Jumana Rezwan's Canvass

Changes in Consumer Behavior as Hartals Take a Toll on Domestic Consumption.

The series of shutdowns has led to a marked change in the purchasing behavior of domestic consumers.  Demand for certain goods, such as groceries and basic necessities, is inelastic and businesses providing these goods will likely continue to maintain profitability.

Worst hit, however, are those businesses that depend on impulse, convenience, or high involvement purchases to sustain their profitability. This is particularly seen in the entertainment and clothing industry.  For example, forced closures during hartals undermine clothing sales at small boutiques in the lead up to important national occasions such as Language Day, Pohela Falgun and Boishak.

Given that these shutdowns are likely to continue until the election of the new government, companies catering to a niche market have to think of alternative means of engaging consumers to ensure that specialty goods sales do not hit rock bottom.

The trend has already started in the fashion retail industry where many smaller boutiques and independent business are turning to e-commerce and using social media such as Facebook and Pinterest to conduct sales. These businesses offer online catalogues of their goods, which can be ordered via telephone, text message or email and delivered to the customers’ doorstep.  In many cases, deliveries can take place on weekends when roads are less crowded, resulting in lower fuel charges.

This business model may prove feasible if targeted at younger more tech savvy consumers.  Moreover, it might further incentivize telecom companies to upgrade their services in order to permit greater use of multimedia messaging services and other features to facilitate e-commerce.

http://www.thedailystar.net/beta2/news/shutdowns-slash-sales-of-processed-foods-beverages/

http://www.thedailystar.net/beta2/news/small-boutiques-on-edge-as-political-strife-far-from-over/

Joint Media Awards for Anti-Corruption Reporting

Four media personnel were recognized for their efforts in exposing issues related to mismanagement  of public finance and corruption across different industry sectors .  The Thomas Media Foundation  2012-2013 Inquirer award recipients investigated various cases of corruption or a lack of transparency within the health sector, Bangladesh Railway and public banks. Their reports not only revealed details of misappropriation of public funds but they also highlight the potential for high quality investigative journalism in Bangladesh.

Such awards perhaps mark the emergence of a new era in Bangladeshi society, where the media has become increasingly empowered.  Reflecting greater press freedom, media outlets have aggressively covered a wave of corruption scandals surrounding the Padma Bridge and Hallmark- Sonali Bank loan scandal.  As a result, the general public is more aware of the causes of corruption and in a better position to demand change. 

With greater oversight, perhaps the time has come for government agencies and private sector companies to initiate changes and incorporate ethical practices in their operations to avoid public relation disasters that will tarnish their image. To ensure that this positive trend continues it will be necessary to continue to reward good journalism and to ensure that reporters are given adequate protection and security from those entities who fear being exposed for their wrongdoings.

 http://www.thedailystar.net/beta2/news/media-award-to-stamp-out-corruption-in-bangladesh/ 

Weekly News Clipping (28 March 2013)

Banks Warned Against Higher Deposit Rates (The Daily Star; March 27, 2013)

The central bank has warned 17 commercial banks, including two foreign ones, against offering higher interest rates on deposits as the practice would fuel an unhealthy competition and distort the monetary system. Though Bangladesh Bank (BB) has not set any ceiling, the Association of Bankers Bangladesh Ltd, a platform of banks’ chief executives, has set the limit at 12.5 percent through an informal understanding between banks. However, a BB survey found that at least one or more branches of these 17 banks have offered interest rates higher than 12.5 percent for deposits.

Dhaka Among Worst Cities For Global Business  (The Daily Star; March 27, 2013)

Dhaka is among the 10 lowest ranking cities in the world for recruitment, employment and relocation according to a recent study. Of the 138 cities selected by Aon Hewitt, an American human resource consultancy firm, Dhaka came in at 130 of the People Risk Index. The index looks at demographics, access to education, talent development, employment practices and government regulations. The points in each category are tallied into a scale from 25 to 250, where 25 represents minimal or no risk and 250 extreme risk. Dhaka scored 180, the same as Tripoli but better than Karachi, Baghdad and Damascus.  More information can be found at https://aonpeoplerisk.com/2012-Update

Meena Bazar Accelerates Effort to Provide Safe Food (The Daily Star; March 26, 2013)

 Meena Bazar of Gemcon Food & Agricultural Products Ltd (GFAPL) has signed an agreement with Bangladesh Council of Scientific and Industrial Research (BCSIR) to facilitate testing and certifying its consumable raw and processed food products against food safety parameters for consumption. BCSIR will test and certify the food samples randomly collected or supplied by GFAPL against national standards for human consumption. Gemcon will now use the label ‘Tested by BCSIR’ along with the logo on the products to let consumer know about food quality and safety. (Disclosure: ULAB is a concern of the Gemcon group.) 

Ctg BGMEA Opens New Horizon for Students (The Daily Star; March 25, 2013)

Students in the port city looking to build a career in the garment sector can expand their horizons as the Chittagong BGMEA Institute of Fashion and Technology offers four-year undergraduate courses on fashion design, apparel manufacturing and technology.  The institute also plans to introduce four-year BSc honours courses on knitwear manufacturing and technology, textile engineering and textile management, MBA and diploma programmes with an aim to develop competent technical professionals for the garment sector.  The institute has been offering various diploma, certificate, and short courses since 2002.

 

FDI Rules Putting Off Investors (The Daily Star; March 25, 2013)

 Complicated entry procedures and weaknesses in regulatory framework, is preventing the desired levels of foreign direct investment (FDI) in Bangladesh, according to a report by the United Nations Conference on Trade and Development (UNCTAD). The report also identified issues, such as, congested roads, unreliable power supply, poor access to remote areas and lack of a deep sea port, among others, which should be addressed if FDI is to play a bigger role in the country’s development. Inward FDI volumes in relation to population and GDP have been 50 percent lower than the inflows to other populous low-income countries such as India and Indonesia.  The report is not yet available, however, UNCTAD’s 2012World Investment Report can be found at: http://unctad.org/en/PublicationsLibrary/wir2012_embargoed_en.pdf

GDP Growth May Hit 6.8pc: BBS (New Age; March 24, 2013)

According to the Bangladesh Bureau of Statistics, the Gross Domestic Product (GDP) of Bangladesh in the current fiscal year 2012-2013 may hit 6.8 percent, which is slightly higher than its previous estimate of 6.66 per cent.  While this is lower than the government’s targeted 7.2 per cent, multilateral lenders, including the International Monetary Fund (IMF), World Bank and Asian Development Bank (ADB), projected the GDP growth rate to be far lower--between 5.5 to 6 per cent. They projected lower rates based on weak domestic demand, sluggish local and foreign investment, and energy shortages.  

60pc decline in sales of flats, plots in 6 months (The Financial Express; March 24, 2013)

A Real Estate and Housing Association of Bangladesh (REHAB) spokesman reported that during the last six months there has been a decline in the sales of both flats and plots of at least 60% as a result of lack of gas and electricity connections, non-availability of bank credits, and an increase in land prices and the cost of construction materials.  In addition, REHAB is protesting moves by the Central Intelligence Cell of the National Board of Revenue to collect information on clients as a means to prevent money laundering in the real estate sector.  The business association contends that the drive has created panic among buyers and businessmen and requested the Ministry of Finance to de-list the real estate sector as a target for money laundering concerns. 

Drilling starts at new Titas gas well (The Daily Star; March 23, 2013)

The state-owned Bangladesh Gas Fields Company Ltd (BGFCL) has started drilling its 18th well in the Titas Gas Field in Brahmanbaria. The 3,200-metre deep well is expected to produce 25-30 million cubic feet of gas every day. The work is likely to end by June. BGFCL now operates six gas fields–Titas, Habiganj, Bakhrabad, Narsingdi, Meghna and Kamta–which have 32 functioning wells producing 765 million cubic feet of gas everyday. The gas produced by the six fields is 37 percent of the total gas being supplied to the national grid.

China offers $1.95b to build Padma Bridge (The Financial Express; March 22, 2013)

A Chinese consortium, backed by a government-owned bank, has officially proposed to channel $1.95 billion to construct the Padma Bridge without interest and a payback period of 20 years. The offer has estimated the cost of Bangladesh's largest ever infrastructure project at $2.79 billion. A previous agreement with the World Bank had put the cost at $2.9 billion. According to the latest proposal by the Chinese, Bangladesh will have to source the rest of the money – which is roughly 30 percent of the total cost - and appoint a firm to supervise the construction work. The fees for that firm will have to be paid by the government. Bangladesh would need to repay $8.15 million a month for 20 years if the agreement is signed for the 6.15-kilometer-long multipurpose road-rail bridge.

Bangladesh Riots Threaten Its Boom (The Wall Street Journal; March 21, 2013)

The Wall Street Journal provides a critical assessment of the current political instability’s impact on the economy.  Political violence in Bangladesh is pushing investors to look for new manufacturing bases. Foreign companies that had flooded into the country now speak of it in the past tense.  As one buyer stated, “How many eggs do you want in a basket that's basically a powder keg?" An upswing in the past few years that had transformed the impoverished country into one of the world's top clothing exporters is losing its momentum after a series of tumultuous events.

Weekly News Clippings (21 March 2013)

HC asks Government to demolish BGMEA Bhaban in 90 days (The Financial Express, March 20, 2013)

Due to illegal occupancy of the government’s land on Hatirjheel Lake, the High Court has ordered the authorities concerned to demolish the BGMEA Bhaban within 90 days. Last year, the court had declared the high-rise as illegal and had ordered for its demolition. According to the court, the land on which the building stands is the property of the government. It was initially acquired for the railway in 1960. However, the Export Promotion Bureau gave the land to the BGMEA by a memo, in 1998, which was an illegal act, as EPB did not own the land until 2006.

Wal-Mart 'to reduce reliance on BD (The Financial Express, March 20, 2013)

Wal-Mart (WMT) has plans to reduce its reliance on Bangladesh. According to a report, published in Women's Wear Daily, the world's largest retailer intends to stop sourcing from Bangladesh from early next year. Wal-Mart has options to tap the labour markets in China and Cambodia where workers’ safety laws are more stringently regulated and monitored. Bangladesh is the world's second largest apparel exporter with an industry worth $19 billion.  

Exports to EU likely to be severely hit if India, EU sign FTA: Experts (The New Age, March 21, 2013)

Export of readymade garment, to European Union will be adversely affected in the long run if India and EU signed a proposed free trade agreement, according to experts. A study conducted by Bangladesh Foreign Trade Institute, listed the industries mostly likely to be affected because of the deal, which include-- RMG, textile, fish and aquatic products, footwear, rawhides and leather, tobacco and manufactured tobacco substitutes and ceramic products. Exporters will also lose 2-3% of profit if EU reduced tariff to 5 per cent from the existing 12 per cent for RMG products.

Foreign investors, buyers shying away from Bangladesh (The Financial Express, March 20, 2013)

The recent political unrest has taken quite a toll on foreign investments and export-oriented businesses. Faced with strikes, foreign buyers and investors may decide to divert their investments to countries like Myanmar, Cambodia and Vietnam. A large number of foreign buyers cancelled their visits to Dhaka during the last two months and many of them threatened to cancel shipments and orders. Import of raw materials, transportation and shipments of finished goods has also been seriously hampered due to frequent strikes or hartals.

Strikes, political unrest take toll on RMG sector (New Age, March 18, 2013)

The RMG sector has expressed its concern at the rise in the production cost due to rampant strikes and political unrest. Exporters claim to be incurring huge losses in the form of wages for longer working hours and cost of air shipments to maintain deadlines. They are worried that a number of small and medium sized companies would be forced out of business as they have been facing threats of discount, cancellation of orders and deferred payment from buyers.

Bangladesh identified as "star performer" (The Guardian, March 17, 2013)

According to a groundbreaking academic study, some of the poorest countries in the world have successfully managed to shrink poverty levels. The report by Oxford University's poverty and human development initiative identifies Bangladesh as one of the "star performers" along with Rwanda and Nepal.

Trade deficit decreases by 29.36pc in 7 months (New Age, March 16, 2013)

The country’s trade deficit in the current fiscal year has decreased by 29.36 per cent compared to that of last year’s, mainly due to negative import growth, according to Bangladesh Bank officials. However, the lowering of deficit does not necessarily have any positive impact on the country. A decreased import of capital machinery and industrial raw materials, which are essential for an emerging economy like Bangladesh, contributed significantly to the reduction in trade deficit.