The present restriction on investment outside the country is creating roadblocks for the aspirant local companies to test their mettles against the rivals in foreign soils to win the ‘global brand’ recognition.
Companies like Otobi, Apex, Pran, Arong and Rahimafrooz want investment opportunity overseas after big success in their backyards in the last one decade.They, however, could not go ahead with their invest plans in foreign lands land due to existing restriction in the foreign currency regulations of the Bangladesh Bank.
The local brand companies, however, firmly believe that they are well armed to compete with their international and regional brand operators which are in downbeat moods due to the global financial meltdown. ‘Prime target of these companies is the Indian market,’ Sabbir Hasan Nasir, the chief executive officer of Otobi said.
India brought changes to its foreign exchange policy in last November and withdrew decade old restriction on investment from Bangladeshi businessmen.
‘The withdrawal of restriction and the global financial crisis is a big opportunity for the local brands to make a foray in the Indian market,’ said Sabbir who has been piloting the company since 2005.
The prevailing situation in India suggests that business activities of many companies have slowed down due to recession. It will serve a suitable atmosphere for local brands in the strong 1.14 billion people Indian market.
With a 35 per cent annual growth in the local market, Otobi started franchise in Kolkata last year and was overwhelmed by response from brand concerned Kolkata shoppers.
Sabbir said the growing presence of Indian middle class will be an added advantage for the confident local brands, which can offer their products at much cheaper prices.
Despite the big opportunity, local companies are hamstrung by the existing central bank rules that do not allow big investment outside Bangladesh, he added.
So far the companies like Otobi, Rahimafrooz, Apex, Arong and Pran rely on export orders from the international buyers and the franchisers to market their products in India, oil-rich Arab and some other African countries.
‘Time has come for the central banks to review the existing rules enabling the local companies to invest outside’, said Apexadelchi Footwear Limited managing director Nasim Manzur.
Investment is needed to set up outlets and even manufacturing plants for higher value addition and global recognition for local brands, he said. ‘A company can earn reputation by marketing its products through franchises, but it needs its own presence with products to grow the brand image,’ he said.
‘A franchiser will not give more emphasise for a brand than a manufacturer,’ he added. Manzur, who is also vice-president of the country’s oldest chamber body-metropolitan chamber of commerce and industry, in a written statement urged the finance ministry to review the existing barrier in last February.
The MCCI statement said:‘The present restriction on investment outside the country needs to be reviewed in the larger interest of the export and market access.’
The given permission to invest outside will help the market Bangladeshi products, it added.The finance minister assured the MCCI leaders of reviewing the demands including that of investment restriction outside the country.
Manzur, however, said they do not want wholesale permission from the central bank to investment outside. He said the permission will be case by case basis and after a thorough review to prevent capital flight from the country. Manzur also said present financial meltdown is favourable to make the investment at a cheaper cost in part of the world.
Even the Bangladesh government is purchasing flats in the New York business district of Manhattan to accommodate its offices. The initiative has taken to cash in on the falling price of real estate in the most costly place on earth.
‘The present establishment costs to set up two outlets, suppose in England, would take half of the price than the last years costs,’ he added.
Rahimafrooz Group has already earned huge reputation for marketing 300,000 pieces of Volta, an automotive battery, in more than 25 countries in last year.
Of the number, Indians consumed the most. To feed overseas markets, Rahimafrooz’s new plant at Ishwardi EPZ will go into operation by June. It will be the south Asia’s largest export-oriented battery manufacturing plant with an annual production capacity of one million units.
‘After putting years of efforts on brand development, we are now getting benefits from foreign markets,’ said Niaz Rahim, managing director of Rahimafrooz Group.
The experts, however, said the group needs to set up assembling plant in India and other countries in near future to keep its competitiveness against the rivals.
Juice, pickles, cookies and confectionaries of Pran Group are now being shipped to more than 50 countries and sold in villages in north-east India to cities in many Middle Eastern and western countries.
Pran’s last year’s exports amounted at around US $15 million, which was more than half of Bangladesh’s total processed food export earning.
It has planned to set up a plant in Indian state of Tripura at an initial investment of around Tk 25 crore to seize the market potential in landlocked north-east estates known as ‘seven sisters’.
‘The central bank restriction on FDI outflow from the country holds the progress of the proposed project,’ said Kamruzzaman Kamal, an executive director of Pran Group.
“We submitted our investment proposals to the central bank late last year,’ he said, adding that his company was waiting for a decision.
The Pran officials are sure about huge success in the Indian market, which can help them to cement their position as a juice to chocolate giant in this part of the world.
Saturday, April 11, 2009
Regulation hinders local
Stanchart inks deal with Warid
Standard Chartered Bank and Warid Telecom have recently entered into an agreement to provide convenience to the common customers of both the organisations through the Auto BillsPay facility.
The Auto BillsPay will allow the bank’s customers to automatically settle their Warid mobile connections’ monthly bills through an auto-debit instruction against their Standard Chartered credit card or account, a news release said.
Warid Telecom chief executive officer Muneer Farooqui and Standard Chartered Bank head of consumer banking Sandeep Bose signed the deal at a ceremony held in Dhaka.
Friday, April 10, 2009
Bangladesh migrant workers suffer
Dreams shattered
The problems could be seen clearly in the arrivals area of the airport in Bangladesh's capital, Dhaka.
Bangladesh relies on its expatriate workers and the money they send home each month. Most work in the Gulf, Malaysia, the US and UK - all places affected by the global economic crisis.
So far the government says only about 300 are returning every day. But everyone here is afraid that these numbers will soon go up.
Fed sees no economic recovery this year
The Federal Reserve no longer sees signs of recovery this year from a prolonged recession and only weak growth in 2010, minutes of a policy-setting meeting said Wednesday.Despite massive interventions by the Fed and other government bodies to jumpstart the moribund economy and unblock tight credit, policymakers at a March meeting viewed grimmer projections than those made two months earlier. The United States, among the earliest to enter recession after financial turmoil stemming from a home mortgage meltdown, could begin to grow again "slowly" next year despite numerous constraints, according to Fed projections.
"Real GDP (is) expected to flatten out gradually over the second half of this year and then to expand slowly next year," the minutes of the Federal Open Market Committee (FOMC)'s March 17-18 meeting said. The central bank anticipated the recovery "as the stresses in financial markets ease, the effects of fiscal stimulus take hold, inventory adjustments are worked through, and the correction in housing activity comes to an end." The United States plunged into recession in December 2007 after a home mortgage meltdown triggered a financial crisis that spread around the world, slashing economic growth.FOMC chairman Ben Bernanke and his policymakers at the March meeting stared down grim staff-prepared forecasts that were sharply lower than the outlook prepared for the January FOMC meeting.
In January, the economy was expected to recover "gradually" during the second half of 2009 albeit shrinking between 0.5 percent and 1.3 percent for the full year.
Sorry state of poultry industry at Magura
More than 200 poultry farms have been closed during last two years in Magura district, sending hundreds of people to unemployment. Bird flu, price hike of poultry drugs and feed and fall in the price of poultry birds are the reasons to bring disaster in poultry industry.
Alone in 2007, due to severe attack by bird flu at least 100 farms were closed in Magura district. The existing farms are facing setback due to price hike of poultry feed and low rate of fowls and high rate of poultry chicks.
Price hike of poultry feed is one of the main reasons behind the deplorable condition of poultry business. Poultry feed per bag of 50 kg is being sold at taka 1300 as against 850 two years ago. Poultry chicks of one day are being sold at taka 46 as against taka 38 two years ago.
On the other hand, mature poultry bird per kg is being sold taka 110 as against taka 130 three months ago. Some poultry farms have also been closed due to the interference by the local administration. Requesting anonymity a farm owner informed, "In 2006 I started a farm in my own land. At that time there was no house nearby. But subsequently some houses were built in that area. Following the complain of the house owners, the administration sealed my farm in the name of saving environment from pollution.
By this time, many educated youths have become jobless due to the closure of the farms Many workers who were involved in poultry farms are now passing hard days as they have no jobs. Poultry feed shop owners are also sufferers for this situation. Mehedi Maruf, a poultry shop owner said that the recovery of more than taka five lakh has become uncertain due to the closure of huge number of farms. Bangladesh Krishi Bank, Jubo Unnyan Directorate, Grameen Bank and BRAC Bank are also getting difficulty in realising their invested money which was disbursed among the owners of the closed farms.
When contacted, District Livestock Officer said that Bird flu is the main enemy of poultry farms, but the attack of bird flu can be controlled by providing firm owners and workers with proper training.
General Secretary of district poultry farm owners said that the government should consider the deplorable condition of poultry farms as a national crisis. He added that to save this industry government has to extend technical support as well as financial help.
GP organizes free eye camp
Grameenphone, jointly with Sightsavers International, organized a free Eye Camp at the Intervida School, Madhab Nagar, Tumulia, Kaliganj, Gazipur on Wednesday, says a press release.
This is the 15th free eye camp organized jointly by Grameenphone and Sightsavers International. Through these camps, conducted in rural parts of Bangladesh where people have little or no access to quality healthcare, Grameenphone aims to provide free eye-care services to the economically disadvantaged people of the area. Islamia Eye Hospital was the local partner in this eye camp.
Ms. Zahida Ispahani, Advisor, Islamia Eye Hospital, Arkanul Islam, Manager, Grameenphone and Rafiqul Islam, Sr. Program Manager, Sightsavers International were present at the camp. Speaking on the occasion, Ms. Zahida Ispahani expressed her appreciation of the initiative undertaken by Grameenphone.
The turn-out of patients was quite high, with more than 1079 patients arriving for care at the Intervida School. All patients were given routine examinations and prescriptions for refractive error were given to those who required it. Among them 162 patients were referred for and administered Intra Ocular Lens (IOL) or cataract surgeries.
In the previous 14 camps, 22,655 patients received free eye-care support and 2,641 cataract surgeries were performed. Bangladesh has the highest number of blind people compared to its population. One of the Major challenges in combating this blindness is to reach the underserved rural population who constitutes 80% of the country's population, as the vast majority of eye care services are based in the big cities only."Health" is one of the key focus areas where Grameenphone has consolidated its social investments. For this, Grameenphone is committed to work with Bangladesh Government and other development agencies to make every life count and is focused on improving basic healthcare service quality, developing infrastructure and ensuring access to healthcare for all.
No unpopular budget, hints Muhith
The finance minister has hinted that the new government will not risk losing public support as it prepares its first budget.
"No, not at all," was how A M A Muhith responded Thursday to suggestion if the first post-election budget would take the customary advantage of adopting unpopular measures such as shedding redundant jobs.
The minister, however, said at a pre-budget meeting with editors and electronic media executives that the size of the budget for 2009-10 fiscal would be big in current contexts.
The minister elaborated that the recession-hit export-focused industries needed cash injection. The scope of the social safety net schemes also needed to widen and the number of beneficiaries increased. In addition, the government would take up programmes to generate jobs.
He said the government was moving towards a budget that blended both the development and non-development programmes.
Muhith said it will be impossible at the moment to reduce military spending and shed redundant administrative jobs to cut back on government spending.
The top news media managers suggested the cost-cutting measures in the wake of the global financial downturn.
He would not comment on suggestions of a cut in allocations for the military. He said when he was finance minister in the early 1980s, the size of the ADP was Tk 2700 crore and the revenue spending was Tk 1500-1600 crore. Now, the revenue spending is three times the development spending, he said.
"There's no way we go back to that kind of a situation." Only increasing the assets was not enough, there was a need to maintain them, he said.
The Financial Express editor Moazzem Hossain suggested a hike in the spending to keep up development efforts and asked the government for measures to ensure the ADP implementation starts from the beginning of the fiscal year.
The Independent editor Mahbubul Alam, also a former caretaker adviser, asked, "Why would the people be interested to pay taxes if they are not given services?"
He termed the newspaper industry a service industry and pleaded for a waiver on the 15 percent VAT on newsprint imports.
The Daily Star editor Mahfuz Anam said the government machine should be more geared up in spending because "we toil a lot to collect revenue but wait till the last minute to spend it".
Toufique Imrose Khalidi, editor-in-chief of bdnews24.com, recommended the government slash military spending to deal with the aftermaths of the global financial downturn on Bangladesh's economy. "There are issues like (widened) social safety net (it would be better if the military budget could be reduced). (Public) hospitals are in poor state," Khalidi said. He suggested retrenchment of redundant jobs to save money. "Does an officer need three-four assistants?"
Daily Manavjamin editor Motiur Rahman Chowhdury said a third of the import duty on capital machinery should go considering the recession.
News Today editor Reazuddin Ahmed asked the finance minister if the government would allow undisclosed income to be legalised.
Daily Jugantar editor Salma Islam MP urged him to give opportunities to use "undisclosed, hidden money".
Muhith said the government will decide on the issue taking into account all aspects.
Prime minister's finance and planning adviser Moshiur Rahman, Daily Prothom Alo editor Matiur Rahman, Daily Sangbad editor Altamash Kabir, Channel I managing director Faridur Reza Sagar, finance secretary Dr Muhammad Tareque, National Board of Revenue acting chairman Nasiruddin Ahmed, Bangladesh Today editor Mahmud Ur Rahman Chowdhury, Daily Inqilab city editor Zakaria Kajal, among others, attended the pre-budget discussion.
Thu, Apr 9th, 2009 7:54 pm BdST
Tuesday, April 7, 2009
Illegal structures on campus, RU losing huge revenues
About one hundred illegal structures and shops have been built on and around the Rajshahi University (RU) camps. Those have been constructed at Amtala area and around all different halls on the campus. Moreover, about 50 illegal and unhygienic open shops are carrying out their business activities with the aid of ruling party's political leaders and activists.
Though the university authorities gave temporary permission on humanitarian ground, a lot of problems have been created. Even the occupants are building the extra houses and renting them to the new employees. Sources alleged that the shop and the canteen owners regularly pay toll to the leaders of a student organisation. If anybody fails or shows reluctance to pay the toll, then the shop owner might suffer heavy losses.The temporary occupants are taking handsome money from the new employees for giving them the shelter, sources claimed. As a result, the university is losing huge revenue. sually we permit to build shops on on 30 square feet of land.
But a group ofemployees of the varsity, occupying more than the allotted land, erecting extra linked houses, said Md. Jahidur Rahman, Chief of RU Estate Office. Actually they are paying rent for 30 square feet of land only @ate taka 5 per square feet, he added.The university has a total of 748.96 acres of land, but a vast part thereof is under the control of some unauthorized persons. They are using varsity electricity and other services illegally. There is a so-called tomb on about 16 acres of land, west side of the main campus boundary under Jamalpur Mouza. RU authorities have taken initiatives twice to remove this land but failed. At last, in the year 2005, the university authority filled a case against Mazaar authority.
Besides, there is no boundary to identify the varsity area. So many disputes were created between the university authorities and the landlords of the locality. Several times thieves have sneaked through the boundary wall with the help of local people. That's why RU's 16 residential halls are insecure. RU Estate Officer Jahidur Rahman informed that a list of all illegal occupants was being prepared for action.
Electricity crisis hampering Boro farming
Boro cultivation is being hampered in the district of Madaripur during the on-going boro season due to frequent load shedding and erratic power supply. Maximum boro lands have been dried up as the farmers could not irrigate their land due to power crisis. Cracks have also been developed in some of those lands.
In this situation, farmers are apprehending that they might not achieve the production target of boro this season. According to the Department of Agriculture Extension (DAE), a scheme was taken up to bring about 47 thousand hectares of land under the boro cultivation this season in the district with an output target of three lakh metric tones. Ninety percent of the land have already been cultivated and the remainder soon. Deputy Director of DAE, Madaripur told The Bangladesh Today that farmers received agricultural inputs timely this season."That is why bumper production was in sight in this season if uninterrupted electricity for irrigation was provided under favourable weather," he said.
Kasem Hossain, a farmer from Jaforabad village under Sadar upazila, said that he brought five acres of land under boro cultivation this season but could not irrigate his land properly due to frequent load shedding. Official source said there was a demand for 40-megawatt electricity in the Madaripur district per day but 18 to 20 mw of electricity was being supplied.
April 8, 2009
wednesday
Record production of maize likely
Harvesting of early variety maize will begin soon though the same will get full momentum from mid- May as the process of seed formation continues everywhere in the northern region. Concerned experts, officials and farmers are expecting a bumper maize production in the region as the crop has been growing excellent under favourable climatic conditions everywhere this season.
The crop is now becoming ready for harvesting and the growing late variety maize plants are also in full bloom predicting an all-time bumper production of the cash crop, officials said on Tuesday.
Availability of quality seeds, including hybrid varieties, huge demand of the commodity in the country and maximum profits have encouraged farmers in farming maize largely.
The Department of Agriculture Extension (DAE) has fixed a target of producing 9.27 lakh tonnes of maize from 1.54 lakh hectares of land this year that is an all-time record target for the region
April 8, 2009
Rhythm of Colours : Bangladeshi painters shine in Dubai
Artworks (clockwise: from top-left) by Monirul Islam, Rafiqun Nabi and Ranjit Das
Rafiqun Nabi is well known for his paintings, woodcut prints and drawings. His paintings delightfully project the serene ambience of nature. Colours usually used by the artist are azure, yellow, ochre, red, black and emerald green -- representing rural Bengal. The colours give a torrential and imposing feel. Nabi does figurative work, painting rural folk, fishermen, kingfishers, broken bridges, buffaloes, boats, crows, wild flowers, people at leisure and gossiping. His landscapes transport the viewer to a higher realm. The artist arranges motifs in different combinations of light and shade.
Monirul Islam is easily recognised as he can interpret life's diverse dimensions with his unparallel style, techniques and arrangement where colours, lines, textures and forms blend in synchronisation. His works generally highlight a dominance of mixed media, watercolour, oil, collage and acrylic. When Monir visits Bangladesh, he uses paper (a particular uneven kind that's used in packing baked food or sweets) as his medium and corrugated board. His lines are very provocative and define new dimensions. At times His works appear technique-oriented. Hope, memory, dreams, nightmares and yearning are common themes in Monir's works.
Ranjit Das is celebrated for his flamboyant style and thought-provoking themes. From the beginning, Ranjit's works have been close to the bucolic countryside and the rural way of life. A large number of Ranjit's works depict villagers with domesticated and, often, wild animals. Their passion, pain, pleasure, bliss, contentment and dreams emerge on his canvas. All his works have in the background a story, which is familiar to us. His works give the viewer a real picture of our socio-political and economic structure. A figurative painter, Ranjit's works are distinguished for their disciplined, mindful and imposing use of colour with the compositions of semi-abstract and symbolic patterns.
Maksuda Iqbal (affectionately known as Nipa) is an upcoming painter who has been trying to carve a niche in our arena of art. She likes to experiment with colour in all its various facets. Texture gives a distinct look to her work. Nipa applies colour directly, piling up thick layers on the canvas. She concentrates more on the application aspect. This creates a hallmark for her canvas.
The exhibition ends on April 9.
Software exports grow 67pc in July-January
Staying immune from the ongoing global meltdown, the local information technology industry witnessed a 67 percent rise in exports during the first seven months (July-January) of this fiscal year, compared to the same period a year earlier.
The IT-enabled service makers fetched $19.75million from exports during the time, which was $11.77million last fiscal.
Software exports in the entire FY 2007-08 reached $24.82million. Industry insiders consider the year 2007 as stagnant for them like other industries because of the political uncertainty prevailed at that time.
"After passing a poor export performing export year, the industry started recovering from mid-2008," said Habibullah N. Karim, president of Bangladesh Association of Software and Information Services (BASIS).
The software industry contributes two-thirds to the total export of IT-enable services. Newly introduced call centres, graphics, data entry, animation and data processing companies are on the lists for the rest of the foreign exchange earners.
Karim said the on-going global meltdown partially affects the outsourcing industry. "As the big multinational corporate houses are in a crisis, local firms have to struggle managing outsourcing," he said.
The BASIS president however asserted that other IT-related industries remain far-from-affected by the global recession. He pointed to the fact that Bangladesh's IT companies are doing very low-end works for the global market.
In Bangladesh more than 300 IT-enable companies are producing services for both local and foreign markets.
Among them 100 companies are exporting their services to more than 30 destinations, mainly US and EU, in the global market.
The BASIS chief feels that an IT park should be set up as early as possible in the country. "An IT park could be a flagship of the country's ICT sector by which foreign investors and outsourcing companies would be encouraged to work with Bangladesh IT professionals.
Tuesday, April 7, 2009
Recession to derail energy targets: Muhith
Citing the on-going economic recession, the finance minister, A M A Muhith, warned Monday that it was unlikely the government would be able to fulfill its polls pledges in the energy sector.
"The power and gas solutions that we had dreamt up before the elections would not be materialised in three years because of the great economic recession," the minister told reporters. "We'll need our full five years in power."
Muhith's comment came after a meeting with 20 secretaries of ministries under the Medium-Term Budget Framework (MTBF).
The Awami League manifesto had promised to prop up power production to 5,000 megawatts in just three years.
The minister described the gas crisis as very grave, and said: "There is no way of getting out this grave crisis. But after three years, we expect to produce 300 MMCF of gas every day."
He said he would increase spending on power and gas sectors.
The minister said his budget speech would also spell out the government's energy plans for the next five years. He said four new ministries—housing, Bridges Division, power and energy—had been brought under MTBF.
Under MTBF, the ministries had been asked to make a three-year budget projection.
"This will ensure accountability and ownership of the ministries with regard to the budget," the minister said.
The recession would also force the government to raise the level of subsidies, he said, and employment, training, agriculture, rural development would receive special attention.
Tue, Apr 7th, 2009 12:29 am
BdST
Pay Commission report won't be executed in one go
The upcoming budget will not implement all the suggestions of the Pay Commission on a new pay scale for public servants in one go, the finance minister said Monday.
Half of whatever recommendations the commission makes will be implemented in the upcoming budget and the remainder in phases, AMA Muhith told reporters after a meeting with the representatives from the Institute of Cost and Accounting Management in Bangladesh at the Secretariat.
The full implementation needed huge funds, the minister said.
He added the situation in which the commission was formed was no more the same. Apart from that there were huge budget deficit.
Muhith said they had not received the pay commission report but added it was likely in a few days. "Work is ongoing to that end."
The caretaker government formed the Pay Commission on Oct 31 last year in the wake of a steep price hike of essentials
Mon, Apr 6th, 2009
2:05 pm BdST
Bank lending rates capped at 13%
The central bank has asked banks to cut lending rates to a maximum 13 percent except for credit card and consumer loans to help deal with the fallout of global financial downturn on Bangladesh's economy.
It also asked the banks to allow loans defaulted by recession-hit sectors to be rescheduled without down payment in the next six months.
Bangladesh Bank governor Salehuddin Ahmed told reporters after a meeting with chief executives of pubic, private and foreign banks Tuesday that only the affected ones will get the scope.
"The banks will take the steps based on their relations with the customers," Ahmed said.
The highest interest rate for all except consumer and credit card loans is currently 14.75 percent.
"We are also facing the impact of ongoing global recession," Ahmed told reporters after a meeting in the bank's headquarters in Motijheel.
"To compensate the loss and increase investment the banks have been asked to lower the lending rate to 13 percent."
Mahmud K Sattar, chairman of the Association of Bankers Bangladesh, an organisation of the bank executives, said they would try to comply with the central bank directives.
The easing of loan rescheduling conditions for the affected sectors might also help to deal with the aftermath of the recession, he said.
Monday, April 6, 2009
Jitters over Bangladesh IPO delay
The Securities and Exchange Commission (SEC) is awaiting government instructions before it can give the go-ahead for Grameenphone to offload shares worth $65m in an Initial Public Offering (IPO).
"The approval of the Grameenphone IPO is under process," says Farhad Ahmed, the SEC's director, but investors say the delay may discourage the listing of big companies in the future.
"This delay may dampen market interests," says Salahuddin Ahmed Khan, former head of the Dhaka Stock Exchange. "The SEC should approve the IPO immediately."
Showcase
When the idea was first mooted in the summer of 2008, the company planned to raise $300m, but that figure has since been more than halved.
"Because of the ongoing global slowdown, the sum we are looking for is $125m," says Grameenphone's Oddvar Hesjedal, "with $65m from the stock market and $60m from private placement."
"The money will be raised entirely within Bangladesh," he adds. "There is strong support from more than 50 local institutional investors."
"We will use the Grameenphone share issue as a showcase for other investments "
The company admits it is under pressure from shareholders who have already committed themselves to a stake in the company.
Yawer Sayeed, of the local asset management company AIMS, says he placed a large order with issue managers City Global some three months ago.
"We are locked into our commitment for a full year so, until the share debuts and starts trading, our money is sitting there without earning any interest," he says.
He also believes the share issue will open up new markets.
"People want to invest in infrastructure, along with gas and oil exploration," he says.
"There are also bridges to be built across our huge rivers, elevated highways, and the deep water port at Cox's Bazaar," he enthuses.
"We will use the Grameenphone share issue as a showcase for other investments."
There is concern, however, that the government is now more focused on settling the crisis stemming from the recent mutiny in the border security forces.
At the time, the mutineers said their revolt was over pay and working conditions, but the government now says it was part of a wider conspiracy aimed at destabilising Bangladesh.
Social Benefits
Grameenphone is the market leader among six mobile phone operators in Bangladesh, with 21 million subscribers.
The company has bucked the global trend of spiralling plunges and saw its profits rise by a staggering 68% in 2008.
Since its inception in March 1997, Grameenphone has built the largest cellular network in the country and nearly 98% of the country's population is within the coverage area of its network.
Villagers initially visited the 'phone lady'
It also pays more tax to the government than any other business in Bangladesh.
The company was founded in partnership with Norway's telecom giant Telenor, after the microfinance banker Professor Muhammad Yunus envisaged how gaining access to to the outside world would help the poor in rural villages.
Prof Yunus explains how farmers can determine the best time to sell their produce by keeping in touch with market prices, and how they can get veterinary advice about their animals.
Grameenphone has generated direct and indirect employment for a large number of people over the years.
It has more than 5,000 full and temporary employees, while another 100,000 people are directly dependent on Grameenphone for their livelihood, including retailers and Sim card outlets.
In addition, the Village Phone Program provides a good income-earning opportunity to more than 210,000 - mostly women.
The programme is a unique initiative to provide universal access to telecommunications service in remote, rural areas.
At its conception, only one person might have had a phone and other villagers would go to what became known as the "phone lady" who would let them use her appliance to make their call.
Ten years later, the entire Grameenphone network is also enabled to allow access to high-speed internet and data services.
Bangladesh clamps down on beggars
Their announcement follows a decision by parliament on Tuesday to grant metropolitan city status to the towns of Sylhet and Barisal.
The new classification means that begging is automatically banned, as it is in Dhaka, Chittagong and Rajshahi.
Critics say the ban has not worked, as many beggars still ply the streets.
They have have accused the government of making meaningless and unenforceable policy statements.
'Over-ambitious'
ActionAid Bangladesh country director Farah Kabir said that while the government's aim to eliminate begging was "laudable" it had given no indication yet as to how it would achieve this objective.
"If we could remove begging from our streets obviously we would welcome it," she told the BBC, "but bearing in mind that about 40% of the people of this country are below the UN-designated poverty line it seems to be a somewhat over-ambitious target.
"We don't know what will happen to people who are beggars - is the government proposing that they be removed from urban areas?
"They cannot be made suddenly to become invisible, they are on the streets in most cases because there are no employment opportunities for them. They do not beg out of choice," she said.
A social welfare ministry spokesman told the Associated Press news agency that detailed guidelines on how begging would be banned were expected to be in place within a month.
According to the proposals, anyone caught begging in public places would face a maximum three months in jail.
Ms Kabir said such a measure would be a "blatant violation" of human rights.
Begging is rampant in the country's two main cities - Dhaka and Chittagong - even though it is technically supposed to be banned.
World's cheapest car is launched
The Tata Nano, the world's cheapest car, has been launched in India.
Costing just 100,000 rupees ($1,979; £1,366), the Nano will now go on sale across India next month, with deliveries starting in July.
Tata hopes the 10-foot (3-metre) long, five-seater car will be cheap enough to encourage millions of Indians to trade up from their motorcycles.
Tata owner Ratan Tata has described the Nano as a "milestone". Analysts say it will not make a profit for six years.
" We wanted a find a safe way to transport Indian families at an affordable price "
Tata owner Ratan Tata
Nano: 'Triumph of Indian ingenuity'
Tata's managing director Ravi Kant said that from the first orders, a ballot would then select the initial 100,000 people to get their Nano.
"I think we are at the gates of offering a new form of transport to the people of India and later, I hope, other markets elsewhere in the world," Mr Tata added.
"I hope it will provide safe, affordable four-wheel transportation to families who till now have not been able to own a car."
Environmentalists are warning that the Nano will add to India's already clogged up roads, and pollution levels will soar. Tata says the Nano will be the least polluting car in India.
Factory row
The four-door Nano has a 33bhp, 624cc engine at the rear.
The basic model has no airbags, air conditioning, radio, or power steering. However, more luxurious versions will be available.
A slightly bigger European version, the Nano Europa is due to follow in 2011, and is expected to cost nearer to £4,000.
"I want to be able to take my wife out for a drive in a car - my own car "
Indian chauffeur Gopal Pandurang
Joining the great Indian dream
Analysts said that if the car proves an immediate hit in its home market, Tata may struggle to meet demand.
This is because the main Nano factory in the western state of Gujarat, which will be able to build 250,000 cars a year, is not due to open until next year.
In the meantime, Tata will only be able to build about 50,000 Nanos at its existing plants.
The delay happened when Tata had to abandon plans to build the Nano in a new plant in the eastern state of West Bengal due to a row over land acquired from farmers.
This caused the launch of the Nano to be put back by six months.
Global slowdown
Even if Tata can sell 250,000 models a year, it will add only 3% to the firm's revenues, says Vaishali Jajoo, auto analyst at Mumbai's Angel Broking.
"That doesn't make a significant difference to the top line," he said.
"And for the bottom line, it will take five to six years to break even."
Yet with seven million motorcycles sold last year in India, Tata is eyeing a huge marketplace for the Nano.
Like almost all global carmakers, Tata has seen sales fall as the global economic downturn has continued.
The firm made a 2.63bn rupees loss for three months between October and December.
In addition, Tata is struggling to refinance the remaining £2bn of its £3bn loan it took out to buy the Jaguar and Land Rover brands from Ford in June of last year.
Gas shortage dropping 9 power generation project
The government has dropped nine power plants with a combined generation capacity of 1800 megawatt (MW) from its short and medium term plans due to gas supply shortage in the country, as said by official sources of Power Division on February 23.
The government earlier took up plans for installation of 45 power plants to supply an additional 6245 MW power to the national grid by 2012. All these plants would need 1233 million cubic feet of gas per day (MMCFD).
The official sources said that at a coordination meeting with the Petrobangla recently, Power Development Board (PDB), Rural Electrification Board (REB) and Power Cell recently, they have revised their plan and decided to drop the nine projects where gas will not be available by 2012.
At the coordination meeting, Petrobangla, a state-owned oil, gas and mineral resources corporation, said it would not be able to supply gas to the proposed nine power plants for shortage of gas production.
The Petrobangla assured the Power Division that Petrobangla will supply necessary 889 MMCFD of gas by 2012 to its 36 small and large power plants, which will generate 4445MW electricity.
Following the severe power shortage and its growing demand in the country, the caretaker government has given highest priority to the generation of electricity to overcome the situation.
Under the plan, it has decided to set up 17 power plants with generation capacity of 3775MW in the public sector, 1840MW capacity five plants in the private sector, 410MW 13 rental power plants in the private sector and 220MW 10 small power plants in the private sector from 2007- 2012 period.
According to the Petrobangla forecast, the existing proven gas reserve will exhaust by 2012 and the probable reserve by 2015.Now all the gas fields in the country produce around 1700MMCFD of gas against the demand for more than 1800MMCFD.
About 90 per cent power plants of the country are now operated by natural gas.
23rd February,2008
Raised license fees for petroleum transportation
Government has raised license fees and services charges after 18 years for transportation of petroleum products and oil depots in a bid to generate more revenue from non-tax sources.
The joint license fees for storage of petroleum products by importer and marketing company have been raised to Tk 7,000 from Tk 3,000 for storage of up to 250,000 liters.
The vehicles that carry petroleum products by road now need to pay Tk 800 for carrying every 5,000-liter instead of Tk 200. The ships that carry petroleum oil need to pay Tk 1,500 for every 400-tonne or less instead of the current Tk 500. An extra Tk 200 has to be paid for carrying every additional 100-tonne.
Besides, the test fee for an oil tanker to make it gas-free has been raised to Tk 300 from Tk 100.
An official of energy and mineral resources ministry said the NBR (National Board of Revenue) is yet to issue an SRO (statutory regulatory order) in this regard, although the finance adviser gave his consent in November in 2007.
9th February, 2008
Approval of 7 rental power plants
The council committee on government purchase led by Finance and planning Adviser AB Mirza Azizul Islam on January 6 approved the setting up of seven rental power plants by private companies having the total electricity generation of 260 megawatts(MW) to mitigate the electricity crisis across the country. The electricity generated from these power plants is expected to the national grid before the next summer.
The electricity power generated plants will be five in gas and two in diesel generated. The state owned Power Development Board (PDB) will purchase electricity form the plants at various rates for the national grid.
Infrastructure Development Company Limited
Invitation to participate in Renewable Energy Development Programme
IDCOL is a public-private sector institution promoting sustainable economic development in Bangladesh by encouraging private sector investment in infrastructure, renewable energy and other sectors. IDCOL seeks applications from non-government organizations (“NGOs”), micro-finance institutions (“MFIs”), private entities for selection as Participating Organizations (“POs”) under its Renewable Energy Development Programme for installation of Solar Home Systems (SHS) in areas where grid electricity is unlikely to reach in near future.
Activities under IDCOL Renewable Energy Programme include dissemination of SHS by:
1. Providing cost reduction grants sourced from GEF/GTZ/KfW funds to the users of SHS and technical assistance for institutional development of POs; and
2. Refinancing of loans sourced from IDA/KfW for SHS made by POs.More than 154,000 SHS have already been installed all over Bangladesh under the programme through IDCOL’s 15 POs.
To further accelerate the dissemination of SHS across Bangladesh, IDCOL intends to select few new POs from organizations mentioned above who have a successful track record and are interested to work in the area of renewable energy.
Interested organizations are requested to download complete application packages from IDCOL website www.idcol.org. Application packages may also be collected from IDCOL office at a cost of Taka 500/- (non-refundable). Completed applications must be submitted to the address mentioned below within three weeks of publication of this advertisement.
Applications will be examined by an independent evaluation committee in accordance with the criteria detailed in the application package. Selected POs will be required to sign Participation Agreement with IDCOL. IDCOL reserves the right to reject any application without assigning any reason.
Please contact:
Infrastructure Development Company Limited, UTC Building (16th Floor), 8 Panthapath, Kawranbazar, Dhaka-1207. Phones: 9114385, 8111235, 8117526, 9143157, Fax: 8116663, E-mail: contact@idcol.org
Spanish Company proposes to set up Nuclear power plants
Spanish nuclear power developer company-Cala Casa Si(CCS)-has proposed to set up small units of nuclear power plants that can provide a minimum electricity generation capacity of 20 megawatts(MW) in Bangladesh.
The CCS has recently submitted an expression of interest(EoI) to the Energy and Power Adviser Tapan Chowdhury.
The company will install the small ‘Units of generation IV’ nuclear power plants having simplified gas cooled reactor(SGR) which will easily meet the very high demand for quality in the digital society.
The Spanish nuclear company noted that the electricity price to be generated from SGR stations would be around Tk 2.5 per unit(1,000 kilowatt-hour) and the life time of the nuclear power plants would be 30 years.
Meanwhile, Bangladesh will send a delegation to the International Atomic Energy Agency(IAE) in mid January to expedite the process of installing a nuclear power plant with its assistance as said by Adviser Tapan Chowdhury. Earlier, IAEA responded positively to the Bangladesh’s work plan to set up the country’s first nuclear power plant having a generation capacity between 700 megawatt(MW) and 1,000 megawatt(MW) at Roopnur in the northwestern Pabna district.
03 Janurary, 2008
NBR decides to lowers duty on rental power plant equipment
The National Board of Revenue(NBR) on December 28 has decided to cut customs duties and taxes on import of machinery for rental power plants to encourage private entrepreneurs and increase generation of electricity.
NBR sources said the rate might be re-fixed at 6.5 percent at 6.5 percent which includes 4.0 percent as income tax and 2.5 percent customs duty. Entrepreneurs are now paying a total of 30 percent as value added tax(VAT), customs duty(CD), Supplementary Duty(SD) and advance Income Tax (AIT) on import of rental power plant equipment.
NBR took the decision as the government has approved setting up of four rental power plants with a total generation capacity of 160 Megawatt(MW) for resolving the acute electricity supply shortage on an urgent basis. The power division expects to supply 660 MW power by July 2008 from the rental power plants.
- 29 December, 2007
Tk 4.0b emergency fund for BPC to manage oil import bill
The government recently paid Tk 4.0 billion to the cash-strapped Bangladesh Petroleum Corporation (BPC) to help it make payment against last month's oil import bills, official sources said.
The finance ministry released the emergency fund as the country's lone petroleum importer and distributor was having problem to meet the oil import bills worth Tk 15 billion for the month of February.
This is for the first time in the current fiscal that the BPC has been provided with funds by the government, in addition to the budgetary provision for the absorption of Tk 70 billion loan liability of the corporation with state-owned banks.
Sources said the finance ministry, which is providing the fund from the 'Investment on Share and Equities' head, attached three conditions before releasing the fund.
Earlier, the BPC sought the financial assistance from the government to maintain the uninterrupted supply of fuel oil after it suffered losses to the tune of Tk 30 billion in the first six months of the current fiscal.
BPC officials, however, said such budgetary assistance is insufficient in the backdrop of growing losses of the corporation due to steep price hike of petroleum products in the international market.
Energy division secretary Mohammd Mohsin had earlier said that they were urging the government to settle the issue of hard term loan worth more than US$500 million offered by two multinational banks to help the BPC finance its oil imports worth $ 3.2 billion in the current fiscal.
Bangladesh Bank has already provided $300 million loan to the BPC. But it is now unwilling to offer any more foreign exchange to avoid pressure on the country's foreign exchange reserve.
According to the energy division officials, the Islamic Development Bank (IDB), the BPC's biggest oil import funding source, is expected to lend $1.2 billion.
BPC will require a further $500 million in addition to the amount being sought under hard-term loans from the multinational banks.
Gas crisis halted the plan of power projects at Ctg EPZs
Bangladesh Export Processing Zones Authority (Bepza) in 2007 initiated the process of having exclusive gas-fired power plants at the EPZs as service industry investment and thus cut down the lengthy tendering process. This is the first time the country has opted for power plants as service industry investment mainly to end investors' sufferings and attract new investment. As part of it, Bepza signed two deals with Malancha Holdings Ltd (MHL)--an enterprise of United Group--to set up a 40 megawatt (MW) plant in Chittagong EPZ and another 40MW in Dhaka EPZ. The Bepza earlier this week signed a deal with Korean EPZ in Chittagong to set up another 50MW power plant.
Sources said, of these three deals-the two power plants by the MHL are expected to come into operation by August-September this year. The Korean EPZ plant may come into operation next year.
As Chittagong's gas supplies lag by around 100 million cubic feet a day (mmcfd), the port city cannot generate enough gas-fired power to meet its own demands.
However, the crisis in Chittagong could have been tackled easily if the government approved a small pipeline project, costing between Tk 40 crore and Tk 50 crore, to transmit high pressure gas from the Titas gas field to the Ashuganj-Bakhrabad (AB) pipeline. The 14 kilometre 20 inch pipeline could transmit 200 mmcfd from the field to the AB pipeline at a high pressure of 1000psi. The work would take just one winter to complete. This Petrobangla proposal, however, did not get due attention of the government.
Myanmar not accepted Bangladesh request for gas
Bangladesh's foreign secretary made the request during a visit Myanmar in February as said by M. Tamim, special assistant to the chief adviser.
The Myanmar delegates said they would sell their gas to India and China but cannot export gas to Bangladesh at the moment and will consider selling gas to Bangladesh only after new discoveries are made.
The decision is a blow to Bangladesh which faces a daily shortage of at least 100 million cubic feet (three million cubic metres) of gas. It needs the fuel to help feed its economy which expanded by a strong 6.6 percent in the last financial year to June 2007.
The energy shortage would become acute after 2009 if new gas finds are not made, special assistant to the chief adviser, Tamim added.
Bangladesh has daily demand for 1,800 million cubic feet of gas but the country's 23 gas fields can provide only 1,700 million cubic feet as lack of investment in new exploration since late 1990s has outstripped supply.
The government has already invited bids from foreign oil companies to explore for gas and oil in the hydrocarbon-rich Bay of Bengal.
Bangladesh has proven recoverable gas reserves of 14 trillion cubic feet according to the latest survey. The reserves are expected to last until 2022 if no new discovery is made.
The possibility of 2000MW power shortage in summer
The country is likely to experience 1500-2000 megawatts (MW) of load shedding at the time of the summer with its full heat. At present, the country generates about 3,600-MW-plus-minus electricity against a demand for over 4,700MW, though the demand is not officially recognized.
Power ministry officials claimed the demand is to be about 4,350 megawatts. The Power Development Board (PDB), however, said the demand would be growing faster with the hot summer starting from May-June. From their previous experience, they said that the demand would cross 5,500 this year in the peak period of summer.
In 2007, the government has deals to install a number of small power plants under different projects whose total capacity will be about 600MW. But, none of the plants has so far come into operation.
Among the projects, deals were signed to install a total of 10 small power plants, having a total capacity of 200MW, 15-year-term six rental power plants having capacity of 150MW and 3-year-term another six rental power units having a total capacity of 244MW.
But, of the plants, only the 3-year rental plants are expected to be installed and come into production by the summer. The rest will come into operation in 2008.
However, for lack of adequate gas supply, some of the projects still see uncertainty about timely production. The country is presently experiencing 100 million cubic feet (mmcf) of gas shortage per day against a daily demand for 1,800 mmcfd.
Of the six projects, three plants, each having 50MW capacity, are planned to be set up in the greater Sylhet area-at Kumargaon, Fenchuganj and Shahjibazar. One 40MW plant will be set up in Khulna, one 20MW plant in Bogra and one 34MW plant to be set up in Bhola.
Growth hinges on GP listing
Wednesday, 18 March 2009 02:04
As the Grameenphone initial public offering (IPO) prospectus awaits the green light from the Securities and Exchange Commission (SEC), its success will dictate the path to market growth.
Its triumphant floatation will not only attract others to be listed on the stock market, but also help the market draw foreign or portfolio investment into Bangladesh.
“Failure of the Grameenphone listing will have devastating effects and it will dampen market interests in the long run,” Faruq Ahmad Siddiqi says in an interview with The Daily Star.
“Furthermore, new companies, including multinationals, will hesitate to come in the market,” the immediate past chairman of the SEC points out. Several big companies are anxiously waiting to see the outcome of the Grameenphone listing, he says.
People close to the Grameenphone IPO move said Bangladesh's largest mobile phone operator has fulfilled all the requirements by the market regulator regarding the $65 million, or Tk 449 crore worth IPO in the last week of February this year.
Successful floatation of the Grameenphone shares will be a pivotal catalyst in the development of the Bangladesh stock market, he believes.
Career bureaucrat Siddiqi completes his three-year tenure as SEC chief on March 12. He joined the SEC as chairman on March 16, 2006.
Siddiqi says, instead of forcing or pressuring companies including multinationals to be listed on the stock exchanges, they should be encouraged to come in the market. “The environment prevailing in the market should be such that it lures multinationals and other big players into the market."
Listing of multinationals will enhance the supply side of the market and attract foreign direct investment, he observes.
“The government should immediately offload the stakes that it holds in different companies, including the foreign ones. The new government should pay more attention to this area, in the interest of the market,” he suggests.
In his three-year tenure, the Bangladesh stock market witnessed robust growth with volatility and manipulation efforts in some cases.
“The figures speak for themselves,” says Siddiqi, also a former secretary.
When he took up responsibility in 2006, the market capitalisation was only Tk 22,670.67 crore, turnover was Tk 15.44 crore, DSE General Index was at 1,555.82 points and the volume was 33,82,959.
On the contrary, on his last working day on March 12, 2009, market capitalisation stood at Tk 1,02,246.75 crore, turnover reached an all time high at Tk 611.98 crore, DSE General Index stood at 2,653.11 points and volume was 3,75,41,462.
What are the factors that contributed to such tremendous growth?
“There was a need for an environment that facilitated trade and commerce. We tried to create such an environment, especially through regular awareness programmes in association with the Dhaka and Chittagong bourses and other market stakeholders, all within the limited resources. And we succeeded,” Siddiqi recalls.
He says the public awareness programmes and the SEC's role as a facilitator, not as a regulator, helped the general investors regain confidence, which was shattered after the 1996's bubble and burst.
“The entry of new companies and fresh investors, expansion of brokerage activities across the country, issuance of rights and bonus shares as dividend by the existing companies, increasing investor confidence and an inflow of fresh liquidity also helped the market reach today's position,” he says.
Apart from rapid growth, he says, there were some problems such as volatility, manipulation, and liquidity gluts and crunches.
“A lack of appropriate manpower within the SEC is a major problem,” he says.
Referring to the resignation of several senior officials from the SEC, he says the existing pay scale could not suffice or attract professionals to work for the SEC.
He says the SEC is in need of professional people who can analyse the quality of financial disclosures, public issues, and monitor the market stakeholders and credit rating agencies.
“The commission has no people qualified enough to monitor the credit rating agencies. There are only two people in the surveillance department, which is an important, tough and demanding section,” he cites.
In order to build capacity of the market regulator by attracting skilled personnel, he recommends: “The SEC and other similar organisations should be kept outside the national pay scale.”
Siddiqi considers two issues as major achievements during his tenure. The first, forming guidelines for margin loans provided by merchant banks to their clients, and the second, book building for IPO pricing.
“Prior to the guideline, merchant bankers provided margin loans indiscriminately. The guideline helps the market stabilise,” he says.
The introduction of book building, a modern mechanism for IPO pricing, will encourage big and established companies, from both home and abroad, to be listed on the stock exchanges, as the book building method ensures a fair price of a company's stocks, he adds.
Commenting on the Dhaka Stock Exchange's recent move against listing securities with a face value of Tk 1, he says, “The DSE cannot take such a decision. The DSE may recommend or request the SEC to take steps to forbid the listing of securities with a face value of Tk 1.”
He, however, welcomes the DSE move on de-listing the Z category companies, which are not in operation or production or an existing status. “But such companies should be carefully identified,” he suggests.
In his concluding remarks, Siddiqi says the Bangladesh stock market has an opportunity to grow in the coming years.
Stabilising share market
Friday, 13 March 2009 02:45
The main index, the DSE Composite Index, went down 87 points to 2416.67 on February 11, 2009 from 2503.21 on the previous day. This prompted a group of investors to demonstrate in front of the DSE building.
Against this backdrop, the Securities and Exchange Commission (SEC) came up with a set of measures to increase the flow of funds to the capital market, in a move to boost investors' confidence that is rattled by a freefall of share prices.
The measures include an enhancement of the margin loan ratio provided by brokers to clients, increasing the banks and non-banking financial institutions' (NBFIs) capacity to give loans to brokers and an immediate issuance of more licenses to merchant bankers.
Some people are blaming vested quarters/syndicates, who are engaged in manipulating share prices. They are blaming syndicates involved in the shock market crash of 1996. Once upon a time, the stock market turnover was only approximately Tk 8 crore a day. At that time, an injection of Tk 20 lack was enough to manipulate the market. But now, daily turnover is more than Tk 200 crore. So, an injection of Tk 5 crore or Tk 10 crore, by a vested group of people, may not be enough to manipulate share prices. Still, it is possible that some big players are present in the market. The SEC should examine this.
Let us look at the forces behind the recent decline in the share price index. About 55 percent of total market capitalisation was captured by only 20 companies, (among these, 10 banks and 4 power sector companies are present). The total banking sector is alone responsible for 55 percent of market capitalisation, while the total power sector companies accounted for 15 percent of the total market capitalisation.
The Price Earnings Ratio (PER) of banks' shares is 14.15, while Earnings per share (EPS) is 20.67 percent, which means investors are willing to pay Tk 280 to Tk 300 per share for a earning per share of Tk 20.
Again, the fuel and power sector, whose P/E ratio is 11.52 and EPS is 44.04 percent, means the price of these shares should be an average Tk 507.34. In the case of banks, there is an expectation that earnings over the last two quarters of fiscal year (FY) 2008-2009 will decline, due to the turmoil in the global economy. So, the share prices of banks have been low. Additionally, power sector shares are mostly government owned. The investors are expecting lower return from these shares, which accounted for almost 70 percent (banks: 55 percent plus power: 15 percent) of the total market capitalisation. A downturn in these share prices caused the total share price index to fall.
We appreciate the measures taken by the SEC. But these measures are not enough. Moreover, the application of these measures should be revised. I would suggest the following, to stabilise our share market in the long run.
It is appreciated that the SEC has taken initiative to increase the number of merchant bankers in our country by providing more licenses, which is badly needed to stabilise the share market in our country. At the same time, we need to heed our attention to some problems we are facing regarding merchant banking. Ninety percent of our merchant bank portfolios consist of retail investor investment. So the merchant banks do not have any discretionary portfolio management. The merchant bankers must maintain at least 30 percent of their own portfolio and increase institutional investors to manage discretionary portfolio management.
We need to ponder over the license provided to a bank for merchant banking, whether it will be a wing of the bank or a subsidiary of the bank. It is undoubtedly argued that merchant bankers need to be created as a subsidiary of the banks, to increase account transparency and accountability.
More and more mutual funds need to be created. Institutions and agencies that are engaged in the mobilisation of the savings of innumerable investors, to channel them into productive investments of a wide variety of corporate and other securities, are called 'mutual funds'. The mutual fund industry has a large number of players, both in the public and private sector. Commercial banks are also making rapid strides in the realm of mutual fund business. ICB AMCL is going to launch three mutual funds worth around Tk 275 crore.
Current regulation regarding mutual funds does not support forming portfolio before IPO issue. So the time gap between IPO issue and portfolio creation utilises the sponsors' fund, which accounts for almost 20-30 percent of the total portfolio. So the portfolio should be allowed to form with the sponsors' money before IPO issue.
SEC has announced that Z category shares will be traded in the OTC market. But it will have little impact on the share market trading as the trade volume of Z category shares is less than 6 percent (Tk 12 crore out of a total turnover Tk 230 crore) of the total turnover of the share market.
Recently, there was a move regarding delisting Z category shares from the market. Z category shares will also not be shown from the top ten lists. Tis poses a serious concern, unless the public holding portions of Z category shares have to be paid out to the public before they are de-listed and become private. SEC has to work out the modalities of payment with the sponsors of Z category share and ensure clearing out the public holding before being de-listed from the market.
To increase dealer member role of brokerage houses, loan on lien of invested shares in CDBL should be made available, at least 50 percent subject to maximum limit such as Tk 5 crore or Tk 10 crore.
The ratio of brokerage loans to investors has been increased from 1:0.67 to 1:2. This action taken by the SEC will bring liquidity into the market. But to ensure effectiveness of this strategy, the confidence of the investors on the share market needs to be increased.
We also need to increase the job tenure of the chairman of SEC, which is currently 3 years on contractual terms. It requires time to get a grasp on the stock market. As they gain expertise, they can take better decisions.
Finally, the decline in the stock market index on that day was “intra-day volatility”, and not “inter-day volatility”. The DSE index again increased in the next day by 121.71 points to 2538.38. That was due to the institutional investors' investments. But it can only rescue the share market in the short run. To stabilise our share market in the long run, we need to take measures as noted earlier. Otherwise this type of volatility in the stock market will be seen more frequently in the future.
The writer is the chairman of the Department of Finance, University of Dhaka.
Bangladesh in the Middle East
Young men from Bangladesh go to the Middle East for economic reliance. Over the years, they send money back home to their families and our country reaps the benefits of these hard earned foreign currencies.
In fiscal year (FY) 2007-08 we received $4.97 billion from the Middle East as inward remittances, which is around 6.3 percent of our country's GDP.
My question is, when those young men contribute to the country's foreign exchange earnings, what do we do to facilitate them? What have we done to uphold Bangladesh's name in the Middle East? Why is Bangladesh unheard of in the Middle East?
As per the latest Statistical Year Book and sources from the Bureau of Manpower, roughly 3.7 million Bangladeshi workers are currently working in the Saudi Arabia, Kuwait, Qatar, United Arab Emirates, Bahrain and Oman, which constitutes around 25.3 percent of the total labour force of those countries.
The remittances inflow from these countries doubled from $2.4 billion in FY 2003-04 to $4.97 billion in 2007-08. In the last fiscal year, Bangladesh received 63 percent of the total remittances inflow from the Middle East.
Since 2004, remittance inflow from the above mentioned countries increased at an average rate of 20 percent. However, the number of new workers migrating to those countries has significantly declined over the years.
In 2007, about 0.2 million workers went to Saudi Arabia from Bangladesh, whereas in 2008, the number has dropped to 0.13 million. The number of new entrants also declined in Bahrain and Kuwait.
Bangladesh, being predominantly a Muslim country, should leverage its relationship with other Muslim countries. Despite what we have seen on the electronic media, about how Bangladeshi workers are being harassed by law enforcers in those countries, my UAE experience reveals that often Indian or Pakistani criminals are passed on as Bangladeshis.
According to an Indian taxi driver in Jeddah, the crime list suggests Yemenis, Pakistanis, Philippinos come before Bangladeshis, if not some other countries too. Even then, Bangladeshis face hurdles in getting “transfer visa” (in fact this is closed now), they are not being paid regularly or arrested by law enforcing agencies all of a sudden. New visa issuances have almost stopped in all Gulf Cooperation Council (GCC) countries.
Our foreign missions should be responsible for ensuring safety, security, well-being and respect of our workers. They should play an active role to make sure that our workers are paid at par in the foreign market and are aware of their rights. Till now, our country depended on the success of the manpower agencies. However, the prevalent malpractices and fraudulent activities of these agencies do not guarantee safe migration.
Post 9/11, the movement of workers was affected all around the world. If foreign countries feel threatened, it will not bring any good for us. However to resolve these issues, we need to develop a trustworthy, stable, and long-term relationship with our partner countries, especially with their upper echelon in the Middle East.
There is also a need for efficient banking and investment services. The workers need secured and low cost fund-transfer services. In Bangladesh, a low share of remittance enters through official channels, largely due to the migrant workers' lack of knowledge on the formal sector and the time and cost involved in channeling money through the formal sector.
Bangladesh Bank has taken several measures over the years, like competitive exchange rates, fixing a time limit for remittance transfer or credit to the beneficiary's account, allowing expansion of exchange houses and correspondent banks, and encouraging banks, which facilitated the growth of remittances inflow.
We still have a long way to go in terms of automation and building technological infrastructure. We may also facilitate alternate distribution channels by including the MFI's into the remittance grid. Added to these, come efficient and effective guidance at the departure counter (having a bank account number or at least 2 weeks of formal training, can also be included as mandatory documents by the immigration department) in the airports.
We need to remember that Bangladesh has mostly been a low skill manpower exporting country, while our neighboring countries (India, Sri Lanka, and Pakistan) were able to send workers at mid to high skill levels.
Hence, it is time that we raise our level of expertise if we want to make our presence felt in the Middle Eastern and enter the next trajectory of employment.
Now let's get into the issue of Bangladesh not being heard off in the Middle East. In late January, a regional head of a large global bank told me, “Despite being a predominantly Muslim country, I wonder why Bangladesh is not even mapped in the Middle East or considered as a destination for Middle East investment.” Similarly, a senior executive in a Saudi Bank explained why they bought a bank in Pakistan, and not in Bangladesh, or why their board feels that Pakistan will by all means come out of the mess.
Being a Muslim country, while Pakistan was able to attract the large sovereign funds of the Middle East based institutional investors; Bangladesh could not convey the message to those investors that it also has immense potential to be an Islamic financials destination.
Hence, we should develop country specific strategies and policies to promote Bangladesh in the Middle East. The government may appoint a special adviser, whose role will be to strengthen the relationship with the Middle East and capture the highest possible benefit from the GCC countries. The key to success is “Effective Relationship Management”.
The writer is a banker and economic analyst. He can be reached at
mamun1960@gmail.com
Importance of Grameenphone IPO
By Ifty Islam
As I have written in previous columns, Bangladesh can take a good deal of pride in the relative resilience of both the stock market and the economy to the current global financial crisis.
But assessing the potential bottlenecks for us to achieve an 8 percent inclusive growth target, a critical factor likely to limit the future growth of companies and emergence of new entrepreneurs, is a lack of risk capital and an over-reliance on over-collateralised bank lending.
One way to overcome these constraints is certainly to attract more Foreign Direct Investment (FDI) and foreign portfolio flows. But I would argue, an equally pressing objective for the new government should be to focus on how best to grow the domestic capital markets and develop new domestic investors.
As the chart illustrates, Bangladesh has one of the lowest market capitalisation/GDP ratios in Asia and indeed among emerging markets more broadly. Even after last year's 55 percent market decline, India stands at 84.1 percent and we are also well behind Pakistan and Sri Lanka.
This reflects more than 90 percent of Bangladesh's top 100 companies have not yet listed. We have to ask why and what the costs are of allowing this situation to continue.
In this context, I want to address the current uncertainty about the timing of the IPO of Grameenphone (GP) and why I believe a successful stock market flotation will be a pivotal catalyst in our capital markets development.
A Daily Star article, dated March 4 stated: “Grameenphone's initial public offering is likely to be further delayed, despite fulfillment of the market regulator's conditions by the mobile phone operator, putting the pre-IPO investors, including the institutional ones in disarray. The government is now more focused on settling the ongoing crisis stemming from the BDR mutiny.”
Clearly we all recognise the need in the immediate aftermath the BDR mutiny tragedy for the government to deal with many pressing issues. But there is also a need to show the international community that Bangladesh is still a good place for foreign investors to consider.
Against this backdrop, I would like to discuss why approval by the SEC for a GP flotation to occur in Q2 is so important and address some potential concerns regulators may have: Firstly, the largest IPO in Bangladesh's history is likely to trigger greater interest from foreign investors to come to the Bangladesh market. There may be some potential concerns from the stock market authorities that a fresh demand for $65 million of capital from the market might affect the values of other stocks or indeed the overall level of the market. However, if the GP brand is sufficiently strong domestically and internationally, we are likely to see significant new interest from foreign as well as local investors.
Also, contrary to conventional economic wisdom, supply will likely create new demand. So we might argue that a successful GP flotation will help support the market by attracting new investors. This is particularly relevant as the current global stock market turmoil is increasing the interest in frontier markets like Bangladesh, which have low correlations with global markets. International investors will be attracted to invest in a GP issue not only on the basis of a strong brand, but also good corporate governance and transparency.
Although the proposed IPO will be domestic rather than specifically targeted at international investors, as was the original intention last summer, it would still be surprising if GP's first issue did not see purchases even in the secondary market from overseas buyers.
By contrast, a second delay to the GP issue will almost certainly send a negative signal to international investors about the commitment to developing Bangladesh's capital markets. The risk is that they focus on other frontier markets in Asia such as Vietnam and Cambodia.
As I highlighted in my last column about FDI, there is a great deal of competition among countries for global investor attention. We need to ensure we maintain their interest and confidence in investing in the Bangladesh economy.
A second potential issue is the valuation of the proposed IPO. It is critical that we move away from the net asset value (NAV) method of IPO towards a more market-based valuation method. In that context, the proposal by the SEC to move to a book-building method of valuation is important and should be introduced as soon as possible. No owners will sell a business at a massive discount to their true value and a failure to change this will see the DSE/CSE fail to attract major companies to list.
Coming back to the GP issue, valuation techniques are complicated by typically focus on international and local comparisons for Price/Earnings (P/E) ratios. GP does not appear expensive to us at their Tk 7 face value that has been proposed.
By international standards, Bharti Airtel, India's leading mobile company, trades at a slight P/E premium to our estimates for GP. But we would argue that GP has a far more dominant market position and brand name than Bharti in India. In addition, mobile penetration in Bangladesh will likely increase from around 28 percent currently, as it remains low, certainly relative to the 80 million mobile subscribers in Pakistan with a population of 160 million, versus 150 million in Bangladesh.
Investors, who might potentially be interested in investing in GP or any other telecom companies that come to market, need to see their future earnings growth prospect, the outlook for new 3G (third generation) wireless networks, industry consolidation and cost reduction opportunities.
We still see significant scope for all the mobile companies in Bangladesh, including GP, to develop a broader range of value-added services, such as mobile banking, greater internet access, doctor on call, Cell Bazaar. This suggests the earnings prospects for them are reasonably attractive. But ultimately, the strong demand seen for the $ 60 million pre-IPO placement seen in December suggests valuations were not unreasonable.
In conclusion, we would argue that developing Bangladesh's capital markets is an important objective for the new government. The decision to broaden the number of asset managers is a welcome step.
The SEC has also been taking some important initiatives in starting the book-building process. But it is important we recognise the damage that might be caused by yet another delay to the GP IPO.
Hopefully a successful flotation later this year will provide the catalyst we need both to attract international investors and for the next phase of the stock market development.
The writer is the managing partner of Asian Tiger Capital Partners and can be reached on ifty.islam@at-capital.com
Build Bangladesh as powerful brand
at a high-profile seminar of Bangladesh Brand Forum at Dhaka Sheraton Hotel yesterday.Photo: STARStar Business Report
The curtain came down on a high-profile seminar of Bangladesh Brand Forum yesterday, with calls for highlighting the positives and strengths of the country to build it as a powerful brand.
Participants of the programme also focused on a collective dream, respect to local culture, corporate ethics and values in brand-building.
An emphasis was also put on financial transparency of corporate houses and their investment in enhancing the purchasing power of the low-income group.
At the seminar at Dhaka Sheraton Hotel, the discussants also called for shrugging off "low self-esteem or inferiority complex" to emerge as a strong brand in the corporate world
"Our strength is entrepreneurship even in the midst of various problems, hopelessness," said Munawar Misbah Moin, director of Rahimafrooz Group, at a panel discussion.
"Bangladeshi entrepreneurs are good at looking at the opportunity,” he said.
Publisher and Editor of The Daily Star Mahfuz Anam, Grameenphone Communications Director Rubaba Dowla, Kazi & Kazi Tea Estates Chief Executive Officer Kazi Anis Ahmed were other panellists.
Chief Adviser of Bangladesh Brand Forum Prof Syed Ferhat Anwar moderated the discussion.
Despite various bottlenecks such as uncertainty in government policies, hartal and corruption, Bangladesh's entrepreneurs, supported by an energetic force of workers, have kept the economic engine rolling with the GDP growing by more than 5 percent over the last five years.
Bangladeshi entrepreneurs, encouraged by the resilience and innovativeness of predecessors, have been able to achieve a competitive edge in sectors such as garments and pharmaceuticals, they said.
The nation now expects to emerge as a shipbuilding nation, shifting away from shipbreaking.
The discussants stressed the need for business houses' investment at the bottom of the pyramid to share the benefit of economic progress with the people living on the margins. This will enhance the purchasing power of low-income groups, they said.
Pointing to microcredit and social-business ideas, Mahfuz Anam, editor of The Daily Star, said the most destitute portion of population is most trustworthy.
"We can bank on that to reach the bottom of the pyramid," Anam said. “It's glorious to be rich and it's more glorious to be rich and share," he said.
Rubaba Dowla said investment meant to improve the livelihoods of people living at the bottom yields good returns in the long run.
She said Bangladesh as a country has to be branded to enable local businesses to take their products to the global stage.
“We need to talk about the positives of Bangladesh to emerge as a powerful brand. We also need to be transparent,” said Dowla.
The discussion also focused on weaknesses such as inferiority complex and low self-esteem that crowd out the strengths of Bangladesh's corporate sector.
Speaking on a topic, "Story of a power brand", Prem Chand, general manager of Nokia Emerging Asia Limited, focused on the need for corporate houses to pursue knowledge and insights from the local community.