p1_infograph_revenue-collection_feb-2023

Revenue barely grows, raising worries about fiscal balance

by Bangladesh BusinessFinancial newsFinancial planning

Infographic: TBS

Infographic: TBS

Revenue growth has nosedived and fallen far behind the target in the eight months of the current fiscal year up to February, raising concerns over financing the deficit and development projects with prospects of more domestic resource mobilisation in the rest of the year remaining bleak.

The downward trend in revenue collection that began in November last year continues with collection growth falling as low as 3.07% this February, sliding by more than a percentage point from 4.91% in January.

According to the National Board of Revenue (NBR) sources, Tk23,727 crore in revenue – income tax, value-added tax (VAT) and customs tax – was collected in February this year, which was Tk23,020 crore in February of FY22.

This persistent declining tendency raised questions among economists about the various initiatives taken by the government to reduce imports, as well as the capacity of the NBR as the central revenue-collecting authority.

At a pre-budget meeting on Sunday, leading economists suggested reforms to the taxation system to increase the country’s tax-to-GDP ratio, which is the lowest in South Asia.

M Saiduzzaman, former finance minister, stressed that increasing the tax-GDP ratio should be given the highest priority in the next budget to solve major problems of the economy.

Revenue collection in eight months till February of the current fiscal year runs short of target by about Tk23,000 crore.

The revenue deficit would mean more government borrowing from the stressed banking system to bankroll the annual development programme (ADP) outlay and more spending in interest payment, economists have warned.

The government has already cut the ADP allocation by 7.5% to Tk227,566 crore, slashing the foreign aid component. But local component remained the same as Tk153,066 crore, meaning that the revenue authority will be under pressure to gear up its efforts to collect more tax revenue to meet the resource gap and comply with the IMF’s condition to raise tax-GDP ratio.

Otherwise, higher bank loans will be the only option for the government as foreign aid flow has dwindled due to limited implementation capacity.

Net borrowing of the government from the banking system stood at Tk41,392 crore in eight months till February, against the target set at over Tk1 lakh crore for the whole fiscal year.

The possibility of changes in the government’s current approach to control imports in the coming months is low. Hence, there is no scope for the revenue collection to increase in the remaining months of this fiscal year, rather this growth may decrease a bit more, economists said.

Dr Muhammad Abdur Mazid, the former chairman of NBR, believes that the country’s macroeconomic stability may be threatened and development activities may decrease as the shortfall in revenue collection in the eight months (July-February) of FY23 is about Tk23,000 crore of the target.

He told The Business Standard (TBS), “Due to low revenue collection, bank loans will increase and the International Monetary Fund’s (IMF) conditions [for the $4.7 billion credit] will also not be met, which may make it difficult to get the next instalment of the loan from the agency.”

However, a review of the revenue collection figures from July to February of FY 23 shows that the growth in NBR’s revenue collection during the period is close to 9%, which was almost double in the same period of last fiscal year. Revenue earnings had a negative growth of 2% in the 2019-20 fiscal year that met pandemic-induced lockdowns, but recovered in the next two fiscal years posting an average 16% annual growth.

“The written-unwritten restrictions on imports were imposed mainly due to the dollar crisis, resulting in a significantly lower collection of import duties. If the situation continues, the current revenue growth may decrease further in the future,” Muntaseer Kamal, a research fellow of the Center for Policy Dialogue (CPD), told TBS, adding that this situation can be called the slowdown of the economy.

Bangladesh’s revenue contribution to GDP (tax to GDP ratio) is very low if compared globally. There are several conditions attached to the $4.7 billion loan from the IMF and one of which is to increase the tax-to-GDP ratio by 0.5% in the next 2023-24 fiscal year.

“But it will be difficult to meet the conditions like reducing tax expenditure and increasing the tax-to-GDP ratio,” Muntaseer Kamal added.

The government has taken several steps to discourage imports since April last year as the strong US dollar raised global commodity prices when the Russia-Ukraine war broke out. These import restrictions were not eased yet but rather increased in some cases. As a result, imports are continuously decreasing.

According to the latest Bangladesh Bank data, imports fell by 5.7% from July to January of FY 23, which affected the revenue collection. In January, there was a negative growth in import duty collection.

NBR sources said, among the three sectors of revenue collection, the growth in import duty was the lowest at a little over 4% in the first eight months of the current fiscal year. The growth in VAT and income tax collection has been 15% and 6.29%, respectively.

Former NBR chairman Dr Muhammad Abdul Mazid said he believes that the main reason for this growth in VAT collection is the high price of imported goods.

NBR takes initiatives to boost revenue collection 

NBR Chairman Abu Hena Md Rahmatul Muneem held a meeting with field-level senior officials on Sunday to find ways to increase revenue collection.

In the meeting, field-level officials explained some of the reasons behind the slow growth in revenue collection.

On condition of anonymity, a senior NBR official, who was present at the meeting, told TBS, “It has been challenging to increase revenue collection due to low imports. However, directives have been given to realise large sums owed to the Bangladesh Petroleum Corporation (BPC), Petrobangla and other organisations.

“We were also instructed to dispose of cases quickly to increase revenue collection,” he added.

Source: The Business Standard
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পুঁজিবাজারে প্রভিশনের মেয়াদ আরো দুই বছর বাড়ল

by Bangladesh BusinessFinancial news
পুঁজিবাজারের অব্যাহত মন্দা উত্তরণে নানা রকম উদ্যোগ নিচ্ছে নিয়ন্ত্রক সংস্থা বাংলাদেশ সিকিউরিটিজ অ্যান্ড এক্সচেঞ্জ কমিশন (বিএসইসি)। এরই অংশ হিসেবে সংস্থাটি শেয়ারবাজারে মধ্যস্থকারী প্রতিষ্ঠানগুলোর প্রভিশনের মেয়াদ দুই বছর বাড়ানোর সিদ্ধান্ত নিয়েছে। কয়েকটি প্রতিষ্ঠানের আবেদনের প্রেক্ষিতে এবার মেয়াদ বাড়িয়ে ২০২৫ সালের ডিসেম্বর পর্যন্ত করা হয়েছে।
বিএসইসির এই সিদ্ধান্তের ফলে ব্রোকারদের ডিলার হিসাবের বিনিয়োগ, মার্চেন্ট ব্যাংক ও অ্যাসেট ম্যানেজমেন্টের ডিলারের বিনিয়োগের প্রভিশনিংয়ের মেয়াদ ২০২৫ সালের ৩১ ডিসেম্বর পর্যন্ত বাড়ানো হয়েছে।
বুধবার (১৫ মার্চ) বিএসইসি’র ৮৫৯তম সভায় এই সিদ্ধান্ত নেওয়া হয়। বিএসইসির নির্বাহী পরিচালক ও মূখপাত্র মোহাম্মদ রেজাউল করিম স্বাক্ষরিত সংবাদ বিজ্ঞপ্তির মাধ্যমে এই তথ্য জানানো হয়।২০১০ সালে শেয়ারবাজারে ধসের পর থেকে শেয়ারবাজারের স্টেকহোল্ডার প্রতিষ্ঠানগুলো বিভিন্নভাবে ক্ষতিগ্রস্ত হয়েছে। এর অন্যতম দুটি বিষয় হলো মার্জিন হিসাবের পুনঃমূল্যায়ন জনিত অনাদায়কৃত ক্ষতির (নেগেটিভ ইক্যুইটি) ও প্রতিষ্ঠানগুলোর নিজস্ব ডিলার হিসেবে বিনিয়োগকৃত নেগেটিভ ইক্যুইটি। এই দুটি কারণে ভালো অবস্থানে যেতে পারছে না প্রতিষ্ঠানগুলো। এতে শেয়ারবাজারের খারাপ অবস্থায় তারা কোনো ধরনের ভূমিকা রাখতে পারছে না। এখন যদি আবার নেগেটিভ ইক্যুইটি সমন্বয় করতে হয়, তাহলে বাজারে বড় ধরনের বিক্রয় চাপ আসতে পারে। বিষয়টি বিবেচনা করে প্রভিশনের মেয়াদ বাড়ানোর সিদ্ধান্ত নিয়েছে বিএসইসি।

Source: The Daily Kaler Kanto

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Govt’s interest expenses jump over 22%

by Financial newsFinancial planningInvestment

The government’s expenses on interest payments rose more than 22 per cent to Tk 40,792 crore in the first six months of the current fiscal year owing largely to higher expenditures on treasury bills, official figures showed.

The interest expenses stood at Tk 33,433 crore in the July-December half of 2021-22.

The interest expense was higher than the annual target because of a rise in interest rates for government securities, according to the quarterly debt bulletin of the finance ministry.

Treasury bills and bonds are one of the major tools the government uses when it comes to borrowing. The interest on the securities has gone up recently owing to the liquidity shortage in the banking system.

The sharp depreciation of the exchange rate against the US dollar was one of the factors behind the liquidity shortage.

The average yield of the treasury bills went past 7 per cent in November last year compared to a range of 6 per cent to 7 per cent previously.

The interest expenses in July-December were half of the annual allocation of Tk 80,875 crore.

Of the interest expenses, Tk 38,147 crore were made against domestic borrowing, which accounted for 52 per cent of the annual allocation of Tk 73,675 crore for 2022-23.

The payments on the loans in the banking system were Tk 14,657 crore. It was Tk 23,490 crore for the non-banking source.

External interest payments stood at Tk 2,645 crore, only 6 per cent of the total interest expenses in July-December.

BORROWING DECLINES 36%

Between July and December, the government borrowed Tk 48,024 crore, both from domestic and external sources, down more than 36 per cent from Tk 75,701 crore a year ago.

The government borrowed Tk 20,948 crore in the first half of FY23, down from Tk 25,445 crore a year earlier.

However, borrowing from both non-bank sources and through the sales of national savings certificates showed negative growth.

The government has set an annual borrowing target of Tk 40,001 crore from non-bank sources. The net borrowing in the segment was a negative Tk 4,497 crore.

Similarly, its net borrowing through national saving certificates was a negative Tk 3,107 crore. The sales target for the whole financial year is Tk 35,000 crore.

Various reform initiatives such as the online issuance process, logical investment limit, and introduction of multi-tier interest rates contributed to the reduction of the net sales of the savings instruments, said the bulletin.

The government’s external borrowing declined 14.17 per cent to Tk 27,078 crore in the first half of FY23. It was Tk 31,548 crore in the same half of 2021-22.

The total outstanding debt stock was Tk 13,59,898 crore as of December last year.

The outstanding domestic debt stood at Tk 864,105 crore. Of the sum, the government owes Tk 438,908 crore to the banking sector and Tk 425,196 crore to the non-banking source.

The outstanding external debt was Tk 495,794 crore as of 2022.

According to the bulletin, the total debt-to-GDP ratio was 30.56 per cent based on the FY23 GDP projection by the Bangladesh Bureau of Statistics and is significantly lower than the 55 per cent threshold of the International Monetary Fund (IMF).

External debt stock is around 11.14 per cent of GDP at the current market price, according to the bulletin, highlighting the well-debt position of the country.

Bangladesh has secured approval from the IMF for a $4.7 billion loan.

“The approval of the loan is a testament to Bangladesh’s strong macroeconomic performance amid global economic and political volatility, and builds confidence among development partners in the country’s economy,” the finance ministry’s bulletin said.

Source: The Daily Star

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Most users not content with BBS data

by Bangladesh BusinessFinancial news
Survey on BBS data

Out of 14 types of statistics gathered by the Bangladesh Bureau of Statistics (BBS), eight are thought to be outdated by at least 50 per cent of people who use the data and participated in a new survey of the state-run agency.

The eight types of data are on agriculture, foreign trade, industry, labour, population, demographic and vital statistics; health, gender and education.

Some 69.23 per cent users, the highest percentage of respondents, think the foreign trade statistics are outdated while only 24.24 per cent, the lowest, think the same for national accounts.

The national accounts data, which is used to produce gross domestic product (GDP) and consumer price index (CPI), is frequently updated by the BBS, according to 54.41 per cent of the respondents.

Moreover, around two-thirds expect more statistical data, according to the “User Satisfaction Survey 2022” made public through a programme on the BBS headquarters in Dhaka yesterday.

Besides, the second most widespread reason for user dissatisfaction was that the “data is not useful”, said the survey.

Some 45.83 per cent of the users found the price statistics produced by the BBS to be least useful.

The data being outdated and not useful were two of five reasons which users stated for being dissatisfied.

The survey data was collected over two weeks between March 27 and April 22 in 2022.

Out of 609 people, 580 responded, including those from government organisations, financial institutions, business communities, education sector, development partners and mass media, said Md Dilder Hossain, project director of the survey.

The BBS should specifically state when it would publish which data and ensure timeliness, said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, at the event.

“The BBS should…at least put in its best effort, which helps to ensure credibility,” he said.

The BBS should try to come up with new types of data every year which will help policymaker a lot, said the economist.

“It is high time to publish the GDP data,” he said, adding, “If India can do it, why not the BBS?”

However, Mansur also underscored the importance of the BBS, as a national statistical agency, staying independent, free from any type of influence.

Many statistical agencies in the world are run under their parliaments, he said.

“It is not a matter of dissatisfaction, it is just inefficiency issues,” said Md Matiur Rahman, director general of the BBS, on the users’ expectations for more data.

The BBS conducted this survey to realise its internal strength and understand where this agency has reached since being formed in 1974, he said.

“Through this survey, now we can understand what we should do in the future,” he added.

Acknowledging the various limitations, the BBS director vowed to fast release data, including labour force surveys on a quarterly basis.

Echoing him, Shahnaz Arefin, secretary to the Statistics and Informatics Division, blamed a lack of skilled manpower and budgetary limitations.

Speaking as chief guest, Shamsul Alam, state minister for planning, welcomed the “self-analysis”.

However, he acknowledged that there were inaccuracies in the data of the BBS. “However, overall, it is reliable,” he insisted.

There is a general mistrust of the inflation data, especially if it falls. “The prices always fluctuate. When eggs become costlier, other products like potatoes may become cheaper,” he said.

Besides, the state minister suggested that the BBS improve its website to make it more user friendly as 89 per cent of the respondents still use it.

 

Source: The Daily Star

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টানা ৪ বছর ধরে বিক্রি ও নিট মুনাফা কমছে ড্যাফডিল কম্পিউটার্স এর

by Bangladesh BusinessFinancial newsInvestmentStock market analysis

সর্বশেষ চার বছর ধরে টানা বিক্রি ও কর-পরবর্তী নিট মুনাফা নিম্নমুখী পুঁজিবাজারে তালিকাভুক্ত তথ্যপ্রযুক্তি খাতের কোম্পানি ড্যাফোডিল কম্পিউটার্স লিমিটেডের। এ সময়ে প্রতি বছরই আগের বছরের তুলনায় কোম্পানিটির বিক্রি ও নিট মুনাফা কমেছে। এমনকি চলতি ২০২২-২৩ হিসাব বছরের দ্বিতীয় প্রান্তিকে (অক্টোবর-ডিসেম্বর) কোম্পানিটির বিক্রি সামান্য বাড়লেও নিট মুনাফা কমতে দেখা গেছে।

কোম্পানির আর্থিক প্রতিবেদন অনুসারে, ২০১৮-১৯ হিসাব বছর থেকে টানা ব্যবসা কমতে দেখা গেছে ড্যাফোডিল কম্পিউটার্সের। আলোচ্য হিসাব বছরে কোম্পানিটির বিক্রি হয়েছে ৬০ কোটি ১২ লাখ টাকা। আগের হিসাব বছরে এ বিক্রি ছিল ৬৯ কোটি ১ লাখ টাকা। আলোচ্য হিসাব বছরে কোম্পানিটির গ্রস মুনাফা হয়েছে ১৭ কোটি ৩৯ লাখ টাকা। আগের হিসাব বছরে এ মুনাফা ছিল ২৩ কোটি ১৭ লাখ টাকা। আর ২০১৮-১৯ হিসাব বছরে কোম্পানিটির কর-পরবর্তী নিট মুনাফা হয়েছে ৭ কোটি ৩৩ লাখ টাকা। আগের হিসাব বছরে নিট মুনাফা হয়েছিল ১০ কোটি ৯১ লাখ টাকা।

আলোচ্য হিসাব বছরের ধারাবাহিকতায় পরের বছর অর্থাৎ ২০১৯-২০ হিসাব বছরে কোম্পানিটির বিক্রি আরো কমে হয়েছে ৫৫ কোটি ৯ লাখ টাকা। এ বছরে কোম্পানিটির গ্রস মুনাফা হয়েছে ১৫ কোটি ৬৯ লাখ টাকা। আর বিভিন্ন খরচ শেষে কোম্পানিটির কর-পরবর্তী নিট মুনাফা হয়েছে ৪ কোটি ৫৫ লাখ টাকা। ২০২০-২১ হিসাব বছরে কোম্পানিটির বিক্রি আরো কমে হয়েছে ৪৮ কোটি ১৪ লাখ টাকা। এ বছর গ্রস মুনাফা হয়েছে ১৪ কোটি ১১ লাখ টাকা। আর বিভিন্ন খরচ শেষে কর-পরবর্তী নিট মুনাফা হয়েছে ৩ কোটি ৪৮ লাখ টাকা।

সর্বশেষ ২০২১-২২ হিসাব বছরে কোম্পানিটির বিক্রি আগের বছরের তুলনায় ২ লাখ টাকা কমে হয়েছে ৪৮ কোটি ৩৫ লাখ টাকা। এ সময়ে কোম্পানিটির বিক্রি কমেছে শূন্য দশমিক ৪৩ শতাংশ। আলোচ্য হিসাব বছরে কোম্পানিটি গ্রস মুনাফা হয়েছে ১৩ কোটি ৮৮ লাখ টাকা। আগের বছরের তুলনায় সর্বশেষ বছরে কোম্পানিটির কর-পরবর্তী নিট মুনাফা কমেছে ১৩ লাখ টাকা বা ৩ দশমিক ৮০ শতাংশ।

এদিকে চলতি হিসাব বছরের দ্বিতীয় প্রান্তিকে কোম্পানিটির বিক্রি হয়েছে ৯ কোটি ৬৪ লাখ টাকা। আগের হিসাব বছরের একই সময়ে এ আয় ছিল ৯ কোটি ৪৫ লাখ টাকা। এক বছরের ব্যবধানে কোম্পানিটির বিক্রি সামান্য বাড়লেও কর-পরবর্তী নিট মুনাফা শূন্য দশমিক ৭২ শতাংশ কমে হয়েছে ৮৭ লাখ টাকা। আগের হিসাব বছরের একই সময়ে কোম্পানিটির নিট মুনাফা ছিল ৮৮ লাখ টাকা।

Source:  Daily Bonik Barta
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Banks waive off Tk5,064cr in loan interests in 2022

by Bangladesh BusinessBanksBanlgadesh BankFinancial news

Sector insiders blame the central bank’s liberal policy that empowers bank owners to waive loan interests on nominal down payments

Infograph: TBS

Infograph: TBS

Default loan rescheduling and loan interest waivers have increased at an unusual rate in the banking sector, according to the latest Bangladesh Bank data.

Lenders waived off some Tk5,064 crore while rescheduling loans throughout 2022. It is Tk3,209 crore higher than that of the previous year.

For such a situation, sector insiders blamed the liberal policy of the central bank which empowered bank owners to waive loan interests on nominal down payments.

Besides, the desperate attitude of banks to recover outstanding loans which got stuck thanks to pandemic-induced relaxed policies also contributed to the surge in waived-off interests.

“All the benefits of loan rescheduling and waiver are received by some large borrowers, who are mostly wilful defaulters,” Salehuddin Ahmed, former central bank governor, told The Business Standard.

“Currently the banking sector is very unfortunate. The central bank is not taking proper actions, banks are tactfully making their balance sheet look good. No one is giving due importance to protecting the interests of the depositors.”

“The central bank should play a stronger role to curb such irregularities in the banking sector. For example, strict measures should be taken if any customer defaults. At the same time, new loans should be scrutinised properly,” he added.

According to the Bangladesh Bank, banks waived off Tk1,194 crore in loan interest in 2018 as the figure jumped to Tk2,293 crore next year. It dropped slightly to Tk1,578 crore in 2020 and spiralled again to Tk1,855 crore in 2021.

Besides, banks rescheduled loans of Tk27,279 crore in 2022, almost two times more than Tk12,380 crore in 2021. It was Tk13,468 crores in 2020.

Thanks to the latest interest waivers, the amount of defaulted loans of banks fell to Tk1.20 lakh crore at the end of December 2022 from Tk1.32 lakh crore in January of that year, Bangladesh Bank data said.

“It would have been good if banks had waived interest on bad loans [to small borrowers]. The benefit of the interest waiver is gone to large groups, unfortunately,” a central bank official, wishing to remain unnamed, told The Business Standard.

Last year, a Chattogram-based group got large amounts of interest waiver from National Bank and a state-owned bank, he added.

Regarding defaulted loans, former governor Salehuddin Ahmed said, “This is not the actual amount of defaulted loans in the banking sector. The figure has been hidden in various ways.”

“International rating agencies are marking our banking sector negatively, which is bad for the overall economy. Our imports will suffer and interest rates on foreign loans will increase, as a consequence. Mass people will be the ultimate sufferer,” he added.

“Now, many banks are in a liquidity crisis.  At the same time, their defaulted loans are increasing. Such banks are set to see more difficulties soon,” a private bank managing director, asked not to be named, told TBS.

“Banks have been stuck with defaulted loans of customers for a long time. Hence, they are trying to recover their money even though they need to waive some amounts, which is why interest waivers have been on the rise,” he added.

The Bangladesh Bank, in a circular in July last year, empowered boards of banks for rescheduling new loans on 2.5-4.5% deposits. Prior to that, the central bank’s approval was required to regularise the loans and 10-30% deposits were mandatory. Besides, the time limit for repayments was extended up to eight years, from the previous two years.

Source: The Business Standard

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BB working to scrap interest rate ceiling

by Bangladesh BusinessBanlgadesh BankFinancial newsFinancial planning
foreign debt

The Bangladesh Bank has taken an initiative to scrap the 9 per cent interest rate ceiling and introduce a market-based interest rate on loans.

“We are working on the development of a market-based reference rate. On top of that, we will be giving a corridor for the lending rates,” said Bangladesh Bank Governor Abdur Rouf Talukder yesterday.

He came up with the remarks on the second day of the Bangladesh Business Summit at the Bangabandhu International Conference Center in the capital.

The Federation of the Bangladesh Chambers of Commerce and Industry organised the three-day event in cooperation with the foreign and commerce ministries and the Bangladesh Investment Development Authority.

Contacted, a BB official explained the governor’s comment, saying that the central bank might initially set a reference rate on loans based on the demand for credit from borrowers.

 

“Non-performing loans (NPLs) are like cancer. If you can’t cure it within the shortest possible time, you will die. And there is no other conclusion,” said Ali Reza Iftekhar, a former chairman of the Association of Bankers

“We will then set a range of a particular corridor of interest rates on the reference rate that will be applicable to borrowers,” he said.

For instance, if the reference rate is set at 9 per cent, the corridor might be in the range of 2 to 3 per cent. This means banks may charge a maximum interest rate of 12 per cent, the BB official said, on condition of anonymity.

“Probably, shortly we will be able to introduce this new initiative,” said the BB governor at a session on long-term finance.

The BB has maintained the ceiling since April 2020. In January, it relaxed the lending rate cap for consumer loans, allowing banks to hike it up to 3 percentage points.

Citing the BB’s efforts aimed at restoring discipline in the foreign exchange market, Talukder said that the central bank was trying to keep the exchange rate stable.

Bangladesh’s foreign exchange market has been under pressure for nearly a year owing to the fast-depletion of the foreign currency reserves amid escalated import bills.

The reserves have slipped to a six-year low of $31.15 billion last week, down 30 per cent from $44.14 billion recorded in March last year. Amid the shortage of the American greenback, the taka has lost its value by about 25 per cent in the past one year.

“We will also eliminate multiple rates of the US dollar. We are close to that. You will see shortly a market-based exchange rate regime.”

Currently, the US dollar trades at different rates for exporters, importers and remitters.

The governor said that the central bank has taken several measures to contain higher inflation, which has stayed at an elevated level for the higher global commodity prices.

Consumer prices climbed to 8.78 per cent in February, breaking a five-month declining trend, official figures showed yesterday.

“Our policy is to reduce the growth of aggregate demand while making supply-side interventions. This means the central bank will finance the supply-side initiatives,” Talukder said.

Speaking at the discussion, Ali Reza Iftekhar, chairman of the Association of Bankers, Bangladesh, a platform for managing directors of banks in Bangladesh, described non-performing loans (NPLs) as cancer.

“If you can’t cure it within the shortest possible time, you will die. And there is no other conclusion. A bank should be very careful about NPLs,” said the managing director of Eastern Bank.

“If you look at the balance sheet of any bank, you will see that it earns a lot of money. But it also loses money because of the defaulted loans.”

Default loans in the banking sector jumped 17 per cent year-on-year to Tk 120,656 crore last year owing to a lack of corporate governance and the ongoing business slowdown.

“If we don’t have good governance at banks, you will face a high level of NPLs. You can’t stop it. The role of the board and the management should be clearly and distinctly divided. The roles are different but the goal should be the same,” Iftekhar said.

The noted banker suggested banks not hide NPLs. “If they hide defaulted loans under the carpet, bad loans can’t be managed.”

According to Iftekhar, good governance, reducing NPLs, and appointment of independent directors are highly important to ensure discipline in the banking sector.

Arif Khan, vice-chairman of Shanta Asset Management Ltd, presented a keynote paper styled “Developing Long-term Finance Markets to Support New Growth Opportunities” at the event.

“Bank deposits are mainly short-term. So, a severe asset-liability mismatch takes place when long-term loans are provided based on those deposits.”

He said higher NPLs have emerged as a concern for the banking sector.

Atiur Rahman, a former BB governor, moderated the session, which was chaired by Shaikh Shamsuddin Ahmed, a commissioner of the Bangladesh Securities and Exchange Commission.

Khalid Qadir, CEO of Brummer Partners, Alamgir Morshed, CEO of Infrastructure Development Company Ltd, Md Mahbub-Ur Rahman, CEO of HSBC Bangladesh, Asif Ibrahim, chairman of the Chittagong Stock Exchange, Yahya Al Harthi, director of Saudi Exim Bank, and D J Pandian, director-general of New Development Bank, also spoke.

Source: The Daily Star

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FMCG companies bullish about further growth

by Bangladesh BusinessFinancial news

Tipu Munshi, commerce minister, and Tapan Kanti Ghosh, senior secretary of the ministry, and chief executives of a number of local and international fast-moving consumer goods (FMCG) companies attend a discussion styled “Leveraging Growing Middle and Affluent Class for a Vibrant Consumer Goods Sector” at the Bangladesh Business Summit at the Bangabandhu International Conference Center in Dhaka yesterday. PHOTO: Palash Khan

Local and international fast-moving consumer goods (FMCG) companies are bullish about growth opportunities in Bangladesh’s consumer goods market on the back of a middle-class set to surge in size.

The number of people belonging to the middle and affluent class is projected to increase from 12 million, or 7 per cent of the population, now to 34 million by 2025, according to a paper of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI).

“Bangladesh is ready for big brands. And people of this country know luxury brands. It is one of the fastest-growing consumer markets in Asia,” said Syed Nasim Manzur, managing director of Apex Footwear Limited.

“People are ready to spend and they are making better choices in how they spend.”

He spoke at a discussion styled “Leveraging Growing Middle and Affluent Class for a Vibrant Consumer Goods Sector” at the Bangladesh Business Summit at the Bangabandhu International Conference Centre in Dhaka.

The three-day summit, organised by the FBCCI, aims at showcasing the country’s progress and potential to both global and local investors.

The market size of consumer goods in Bangladesh is $3.6 billion with an annual growth rate of 9 per cent, said the FBCCI paper.

Zaved Akhtar, managing director of Unilever Bangladesh, said Bangladesh would become a trillion-dollar economy at a modest 5 per cent GDP growth by 2040.

“We believe that we would be better than that.”

According to Akhtar, there is a lot of headroom in the FMCG sector as per capita consumption of Bangladesh remains lower than comparable markets.

Bangladeshis only spend $23 per capita on FMCG while in India it is $44 and more than $100 in China and Indonesia.

He said the sector has a massive potential to improve the country’s export basket.

“Currently, the country’s exports in this sector are limited to a few products. With the right policies and investments, the FMCG sector can diversify its product range and enter new markets. There are opportunities for foreign direct investment in the FMCG sector as well.”

During his presentation, MHM Fairoz, managing director of Singer Bangladesh, said the size of the consumer durable market for electronic products stood at $2.4 billion and is expected to go up to $10 billion by 2030.

“Air-conditioners were once a luxury product; but today, it is increasingly becoming an essential product owing to rising temperatures.”

Fairoz called for stable fiscal and monetary policies, centralised one-stop service, fiscal incentives for the backward linkage industry, and a consistent and long-term budgetary approach.

Speaking as the chief guest, Commerce Minister Tipu Munshi said the expanding middle class offers huge growth opportunities to the consumer goods sector.

The economic policy of the government has been an enabler in creating a sizeable middle and affluent class, he said.

“There is an immense potential for Bangladesh to become a manufacturing hub for consumer goods.”

Nasim Manzur shared some insights on how the consumer goods market is reshaping.

When BMW launched its cars in Bangladesh, the initial plan was to sell 60 cars in a whole year. “But BMW sold 60 cars in the first three months,” he said.

“There is a consumer society out there ready to consume. You can cater to the demand. There is a great room to grow in the premier space.”

Manzur said brands, both local and global, want predictable cost structures.

“Bangladesh is also making great strides in this area. For example, we know what the wage increase is going to be year-on-year. But in some competitor countries, the wage may go up by 30 per cent from one year to another year, making long-term investments very difficult.”

Rajat Diwaker, managing director of Marico Bangladesh, said the current size and growth of the FMCG sector itself speaks about the single largest opportunity for anyone who wants to do business in the country.

Md Saiful Islam, president of the Metropolitan Chamber of Commerce and Industry, said companies would have to put emphasis on sustainability in order to tackle the challenges stemming from climate change.

“There will have to be an increased focus on recycling.”

Naquib Khan, president of the Bangladesh Supply Chain Management Society, said every village has become a small town.

“Food habits are changing. The consumption pattern of Generation Z is different from ours.”

“We also need to think about sustainability and social responsibility. We need to help our environment.”

Hidayet Onur Özden, chairman of the Turkey-Bangladesh Business Council, said a circular economy is very important because without recycling, a country or firm can’t have a sustainable future.

Özden is involved in the recycling business. “From recycling, businesses can make money. This is not only for making the world greener or doing good for our future generations.”

Tapan Kanti Ghosh, senior secretary of the commerce ministry, said firms would have to cut costs to remain competitive as competition would intensify once Bangladesh graduates from the grouping of the least-developed countries and becomes a developed nation as duties have to be slashed significantly.

While moderating the discussion, Rupali Chowdhury, managing director of Berger Paints, said the consumer goods sector is growing at multiple times the gross domestic product.

She said per capita paint consumption in Bangladesh is one kilogramme whereas it is 25 kgs globally. “So, there is a huge room to grow.”

Source: The Daily Star

why-invest-in-bangladesh

Time to become a manufacturing hub

by Bangladesh BusinessFinancial news

Enormous infrastructure development is among the key factors that policymakers have highlighted to portray Bangladesh’s conducive investment ecosystem to attract as much as $100 billion in diversified sectors ranging from apparel to healthcare and logistics.

A huge domestic market of 170 million people, access to the regional market of 1 billion consumers, higher rate of working age population also make Bangladesh a viable investment destination, they listed at a session on the second day of the three-day Bangladesh Business Summit 2023 organised by the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI).

The government is working on to establish 100 economic zones by 2030, which will provide a solid foundation for private sector growth, while the Matarbari deep-sea port, once completed in 2026, would be the real game-changer, Salman F Rahman, private industry and investment adviser to Prime Minister Sheikh Hasina, told the session.

The Padma Bridge linking the south-west of the country to the northern and eastern regions, and the establishment of 28 hi-tech and software parks, 100% electricity coverage, nuclear power plants and ongoing road and rail projects will help Bangladesh achieve foreign direct investment targets, he added.

Opening the session titled “Bangladesh: $100 billion investment opportunities in key sectors for investors to leverage”, Prime Minister’s Principal Secretary Mohammad Tofazzel Hossain Miah explained Bangladesh’s dream to become the “next manufacturing and digital hub in Asia” as he sees a lot of potentials for investment in varied sectors.

Bangladesh has had a strong track record of accelerating its GDP growth by at least 100 basis points every decade and it keeps thriving more with the help of the policies for deregulations, greater economic liberalisation and trade integration, he pointed out.

Steps have been taken to ease business and red tape, and 150 services of 34 agencies are being identified for process simplification. Once completed, clients will be able to receive these services from a single point, making it easier for businesses to operate in Bangladesh, policymakers said, elaborating on the privileges offered for investors.

According to Salman’s presentation, of the $100 billion investment opportunities in Bangladesh, $25 billion can be invested in infrastructure, over $14 billion in green investments, $24 billion in PPP investment, and $15 billion in logistics. Additionally, there is a strong appetite for foreign investments in various other sectors, including apparel industries, healthcare, digital economy, and more.

State Minister for Foreign Affairs Shahriar Alam said investors should anticipate even greater growth in the coming years as a number of mega-projects have already begun to significantly contribute to the national GDP.

In addition to its economic progress, Bangladesh has made significant strides in the areas of labour rights and human rights, he said.

Also, Bangladesh has also made significant improvements in sustainability, said the state minister. Currently, 67 of the top 100 green textile factories are located in Bangladesh, reflecting the country’s efforts to learn from past mistakes and prevent the terrible incidents that occurred a decade ago.

Additional strengths of Bangladesh

The country’s attractive geographic location enables companies secure access to the Asia Pacific market of 290 crore (2.9 billion) people who spend $8.53 trillion a year. The country has GSP facilities in 38 countries – including 28 in the EU, Australia, Canada, Japan, New Zealand, Norway, Russia, Switzerland and Turkey. In addition to Europe and USA, Bangladesh has preferential trade access in both the Chinese and Indian markets.

Meanwhile, Bangladesh, already emerging as a home to 29 million middle and affluent class consumers and set to have 34 million by 2025, thanks to the 12.3% compounded annual growth rate. The country is going to be the ninth largest consumer market by 2031, according to HSBC.

Lastly, it’s worth noting that Bangladesh offers a significant advantage in terms of cheap labour. With 68.4% of its population within working age, and a median age of 28 years for Bangladeshi citizens, the country has a younger workforce compared to India (29 years), Indonesia (31 years), Vietnam (22 years), and Thailand (39 years).

The country has bilateral investment treaties with 32 countries, double taxation avoidance treaties with 28 countries; investment here is protected by the laws against nationalisation and expropriation, while it allows 100% foreign ownership in almost every sector – all positives for FDI.

Alongside the solid macroeconomic fundamentals, Dhaka offers cost competitiveness which will help investors save hugely in worker wages, managers’ salary, water and electricity costs compared to regional peers.

What foreigners and businesses say

Calling Bangladesh the next China in his book a few years back, Jong Won Kim, the Director General of the Green Growth Department at the Korea Trade-Investment Promotion Agency, said Bangladesh is going to be a manufacturing hub.

He said Korean companies which missed the investment opportunities in Vietnam earlier and are looking to relocate factories from China or from somewhere else should consider investing in Bangladesh.

In a video message, Yasutoshi Nishimura, the Minister of Economy, Trade and Industry of Japan, revealed that approximately 70% of Japanese companies operating in Bangladesh are keen to expand their investment by establishing one to two more units.

The UK’s Indo-Pacific Minister, Anne-Marie Trevelyan, anticipates increased British investment in sectors such as higher education and financial services.

Bjarke Mikkelsen, CEO of Daraz, noted that investing in Bangladesh has become more predictable, whereas a decade ago, it was akin to gambling.

Khalid Quadir, founding managing partner of Brummer & Partners (Bangladesh), said Bangladesh can be the mini-China as it can attract foreign investors due to having cheap labour.

He said the global private capital market size is $8 trillion, of which 20% allocated for emerging countries. But Bangladesh is still not focusing on the private capital market and running after traditional funding from multilateral donors like the World Bank and the IMF.

Challenges

Inadequate infrastructure, red tape and corruption, poor immigration and customs and lack of skilled labour are the main challenges investors pointed out at different sessions of the summit on Sunday.

Takeshi Mamiya, Managing Executive Officer of Marubeni ASEAN Pet. Ltd, presented a paper at a session where he said Bangladesh is set to graduate from LDC status by 2026, and entering into the Economic Partnership Agreement (EPA) with Japan is crucial for the continued development of its textile industry.

“Attracting FDI is the common goal of most countries in order to create local employment and economic growth; however, it is not something achievable overnight,” he said.

Arif Khan, vice chairman of Shanta Asset Management, said foreign investors are not willing to come because they want a predictable policy for at least five years about remitting money, stable exchange rate and interest rate.

 

Source: The Business Standard

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Japanese entrepreneurs keen to invest more in Bangladesh

by Bangladesh BusinessFinancial newsFinancial planningInvestment
Photo: Rajib Dhar/TBS

Photo: Rajib Dhar/TBS

Japanese entrepreneurs are willing to invest more in Bangladesh to take advantage of available manpower and market access facilities, as well as explore the potential of the local market, according to business leaders, envoys, and policymakers from Japan.

“About 70% of Japanese companies in Bangladesh have expressed their willingness to expand their investment in one to two units,” said Yasutoshi Nishimura, minister of economy, trade, and industry of Japan, in a video message at a parallel session styled “Japan-Bangladesh Trade and Investment: Opportunities and Way Forward” at the Bangladesh Business Summit 2023 on Sunday.

To mark its 50th founding anniversary, the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) has organised the three-day summit beginning on 11 March in partnership with the foreign and commerce ministries and the Bangladesh Investment Development Authority (Bida) at the Bangabandhu International Conference Center in Dhaka.

“Many Japanese companies are interested in investing in Bangladesh. In 2021, foreign direct investment (FDI) from Japan reached a high of $910 million,” the minister said, adding that apart from the textile industry, the companies are also investing in the automobile, motorcycle, energy, and IT sectors to diversify the industries of Bangladesh.

Many Japanese companies are contributing to developing infrastructure in Bangladesh, like the Jamuna Bridge, Matarbari Deep Seaport, and the expansion of the Dhaka International Airport, said the Japanese minister.

In the keynote presentation, Takeshi Mamiya, managing executive officer of Marubeni ASEAN Pet Ltd, said a number of Japanese companies are providing high-efficiency technology support to produce high-value products like outerwear and suits.

Bangladesh is set to graduate from LDC status by 2026, and entering the Economic Partnership Agreement (EPA) with Japan is most important for Bangladesh’s continued development of textile industries, he added.

Thanks to a joint study group launched last December between the two governments, Bangladesh’s RMG exports to Japan will not be affected after LDC graduation, hoped Takeshi Mamiya.

The Japanese government and Japan International Cooperation Agency (Jica) are committed to providing concessionary loans for the infrastructure development of Bangladesh, as infrastructure is the backbone of a nation’s development, he added.

“There are more than 5,000 Japanese companies operating their businesses in Thailand, 2,000 in Vietnam, and 1,500 in Indonesia, while in Bangladesh, only 340 companies are registered due to physiological distance,” said the managing executive officer of Marubeni, and he hoped this business summit would help to reduce this physiological distance.

He urges the government to develop a policy to create an environment that acts as a level playing field to attract foreign investment, and Bangladeshi companies may join hands with Japanese companies to invite them to Bangladesh for knowledge and technology transfer.

Taro Kawachi, managing director of Bangladesh Special Economic Zone (SEZ) Ltd, said in the last one year 175 Japanese companies have visited their SEZ, registering visitor arrival growth of about 400% compared to a year ago.

This economic zone aims to facilitate Japanese quality in Bangladesh to attract investment, he said, adding that they started a part of the zone in December last year and that already three Japanese companies, including Singer, have invested here.

Myungo-Ho Lee, president of the Japanese commerce and industry association in Dhaka and general manager of Mitsubishi Corporation’s Dhaka office, said 10 Japanese companies are joining this business summit from outside the country to explore the investment opportunity.

Abdul Haque, an advisor at FBCCI, said that by cashing in on Japanese investment, Taiwan, Vietnam, Indonesia, and Malaysia have made significant progress in their industrialisation and export diversification.

He said Bangladesh has a chance to bring more Japanese investment by establishing a special economic zone for Japanese investors, and many investors may come in the days to come. The government should reform policies and rules to make them investment-friendly.

The next ten years will be very crucial for Bangladesh, he said, adding, “We must take all reforms in the Japanese standard to promote investment.”

Japanese Ambassador Kiminori Iwama also spoke at the event, while foreign minister AK Abdul Momen sent a video message and Lokman Hossain Miah, executive chairman of Bida, made the introductory remarks.

 

Source: The Business Standerd