1. Art and Diseño

Daily News Recap
Sunday
February 1, 2015
Analyst:
Salma Yeasmin Xinat
[email protected]
Industry
Bangladesh Bank has now followed through on its decision to allow restructuring of large loans until June 30
with a watertight guideline for banks to ensure no further defaults on the loans. Political turmoil for the best
part of last fiscal year has damaged many large borrowers' business and their debt servicing capacities. Given
that the affected large borrowers have significant importance from the socio-economic and employment
generation perspective, the BB board on Wednesday
agreed to extend restructuring facility to them on their
loans of Tk 500 crore and above. The guideline, circulated on Thursday, said the restructuring facility would
only become effective after the receipt of downpayment of at least 2 percent of the outstanding amount
in cash. If the outstanding amount is upwards of Tk
1,000 crore, the down payment would then be 1 percent
of the sum.
Strict rules for large
loan restructuring
The loans would have to be repaid in quarterly instalments; the failure to pay two consecutive
instalments would be considered as default and the restructured facility cancelled. Incomes
from the restructured loans shall be accounted for only when they are actually received. All restructured loans would be treated as special mention assets (SMAs). SMAs are potentially
weak loans or assets presenting an unwarranted credit risk but are less risky than substandard
assets. Assets listed for special mention generally reflect weaknesses in administration, servicing or collection. Consequently, the banks will have to keep provisioning, with the amount calculated at the existing rate for SMA along with a further 1 percent. As collateral, the banks should
obtain: charge documents covering the restructured loan amounts, corporate guarantees from
the business concerns of the groups and personal guarantees from all the directors/owners.
They should also try to raise more physical collaterals to cover the restructured loans.
The borrowers are strictly forbidden from announcing any cash dividends or making any personal drawings in the first three years of the restructured tenure. After that, they can do so but
need prior consent of the banks. The banks will also have to set up special cells headed by their
heads of recovery for continuous monitoring of the restructured loans. The cells would have to
hand in quarterly reports, comprising compliance progress of the restructuring terms and conditions among others, to the banks' boards, who would then forward it to the central bank. Under
the policy, the borrowers can also apply for new financing facility or enhancement of existing
credit facility so that the repayments are made in time. The banks are allowed to extend working
capital financing of up to 50 percent of the last sanctioned limit in the first three years. After that,
the working capital requirement issue may be decided on the basis of banker-customer relationship and the need of the business.
Term financing may be allowed up to 60 percent of the last sanctioned amount in the first five
years. Beyond that, the banks have the prerogative to extend fresh term financing. In case of
default, the restructured facility will be cancelled and the loan classified as per the existing policy. Banks must take all possible legal steps for recovery of such defaulted loans, failing which
may result in filing suit under the Bankruptcy Act, 1997. Zahid Hussain, lead economist of the
World Bank's Dhaka office, said the facility should not be extended beyond the announced
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Daily News Recap
date. If the borrowers begin to expect continuation of the facility year after year, as seen in case
of black money whitening, they will lose the incentive to take all possible precautions to make
sure they do not take excessive risk in using the borrowed money, he said.
“This is a type of bailout attempt -- there are many such instances in other countries. On the
one hand, it creates a moral hazard and on the other, it is not a permanent solution to a problem,” Nazrul Huda, former deputy governor of BB, said. “The devil is always in the details and
how the policy is implemented,” Hussain said, adding that it will also be important to make sure
the habitual defaulters do not hijack this window. The WB economist also said the root cause
for restructuring has to be addressed. Huda reiterated the same, while calling for the formation
of a dedicated cell to monitor the loans that will get the opportunity to restructure.
News source: h p://www.thedailystar.net/business/strict-rules-for-large-loan-restructuring62596
Bangladesh becoming a hub for nontraditional garment
products
Bangladesh has become a hub for technical and non-traditional garment products as international retailers are coming with an increasing number of work orders. Bangladesh is the second
largest garment exporter after China in woven and knitwear segments. Not only that, Bangladesh also supplies military uniforms, travel bags, backpacks, sleeping bags, tents, outdoor jackets, jute slippers and other jute goods. “Currently, Bangladeshi factories, especially the ones in
export processing zones, are performing well in export of non-traditional items,” an official of
Chittagong EPZ said, asking not to be named. Bangladeshi factories supply uniforms for the
British army and French navy, the official said. Apart from non-traditional and technical garments, some factories in Chittagong EPZ produce computer accessories for renowned brands,
wigs, spectacles, frames and lens of spectacles, and selection buttons of vending machines
used in Western countries, the official said.
“Very few people know that Bangladesh is the top exporter of army boots for some European
nations. The boots are made in the factories housed in the EPZs of Chittagong,” the official
said. He said Bangladesh produces high-quality ski jackets. The export prices of ski jackets,
produced in the Bangladeshi EPZ factories, range between $1,200 and $1,500 apiece, he said.
Bangladeshi workers, especially the female ones, are producing all these items in the factories.
The factory owners, mostly foreigners, train the workers for two to three months for producing
the technical products, he said. Mainly foreign investors are allowed in the EPZs to set up their
factories. In recent years, many foreign investors established factories in the EPZs to produce
technical and non-traditional garment items mainly due to higher cost of production in China.
The US and some European countries are the main export destinations for such non-traditional
and technical items, said Shahid Ullah, general manager (commercial) of HKD, a Korean company based in Chittagong EPZ. The company came to Bangladesh in 1991 and now runs three
units in two EPZs in Chittagong. It exports tents worth more than $80 million a year, the factory
manager told The Daily Star by phone. He said Bangladesh exports more than $100 million
worth of tents a year from different factories. “The prospects for these products are bright as
international retailers are coming with a lot of work orders every year,” Shahid Ullah said.
Mashrul Anwar, commercial manager of Eusebio Sporting Bangladesh Ltd, a tent and sleeping
bag manufacturer in Karnaphuli EPZ in Chittagong, said the demand for these non-traditional
items is rising fast among Western customers. “We are also adding value to these products,” he
said.
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Daily News Recap
Germany-based Commerzbank in a survey said the demand for technical and non-traditional
textile items will rise 2 percent year-on-year in 2015. In the period from 2007 to 2013, the European manufacturers of technical textiles saw stronger growth than the European economy as a
whole, said the survey released last month. Technical textiles are conquering more and more
new application areas and are superseding conventional materials, the survey said.
News source: h p://www.thedailystar.net/business/bangladesh-becoming-a-hub-for-nontradi onal-garment-products-62609
Action plan for nuclear infrastructure
adopted
The Russia-Bangladesh working group of the joint coordination committee for implementing the
nuclear power project has adopted an action plan for nuclear infrastructure development in the
country in the next two years. The working group signed two documents regarding action plan
for nuclear infrastructure development and nuclear power communication strategy during a
three-day meeting in the capital last month. More than 40 experts from Russia and Bangladesh
took part in the discussion on various areas of nuclear infrastructure development. The action
plans address the International Atomic Energy Association (IAEA) guidelines as well as needs
of Bangladesh, a company insider said. Action plan for the nuclear infrastructure development
includes steps that the country needs to undertake to achieve goals of the nuclear power project, nuclear safety, human resources, site selection and installation support, management,
legislative and regulatory framework, electrical network, funding and financing, planning for
emergencies, nuclear fuel cycle, radioactive waste management.
Bangladesh's nuclear power communication strategy addresses needs to inform and educate
people of the country and around Rooppur in particular about basics of nuclear energy, its benefits, safety, eco-friendliness and cost effectiveness. "The documents we signed are a positive
step towards implementing the nuclear power programme for Bangladesh. Nuclear infrastructure is a vital pre-condition for establishing the nuclear power plant in the country. I am happy
that we are proceeding steadily towards our dream," said head of the Bangladesh delegation
and co-chair of the working group, Rabindranath Roy Chowdhury, who is also the Joint Secretary of the Ministry of Science and Technology. His Russian counterpart Yury Sokolov, Director
of the department on international scientific and technical cooperation of Rosenergoatom, the
power generation company of state-run Rosatom, said, "With a long experience in the nuclear
industry, we have worked out with Bangladeshi partners the action plans which I believe completely correspond to their needs and at the same time, to the guidelines set by IAEA."
News source: http://www.thefinancialexpress-bd.com/2015/02/01/78795
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Daily News Recap
Public hearing on
gas price hike
opens Monday
Bangladesh Energy Regulatory Commission (BERC) opens tomorrow (Monday) a four-day public hearing on proposed raise in natural gas tariffs and wheeling charge. State-owned gasmarketing and-distribution companies have sought the hike in tariff rates as much by 122 per
cent for the end-users. During the hearings, officials said, the regulator is set to consider the
tariff-hike proposals on the basis of already-fixed asset value of natural gas, for the first time
ever. The Energy and Mineral Resources Division (EMRD) under the Ministry of Power, Energy
and Mineral Resources has already fixed asset value of the natural gas at Tk 25 per Mcf (1,000
cubic feet) from previous 'zero' for appraising the worth of this fossil fuel. Fixing value of the
natural wealth was never done before. The BERC did not calculate any asset value of gas before for fixing its tariffs before.
Only the upstream and downstream costs and the costs against the purchase of gas shares of
the international oil companies (IOCs) used to be taken into account. As per schedule, the public hearing for raising wheeling charge against the proposal of state-run Gas Transmission
Company LTd (GTCL) will be held on February 2. Public hearings for Titas Gas Transmission
and Distribution Company Ltd and Pashchimanchol Gas Company Ltd will be held on February
3. Bakhrabad Gas Distribution Company Ltd and Karnaphuli Gas Distribution Company Ltd will
face public hearings on February 4. And the price-hike pleas of Jalalabad Gas Transmission
and Distribution Systems Ltd and Sundarban Gas Company Ltd will come up for hearing on
February 5.
News source: http://www.thefinancialexpress-bd.com/2015/02/01/78796
FDI likely in RMG
outside EPZs with
no string attached
The government will soon take a decision on allowing foreign investment in readymade garment
(RMG) industry outside the export processing zones (EPZs) without any conditions, a move that
has been vehemently opposed by local apparel industry owners. The Ministry of Commerce
(MoC) will convene a meeting next week with stakeholders to settle the issue of allowing foreign
investment outside the EPZs in both high-fashioned and basic garments, according to officials
concerned. Stakeholders in October last had agreed to accept foreign investment outside the
EPZs provided those factories will produce fashion items and export those in non-traditional and
new markets like Russia, Brazil, China, South Africa, India, Australia and Mexico. Officials said,
the government is under pressure from several countries to allow FDI in basic garments without
any condition.
"We will sit with the stakeholders next week to settle the issue," Commerce Secretary Hedayetullah Al Mamoon told the FE without elaborating. A senior MoC official told the FE months
back stakeholders at a meeting with officials of the Export Promotion Bureau (EPB) had agreed
on conditional acceptance of FDI in the RMG sector outside the EPZs. "But immense pressure
is there to accept FDI in RMG sector without imposing any condition. Foreigners want to invest
in basic garment production as well," he said. He said the EPB has forwarded the new proposal
to the ministry concerned for decision-making since they could not convince the stakeholders to
allow FDI in low-end garment items.
"We will have to take a decision immediately. Our Prime Minister had to face questions on this
issue during her several overseas visits," said the official preferring anonymity. Vice-President
of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Shahidullah Azim
told the FE Friday that allowing foreigners in low-end garment items will create chaos in the
industry. Referring to previous experience, Mr Azim said some joint venture factories, located
outside the EPZs, had paid excess wages to their workers which the nearest other local factories could not afford. As a result, workers of local factories, who were getting wages according
to the government wage structure, had demanded additional pay. This led to labour unrest. "We
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Daily News Recap
are good enough to produce basic garments. Interested foreigners can invest in fashion items
as well as backward linkage industries," he said adding local garment-makers won't accept foreign investment in basic items.
Officials said, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and
the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) are entitled to
provide utilisation declaration (UD) certificates for RMG factories. The two trade bodies have
been issuing UD certificates to their member-factories only. The two trade bodies do not issue
UD certificates to factories having foreign investments on grounds that such investment outside
the EPZs would pose threat to the local RMG industry. According to the law of the land, membership of the concerned associations and UD certificates are a must for the export-oriented
factories to import raw materials under bonded-warehouse facility.
News source: http://www.thefinancialexpress-bd.com/2015/01/31/78622
Economy
BB to continue
'cautious' monetary
policy for H2
The Bangladesh Bank (BB) will continue its existing 'cautious' monetary policy for the second
half (H2) of the ongoing fiscal year (FY) 2014-15 with an aim to maximise economic growth by
curbing inflationary pressure on the economy. "The cautious monetary policy stance of H1 FY
15 will remain unchanged in H2 of FY15 without any new loosening or tightening," BB Governor
Atiur Rahman said while formally announcing the monetary polity statement (MPS) for the January -June period of this fiscal at a press conference held at the central bank headquarters in
Dhaka Thursday. The central bank chief also said the BB will also maintain continuity and further strengthen the momentum of investment-friendly reforms in credit and financial policies
accompanying the monetary policy in the H2 of FY 15 towards enhancing effectiveness of the
financial markets as transmission channels. The BB is going to introduce a rebate policy for
rewarding regular borrowers, the central bank governor said.
"I instructed the BRPD (Banking Regulation and Policy Department) department on Wednesday
to formulate a policy in this connection," he disclosed this while answering a query. Talking to
the FE, a BB senior official said the BRPD is now making preparation to formulate the policy. "We're working for all, not for a certain quarter or group," the BB governor said while replying to another query relating to the new large loan restructuring policy. He also said no borrower
will be eligible for such restructuring facility if he or she is found involved in any forgery or malpractice. After restructuring, if any borrower fails to repay two consecutive instalments of their
loans, then such facility will be cancelled, he added. "The policy will help increase profitability of
banks through reducing their amount of classified loans," SK Sur Chowdhury, deputy governor
of the BB, said, adding that it will also help create employment opportunities.
Regarding monitoring and supervisions, Dr Rahman said the BB's supervisory oversight on
credit disbursement and loan recovery disciplines in banks and financial institutions will intensify. There will be particular emphasis on risk management, internal audit and internal controls,
accountability and transparency, he added. "Besides firmly discouraging abetting of habitual,
wilful repayment default, creating room for helping out recovery of genuine businesses
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Daily News Recap
distressed by circumstances beyond their control with realistic debt restructuring in line with
best international practices is under the BB's careful consideration," he noted. The ceiling for
private sector credit growth remained unchanged at 15.5 per cent for the H2 of FY 15 while
public sector including the government re-fixed it at 25.3 per cent from 24.8 per cent earlier.
Private sector credit will have space for 15.5 per cent growth, a level substantially higher than
the 12.7 per cent November 2014 level, according to the BB governor. "We're ready to increase the ceiling of private sector credit growth in line with requirement," Dr Rahman said
while replying
News source: http://www.thefinancialexpress-bd.com/2015/01/30/78498
Inflation eases
slightly in Dec
The country's inflation as measured by consumers' price index (CPI) eased slightly in the
month of December last on both the point-to-point and 12-month average basis mainly because of decrease in prices of food items. The inflation rate came down to 6.11 per cent in
December 2014 from 6.21 per cent of the previous month on the point-to-point basis, according to the Bangladesh Bureau of Statistics (BBS) data. On the other hand, the annual average
inflation fell to 6.99 per cent in December last from 7.10 per cent of the previous month. "The
CPI inflation decline is, however, mainly from the food component of the consumption basket.
Core (non-food, non-fuel) CPI inflation has been on somewhat upward edging trend in November and December 2014," the BB governor explained. He also said progress in bringing
annual average CPI inflation down from 7.35 per cent at the beginning of FY 15 to 6.5 per
cent by June 2015 is broadly satisfactory, with 6.99 per cent level by the close of the H1 of FY
15.
The central bank governor hoped that the MPS for the H2 of FY 15 would play the same effective role as the previous one in instilling and strengthening public confidence on the BB's actions aimed at containing and stabilising CPI inflation. He also believed that its attendant inclusive, environmental sustainability supportive credit and financial policies would make meaningful contribution in supporting the government's pursuit of inclusive, environmentally sustainable growth and poverty eradication on the country's path towards prosperity. The central
bank projected that the country's overall trade deficit might rise to US$9.91 billion by the end
of the FY 15 from $6.81 billion in the previous fiscal. The current account deficit might reach
$1.35 billion in the FY 15 from $1.35 billion surplus a year ago. The country's current account
balance entered into negative territory in the month of September 2014 due to higher landed
imports, a BB official said. The overall balance of payments (BoP) may come down to $642
million in the FY 15 from $5.48 billion in the previous fiscal, according to the BB's latest projection. BB Change Management Advisor Allah Malik Kazemi and Chief Economist Biru Pakska Paul also spoke on the occasion.
News source: http://www.thefinancialexpress-bd.com/2015/01/30/78487
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Daily News Recap
BD fails to qualify
for US MCA fund
again
Bangladesh has failed to qualify again for the Millennium Challenge Account (MCA) fund of
the USA this year due to its failure in improving the 'control of corruption' index, officials said
Friday. Its neighbour Nepal, however, has qualified for the 2015 fund in the latest review made
last month for its better performance in several indicators. It remains the only eligible South
Asian country to get funds from the US government to cut poverty. MCA is a fund administrated by an independent US government agency Millennium Challenge Corporation (MCC) for
the poor countries to facilitate cutting poverty and improving social conditions. Ministry of Finance (MoF) officials said Bangladesh has been trying for past many years to qualify for the
fund under the MCA. "Although Bangladesh's position has been improved in freedom of the
people's rights, child health and elimination of gender disparity, it has failed to curb corruption
to a satisfactory level. So, the country has not been eligible for the USA fund," a senior Ministry of Finance (MoF) official told the FE Friday.
He said if a country wants to qualify for the MCA fund, it will have to improve three broad indexes - 'Ruling Justly', 'Encouraging Economic Freedom', and 'Investing in People'. Under the
broad index, a country has to improve 'Control of Corruption', 'Democratic Rights' and at least
half of remaining small indexes. An Economic Relations Division (ERD) official said Bangladesh has done a good job in the last two indexes while failed to comply with the first one
(Control of Corruption). Among the 20 sub-categories of the three broad indexes, Bangladesh
has failed to improve the indicators including control of corruption, health expenditure, primary
education expenditure, national resources protection, fiscal policy, regulatory quality, trade
policy, land rights and access and access to credit.
It, however, has been able to comply with 11 remaining indicators including immunisation
rates, girls' primary education completion rate, child health, political rights, civil rights, freedom
of information, government effectiveness, rule of law, business start-up, gender in the economy, and inflation. The Board of the MCC in December last selected Mongolia, Nepal, and the
Philippines as eligible for such assistance for FY 2015. Another ERD official said although the
fund is not so significant in amount for Bangladesh, its eligibility could send a good message
to the world community about the country's better environment for business and investment.
Established in 2004, the MCA is an innovative foreign assistance programme designed to
reduce poverty in developing countries through sustainable economic growth. Every year, the
MCC Board of Directors meets to select countries for MCA assistance.
News source: http://www.thefinancialexpress-bd.com/2015/02/01/78792
Political instability
to take toll on private investment,
fears UO
The Unnayan Onneshan (UO), independent multidisciplinary think-tank, has cautioned that the
trend of shortfall in the target of growth in private
sector credit may further worsen the sluggish rate
of private investment triggered by current political
instability, reports UNB. As a result, it said the
rate of growth in gross domestic product (GDP) might not reach the target of 7.3 per cent in
fiscal year (FY) 2014-15. The UO in its rapid assessment of recently announced monetary
policy statement for the second half of the FY 2014-2015 revealed that the growth in private
sector credit may fall short of target in view of the observed trend of unachieved targets in
previous occasions. The UO said this in its January issue of Bangladesh Economic Update
2015. The research organisation further elaborates that until November of FY 2014-15 when
the political unrest did not reach the current level, the Bangladesh Bank remained far away
from its target of 14 per cent growth in private sector credit set for the period of JulyDecember of FY 2014-15.
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Daily News Recap
The target of 15.5 per cent for the January-June period of FY 2014-15, therefore, seems to be
unrealistic amidst the current state of severe political uncertainty since January 2015. Referring to the gap between the targets and actual credit growth of private sector, the UO demonstrated that the rate of growth in private sector credit became 12.7 per cent in November of FY
2014-15 against the target of 14 per cent. Similarly, the rate of private sector credit growth
was calculated at 10.8 per cent and 12.3 per cent during FY 2012-13 and FY 2013-2014 respectively against the target of 18.5 per cent and 16.5 per cent respectively, it added.
It said that the "cautiously restrained" policy may face the challenges of increasing real interest rate due to the recent discrepancies between the decrease in inflation rate and the decrease in nominal interest rate, commented the research organisation. Referring to persistent
deterioration in the financial portfolio of the state-owned banks, the research organisation
showed that the government plans to allocate Tk 60 billion to the four state-owned banks in
FY 2014-15, which was Tk 41 billion in December of FY 2013-14 representing a increase of
46.34 per cent.
The shortfalls in capital in the banking sector can largely be attributed to the inefficiency in the
sector caused by slack surveillance, frequent incidence of scam and fraudulence, captured
governance, and poor risk management, added the UO. Calling for a cautious harmonisation
of fiscal and monetary policies that would cause both the money and fiscal multiplier to work in
the economy and channel adequate resources for the expansion of productive capacities, the
UO urged for an inclusive political dialogue between the political parties that would create a
stable investment climate and increase the private investment by restoring business confidence and cause the national output to grow at 6.26 per cent in FY 2014-15, as projected by
the UO.
News source: h p://www.thefinancialexpress-bd.com/2015/02/01/78719
Current account
deficit likely for 1st
time in 2 years
The current account balance is likely to plunge to deficit for the first time in two years in the
current fiscal year with imports exceeding exports. The deficit is projected to be $1,348m in
the fiscal year 2014-15, according to the latest monetary policy statement. Until the first quarter of the fiscal, the current account had been in the black since FY2011-12. The current account balance recorded a deficit of $1,316m during the July-November period of 2014 compared to a surplus of $1,127m in the same period a year ago, according to the Bangladesh
Bank data. “The current account balance was negative during the period, particularly owing to
import growth outstripping export growth,” said the central bank statement. On projection of
current account for this fiscal, it said there will be a correction in the pace of export growth as
the existing outcome of export earnings appears to be the lag effect of cancellation of garments order followed by political deadlock in the first half of current fiscal year and collapse of
Rana Plaza, along with a pick-up in imports as investor confidence grows.
Imports rose by 11.59% to $17.8bn in the first half of this fiscal when exports rose 1.56% to
$14.91bn compared to the same period a year earlier, according to the Export Promotion Bureau. A banker said imports might increase further with the start of Padma Bridge construction
works, the country’s largest infrastructural project. Political unrest might dampen export
growth, which would put the balance of payments under pressure in future, he added. For this
fiscal year, the central bank projects an overall export growth of 8%, import 15% and remittance 12%, which will lead to having a reasonable balance of payment surplus. However,
starting from FY2015 in order to retain external sector stability it will be important for export
and growth to pick up as imports are likely to grow further, Bangladesh Bank said in policy
statement.
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Daily News Recap
“This will require coordinated activities to boost export diversification, change in destination,
manpower exports, upgrading skills of migrants and enhanced incentives to use formal channels to remit and invest funds. Bangladesh Bank will continue its efforts in this regard,” it said.
Despite a reasonable remittance growth of more than 10% in the first six months of this fiscal
year, the deficits in trade balance ($4.48bn), services account ($2.05bn) and primary income
account ($1.21bn) exacerbate the current account balance to a deficit, according to BB. It said
fortunately, remittances and other secondary income to the tune of $17bn are expected to
cushion against the deficits of trade, services, and primary income, limiting the amount of current account deficit to $1.35bn for FY2015 – which appears to be normal and serviceable for a
growing economy like Bangladesh. Aiming at keeping exchange rate stable, Bangladesh Bank
will continue to buy greenback.
“Intervention in the foreign exchange market have protected exporters by slowing the appreciation or in turn, helping depreciation of the taka.” The central bank anticipates further buildup
in foreign exchange reserves in the second half of FY2015 though at a more moderate pace
than FY2014 due to the balance of payments assumptions. Foreign currency reserves are
hovering over around $22bn – enough to cover imports of more than six months. After a period of appreciation since early 2012, the exchange rate remained stable since mid-2013.
News source: http://www.dhakatribune.com/business/2015/feb/01/current-account-deficitlikely-1st-time-2-years#sthash.S60CXZJo.dpuf
FY15 exports may
fall short of target
Bangladesh is unlikely to reach its export target set for the current fiscal year in the wake of
the prevailing political unrest that has already undertaken heavy toll on the country’s economy. The government has set US$33.2bn export target for the fiscal year 2014-15 to earn
$27.5bn from the nation’s potential garment sector. The target is 8.85% higher than that of the
last year’s earning of $30.19bn. According to Export Promotion Bureau (EPB), in the first half
of the current fiscal year, Bangladesh earned $14.9bn, which is 4.42% less than that of the
export target of $15.6bn for the period. On the other hand, the export growth had showed a
slower trend to 1.56% in July-December period, the lowest in the last five year. In the first half
of the current fiscal year, Bangladesh has witnessed over 1.5% growth against the target of
around 10%, former finance adviser to a care taker government ABM Mirza Azizul Islam told
the Dhaka Tribune.
“If we want to meet the target, we have to achieve over 15% growth in next six month, which
is not possible due to the ongoing political unrest as it has already disrupted both the supply
and the demand sides,” said Islam. In this regard, he also reminded that the buyers were unwilling to place orders in Bangladesh amid political unrest. “The export target for the FY201415 is under great threat due to the ongoing political turmoil since January 5 and if the present
situation does not improve, it will be quite impossible to meet the target,’’ Mohammad
Hatem, former first vice president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), told the Dhaka Tribune. A confirmed order worth $3.8m has finally been
withdrawn as the buyer is not willing to take any risk placing orders in Bangladesh under the
current state of political unrest, he added.
If there is not enough work orders for the export-oriented industry, especially the apparel industry, how come it would be possible for us to ship the products under police escort? questioned an exporter, commenting on the government’s initiative to keep the supply and delivery
chain smooth at any cost. The country’s supply chain has been shattered since 5 January and
if it continues any further, production at the export oriented factories will come to a halt, he
added. After the X-mas, it is the high time for the buyers to place orders but they are placing
at least 30% to 40% less orders due to the political unrest, he further said. As there is no sufficient orders, a good number of factory owners is running their factories partly, said BGMEA
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Daily News Recap
Vice President Shahidullah Azim. “It would be quite impossible to reach the export target by
any means under the current situation and consequently, it would badly hit the export target of
$50bn by 2021,” he added.
According to Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the
RMG sector has lost more than 30% orders as the buyers are not even coming to Bangladesh
to place their orders. Bangladesh mainly depends on garment, leather, agricultural products,
shrimp and jute and jute goods to achieve its export target. Among the major export sectors,
Knitwear sector failed to reach the target by 2.41% followed by Woven 7.27%, leather and
leather products 12.80%, home textile 7.19%, specialised textile 12%, frozen fish
10.47% while vegetable 26%.
News source: http://www.dhakatribune.com/business/2015/feb/01/fy15-exports-may-fall-shorttarget#sthash.u9VmhZug.dpuf
Capital Market
Performance-based
management fees
for AMCs in the offing
The Bangladesh Securities and Exchange Commission is planning to set performance-based
management fees for asset management companies of mutual funds in line with its effort to
pressurise the entities to improve performance, a BSEC senior official has told New Age recently. In the existing mutual fund rules AMCs get regular fees for managing the mutual funds
indiscriminating their performance in terms of how much the mutual funds are offering dividends to their unit holder, he said. Due to the legal constrain, AMCs have no urge in improving performance of the mutual funds, the official said. Some of the mutual funds are investing
funds based on their personal interest, he said. Due to the BSEC’s tough monitoring over the
mutual funds, the performance of the mutual funds have improved a bit in 2014, but, except a
few, almost all the mutual funds have declared less than 15 per cent dividend to their unit
holders which have failed to lure investors, the official said.
Considering all of these, the commission has decided to amend the mutual fund rules setting
performance-based management fees for the asset managers, he said. The commission
might set a standard dividend return ratio that must be ensured by the AMCs for entitlement of
regular management fees, the official said. Issuance of dividends less than the specified percentage will result deduction of management fees, he said. Another BSEC official said that the
commission might amend the mutual fund rules keeping scope for penalising the AMCs. Experts on mutual funds say that lack of investment instrument, managerial capability and imprudence of the asset managers are the main constrain in making funds for investment. In December last year, the capital market regulator issued letters to the custodians of mutual funds
asking the entities to submit details of the MFs’ assets under their custody within January 20,
2015. The commission in the last couple of years had taken several steps to make the ailing
mutual fund sector vibrant by ensuring proper function of the mutual fund-related organisations, a BSEC official said.
In line with the commission’s previous actions, verifying assets of the mutual funds will help
the commission find out irregularities done by the mutual fund-related entities, he said. After
the market crash in 2010-2011 most of the mutual funds failed to offer dividend to their unit
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Daily News Recap
holders that put a negative impact on the overall mutual fund sector. Due to the investors’
negative perception about the mutual funds, most of funds are now trading at the stock exchanges below their net asset values per unit, the official said. The commission’s actions
against the asset managers, trustee and custodians of the mutual funds might improve performances of the funds and restore investors’ confidence, he said.Seventeen asset managers
are operating 40 mutual funds listed with the capital market.
New source: http://newagebd.net/90719/performance-based-management-fees-for-amcs-inthe-offing/#sthash.WJn0AKvh.dpbs
BD contributes notably to Asian Frontier Fund
Despite having a sluggish performance in the domestic stock market, Bangladesh emerged as a
leading 'return contributor' for
Asian Frontier Fund (AFF) in last
year. Hong Kong-based Asia
Frontier Capital (AFC) Limited is a
fund management company specialises in investing in high growth
Asian frontier economies by managing the AFC Asian Frontier
Fund and the AFC Vietnam Fund.
'Breaking down 2014 performance country wise, on a gross return basis, the leading return
contributors within fund were Pakistan, Vietnam, Bangladesh and Sri Lanka, in that order,'
said the annual review of the AFC, revealed second week in January this year. The review
report also mentioned that these four countries make up 68 percent of AFC's fund as of December 2014 and historically these four countries have been a majority of the portfolio. The
fund puts around 13 per cent of it's total investment to Bangladesh market, the data reveals.
The report also refers to five stocks which provided the highest returns on investment without
mentioning specific names. These are: a pharmaceutical, a consumer beverage and a tobacco company from Pakistan; a pharmaceutical company from Bangladesh, and a consumerfocused conglomerate from Sri Lanka. 'All of these five companies were part of our top 20
holdings during the year except for the Pakistani tobacco company, which we exited and
booked profit on in the beginning of second quarter,' said the report. The first one invests in
public equities of Asian frontier countries that are seeing increasing consumption due to favourable demographic trends, rising incomes and high economic growth. The fund invests in
listed equities of companies that have their principal business activities in Bangladesh and 12
other countries.
Less advanced capital markets from the developing world are known as frontier markets. They
have invest-able stock markets that are less established than those in the emerging markets
like China and India.
Bangladesh's Outlook Better
The AFF expects better return from Bangladesh in this year taking the political risk in consideration. 'Political protests can be an issue going forward but these events have occurred in the
past as well and companies have continued to deliver numbers,' said AFF. On it's outlook, it
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Daily News Recap
also said, 'The beginning of 2014 witnessed political protests due to the election period, but
things have stabilised since then. We continue to like Bangladesh as we think it provides a
good consumer story with a population of close to 160 million and a GDP/capita of $1,100.'
According to AFF, consumer companies in the country will be benefited due to rise in income
level in future. 'Therefore we like the long term story of consumer related stocks in Bangladesh. We think lower crude oil prices will be a positive for the economy and also for consumer
stocks in general.'
AFF also underscored the macroeconomic performance of Bangladesh and termed it better
compare to Pakistan and Sri Lanka as the country has managed to have a current account
surplus through increased exports, kept its fiscal deficit under control (3.4 percent of GDP),
and has not built up high levels of government debt (35 percent of GDP). The fund, however,
put a note of caution on future investment as it said, 'Valuations are not cheap in Bangladesh
and we will need to be selective in our investments.'
News source: h p://www.thefinancialexpress-bd.com/2015/01/30/78428
BBs liquidity support for capital market continues
Bangladesh Bank (BB) has continued liquidity support for capital market in accordance with
the banks' permissible limit along with ensuring their compliance set in laws and regulations,
officials said. BB Governor Dr. Atiur Rahman Thursday said this in his speech while unveiling
the Monetary Policy for January-June, 2015. "Amid the attention to financial markets stability,
the BB's attention in support of capital market stability will also continue in the second half of
FY2015," Atiur said. He said the central bank has the statutory responsibility of enforcing compliance of banks with the legal limits on their capital market exposures. "Further to this, the BB
has continued liquidity support for capital market transactions in volumes permissible within
the central bank's monetary programs," the governor said.
While mentioning the government's initiative in lessening burden of investors affected during
the 2010-11 stock market debacle, Dr. Atiur said the central bank played instrumental role in
structuring the refinancing program supporting capital market activities. "BB will continue its
supportive role in capital market developments to the feasible within laws and regulations," the
governor said. At the press the newsmen raised question about the facility provided to large
loan defaulters amid sufferings of thousands of affected investors of the capital market. In this
regard, the governor said the central bank has already disbursed Tk 6.0 billion of the capital
market re-financing scheme. "We are also sitting with the stakeholders of the capital market
once in every three months," the governor said. The ministry of finance (MoF) earlier stressed
on proper coordination among the regulators of the capital market and other ones ahead of
taking any decision that could affect the stock market.
In this regard, BB Governor Dr. Atiur said the central bank is engaging regularly with capital
market and other financial system regulators in quarterly policy coordination meetings. "In the
first half of FY2015, the central bank has introduced a number of new investor friendly regulatory reforms facilitating external transactions of foreign and local businesses including investors in the capital market." The governor also said due to reform brought in rules, foreign equity investments made in unlisted local companies can now be sold to local investors at market
based prices rather than at net asset value. "I hope the monetary policy declared Thursday will play a key role observed earlier for the sustainability of the money and capital market," the governor added.
News source: http://www.thefinancialexpress-bd.com/2015/01/30/78429
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Daily News Recap
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