Weekly News Clippings (June 27, 2013)

Govt floats tender for Padma’s main work (The Financial Express, June 27, 2013)

The government has finally floated an international tender for the main work of the much-expected Padma Bridge project. It has invited four international companies to submit bids for the construction work of the bridge. The Padma Multipurpose Bridge project was the present government's election pledge set to be completed by 2014, but its progress came to a halt over the issue of 'corruption conspiracy' raised by the World Bank after the bidding process began in 2010.

BGMEA probe accuses building, factory owners (Dhaka Tribune, June 26, 2013)

The Rana Plaza collapsed as rules were broken in every step of the way, the BGMEA found in its study. According to an investigation commissioned by the Bangladesh Garment Manufacturers’ and Exporters’ Association (BGMEA) the building was constructed using substandard materials, which were unable to bear the load of the six heavy-weight generators placed on the rooftop. Though the authorities concerned approved the construction of six floors on the swampy land, the building’s owner, Sohel Rana, added three more floors. The layout also permitted only two generators at the top of the building. Rana Plaza collapsed on April 24, killing more than 1,100 people and injuring thousands.

 

Gas shock halts life (The Daily Star, June 24, 2013)

Every home and factories that rely on gas supply experienced a steep fall in gas supplies on June 23 as a major gas field, Bibiyana, had to be shut down for emergency repair. Its US operator Chevron had noticed a leaking gasket in its gas processing plant that needed urgent repair. At present, the country consumes around 2,250 million cubic feet of gas per day — leaving a short supply of 500 mmcf. The Bibiyana field meets about one-third of the country’s daily demand for gas.

NBR loses Tk 40cr in a day of hartal (New Age, June 23, 2013)

A day’s hartal causes the government to lose Tk 39.90 crore in revenue from the international trade. According to a recent study conducted by the National Board of Revenue, in 10 days of hartal in March, the NBR lost a total of Tk 399 crore in duties from import and export businesses. The research and statistics wing finalised the study report based on the findings of its 14 field offices of customs and VAT and placed the report before NBR chairman Ghulam Hussain last week. Officials of the revenue board said that the total loss due to the hartals would have been higher if losses of value-added tax and income taxes were taken into consideration.

Govt borrowing from scheduled banks soars to Tk 24,189cr (New Age, June 22, 2013)

The government is borrowing heavily at the last stage of its tenure to meet its budgetary allocation. According to the latest Bangladesh Bank data, the government borrowing from the scheduled banks stood at Tk 24,188.82 crore as of June 12, 2013. A BB official said that the government had successfully contained the bank borrowing in the first 10 months of the current financial year, but it had to borrow a significant amount between May and June. If the government borrowing increases in the remaining days in June, the commercial banks might plunge into a liquidity crisis.

Canada investors pressure cos to sign Bangladesh safety accord (New Age, June 21, 2013)

A group of Canadian investors representing $44 billion in assets wants corporations to support the new Bangladesh safety accord, a broad agreement between factories, workers unions and garment companies launched after more than 1,100 workers died when a factory complex collapsed in April. The investors — which include the Public Service Alliance of Canada and Canadian Labour Congress — released a statement pressing for ‘timely and effective action to ensure respect for the fundamental human rights of workers in the supply chains of the companies in which they invest.’

Weekly News Clippings (20 June, 2013)

Rajuk knocks down illegal part of mall (The Daily Star, June 20, 2013)

Rajdhani Unnayan Kartripakkha (Rajuk) demolished the illegal portion of a 15-storied shopping mall encroaching on the pavement of Mouchak intersection, one of the busiest intersections in the capital. The builder of Fortune Shopping Mall had started constructing the illegal shops in violation of the building’s approved design illegally occupying the pavement near the Mouchak footbridge. Global Engineers and Developers Ltd, the construction company of the shopping mall, started building the illegal shops at its entry gate several months ago. Eight of the 11 directors of Fortune Shopping Mall own Global Engineers and Developers Ltd.

Grameen Bank faces uncertain future (Dhaka Tribune, June 19, 2013)

Bangladesh’s pioneering microcredit organisation faces an uncertain future after a commission proposed the government to break up the Nobel-winning Grameen bank which was founded by Nobel Laureate Muhammad Yunus. The commission has released a working paper on restructuring the microlender which has lent more than Tk 88,000 crore ($11billion) to millions of people – mainly women – to help them gain financial independence. The paper recommends that Grameen Bank should be broken up into 19 separate organisations with a headquarters, resembling the erstwhile Bangladesh Shilpa Bank (BSB) or Rural Electrification Board (REB) in order to give the government absolute control over the microcredit organisation. The move comes at a time when the successful microcredit model of Grameen Bank is being replicated not only in the developing world, but also in developed economies.

Importers anticipate price stability during Ramadan (Dhaka Tribune, June 19, 2013)

Each year, during the month of Ramadan, an increase in consumption triggers an increase in demand leading to a rise in the prices of essentials, especially food. Supply shortage, both natural and man-made carries the products beyond the affordability of the lower-middle class. However, this year, private importers have started to bring in large consignments of edible items with less than a month to go for Ramadan. Already 14 vessels carrying 450,000 tonnes of food have arrived at the Chittagong Port.

Internet for rural people (The Daily Star, June 19, 2013)

The government has approved a project worth Tk 499 crore to bring all the upazilas under the optical fibre cable network to allow people living in rural areas access the internet. At a meeting, the Executive Committee of the National Economic Council (Ecnec) approved the project under which internet connection will be provided to 290 out of the 486 upazilas in Bangladesh. According to the planning ministry, a total of 179 upazilas are now under the optical fibre cable network provided by Bangladesh Telecommunication Regulatory Commission and other projects.

Gender discrimination persists in banks (New Age, June 18, 2013)

Banks are reluctant to hire women to avoid granting them maternity leave and providing them with transport facilities if they work overtime. So far only 29 banks had so allowed their female staff to take maternity leave. According to the latest Bangladesh Bank data, in the 47 scheduled banks in Bangladesh, there are only 9 to 19.85 per cent females employed in various departments of the banks, as of December 31, 2012. Of the total staff in the banking industry, the percentages of female staff at various levels were:

·         17.80 at entry level.

·         15.11 at mid level

·         11.15 at senior management level.

·         14.17 per cent as board members.  

Bangladesh Factories’ Safety Issues Run Deep: Survey (The Irrawaddy, June 17, 2013)

According to a survey conducted by Bangladesh University of Engineering and Technology (Buet), over 10 percent of 200 garment factories were so dangerous that were ordered to shut down their operations. Some of the owners who are among the more safety conscious in the industry volunteered their buildings for inspection and even paid for the surveys. The conditions in the remaining 4,000 garment factories however, could be far worse, said Mujibur Rahman, head of the university’s department of civil engineering. The engineers found that huge numbers of the factories were housed in commercial or residential buildings not designed to withstand the vibrations and heavy loads of industrial uses. Machinery vibrations were one of the causes for the collapse of Rana Plaza.

Black money in real estate to push land prices up further (The Financial Express, June 16, 2013)

The provision of “whitening” black money in the real estate sector would push the prices of land and flats beyond the reach of most people. Businessmen and experts want the government to allow the undisclosed money in sectors which generate more employment, like the manufacturing sector instead of the real estate sector. "The prices of land and flats have already been out of reach for most of the people of the country," said Executive (PRI) Director Ahsan H Mansur Policy Research Institute (PRI), adding that the penal tax should be higher than 10 per cent. President of Foreign Investors' Chamber of Commerce and Industry (FICCI) said that there would not be any new land for setting up factories in the future if the proposed facility is approved.

Wetland, water bodies disappear fast as govt drags its feet on DAP (The Financial Express, June 15, 2013)

Real estate companies and unscrupulous individuals have been destroying wetlands and grabbing water bodies while the government is yet to take firm measures to counter such violations. Experts and urban planners are expressing their doubts over the success of the government's planned actions as bureaucratic tangles have slowed down the process of its implementation. A number of committees and sub-committees were formed with political ministers heading those rather than technical experts. The DAP of Dhaka is the third component of Dhaka Metropolitan Development Plan (DMDP), popularly known as the master plan of the metropolis. The DMDP was initiated in 1992, completed in 1995 and officially gazetted in 1997. But Rajuk started working on it in November 2004. In spite of the delay, it also extended the deadline three to four more times, the latest extension expiring at the end of June. The delays resulted in filling up of vast low-lying areas in and around the city increasing the threat of environmental hazards, flooding and water logging in the city.

Tesco stops sourcing from a Bangladesh factory due to safety concerns (Reuters, London, June 15, 2013) Tesco one of the largest retailers in the word has stopped sourcing clothes from a factory in Bangladesh after discovering serious problems with the safety of a building. The retailer has promised to conduct structural surveys of all the factories it sources from and has urged the owners of Liberty Fashions to stop its operations and to evacuate the premises to ensure the safety of its workers. It had also announced its decision to the relevant authorities, including the Bangladesh Garment Manufacturers and Exporters Association (BMGEA), along with other customers. Tesco said it had sourcing from 15 factories housed in risky buildings in Bangladesh in the past 12 months.

Chevron to build LPG plant in BD (The Financial Express, June 14, 2013)

Chevron Bangladesh is planning to build a liquefied petroleum gas (LPG) plant in the Bangladesh. The US firm has submitted a proposal to the Energy Division under the ministry of power, energy and mineral resources to build the LPG plant near its Bibiyana gas field in the Sylhet region. Chevron is the operating the largest gas-producing field in the country with an average output of around 820 million cubic feet of gas per day from the 12 wells.

Weekly News Clippings (13 June 2012)

94pc mangoes of capital formalin-treated (New Age, June 12, 2013)

A study has found excessive formalin in seasonal fruits like mangoes, litchis and blackberries sold at shops in different areas of the capital. Even shops with signboards reading “chemical-free fruits” sell fruits soaked in formalin. Save the Environment Movement (SEM) revealed the findings of the study after running formalin tests on fruits from shops in 26 areas on June 1-10. It found that around 94 percent of the mangoes and 100 percent blackberries and litchis were contaminated with formalin.  The high rates were attributed to fewer mobile court drives and police support. Formalin, a 37 percent water solution of formaldehyde, is poisonous and can cause cancer. Traders use this chemical as a preservative and to make fruits and vegetables look fresh for longer periods.

 

Mobile banking carving a niche (The Daily Star, June 11, 2013)

Mobile banking has garnered quite an appeal among Bangladeshis, especially to those living in the rural areas.  Convenience plays an important role as anyone can transfer money, receive salary or pay bills from a bank account, simply by using a mobile phone. According to Bangladesh Bank, around Tk 121.25 crore is transacted each day through mobile banking services. More people without any prior banking history are joining formal banking activities through mobile phone. As of April, the country had 52.54 lakh mobile banking subscribers, while the total number of agents providing such services was at 83,638.

 

New economic zones yet to see progress (The Daily Star, June 11, 2013)

The government passed the Bangladesh Economic Zones Act in August in 2010 to expand export processing zones throughout the country, but there has been much delay in formulating the regulations to support this new law. There are currently eight export processing zones in Bangladesh housing foreign and joint venture investors, but there is a recognized need for more.  Vietnam has over 400 economic zones and China, Malaysia and Indonesia also have hundreds of these zones for both their local and foreign investors. An official of Bangladesh Economic Zones Authority said foreign investors will not wait for years to invest in Bangladesh and will take their capital to other countries. He also said that growth of most factories are not regulated, which is why they are mushrooming in the capital and its fringe areas. The majority of these are housed in multipurpose buildings at risk of fatal accidents.

 

Money hardly whitens (The Daily Star, June 10, 2013)

The widely condemned proposed amnesty on undisclosed money in the real estate sector will not just “whiten” black money, but it will create additional black money.  An investigation by The Daily Star has found that buyers often show a much lower value of property during registration to evade paying taxes, resulting in new illegal/unaccounted for money. According to an official of Tejgaon Land Office, “Government revenue from land tax would have been 10 times higher if the actual price of property were taken into account.” In addition, analysts say that amnesty on black money in the real estate sector will also pushed up property prices.  Furthermore, the benefits of such “whitening” proposals might be over rated.  According to National Board of Revenue data, a total of Tk 13,516 crore was whitened between 1971 and April 2013, and the government received only Tk 1,407 crore as tax. Ahsan H Mansur, executive director of Policy Research Institute suggested introducing capital gains tax to prevent tax evasion and under-pricing of property values.

Chief factory inspector changed (New Age, June 11, 2013)

The labor ministry has replaced the chief inspector of factories and suspended seven factory inspectors for renewing the licenses of the factories at Rana Plaza without inspecting the site in person. Of the five factories, Ether Tex had been operating without any license from the factory inspection department since 2008. The building that housed the factories collapsed on April 24 killing at least 1,127 people. Of the seven inspectors, three had approved the renewal of the license of Tazreen Fashions Ltd. without paying a visit to the factory.

 

Budget surreal, says CPD (The Financial Express, June 8, 2013)

The Center for Policy Dialogue (CPD) has termed the proposed budget as “surreal” and justified their statement by pointing out the chasm between the income and expenditure.

The think-tank also termed the GDP growth target as “radical”, citing the present scenario of faltering investment and domestic demand, low industrial productivity, a weak international economy and declining domestic savings. The CPD termed the revenue target “ambitious” as it based on the outgoing fiscal year’s target, not the actual collection. The think-tank expressed its doubts about the country’s achieving a 22 percent revenue growth target next year. Moreover, the government received $2 billion foreign aid in the outgoing fiscal year, and yet it has set a target of $3.8 billion for the next year, which CPD thinks would be impossible to get.

Investment ceiling for small businesses to go up (The Daily Star, June 7, 2013)

The government plans to give tax exemption benefits to more small entrepreneurs with an increase in capital investment and annual turnover limit. It means entrepreneurs making investment of up to Tk 40 lakh on plants, machines, or equipment will receive the exemption, up from Tk 25 lakh.  Those having an annual turnover of Tk 60 lakh will also enjoy the tax benefit, up from Tk40 lakh.

Ceiling now Tk 2.20 lakh  (The Daily Star, June 7, 2013)

The government has raised the ceiling of tax-free income in the proposed budget for the coming fiscal year. The finance minister said that he took into account factors like inflation and rising living expenses before proposing a reduction in the tax liability of marginal taxpayers.

·         For citizens: From Tk. 2 lakh to Tk. 2.20 lakh.

·         For senior citizens and women the threshold has been increased from Tk. 2.25 lakh to Tk. 2.50 lakh.

·         For physically-challenged taxpayers from Tk. 2.75 lakh to Tk. 3 lakh.

Bangladesh Budgets 2004-2013: A Decade of Government Spending (This article was first published in Dhaka Tribune on June 8, 2013)

Bangladesh’s budget has changed significantly in the last decade, and the country’s budgets have grown extraordinarily along with the country’s economy. Core challenges include debt risks and high non-development expenditure that will not produce dividends in the future.  The proposed budget (of Tk.222,491 crore) at a glance:

• The budget has a deficit of Tk.55,032 crore of which Tk.21,068 crore may come from foreign sources and the rest from the domestic ones, mostly by borrowing from the banking sector.
• The revenue earning target has been set at Tk.167,459 crore,
• Annual development programmes are set to get Tk. 65,870 crore.

 

 

 

Weekly News Clippings (June 6, 2013)

False dawn for power (The Daily Star, June 6, 2013)

·         The cost of power generation was Tk 2.5 per unit in 2009 and Tk 6.02 per unit in 2013

·         The Power Development Board (PDB) earned in revenue Tk 2.47 in 2009 and Tk4.7 in 2013.  While revenue has increased, there is still a need for a subsidy.

·         The subsidy for PDB was Tk 993 crore in 2009-2010 fiscal year and has risen to Tk 5140 crore in 2012-2013 fiscal year.

·         Oil based fuels made up 6% of inputs used for energy in 2009-2010 and 21% in 20012-2013.

 

FY14 budget deficit may fall to 4.6% of GDP (Dhaka Tribune, June 6, 2013)

The budget deficit for the next fiscal year is likely to be 4.6% of GDP (gross domestic product), slightly less than the estimated 4.8% for the outgoing fiscal year. The finance minister is scheduled to announce the 2013-14 national budget today. The deficit would stand at Tk550 billion. This high deficit is contrary to the International Monetary Fund’s (IMF) condition that the deficit should be 4.3% of GDP as part of its Extended Credit Facility arrangement of around one billion dollars.

 

Half of world’s food thrown away (Dhaka Tribune, June 5, 2013)

This year’s World Environment Day is aimed at raising awareness about the environmental impact of food choices, particularly household food waste. According to the United Nations Environment Programme, consumers in wealthy countries waste 222m tonnes of food every year, which is almost as much food as the entire net food production of sub-Saharan Africa. However, in Bangladesh, where around 30% of the population lives below the poverty line, food wastage is much lower.   

Rental power: a no-go (The Daily Star, June 4, 2013)

Bangladesh should not go for the costlier option of quick rental power plants as a temporary solution to electricity shortage. According to the Executive Director of The Centre for Policy Dialogue, the government should try to phase out the rental power plants as soon as possible. “On the one hand, consumers are paying higher power tariffs. On the other, the government is paying higher subsidies to the power sector,” he said. Subsidy on the rental power plants in 2011-12 accounted for about 44 percent of the total subsidy to the power and energy sector.

Costs of a day’s shutdown (The Daily Star, June 4, 2013)

A study by the Centre for Policy Dialogue estimates that a reduction in capital stock as a result of hartals will reduce GDP by 0.9 percent. [The article actually says that a single day of hartal reduces the GDP by this amount, but this is incorrect.] CPD estimates that hartals will cause exports to drop by 2.4 percent and imports by 0.8 percent. The government also risks losing 0.7 percent in revenue and its deficit would widen by 7.1 percent. The study used applied data from the early months of 2013 on the computable general equilibrium model, a class of economic models that use actual data to estimate how the economy would react to changes in policy, technology or other external factors.  [The original report can be found here.]

The influence of black money on economy (The Daily Star, June 2, 2013)

Black money has spread across the economy in various ways including tax evasion, sending the untaxed money abroad and investing in the stock market. Since 1976, all successive governments have provided opportunities to whiten black money. A finance ministry report prepared in 2011 shows that the amount of black money is within 45 percent to 81 percent of Bangladesh’s gross domestic product The main motive behind providing money whitening scopes has been to retain the money within the economy, so that it could foster development in certain sectors, like the housing industry.

 

Unions Press to End Special Trade Status for Bangladesh (The New York Times, May 30, 2013)

Labor advocates in the US are pushing the Obama administration to revoke the special trade status enjoyed by Bangladesh, to express its disapproval of the working conditions in the country. Bangladesh receives breaks on United States tariffs under a World Trade Organization program, the Generalized System of Preferences (GSP), a duty-waiver scheme introduced in 1976 by the US government for the least developed countries. The US GSP covers about 0.54 per cent of Bangladesh’s exports to the USA. A total of 97 per cent Bangladeshi export goods enter the US market without any duty. However, the garments sector generally has to pay 15.3 per cent duty. The United States trade representative is to decide the fate of the country’s trade status in this month.