Weekly News Clippings (4 April 2013)

One shutdown means Tk 1,600cr losses (The Daily Star, April 04, 2013)

A survey by Dhaka Chamber of Commerce and Industry (DCCI) revealed that a day of shutdown (hartal) causes a loss of Tk 1,600 crore to the country’s businesses. The Ready Made Garment (RMG) is the hardest hit sector, which counts a loss totaling Tk 360 crore from single day of shutdown. On average, Bangladesh faces 40 shutdowns in a year leading to financial losses of Tk 64,000 crore which means 6.5 percent of the country’s gross domestic product (GDP). Opposition parties enforced shutdowns for 22 days so far this year.

Remittance goes into property purchase, fuels prices: analysts (The Daily Star, April 04, 2013)

Property investments using remittance is a key factor behind rising land prices, as many migrant workers send money to their families in Bangladesh to purchase land. The observation was made at a workshop held, to design a questionnaire for the country’s first ever survey on the uses of remittance. Bangladesh Bureau of Statistics (BBS) will conduct the survey from early June. At present, more than 80 lakh Bangladeshis are working all over the world. The country received $12 billion in remittance during the fiscal year 2011-12, according to Bangladesh Bank data. However, there is no data on how the recipients of remittance use the money.

Tannery relocation looks uncertain, costs to environment mount (The Daily Star, April 03, 2013)

The relocation of tanneries from Hazaribagh to Savar seems to have hit a dead-end due to lack of coordination between the industries ministry and Bangladesh Tannery Association (BTA) much to the grievance of green activists. According to a memorandum of understanding (MoU) signed in 2007 between the two parties, the Central Effluent Treatment Plant (CETP) was supposed to be constructed by the government, with the tanners paying back in installments spread over 15 years. However, the industries minister blamed the BTA for delaying to sign the agreement of setting up the plant.

Without the signed agreement, the ministry will not be able to get the approval from the Executive Committee of National Economic Council to get the project started.

 

BlackBerry comes under BTRC lens (The Daily Star, April 03, 2013)

The high end Canadian smartphone brand BlackBerry has recently raised suspicions of an intelligence wing of the government, which advised the Bangladesh Telecommunication Regulatory Commission (BRTC) to ban BlackBerry services for the sake of national security. At present, Grameenphone and Airtel, the service providers of BlackBerry, have 4,664 and 1,661 users of the smartphone brand. As per licensing terms and conditions in most countries, the government reserves the right to gain access to telecom service providers’ networks. But this interception does not work in cases of subscribers with BlackBerry handsets, as the messages sent from the devices are highly encrypted to protect privacy. Some countries, including India, United Arab Emirates, Saudi Arabia, Indonesia, Russia and China raised concerns about the use of the handset, with many threatening to ban the company’s proprietary email and instant messaging service called BlackBerry Messenger.

BB to launch new system to fix fund shortage for banks (The Daily Star, April 01, 2013)

Bangladesh Bank (BB) will introduce a new system to overcome the liquidity crises experienced by commercial banks. Under the system, BB will adjust a bank’s shortage in the cash reserve requirement (CRR) and statutory liquidity ratio (SLR) with another bank with surplus funds. The borrower bank, in this case, will have to pay an interest rate equivalent to the average call money rate or any other rate fixed by the central bank that the other banks agreed upon.

Sovereign bonds on way to start off Padma bridge (The Daily Star, April 01, 2013) 

The government plans to finance a part of the Padma bridge project by issuing sovereign bonds over the next two years. The bonds will have a maturity period of 15 years and will carry an interest rate of 5.5 percent. The government plans to raise about $1 billion via the bonds, with the first issue coming sometime between April and June. The standing committee members also welcomed the decision to construct the bridge with own resources. The minister said a detailed plan of the project, which would include the financing structure, would be disclosed by April 8.

40,000 tax evading apartment owners found in just one part of city: NBR (New Age, April 01, 2013) 

The tax administrator has identified 40,000 apartment owners who have no Tax Identification Number (TIN). According to the Chairman of National Board of Revenue (NBR) the apartment owners do not have TINs although they have taxable incomes from house rent. Of the 35 lakh people who have TINs, only 13 lakh pay taxes regularly. NBR intends to bring them under the tax net by assessing their income in the next fiscal year.

Widening CSR across banking industry in Bangladesh (The Financial Express, March 31, 2013)

Bangladesh Bank circular had issued a circular in 2008 to the chief executives and managing directors of all banks and financial institutions for mainstreaming Corporate Social Responsibility (CSR) in their businesses. However, recent findings said that CSR operations go beyond mandatory compliances by law (e.g. ETI in primary health, compulsory primary education in public education) into voluntary engagements to promote equitable and sustainable development.  CSR is not required of banks that are undergoing losses. Among the state-owned banks Sonali and Janata bank incurred a loss of Tk 12.77 billion and Tk. 5.42 billion respectively in 2012.  Agrani and Rupali made a profit of Tk. 6.77 billion and Tk.1.31 billion respectively and spent Tk.60 million (6.0 crore) on CSR activities.

Tour operators count losses in political unrest (The Daily Star, March 31, 2013)

Around 2,500 tourists have cancelled their trips to Bangladesh since January due to political unrest, causing a loss of at least Tk 50 crore to the country. According to tour operators, holidaymakers do not consider Bangladesh as a safe place any more, due to the political violence over the last few months. The tour operators formed a human chain in front of the National Press Club, last Saturday, to voice their concern over the hartals and violence which are hurting the tourism industry. At present, there are around 220 tour operators in Bangladesh, employing over 25,000 people.

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.