Weekly News Clippings (2 May 2013)
Garments from Bangladesh currently enjoy preferential
access to EU markets; however, in order to pressure Bangladesh to improve
safety standards in the wake of the Savar tragedy, the European Union is threatening
to reconsider this preferential trade status.
A statement issued by the EU foreign policy chief implored Bangladesh to
comply with international labor standards.
Bangladesh exports an estimated $3.4 billion in garments to Germany, $2.13
billion to the UK, $1.71 billion to Spain, and $1.27 billion to France.
The National Board of Revenue (NBR) has
vehemently objected the government’s move to set tax revenue collection target
at Tk 1,36,000 crore for the upcoming 2013-2014 fiscal year. The NBR recommended
to set it at Tk 1,25,000 crore as it considered the government’s target as
“unrealistic and unachievable” amid the ongoing political unrest and global
recession. The NBR chairman said that overall macroeconomic factors along with
political tension are not in favour of higher growth target for revenue
collection as export, import and business activities are on the decline and
because of the depreciating value of the dollar against the taka.
The government is going to borrow more
than $800 million from the overseas banks to pay the oil import bills due to
costly rental power plants. The annual bill for the fuel oils import hit close
to $5 billion last year with Bangladesh’s oil imports mounting up to 5.2
million tonnes. According to the Energy Division officials, the state-owned
Philippine oil producer (PNOC) agreed to provide $328 million credit at 4.5 percent
interest while, Standard Chartered Bank, HSBC and Citibank NA will lend $250
million at 5.03 interest rate.
Bangladesh
should take initiatives and develop long-term plans to boost the Information, Communications
and Technology (ICT) sector, which has the potential to become a billion dollar
industry, according to experts. Bangladesh Association of Software and
Information Services (BASIS) and The Asia Foundation organized a roundtable
titled “Facilitating policy reforms to encourage private sector investment in
ICT,” where speakers said that negative policies and regulatory issues are
denting the confidence of Bangladeshi expatriates in the USA who would
otherwise be willing to invest in the local ICT sector. Policy reforms for
software export and import, easy regulation, content development efforts by the
government, tax waiver for internet use, and easy bank loans can uplift the ICT
sector in a major way.
BB
goes tough on lending to buyers of buildings, floors (The Daily Star, April 29, 2013)
The
central bank has cautioned all commercial banks financing projects related to
construction and land development. The banks will be required to verify whether
the credit applicant has adhered to the Building Construction Act 1952,
Bangladesh National Building Code 2006, Bangladesh Environment Protection Act
1995, Fire Prevention and Extinguishing Act 2003 and other applicable laws and
rules before financing such projects. Bangladesh Bank made the decision after a
non-compliant building, Rana
Plaza, collapsed in Savar
on April 24, 2013, killing more than 350 people and injuring thousands.
Policy
Research Institute (PRI), a leading think-tank has urged the government to
privatize state-owned banks, which currently operate in an adverse environment
of political intervention and weak governance. In a paper titled “Banking
Sector in Bangladesh: Progress, Challenges and Agenda for Reforms”, Sadiq
Ahmed, vice-chairman of Policy Research Institute (PRI), pointed out plenty of
international evidence showing that publicly-owned banks do not perform well in
an environment of weak governance.
The advance-deposit ratio (ADR) in banks
has decreased further as the credit demand in the private sector dropped in the
last few months because businessmen are unwilling to risk news investments in
the current climate of political unrest. According to Bangladesh Bank
officials, the ADR in the banking sector will decline further if the ongoing
political instability persists. Banks are now focusing their investments on
government securities, like treasury bills and bonds with lower rates of
interest. The credit growth in the private sector has dropped to 13.96 per cent
in February, the lowest since the FY 2009-10. The BB data showed that the ADR
in 33 banks had gone down sharply between January 10 and March 14 of this year.
The
government has plans to develop a central database for the microfinance sector
in Bangladesh
to ensure proper regulation, transparency and accountability for the lenders.
The new database will help the government, Non-Government Organizations (NGOs),
Microfinance Institutions (MFIs), researchers and stakeholders said the
secretary to the Bank and Financial Institution Division of the finance
ministry. The new database will also reduce the operating cost of NGOs and
MFIs, he said. Bangladesh Telecommunication Regulatory Commission and
Bangladesh University of Engineering and Technology have been assigned to
conduct a study and design an appropriate system for the proposed database.
Moody's Investors Service rated
Bangladesh's outlook as stable although it indicated some financial and
political risks. According to the global credit rating agency, rising political
turmoil due to the upcoming elections-- due between October 2013 and January
2014-- is deterring investment and are disruptive to economic growth. From Moody's
viewpoint, although political tension is unlikely to spiral out of control, any
prolonged unrest will be “credit negative”.
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