross-border trade products of the SAARC countries.
News source: http://www.thefinancialexpress-bd.com/2014/12/28/73083
BD may export rice
to India
Bangladesh is mulling rice export to India as it has exported the first consignment of rice to Sri
Lanka today. Senior officials said a proposal from India to export rice to Uttar Pradesh is in
place. The proposal for exporting 30,000 metric tonnes (MT) of rice is under active consideration of the government. Director General (DG) of Food Sarwar Khan told the media during departure of MV Banglar Kakoli with 12,500 metric tonnes of boiled rice from Chittagong Port for
Sri Lanka. He said that Bangladesh has sufficient stock of rice now from which the country can
export 0.1 million MT of rice. Sri Lanka has signed an agreement to buy 50,000 MT of rice at
the rate of US$ 450 per metric tonne. If discussion proceeds successfully Bangladesh will export another 30,000 MT of rice to India in the near future, he said.
The first consignment of 12,500 MT of rice was sent today in the first phase of 25,000 MT of
rice while the rest will be exported soon. The second consignment of 12,500 MT rice for export
to Sri Lanka will be loaded in another vessel of the state-owned Bangladesh Shipping Corporation (BSC), he said. Senior officials of the department of food, BSC, Chittagong Port Authority
and Chittagong Custom House were present on the occasion at jetty no. 3 of the seaport this
afternoon. The BSC vessel MV Kakoli set sail for the Sri Lankan port of Colombo from Chittagong Port at 1.50 pm on Saturday with the beginning of the high tide. Bangladesh had earlier
exported aromatic rice to other countries in small quantities but this is the first time that the
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Daily News Recap
country is exporting rice in bulk quantity as it claims itself to be self-sufficient in rice production
now. Though the public sector import of rice had been negligible since last fiscal (2013-14), the
import of the same by the private sector has been on the rise during the period. The private
sector imported 371,000 metric tonnes of rice during the last fiscal and the import of the country's main staple food until December 22 this fiscal was 454,000 MT.
News source: http://www.thefinancialexpress-bd.com/2014/12/28/73088
GDP growth may
fall short of target,
fears UO
The rate of growth in gross domestic product (GDP) may fall short of the target due mainly to
the economic factors-sluggish investment, infrastructural underdevelopments, unsatisfactory
collection of revenue vis-à-vis target, low-performance in external sector, and non-economic
factors - institutional weaknesses and current political uncertainties. This was revealed by Unnayan Onneshan (UO), an independent multidisciplinary think tank, in its half yearly assessment of the economy for FY 2014-15, reports UNB. The UO also suggests an urgent inclusive
political dialogue that reducing the exigencies of current political uncertainly will ensure consolidation of democracy through regular transfer of power and cause the economy to grow faster.
The UO after a rigorous assessment of the trends of major macroeconomic indicators during
the first half of FY 2014-15 projects that if the business as usual situation continues the rate of
growth in GDP falling short of the target of 7.3 per cent may stand at 6.26 per cent at the end of
the current fiscal year.
Taking account of the impact of non-economic factors such as political uncertainty together with
underdeveloped infrastructure, the think tank opines that industrial production has been badly
affected by the current uncertain political situation-induced risky investment climate. As regard
declining private investment, the think tank shows that private investment as percentage of
GDP has been on the decline since FY 2010-11. In FY 2011-12, private investment stood at
22.50 per cent, which reached to 21.75 per cent and 21.39 per cent in FY 2012-13 and FY 2013
-14 respectively. Referring to increased gap between savings and investment, the research
organisation evinces that in FY 2012-13 and FY 2013-14, the national savings were 30.53 per
cent and 30.54 per cent, whereas the total investment were 28.39 per cent and 28.69 per cent
of the GDP representing 2.14 and 1.85 percentage point gaps respectively.
Pointing to the economy's lagging behind other developing economies in collecting revenue, the
UO demonstrates that the tax-GDP ratio stood at 9.7 per cent against the target of 11 per cent
in FY 2013-14. Meanwhile, the ratio stood at 13.9 per cent and 12 per cent in Nepal and Sri
Lanka respectively in 2013. The total number of the holders of Taxpayers Identification Number
(TIN) is only 1.70 million which is only 1.09 per cent of the total population against 6.90 million
people of taxable income. Among the total number of TIN holders, only 0.86 million people that
represent 0.54 per cent of the total population submitted their tax returns in November 2014.
Referring to institutional weakness of the economy, the research organisation says "country's
banking sector is caught in trap and is characterised by high interest spread, excess liquidity
and declining growth in disbursement of credit to private sector coupled with poor risk manage
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Daily News Recap
ment, fraudulence, captured governance and lax oversight."
In FY 2010-11, the rate of growth in quantum index of production (QIP) was 16.95 per cent,
which decreased to 10.79 per cent in FY 2011-12 and slightly increased to 11.59 per cent in FY
2012-13. Later on, the index drastically fell and stood at 8.3 per cent in FY 2013-14. The research organisation has called for an expedient seven-point policy measures - improved international diplomacy, employment enhancement strategies, higher revenue collection through
expanding tax base, institutional reform in financial sector, increased private investment through
incentivising investors, narrowing interest rate spread through effective harmonisation of macroeconomic policies, and development of a functional social security system.
News source: http://www.thefinancialexpress-bd.com/2014/12/28/73047
Capital Market
The government plans to embark on an ‘inclusive capital market reform programme’ with partici-
Inclusive capital
market reforms’ in
offing
pation of pension and provident funds and introduction of Islamic bonds to energise the ailing
stock business. Six broad areas of policy interventions are the salient features in the planned
reforms under an ADB-financed programme, a senior finance ministry official said. The ministry
officials appeared optimistic about the planned reforms as two similar programmes of ADB
brought about significant development in the capital market. The programme is expected to kick
-start from the beginning of next year. A processing mission of Asian Development Bank after a
week-long visit to Bangladesh this month hinted to lend US$ 250 million for the programme
called ‘Third capital market development programme’. ‘We have given the go-ahead to ADB,
and primarily agreed to implement the policy interventions and bring about reforms in the capital
market so that a lasting sustainability exists in the stock business,’ a finance official told New
Age.
The project is aimed at making sure that the capital market is more effective in mobilising resources to support the economy’s financing requirements to promote growth and development,
he added. The ADB-prescribed reforms were agreed by the regulators including finance ministry, Bangladesh Bank, and Securities and Exchange Commission during a series of meetings
with the ADB mission early this month, officials concerned said. A formal loan agreement for
US$ 250 million would be signed soon to this effect, they said. The areas of reforms to be implemented are : introducing corporate bond market, catalyzing institutional investors’ demand,
pension and provident fund participation in stock business, strengthening the insurance sector,
promoting Islamic bond market development and encourage ‘Sukuk’ issuance, promoting private equity fund participation and mutual fund activity in the capital market and establishing a
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Daily News Recap
clearing house to promote development of derivatives.
Officials concerned at the SEC and finance ministry said the proposed reforms, if brought in the
policy perspective, would give the capital market a firm platform to stabilise the market and entice institutional and portfolio investors. They said they had been relentlessly working to
strengthen the market through participation of pension and provident fund, but faced hindrance
as some vested quarters oppose the move. ‘Once we will pursue the issue under a programme
which involves huge lenders’ money, things will become easy to go through,’ a high official at
the finance ministry said. Under the previous two ADB-sponsored development programme, the
government established a special capital market tribunal and a state-of-the-art surveillance system at the SEC, capped the commercial banks’ total direct and indirect exposure to the stock
business and brought changes in the margin loan regulation. The amendments to Bank Companies Act, SEC Act 1993 and Insurance Act were also made under two previous programmes of
the ADB, sources said.
News source: http://newagebd.net/80667/inclusive-capital-market-reforms-in-offing/
#sthash.V79EFSN4.dpuf
Company
The state-run ICB (Investment Corporation of Bangladesh) has received Tk 2.16 billion from the
ICB gets Tk 2.16b
from govt for rights
shares
government for subscription of the company's rights shares, officials said. "We received the
cheque of Tk 2.16 billion on Wednesday last from the Ministry of Finance (MoF) for subscription
of rights shares," ICB managing director Md. Fayekuzzaman told the FE. He said as per the
rights offer, the government was supposed to pay Tk 2.84 billion because of its stakes in the
Corporation. "Due to its stakes in the Corporation, the government will get Tk 680 million in the
form of dividend. The government's payment worth Tk 2.84 billion for the subscription of rights
shares has become fulfilled due to its payment of Tk 2.16 billion and non-realisation of dividend
portion worth Tk 680 million," Mr Fayekuzzaman said. Contacted, a senior official of the MoF
said the ministry sent the cheque to the ICB on December 15 last. As per the company's rights
share offer document, the board of directors of the Corporation, in a meeting held on February
14, 2013, decided to raise the paid-up capital through the issuance of rights share at a ratio of 1
(R): 2, i, e, one rights share against two existing shares. Later, the shareholders approved the
rights offer at the company's extraordinary general meeting (EGM) held on December 13, 2013.
In early August, 2014, the Bangladesh Securities and Exchange Commission (BSEC) approved
the rights offer of the ICB for over 21 million shares of Tk. 100.00 each at an issue price of Tk.
500.00 per share, including a premium of Tk. 400.00 for each share. The purpose of the issuance of rights share is to boost the company's capital base for the sake of sustainable growth
and stability in the capital market.
News source: http://www.thefinancialexpress-bd.com/2014/12/28/73082
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Daily News Recap
BRAC Bank deal
with Midland Bank
to help boost remittance in-flow
BRAC Bank has recently signed an agreement with Midland Bank Limited. Under this agreement, Midland Bank will execute Xpress Money remittance transactions from all of their outlets
as a sub-agent of BRAC Bank Limited. "This agreement is a significant development to increase
the remittance inflow through banking channel," an official of Midland Bank told The FE Saturday. According to a recent World Bank report, Bangladesh is estimated to receive US $15bn as
remittance this year. Bangladesh has a fast-growing labour population, which is increasing every year, as an estimated 0.4 million Bangladeshis migrate to foreign shores in search of a better
livelihood. The two pre-requisites for increasing the amount of remittance to the country would
be, migration of skilled workforce and receiving remittance through legal channels.
The government is making efforts to send skilled workforce to various job markets under the
Government-to-Government (G-to-G) system. It has set up several training centres across the
country to improve their skill-sets, impart training in different subjects and educate potential
migrants on safe remittance practices. A five percent growth in remittance inflow to developing
countries has been projected in the World Bank report. "Remittance flows into Bangladesh have
shown remarkable resilience in the economy, not only during but also after the global crisis. It is
growing at a CAGR of 5 per cent with $ 14.22 billion in 2013-14 up from $ 10.98 billion in 200910. These remittances through legal channels have helped Bangladesh transform from a least
developed country to a middle income nation," an industry insider said.
"One of the main barriers to the growth in remittance is the existence of the undocumented
channel - Hawala. With this channel, there is always a risk of the middlemen running away with
the money or the money being used for illegal purposes that can pose as a threat to the security
of the country," a senior official of Xpress Money said. "The Bangladeshi government can address this barrier by implementing the free remittance scheme and offer a rebate to the banks
or money transfer operators, like few countries in the world have successfully implemented.
Additionally, it can also start incentivizing customers who use formal money transfer channels.
Furthermore, the government encourages money transfer operators like us to organize grassroot level activities year-on-year across Bangladesh which talks about safe remittance practices, and sending money through legal channels."
"Since its inception in 2003, Xpress Money has been playing a very important role in the Bangladesh remittance industry, with a share of around 10 per cent in the organised market. We
offer a plethora of services to our customers, catering to different customer needs and requirements. We have become one of the leading foreign remittance players in Bangladesh with a
wide network of 11,000 agent partners with associations with all leading banks in the country.
This makes remittances easily accessible to the beneficiaries residing in remote towns and villages at very affordable rates," the Xpress Money source added. Engaging with the Bangladeshi customers at the grass-root level through financial awareness camps and road shows are
an intrinsic part of our marketing plan. We, also, run promotions during festivals such as Eid-ulFitr and Eid-ul-Azha, adding value to the transactions through special gifts. "Infrastructural developments in key send markets with events such as Expo 2020 and FIFA 2022 will lead to a
huge demand for skilled and semi skilled Bangladeshi workforce. Owing to this, we are expecting a 15-20 per cent rise in remittances to Bangladesh through our channel," the Xpress Money
source said.
News source: http://www.thefinancialexpress-bd.com/2014/12/28/73028
13
Daily News Recap
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