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.

Jumana Rezwan's Canvass

Analysts reiterate the need for investments in the education sector

At a recent seminar on “Entrepreneurship development in Bangladesh” various analysts and researchers stressed the need to produce higher quality human capital. The poor quality of the current educational system has become a major concern, as an entrepreneurial culture cannot flourish without a good educational foundation.

The importance of private investment in education was highlighted as a lack of public funds appears to be hampering growth in the education sector. And, in fact, private universities have been on the rise as demand for education has increased, fueled by increased incomes and limited places in public universities.

However, in order to benefit from private investment, a few vital changes to the education system will prove invaluable. First, entrepreneurship requires innovation, creativity, and problem solving ability, but these skills are not taught in our education system, which rewards memorization rather than understanding and critical thinking.  Second, if Bangladesh is to compete internationally, strong command over the English language is critical.  While formally the university system is English medium, in practice students continue to function in Bangla.  Third, steps need to be taken to ensure new and old universities are meeting basic standards in order to generate quality professionals with the skills needed to contribute to the economy.

 

http://www.thedailystar.net/beta2/news/education-needs-more-investment-analysts/

 Hartals and the adverse effect on “Beautiful Bangladesh” 

 

The recent spate of violence and shutdowns have affected businesses across all sectors of the economy but the tourism industry is affected in ways which are completely different from export businesses.  While export businesses have experienced delays in production or delivery, they are still able collect orders.  The fledgling tourism industry, on the other hand, has seen business dry up.

In addition, tourists have been stranded in key tourist spots such as Cox’s Bazar , forcing tour operators to provide extra facilities, which in turn have increased operating costs by up to 20% in some cases.

The tourism industry, already handicapped due to poor infrastructure will suffer mostly in terms of reduced inbound international tourists, as the international brand image of Bangladesh is being maligned by the violence.  The “Beautiful Bangladesh” campaign; focused around creating Points of Differences (PODs)  between Brand Bangladesh and other neighboring tourism spots was perhaps one of the most appreciated promotions of Bangladesh, touching upon the different experiences one could have solely in Bangladesh. However, accessing sights such as the Sunderbans requires certainty that tourists will be able to travel to their destinations. Perhaps it is time that tour operators look to cash in on increasing disposable income levels and focus more on outbound tourism. 

http://www.thedailystar.net/beta2/news/shutdowns-keep-tourists-at-bay/

Weekly News Clippings (14 March)

3 new banks get licenses (The New Age, March 13, 2013)

Three new commercial banks received their licenses from Bangladesh Bank rounding up the total number of banks to 50.  NRB Commercial Bank, South Bangla Agriculture Bank and Union Bank are expected to begin their operations by the first week of April. The central bank has given no objection certificates (NOCs) to seven banks, which were selected out of the nine proposed banks.  The government is being accused of giving licenses to the new banks on political grounds, as most of them are either leaders of or inclined towards the ruling Awami League and its alliance.

Formalin detection point for fish buyers at Karwan Bazar (The Daily Star, March 13, 2013)

The government has provided its people with the opportunity to check their fish for formalin, free of charge, by re-launching a formalin testing centre at Karwan Bazar. The Ministry of Fishery and Livestock and the Home Ministry will monitor the activities of the centre with support from Square Consumer Products Ltd. Two trained volunteers will be available to operate the machine. Till now the ministry has provide 80 formalin detection machines throughout the country and seven fish markets have been declared formalin free.

Political unrest adds to realtors’ woes  (The Daily Star, March 11, 2013)

Lately, political instability has been causing quite a few setbacks in the real estate sector. Real estate owners have slowed down construction of existing projects and stopped taking new projects as they are facing uncertainty over receiving electricity and gas connections. Sale of apartments also fell and around 22,000-25,000 ready flats worth Tk 15,000 crore to Tk 18,000 crore remain unsold. Construction of around 8000 flats has been suspended. With expatriates investing more in Malaysia, Singapore and other countries, sale of flats to non-resident Bangladeshis have also decreased dramatically

Sammilita panel sweeps BGMEA polls  (The Daily Star, March 11, 2013)

Sammilita Parishad has swept the biennial election of BGMEA with the leader of the panel Atiqul Islam, also managing director of Islam Garments Ltd winning 15 posts from Dhaka and six from Chittagong. Another panel Forum led by Mahmud Hasan Khan, managing director of Rising Group won the remaining six posts. The elected directors will now select a president and four vice-presidents.

Incentives to propel women forward (The Daily Star, March 11, 2013)

The President of Chittagong Women Chamber of Commerce and Industry (CWCCI) Monowara Hakim Ali said that women entrepreneurs in Bangladesh deserve more incentives as they are playing increasingly important roles in employment, economic and infrastructural development and overall social improvement. They can be provided incentives in the form of license provisions, export opportunities, tax holidays, soft loans and training and development centres. She is the first vice president of Federation of Bangladesh Chambers of Commerce and Industry. Intraco Group has 18 companies- oil and gas, telecommunications, renewable energy, real estate, tourism, amusement (Butterfly Park) and hospitality. She formed the Chittagong Women Entrepreneurs Association in 1999 and Chittagong Women Chamber of Commerce and Industry in 2003.

Jumana Rezwan's Canvass

BB to impose charges on essential banking services.

Bangladesh Bank has decided to impose charges for ATM banking services such as balance inquiry, inter-bank account transfers and mini-statement. The new charges, ranging from Tk5-10, will be applicable to users of all ATM’s except for those under Q-cash agreement. This move is in direct contrast with a recent statement from the National Payment Switch Bangladesh NPSB, which had promised to lower transaction charges. The NPSB was opened to facilitate expansion of card based payment channels, e-commerce, and to reduce circulation of fake currency notes.

While the new fee structure may generate additional income, it is likely to hinder the acceptance of electronic banking among important sectors of the society, such as low wage workers, who prefer to save every penny they earn.  In developed countries a good majority of the population is already part of the banking system.  They tend to use the different banking services despite the fees levied, as the actual value of the services are higher than the perceived costs. However, in the case of Bangladesh, levying charges for baking services may serve as a disincentive for new customers to enter the banking system. If the vision for Digital Bangladesh at 2021 is to be realized, perhaps expanding financial access and educating the population through affordable technology in mainstream areas such as telecommunication and banking systems may be a strategy that will reap greater benefits on the long run.

http://www.newagebd.com/detail.php?date=2013-03-06&nid=42037

BRAC Saajan to offer remittance services

BRAC Saajan Exchange, a subsidiary of BRAC Bank Ltd has been granted permission from British authorities to operate remittance operations across Europe. The new exchange service will allow funds to be transferred from Europe to local beneficiaries in Bangladesh within 10 minutes, making it one of the fastest exchange houses in the country. Moreover, non-resident Bangladeshis (NRBs) will also have the option of investing in Bangladeshi capital markets through BRAC Bank’s Probashi Biniyog and in the Bangladesh Bank’s  Probashi Wage Earners’ Development Bond.

In addition to facilitating remittances, BRAC Saajan is likely to help boost the foreign currency reserve by offering NRBs an option to invest money in Bangladesh rather than Europe. However, given the current political turmoil and its resulting impact on the economy, it will be interesting to see if NRBs prefer to invest in the more stable, yet declining European economy.

BRAC Saajan already has the advantage of belonging to one of Bangladesh’s premier business groups, and hence has brand equity similar to other BRAC subsidiaries. As UK has already approved BRAC’s  operation in the country, they may well be able to take advantage of this and slowly begin expanding to other parts of the EU. Attracting investments from patriotic NRB investors may be easier if BRAC Saajan looks into the possibility of creating Europe based investment schemes.

 http://www.thedailystar.net/beta2/news/brac-saajan-to-open-exchange-houses-across-europe/