Weekly News Clippings (9 May 2013)

8 new banks must lend govt just after start of operation (New Age, May 9, 2013)

Bangladesh Bank is requiring the eight new commercial banks to participate in a government securities auction at the start of their operations to facilitate government borrowing. According to BB officials, the banks will have to purchase the treasury bills and bonds from their paid-up capital. This might create a challenge for the new banks, which have not had the time to build up deposits from clients.  

 

Political unrest hits transport business (Dhaka Tribune, May 8, 2013)

The supply chain has been affected badly in Bangladesh, as the frequent shutdowns and political violence have disrupted the transportation of goods. According to the acting general secretary of Bangladesh Covered Van and Truck Owners’ Association, around 1,000 vehicles came under attack and more than 400 trucks and covered vans were vandalised in last three months of political violence. Businessmen complain that the vehicles have become the most common targets for arson attacks on the hartal days, which has adversely affected the transportation business. Transport owners claim that their businesses have declined by 70% due to violence and shutdowns while Bangladesh Bureau of Statistics figures show that food prices this year, have increased from 7.45% in February to 8.57% in April. Most truckers prefer to keep their vehicles off the roads during hartals, fearing attacks, which is why commodities fail to reach the markets and prices rise.

 

Exports slow as strife lingers (The Daily Star, May 8, 2013)

The persistent political strife has led to 9.73 percent decline in exports in April. According to Export Promotion Bureau, export earnings were worth $2.07 billion in April, which is lower than the monthly target of $2.34 billion. Nonetheless, the overall earnings during the first 10 months of the current fiscal year, have increased over the previous year by 10.14 percent to $19.78 billion.

Imports nosedive in July-March amid poor business climate (New Age, May 7, 2013)

The recent spates of political violence have created an unfavorable business environment affecting the import bill payment. According to the Bangladesh Bank data released on May 6, 2013, the overall import bill payment in July-March of the FY 2012-13 posted a negative growth of 10.40 per cent compared to the 14.60 per cent growth during the corresponding period in the FY 2011-12. The business people are hesitating to expand their investment as the times are uncertain ahead of the national election.

 

BB committee warns govt of risks (New Age, May 7, 2013)

Prevailing political tension ahead of the next national elections might affect the rate of interest and repayment arrangement for a potential sovereign bond issuance. According to a report by the Bangladesh Bank, the government should consider the risks before issuing the country’s first ever sovereign bond to raise funds for infrastructure projects from the international money market. The IMF has also advised against “rushing to the market with non-strategic view, as the market prefers low political risk”. Failing to obtain funds for the Padma bridge project because of alleged corruption, the government has decided to build it with its own finance. As part of the plan finance minister, had announced that a substantial amount of $1.8 billion would be raised from the international market through issuing bonds.

 

ILO rolls out roadmap (The Daily Star, May 5, 2013)

The International Labour Organisation (ILO) is set to formulate a “road map” to improve labor standards. Under the action plan, the government will recruit, within six months, 200 additional inspectors and ensure that the Department of the Chief Inspector of Factories and Establishments is upgraded to a directorate with an annual regular budget allocation. The deputy director general of the UN agency viewed the latest incident of building collapse in Bangladesh with great concern. His mission’s recent discussions with the stakeholders (i.e. the government, the employers and the workers’ rights groups) were focused on the issues of workers' rights, workplace safety, and minimizing the impact on the image of the country in order to ensure its economic growth.

BGMEA to set up a database of garment workers  (The Daily Star, May 5, 2013)

Bangladesh Garment Manufacturers and Exporters’ Association (BGMEA) has plans to prepare a central database of the 3.6 million workers garment workers for ease of verification during crises. “We will sign an agreement with the ILO [International Labour Organisation] soon to prepare a central database of workers,” said the President of BGMEA.

 

EU warns of trade action (The Daily Star, May 3, 2013)     

The European Union has warned that it would take trade action against Bangladesh through its Generalised System of Preferences (GSP) if the country failed to ensure workers’ safety in factories. The EU is Bangladesh’s top trading partner, accounting for 60 per cent of the country’s exports. If Bangladesh was placed outside the GSP, it would face import duties up to 12 per cent.

 

Land prices put Dhaka on par with NY or London (Dhaka Tribune, May 3, 2013)

According to a recent study by urban planners and economists in the country, for most Dhaka dwellers the prospect of buying a house seems dim. A World Bank study conducted in 2007 shows that land prices are comparable to those in suburban New York or London, although the median income in Dhaka is 50 to 100 times lower. The price income ratio in Dhaka is 5:1 (i.e. the price of the median home is five times more than the median annual income), compared with Kolkata, which has a ratio of 3:1. Between 2000 and 2007 in Dhaka and its outskirts, land prices have increased by more than 300%. Real estate developers’ estimates suggest that the it would be close to 350% now.