Daily News Recap Wednesday

Daily News Recap
Wednesday
November 5, 2014
Analyst:
Salma Yeasmin Xinat
[email protected]
Industry
Nine new banks
face competitive
pressure
Nine new banks are struggling to do business, facing intense competition from 47 old peers in
lending and attracting deposits, industry insiders said. Lending is the biggest challenge for the
new banks as borrowers demand the lowest interest rate without considering the banks' cost of
funds. “Often, we cannot afford the interest rate a borrower wants,” said Muklesur Rahman,
managing director of NRB Bank. According to these banks, the cost of their funds is between 12
and 14 percent, which is well within a single digit for many old banks. In terms of lending, if a
new bank offers a borrower 11 percent, an old bank offers 10.5 percent.
“We are in a double bind -- depositors demand more and borrowers offer less. It's tough to get a
margin,” said Abdul Kuddus, managing director of NRB Global Bank. Touhidul Alam Khan, deputy managing director (business) of Modhumoti Bank, said attracting low-cost deposits by competing with other banks and lending to appropriate clients have become a big challenge for
them. These new banks commenced business at a bad time last year, when the country was
facing months of political unrest. Nine banks came into the market between April and October of
2013. Despite debate and opposition from different quarters, Bangladesh Bank allowed these
fresh banks to take the tally to 56.
As on September 30 this year, Union Bank collected the highest deposit worth Tk 3,025 crore,
followed by NRB Commercial with Tk 1,586 crore, South Bangla Agriculture Bank Tk 1,349
crore and NRB Global Tk 1,095 crore; others' deposits were less than Tk 1,000 crore, BB data
showed. Union Bank also topped the list in lending. The bank lent Tk 2,323 crore till September
30 this year, followed by NRB Commercial with Tk 1,127 crore, South Bangla Agriculture Tk
1,050 crore and NRB Global Tk 752 crore. In terms of income, Modhumoti Bank earned the
highest of nearly Tk 32 crore in operating profits in one year through September this year, followed by Union Bank with Tk 30 crore and South Bangla Agriculture Tk 20 crore.
“It has become tough to make profit. Borrowers do not even want to pay service charges,” said
Abdul Kader, manager of Union Bank's Panthapath branch. However, some bankers see opportunities among the untapped sectors and un-banked population at this challenging time. “We
have to go for funding small and medium enterprises and rural firms. The spread is greater
there,” said Rahman of NRB Bank. “We will lend to build entrepreneurs.” Khan of Modhumoti
Bank said new banks have a great chance to become solid and transparent as still they have
zero non-performing loans in their portfolios. “If the new banks are cautious in lending and move
forward complying with rules and regulations, there is huge scope to make a solid footprint in
the banking industry,” he said.
News source: h p://www.thedailystar.net/business/nine-new-banks-face-compe
pressure-48754
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Daily News Recap
Bangladesh, India
decide on power
inter-connection
line
The import of 100 megawatt electricity from Tripura received a boost yesterday after officials of
Bangladesh and India finalised the inter-country transmission line. The two countries decided
that an inter-connection line would be drawn from Suryamaninagar power sub-station in Agartala to Comilla in Bangladesh. The electricity will be transported from the 726MW thermal power
project at Palatana in Gomati district of the northeastern Indian state. The decision was taken at
a meeting of technical experts from India and Bangladesh in Agartala, the capital of Tripura,
according to the Press Trust of India.
Chowdhury Alamgir Hossain, director of Power Grid Company of Bangladesh, who led the
Bangladesh delegation, said from Suryamaninagar substation, the line would be drawn by the
Indian government up to Konaban, the crossing point to Bangladesh, covering a distance of
about 24km. From Konaban, the line would enter Bangladesh territory and would be drawn by
the Bangladesh government up to Comilla grid covering a distance of about 27km which would
cost about Tk 135 crore. MK Chowdhury, a director of Tripura State Electrical Corporation Ltd
(TSECL), said Power Grid Corporation of India Ltd would draw the line on the Indian side and
the cost is yet to be calculated.
The newly constructed Suryamaninagar sub-station in West Tripura district was erected with
installed capacity for international power trading, said SK Roy, chairman and managing director
of TSECL. New Delhi on Dhaka's request has agreed to sell 100MW power from the stateowned Oil and Natural Gas Corporation Ltd's gas-based Palatana power project. Bangladesh
had allowed to use its port and roadway to transport cargos and turbines for the project. Power
Grid Corporation of India will construct the transmission lines and likely to bear the cost of the
same, said the PTI report. Bangladesh has been importing about 470MW of electricity from
India since October 2013 through a transmission line that runs from Baharampur in the Indian
state of West Bengal to the southwestern Bangladesh town of Bheramara.
News source: http://www.thedailystar.net/business/bangladesh-india-decide-on-power-interconnection-line-48757
IT industry on track,
but needs policy
support: analysts
The IT industry is moving in the right direction to see exports worth $1 billion within 2018, analysts said at a workshop yesterday. They, however, said the progress in the sector is slow due
to a lack of support from the government. Habibullah N Karim, a former president of Bangladesh Association of Software and Information Services (BASIS), said the trade body might not
have done enough research or homework when it set the $1-billion target, but the goal can be
met. He said the private sector is doing a lot of things such as developing infrastructure, and
building IT parks and data centres. The IT trade body organised the workshop at The Daily Star
Centre in Dhaka to get suggestions from experts on preparing a roadmap on how to reach the
export target under its One Bangladesh campaign.
Raihan Shamsi, chief executive officer of Accenture Bangladesh, said the $1-billion target is
easily achievable if three issues are addressed: human resources, infrastructure development
and policy support. Accenture, a leading global IT firm, is working in Bangladesh as the country
has huge potential to grow in the sector, according to Shamsi. “The Indian IT industry also
faced the same critical situation 15 years ago. So we should learn from their (Indian) experience,” he added. Business process outsourcing (BPO) should be the main focus of the IT industry to reach the target, said Syed Almas Kabir, chairman of the standing committee on access to internet and infrastructure of BASIS. But, he said the country does not have enough
human resources to tap the BPO potential.
Fahim Mashroor, another former president of BASIS, said Bangladeshi entrepreneurs did not
initially concentrate on e-commerce. As a result, the sector is being dominated by foreign companies now, he said. "The local IT companies have to be successful, otherwise the government's vision of a Digital Bangladesh will not materialise." AK Shabbir Mahbub, chairman of the
standing committee on call centre and BPO of the trade body, said multinational companies
operating in Bangladesh do not use locally-made software. Many countries make policies that
bind businesses to use local software. "Bangladesh needs such a policy," he said.
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Daily News Recap
Forkan Bin Quasem, chairman of the standing committee on e-governance, said even the government institutions do not use local software. The government has to invest in the IT industry
and purchase local software, he said. TIM Nurul Kabir, a former director of BASIS, suggested
the trade body conduct a survey to find out the obstacles in the industry. Russell T Ahmed, senior vice-president of the trade body and moderator of the workshop, said the government listens
to the suggestions that BASIS puts forward, but hardly acts on those.
News source: http://www.thedailystar.net/business/it-industry-on-track-but-needs-policy-support
-analysts-48717
Tk 3.83b deal inked
with Korean consortium
The government inked a Tk 3.83 billion deal with a Korean consortium on Monday for supervising construction of two main components of the Padma Multipurpose Bridge (PMB) project
which are to be carried out by two Chinese companies. Project insiders said, with the deal, construction work of the country's longest bridge over the river Padma and its bank protection work
would be expedited at the ground level soon. The Bangladesh Bridge Authority (BBA) has already awarded the China Major Bridge Company (CMBC) work for the 6.15 kilometre bridge
construction and the Sinohydro Corporation Limited for over 20 km river training work. The
CMBC has started mobilisation work after signing contract with the BBA on June 17. Signing of
the deal with the Sinohydro Corporation of China is likely to be held on November 10 as announced by Road Transport and Bridges Minister Obaidul Quader during the signing ceremony
of the Construction Supervision Consultant (CSC) on Monday.
Project Director Mohammad Shafiqul Islam and team leader Cho Nan Min signed the deal on
behalf of the BBA and the KEC at the Setu Bhaban. Pyunghwa Engineering Consultants Ltd,
Korea Engineering Consultants Corporation, SUNJIN Engineering and Architecture Comapany
Ltd (SUNJIN) of Korea, ACE Consultants Ltd and DevConsultants Ltd (DevCon) of Bangladesh
will assist the lead partner KEC to supervise expensive construction part of the project as the
CSC for five years. The Project Office considers the signing of CSC the end of the long-awaited
tender process of the project which took over five years following allegation of corruption raised
by the World Bank (WB) in the BBA's earlier selection of SNC Lavalin as CSC.
Observers, however said, delay has nearly doubled the cost of estimated Tk 3.50 billion CSC
work due to failure to take the WB's allegation into account in time. The government took the
decision to give part of the CSC work to the Bangladesh Army to start the project work without
delay after it refused the WB fund in the Padma bridge project and announced to do it with its
own fund. Following the decision, the BBA signed Tk 1.33 billion deal with the Special Works
Organisation (SWO-West) of the Bangladesh Army on October 14 to supervise the construction
of the two approach roads and a service area development work of the project in association
with the Bangladesh University of Engineering and Technology (Buet) and the Bangladesh
Road Transport Corporation (BRTC). Besides, a deal of over Tk 780 million was also signed
with the Army for carrying security work which finally raised the CSC cost to nearly Tk 5.95 billion.
The CSC appointment was supposed to be made first among all the five tenders of the Tk 200
billion project, which, the observers say, has put challenges to coordinate with the works already started. The CSC has to ensure quality and quantity of the construction work including
procurement and progress of the work. During Monday's signing ceremony, Bridge Division
Secretary Khandker Anwarul Islam, Korean Ambassador to Bangladesh Lee Yun-Young, Panel
of Experts Chairman Professor Jamilur Reza Chowdhury and three other experts of PoE Alamgir Mujibul Haque, Shamim Bosnia and Ainun Nishat and BBA Chief Engineer Kabir Ahmed
were present. The minister on the occasion said the CSC work signing was held on Monday
after getting approval from the cabinet committee on government purchase and Prime Minister
Sheikh Hasina.
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Daily News Recap
He said mobilisation for the main Padma bridge construction has already started with bringing
three dredgers, three floating cranes, two tag boats and one anchor at the construction site. Mr
Quader said one shipment of the Chinese company is now waiting for release in Chittagong and
more are on the way to the country. Besides, he said many works of the main bridge have been
going on in different countries including Germany, Singapore and China.
News source: http://www.thefinancialexpress-bd.com/2014/11/04/64406
$162.7m foreign
loan proposals approved
The non-concessional loan committee approved Monday two proposals worth US$162.7 million
for construction of a power plant and procurement of vehicles for city corporations and municipalities, sources said. With the loan money worth $112.7 million from the HSBC, the Bangladesh Power Development Board (BPDB) will set up a 100 MW peaking power plant in
Chapainawabganj. The BPDB for the first time has entered the foreign loan market as it has
been facing fund crisis, a member of the committee said. He said construction of the power
plant has been delayed for three years as the foreign donors were showing less interest to fund
the project.
The BPDB had floated tender on September 9, 2011 for the power plant but it failed to get any
donor for its construction. The Board had talks with several donor agencies to fund the construction of the power plant but got poor response from them. The HSBC loan will charge the
BPDB LIBOR (London Inter-bank offered rate) plus 5.0 per cent rate of interest. The same
meeting also approved a proposal for taking supplier's credit from Belarus to procure vehicles
and equipment for city corporations and municipalities under a government-to-government arrangement. Against the loan amount, the Belarus government will provide services to the vehicles for next 11 years according to the contract of commodity credit. The Belarus government
will charge Bangladesh 6.0 per cent interest.
Committee chairman finance minister AMA Muhith presided over the meeting held at his Bangladesh Secretariat office. Bangladesh Bank governor Dr Atiur Rahman and high officials of the
concerned ministries attended the meeting.
News source: http://www.thefinancialexpress-bd.com/2014/11/04/64407
Govt to introduce
0.26m prepaid gas
metres in Dhaka,
Ctg
The government has decided to introduce 0.26 million prepaid gas metres in the capital city and
the commercial capital of the country aimed at preventing the wastage of natural gas, a ministry
official said. "The government took the two projects to introduce the prepaid gas metres for
residential consumers in the two mega cities," Secretary of Power, Energy and Mineral Resources Ministry Abu Bakar Siddique told BSS Monday. The total cost for implementation of the
two projects is Tk 9.70 billion, of which Japan International Cooperation Agency (JICA) will finance Tk 6.07 billion and the rest of will come from Bangladesh Govern-ment, the secretary
said.
He said the two projects are now at the planning ministry for final approval by the Executive
Committee of National Economic Council (ECNEC) and Titas will implement its project from
July 2014-June 2022 and Karnaphuli from July 2014-2020. According to the project, Titas Gas
Transmission and Distribution Company Limited will install 2,00,000 prepaid metres for the residential consumers of Dhaka at a cost of Tk 7.22 billion, while Karnaphuli Gas Transmission and
Distribution Company Limited will set up 60,000 metres at a cost of Tk 2.48 billion.
News source: http://www.thefinancialexpress-bd.com/2014/11/04/64326
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Daily News Recap
Economy
Efforts to step up
aid roll-out
The government has decided to
intensify its foreign aid disbursement efforts this fiscal year in the
face of a sudden surge in aid inflow: a record $19.5 billion. It aims
to dispatch 22 percent of the total
by next June, after which the disbursement rate will be bumped up
to 25 percent. In other words,
some $4.29 billion in foreign aid
has to be dispatched in fiscal
2014-15, up 43 percent from last
year's record disbursement of $3
billion. The decision came at yesterday's cabinet meeting chaired
by Prime Minister Sheikh Hasina,
during which the Economic Relations Division placed a report on
foreign aid. Foreign aid piled up in recent times due to an increase in commitments, Cabinet
Secretary Musharraf Hossain Bhuiyan told reporters after the meeting.
But the government will take steps to improve the disbursement rate, including heightened
monitoring at field level and frequent meetings with donors to expedite the disbursement process. It will also ask development partners to delegate more power to their field offices, he
said. Meanwhile, the ERD report said the aid pipeline bulged due to huge mobilisation of foreign aid starting from fiscal 2010-11. The average commitment between fiscal 2010-11 and
2013-14 stood at $5.6 billion in contrast to $2.6 billion between fiscal 2006-07 and 2009-10. In
response, the average disbursement between fiscal 2010-11 and 2013-14 was raised to $2.43
billion from $1.94 billion in the preceding four fiscal years.
“This means our ability to utilise aid has lagged behind our ability to negotiate new aid,” said
Zahid Hussain, lead economist of the World Bank's Dhaka office. The report, however, said
that the swell is likely to recede soon as the capacity for project implementation is continuously increasing. One of the core reasons cited for slack aid disbursement is the delay in project
take-off: it takes one to two years for projects to just start. Some 62 percent of the delays were
caused due to bottlenecks on the government's side and 19 percent due to the development
partners; 12 percent were due to both government and development partners, and 7 percent
were affected by outside causes like political unrest, according to the ERD report.
The delays from the government side were by way of slow approval of project proposals and
drawn-out tendering, contract awarding, project designing and land acquisition processes. The
tardy tendering and contract awarding processes jointly contributed 26 percent of the delays.
From the donors' side, lags in project approval and appointment of experts or consultants held
back start dates. “All these problems ultimately snowball into delayed disbursement of aid in
the pipeline,” the report said, adding that it takes more than six years to complete disbursement on a project. The report also presented a number of immediate and long-term action
plans for increasing the disbursement.
News source: http://www.thedailystar.net/business/efforts-to-step-up-aid-roll-out-48752
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Daily News Recap
Forex reserves hit
record $22.3b
Bangladesh's foreign exchange reserves rose to a record high of $22.31 billion at the end of
October from $21.84 billion a month ago, the central bank said on Monday, supported by exports and a rebound in remittances. The reserves rose from $17.35 billion in October 2013
and are enough to cover almost seven months of imports.
News source: http://www.thedailystar.net/business/forex-reserves-hit-record-22-3b-48759
Govt body starts
work to identify
trade barriers
A government-formed committee has started working to identify the existing trade barriers at
domestic and international levels to address those in the draft Comprehensive Trade Policy
(CTP), officials said. "The official sub-committee is scrutinising the trade barriers and problems that will be adjusted with the draft CTP for finalising the policy," said a high official concerned. The draft CTP will be finalised within the next one month, he hoped. A meeting of the
sub-committee was held recently. Amitabh Chakravarty, additional secretary of the Ministry of
Commerce (MoC) and director general (DG) of its World Trade Centre (WTO) Cell, presided
over the meeting. In the meeting four working committees were formed to fix work areas on
market access and trade agreement, trade in services and investment policy, trade facilitation,
removing barriers to trade and behind the border measures.
Each of the committees will submit a report to its respective chief, identifying the trade barriers
and providing recommendations. The committees will submit a comprehensive report to the
focal committee, which will submit the final report to the MoC senior secretary. A meeting will
also be held with the stakeholders regarding the draft CTP. Besides the sub-committee and
working committees, another committee is working on other trade-related issues in connection
with the draft. "The CTP aims to achieve an accelerated and sustainable economy through an
integrated trade approach that commensurates with the vision of becoming a middle-income
country by 2021," a high official told the FE. It also targets significant trade growth, crucial for
raising the gross domestic product (GDP) growth rate to 8 per cent by 2015 and to 10 per cent
between 2017 and 2021, as outlined in the perspective plan for a transformed Bangladesh
within 2021, he also said.
So, the Core Group (former 'trade policy working group'), established under the MoC supervision, is working to develop the CTP in line with the development objectives of the perspective
plan, he added. The major principles of the CTP are - promotion of diversified, export-led industrialisation, strengthening production network of existing and export-oriented products,
increasing the country's international competitiveness, creating favourable market access
conditions, and making trade contribution towards poverty reduction by increasing and diversifying exports. Besides, making the country's trade regime contributable towards sustainable
development by ensuring its consistency with the development objectives and existing international trade commitments is another major principle of the policy.
The draft CTP is being prepared under the Bangladesh Trade Policy Support Programme
(BTPSP), jointly funded by the European Union (EU) and the Government of Bangladesh.
MoC is the implementing authority of the programme.
News source: http://www.thefinancialexpress-bd.com/2014/11/04/64417
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Daily News Recap
Remittance falls by
25pc in October
The inward flow of remittances fell by nearly 25 per cent in October over the previous month's
mark, in a bit ebb tide after a steady surge. Official figures show the downturn came after a
steady growth in the overall remittance inflow that took the total over US$5.0 billion in the first
four months of this fiscal. "The inflow of remittance is still at a satisfactory level despite downturn in the month of October," a senior official of the Bangladesh Bank (BB) told the FE. The
Bangladeshi nationals working abroad sent US$1.01 billion in October 2014. The amount was
lower by $333.55 million than the level of remittance receipts in the previous month. In September, the remittances amounted to $1.34 billion.
"The inflow of remittances decreased in the month of October because of the celebration of
Eid-ul-Azha festival," the central banker said to explain the fall. He hopes an upturn in the flow
of foreign currencies from the wage earners in the current month. The flow of inward remittances grew by 11.54 per cent to $5.02 billion during the July-October period of the fiscal year
2014-15 against $ 4.50 billion in the corresponding period of the previous fiscal year, the BB
data showed.
"We're working continuously to increase the inflow of remittance from across the world," another BB official said, without elaborating. Currently, 29 exchange houses are operating
across the globe and have set up 981 drawing arrangements abroad to expedite the remittance inflow. The BB earlier took a series of measures to encourage the expatriates to send
their hard-earned money through the formal banking channels, instead of the illegal "hundi"
system, to help boost the country's foreign-exchange reserve. Meanwhile, the forex reserve
stood at $22.30 billion Monday. The BB official attributed the substantial figure to higher
growth of inward remittances from Bangladeshis working abroad in recent times.
Most private commercial banks along with the state-owned ones are trying desperately to increase the flow of inward remittances from the Middle East, the United Kingdom, Malaysia,
Singapore, Italy and the United States. "We're trying to increase the inflow of remittances from
different parts of the world by establishing new contacts with overseas companies," a senior
official at a leading private commercial bank said. He also said most of the banks were still
serious about increasing the inflow of remittances through official channels to meet their internal foreign-exchange demand.
News source: http://www.thefinancialexpress-bd.com/2014/11/04/64419
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Daily News Recap
Capital Market
October sees fall in
foreign investment
Net foreign investment in the
Dhaka stockmarket slumped
14.22 percent year-on-year in
October as investors remained
cautious. Foreign investors
bought shares worth Tk 302.88
crore and sold shares worth Tk
107.02 crore to take net investment to Tk 195.86 crore last
month, according to data from the
Dhaka Stock Exchange. Stock
indices and turnover rose last
month, leading some foreign investors to offload a portion of
shares from their portfolio to book
profit. DSEX, the benchmark index of the premier bourse, increased almost 2 percent to 5,173
points last month. Daily average
turnover on the DSE jumped 186
percent to Tk 750 crore in October from the same period last year.
“It is not possible to evaluate the foreign investment trend with one or two months' statistics,
as they are long-term investors,” said a leading stockbroker who deals with foreign investment. Foreign investors usually remain on the sidelines when the market rises, he said, adding that their go-slow approach may be a reason behind last month's decline in net position.
However, overseas investors still interested in the Bangladesh market with the country's favourable economic factors, political stability and a positive market outlook, the stockbroker
said. The foreign investors are mostly fund managers like Morgan Stanley, JP Morgan, Goldman Sachs and BlackRock.
They managed various types of funds like endowment funds, hedge funds, long-only funds
and mutual funds, and they invest in the Bangladesh market through these funds. Last
month's net investment amount was 1.5 percent of a total turnover of Tk 12,765 crore on the
premier bourse. Also known as portfolio investment, foreign investments account for around 1
percent of DSE's total market capitalisation of Tk 341,003 crore as of yesterday. Banks were
initially the foreign investors' preferred sector, but non-bank financial institutions, power and
energy, pharmaceuticals, multinationals, telecoms and IT also caught their attention. In January-October, foreign investors bought shares worth Tk 3,871.34 crore and sold shares worth
Tk 1,597.39 crore to yield a net investment of Tk 2,273.95 crore, according to DSE data.
News source: http://www.thedailystar.net/business/october-sees-fall-in-foreign-investment48753
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Daily News Recap
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