A Monthly Update of Economic Banking and Financial News

A Newsletter of Research & Development Division, Prime Bank Ltd.

After recession, export of the country is also getting some new boost; PERSPECTIVE: local export of personal leather goods, such as belts and wallets to the US market has increased. Some 1,07,000 pieces of personal A new year begins, 2010, but impacts of global recession still leather goods were shipped from in January-October continue as Singapore's economy shrank 6.8% in the fourth quarter 2009 for the US$ 70 billion plus US market of personal leather goods. to December from the previous three months. The government The country's medicine exports may witness an impressive jump in declared the recession to be over in November, but cautioned that 2010 thanks to the aggressive marketing the local manufacturers the strength of its recovery would depend on the pace of rebound in pursued in the early days of the global economic crisis. Local Singapore's major trading partners such as the United States, the pharmaceuticals' exports have received a blow at the start of the last European Union and Japan. On the other hand, Bank of America fiscal year 2008-09 as many importing countries shied away as they posted a loss of 194 million dollars in the fourth quarter of 2009, and were not able to continue their orders due to the recession. Now they that repayments of government aid boosted the loss for shareholders are opening letters of credit as the situation is improving worldwide. to 5.2 billion dollars. In the continent of Europe, ten out of hundred But, currently they have come up and started importing medicines people, who could be working are now unemployed. In Spain, one of again. Similarly, many countries in South America, who also stopped continental Europe's biggest economies, the rate has now hit a importing, have started importing. Georgia and many African shocking 19.4%. But at the same time, countries are trying boost their countries such as Ethiopia, Kenya and Congo are taking our way out of the recession, Taiwan aims to create 100,000 jobs. products. A three-member delegation of the European Union (EU) Taiwan's Council for Economic Planning and Development has set a arrived in to observe the shrimp industry, as freshwater target for lowering the island's jobless rate from just under six percent shrimps worth Tk 300 crore have been prepared here for export. in 2009 to 4.9% this year, a goal that will not be an easy task.So, we Export of freshwater shrimps to the EU resumes this month after six can see, though world is getting out of the recession but, it is not over months' suspension since June last following detection of health- yet, hopefully at the end of 2010 we will see some better results, till hazardous antibiotic Nitrofuran in consignments of exported shrimps then we may keep our fingers crossed. in January 2009.

There are some news that makes us believe that recession is really Despite global economic recession, local commercial banks posted fading way like, The World Gold Council (WGC) said on January 11 record operating profits in 2009. Operating income for most banks that gold sales across the countries in Middle East will considerably rose by 5 to 100% in 2009 compared to previous year, according to pick up in 2010, thanks to better market conditions and rising data collected from different banks. Officials said private banks were demand for the yellow metal in the Middle East, led by the United able to make huge profits from the share market. Besides, their Arab Emirates (UAE). Another Middle Eastern country, Iran planned earnings were boosted by the remittances and export-import next year's budget based on an oil price of US$ 60 per barrel, nearly business. Bangladesh Bank is taking many new reform measures, double the price from the last year, indicating rising optimism over for the financial sector of the country like; Dhaka Inter-bank Offered energy prices. Last year, the parliament approved a budget based on Rate (DIBOR) will be officially launched denoting the country's US$ 37.5 per barrel for the fiscal year ending in March, reflecting the benchmark interest rate and aimed at bringing discipline in its steep drop in prices that severely impacted the economy. financial market. Under the DIBOR, banks in Bangladesh will publish five rates-overnight, one week, two weeks, one month and three months-initially to ensure transparency in the country's money Macro-economy of Bangladesh is also showing some good news, in market. This also turns out to be the first ever index-based floating 2009 the stock market grew by 82.22%, to a total capitalisation of Tk rate transaction in Bangladesh Taka. Bangladesh Bank has directed 1,90,322 crore, from the capital base of Tk 1,04,380 crore in the all banks that they must take prior permission from it for purchasing previous calendar year. The daily average transaction increased to land, floor space or any other permanent structure. The government Tk 604.63 crore during the year ended in December '09, compared to has created a new administrative division on banking and finance from Tk 281.84 crore daily average in the previous year. In 2008, the under the finance ministry. The new division has been named as the inward foreign remittance was US$ 8.97 billion. Remittance crossed Bank and Financial Division, an official handout said. Bangladesh US$ 10 billion mark for the first time in Bangladesh history in the year Bank opened a separate department for the small and medium 2009 because migrants, a main driver of the country's economic enterprises (SME). The department will focus on the SME sector, progress, sent more money home despite all odds during global helping both the banks and the borrowers flourish their businesses, recession. With 20% growth, inward foreign remittance inflow said BB governor Dr. Atiur Rahman while inaugurating the new wing reached US$ 10.72 billion last year. A very welcoming news is that, at the central bank headquarters in the city. The Bangladesh Bank governor, Dr. Atiur Rahman, said Bangladesh was on the right track to be promoted as a middle-income country by 2012. Atiur pointed out that, the per capita gross national income had risen by about 50% to reach US$ 690 in four years, till June 2009. 'Reaching the middle-income threshold of US$ 976 should not take Inside this Issue Editorial Body more than four more years,' said BB governor. In Focus: Perspective 01 S M Anisuzzaman, SAVP Global Business & Economy 02 ANM Farukh, EO Investment climate of the country is showing some good indications; Md. Golam Moula, EO two foreign companies will invest more than US$ 52 million at Uttara Bangladesh Economy 02 Ashique Iqbal, MT and Adamjee EPZs. The companies will also create employment Agriculture 04 Research & Development Division opportunity for 15,017 Bangladeshi and 17 foreign nationals. A local Finance & Banking 04 Prime Bank Ltd. company, will expand its garments manufacturing industry in the SBC Tower (6th Floor) Karnaphuli Export Processing Zone (KEPZ). This 100% locally- Energy 08 37/A Dilkhusha C/A owned company will invest US$ 1.74 million in setting up its unit and Readymade Garments 08 Dhaka-1000 will produce specialised garment items. The company will also create Tel : 956 5564 employment opportunity for 1,500 Bangladeshi workers. Telecommunication 09 PABX: 9568184, 95657594 (Ext: 221) Miscellaneous 09 email: [email protected] A Newsletter of Research & Development Division, Prime Bank Ltd.

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dollars. For all of 2009, the largest US bank by assets had a profit GLOBAL BUSINESS & ECONOMY: of 6.3 billion dollars, but for shareholders the results were a loss of 2.2 billion following payments to the US Treasury stemming from Singapore economy shrinks 6.8% in Q4 bailout aid. The last quarter's results were affected by a charge of Singapore's economy shrank 6.8% in the fourth quarter to 4.0 billion dollars to repay the US government for its capital aid December from the previous three months, but the slowdown was under the Troubled Asset Relief Program (TARP), a massive effort less than expected for the whole year, the trade ministry said today. to stabilize the banking system, Bank of America said. (Source: The The decline in gross domestic product was attributed to weakness Daily Star, January 21, 2010) in the key manufacturing sector, which shrank 38.4% on a seasonally adjusted quarter-on-quarter annualised basis, it said. Taiwan aims to create 100,000 jobs The government declared the recession over in November '09, but Taiwan's President Ma Ying-jeou said his government aimed to cautioned that the strength of its recovery would depend on the create 100,000 jobs this year in a bid to cut the island's pace of rebound in Singapore's major trading partners such as the unemployment rate significantly. Taiwan's Council for Economic United States, the European Union and Japan. With the economy Planning and Development has set a target for lowering the island's contracting less than feared, Singapore escaped what could have jobless rate from just under six percent in 2009 to 4.9% this year, a been its worst recession since independence in 1965, thanks in goal that Mr. Ma said would be "no easy task." He said there were part to a 20.5 billion Singapore-dollar (US$14.5b) government encouraging signs for employment, including a gradual recovery in stimulus package. (Source: The New Age, January 5, 2010) the high-tech and electronic sectors and a consecutive decline in the unemployment rate for the last four months of 2009. (Source: Global financial regulation overhaul seen in 2010 The Daily Star, January 25, 2010) Global financial regulation has changed little since the 2008 banking crisis, but that won't be the case much longer. US and EU Iran budgets US$ 60 for crude oil authorities are expected to hammer out the definite shape of a new Iran planned next year's budget based on an oil price of US$ 60 per regulatory order in 2010 that will fundamentally change how world barrel, nearly double the price from the last year, the official news banks and markets operate. Banking lobbyists and Republicans are agency reported, indicating rising optimism over energy prices. Last working to block reforms. Senate debate will resume this month, year, the parliament approved a budget based on US$ 37.5 per with analysts expecting passage of legislation in early spring. The barrel for the fiscal year ending in March, reflecting the steep drop Senate and House will then have to agree on a single measure to in prices that severely impacted the economy. About 80% of Iran's send to president Barack Obama. That could happen in April or foreign revenue comes from oil exports. (Source: The Daily Star, May'10. In Europe, EU member states and the European January 25, 2010) Parliament must still rule on a range of proposed regulations for banks, markets, insurers, hedge funds and private equity groups. World Bank praises China anti-inflation steps The European Parliament will hold a confirmation hearing that day The World Bank said recent moves by China to clamp down on with Michel Barnier. He is the Frenchman the European rampant lending were the "best way" to tackle the problem of rising Commission has proposed oversee the EU's financial services inflation and the threat of asset bubbles. "It is very tricky once you industry and play a core role in drafting legislation. (Source: The are in this situation of heavy credit growth to try to come off that. It New Age, January 7, 2010) is a very fine line between doing it too quickly and not doing enough," Ardo Hansson, lead economist of the World Bank in Unemployment hits 10% across eurozone Beijing, said at a news conference. Beijing moved this month to Ten people in a hundred who could be working are now calm growing inflationary pressures and soaring stock and property unemployed across the 16 countries that use the euro, the EU said prices caused by runaway bank lending, which last year nearly as the human cost of the economic crisis was laid bare. New doubled from 2008. It followed an earlier move on its benchmark figures for November 2009 showed that the seasonally-adjusted one-year treasury bills and official data that showed the world's unemployment rate hit a miserable 10%, with 102,000 more people third-largest economy grew by 8.7% in 2009 and 10.7% in the left without their own income compared to October. In Spain, one of fourth quarter. (Source: The Daily Star, January 26, 2010) continental Europe's biggest economies, the rate has now hit a shocking 19.4%. Unemployment is the last indicator to turn around South Korea to hold FTA talks with Japan and China as economies re-configure to get over the pain of recession. The South Korea, Japan and China will hold talks this week to launch a unemployment rate throughout the EU as a whole was registered at joint research project into a possible free trade pact, officials said. 9.5% in November. The wider picture was illustrated sharply on The three countries agreed at their summit in October 2009 to push January 7 by a fall in euro retail sales and with the Bank of England for the joint research. South Korea has been actively pushing for leaving its key interest rate at a record low. Fears abound for free trade agreements worldwide to bolster its export-dominated stretched households across the continent over the impact of rising economy. It already has free trade agreements with Chile, credit repayments when interest rates begin to rise. (Source: The Singapore, India, the European Free Trade Association and the New Age, January 9, 2010) Association of Southeast Asian Nations. A free trade pact was signed with the European Union in October 2009 and awaits Gold demand to rise in Middle East in 2010 ratification. A deal signed with the United States in 2007 also needs The World Gold Council (WGC) said on Monday that gold sales ratification. (Source: The Daily Star, January 26, 2010) across the countries in Middle East will considerably pick up in 2010 thanks to better market conditions and rising demand for the yellow metal. Countries in the Middle East, led by the United Arab BANGLADESH ECONOMY: Emirates (UAE), are major consumers of gold, after China and India, globally. Dubai, part of the UAE, is the largest importer and Govt banks likely to open more branches after 8-year restrictions consumer of gold in the Gulf region. WGC Managing Director for State-owned commercial and specialised banks are planning to Middle East and Turkey Anan Fakhreddin told reporters that people open more branches this year, after restrictions on such expansion in the Middle East are increasingly betting on gold as a safe haven for eight years now, to net more clients for low-cost deposits, asset. "Gold demand in the region is picking up and thus gold sales finance ministry officials said. The government has a verbal are increasing," he said. (Source: Commodity Online, January 12, restriction on the banks not to open any more branches as the 2010) banks are incurring losses by running loss-making branches. (Source: The New Age, January 9, 2010) Bank of America posts loss Bank of America said January 20 it posted a loss of 194 million Stock market grew by 82.22% in 2009 dollars in the fourth quarter of 2009, and that repayments of The stock market grew by 82.22% to a total capitalisation of Tk government aid boosted the loss for shareholders to 5.2 billion 1,90,322 crore last year from the capital base of Tk 1,04,380 crore A Newsletter of Research & Development Division, Prime Bank Ltd.

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delegation went to Nepal in the past week to make the deal on the BANGLADESH ECONOMY... import of 15,000 tonnes of lentil by the Trading Corporation of Bangladesh. But a Memorandum of Understanding (MoU) was finally the previous calendar year. The daily average transaction increased signed between the two governments for the import of lentil which to Tk 604.63 crore during the year ended in December '09 compared says the Trading Corporation of Bangladesh will participate in an to from Tk 281.84 crore daily average in the previous year. 13 IPOs international tender to be floated by Nepal trading agency, said were floated in the stock market last year to collect a total of Tk commerce ministry officials. (Source: The New Age, January 17, 726.22 crore. Same number of IPOs also came to the market in the 2010) previous year but their capital mobilisation stood at Tk 435.34 crore. (Source: The New Age, January 10, 2010) 36 brokerage branches await SEC approval The Securities and Exchange Commission (SEC) has approved 341 SCBs won't be allowed to float shares now branch offices of brokerage houses so far and another 36 branch Banks in the country should go for merger to become strong, or else offices are awaiting the SEC nod to enhance the operation of the it would be difficult for them to survive under stiff competition in the capital market as well as to create more employment opportunities. future, said finance minister AMA Muhith. "They can survive in 2010, Dhaka Stock Exchange (DSE) officials said the number of brokerage but in 2015 when the financial sector will be opened, it will be difficult houses has increased to 396 in January 2010, from 272 in January for them to survive," he said at a press briefing after meeting with the 2009. At the same time about 253 authorized representatives are officials of Bangladesh Bank and three state-owned commercial also waiting for the SEC nod to work in the capital market. In a banks (SCBs).The country does not have merger culture as the meeting held recently with the DSE, the SEC said it would approve business is less mature, but it is popular in other countries, the the prayers for new branch offices and authorized representatives minister said. The finance minister rejected outright the idea of within two weeks. (Source: The Financial Express, January 23, 2010) floating shares of the SCBs on the capital market now. "We are not going to allow any SCB to float share right now as their financial Selected Macroeconomic Indicators barometers are not strong," he said. (Source: The Financial Express, January 11, 2010)

Analysts urge India to erase trade barriers to Bangladesh India should act fast to eliminate non-tariff barriers (NTBs) and cut the negative list to help Bangladesh export more to the neighbouring country for reducing the huge trade gap between the two states, experts said on January 10, 2009. Bangladesh's exports to India nosedived by nearly 23% to US$ 276 million in fiscal 2008-09 ended in June 2009 against US$ 358 million a year ago. The trade gap widened to over US$ 3 billion in fiscal 2007-08 from less than US$ 1 billion in 2001-02. The gap narrowed to around US$ 2.6 billion in 2008-09 mainly because of less imports by Bangladesh worth half a billion dollars. According to businesspeople and trade experts, India also deprives Bangladesh of getting a special treatment as a least developed country under the South Asia Free Trade Area (SAFTA) framework. (Source: The Daily Star, January 11, 2010)

Govt hopes to get Tk 2,100cr from US millennium challenge fund The government is likely to get Tk 2,100 crore of the US-sponsored millennium challenge fund for the next financial year as Bangladesh is set to fulfill all the conditions required, finance ministry officials said. The finance ministry at a meeting today discusses the possibility of getting the fund aimed at narrowing the deficit in the budget for the next financial year. Bangladesh has met nine conditions that include good governance, investment in people and fostering entrepreneurship for being selected for funds from the Millennium Challenge Corporation of the United States, the officials said. (Source: The New Age, January 13, 2010)

Public-Private Partnership (PPP) policy may be finalised this month The government is likely to finalize Public-Private Partnership (PPP) policy within this month as the Board of Investment (BoI) sought approval of the cabinet regarding its draft guideline last week, officials said Thursday. The officials said BoI has already devised the policy titled "Bangladesh Public Private Partnership Policy and Guideline 2009" and sent it to the cabinet division to place it before the cabinet meeting. Prime Minister Sheikh Hasina has already given her consent to the draft policy on PPP, a new investment model to attract private investment aimed at steering economic growth through infrastructure development, a BoI official told the FE. The government started to frame the PPP policy early this year in order to upgrade the P*- Provisional; R*- Revised (Source: Bangladesh Bank) country's ailing infrastructure, especially transport and energy sectors. The government in the current financial year has introduced Local company to invest US$ 1.74m in KEPZ the PPP concept that has turned popular in neighboring India, and A local company, namely M/s Arrow Fabrics (Pvt) Ltd will expand its allocated Tk 25 billion in the current national budget. (Source: The garments manufacturing industry in the Karnaphuli Export Processing Financial Express, January 16, 2010) Zone (KEPZ), said a press release. This 100% locally-owned company will invest US$ 1.74 million in setting up its unit and will Lentil import from Nepal faces hurdle produce specialised garment items. The company will also create The government's move to import 15,000 tonnes of red lentil from employment opportunity for 1,500 Bangladeshi workers. (Source: Nepal has faced hurdle as Kathmandu has asked Dhaka to The Financial Express, January 24, 2010) participate in an international tender. A four-member government A Newsletter of Research & Development Division, Prime Bank Ltd.

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BB says Bangladesh to become middle-income country by 2012 BB opens SME department The Bangladesh Bank governor, Atiur Rahman, observed Bangladesh Bank on December, 31 opened a separate department Bangladesh was on the right track to be promoted as a middle- for the small and medium enterprises. The department will focus on income country by 2012. He made the observation as he released the SME sector, helping both the banks and the borrowers flourish the bank's annual report 2008-09 at a briefing in his office in Dhaka. their businesses, said BB governor Atiur Rahman while inaugurate Atiur pointed out that the per capita gross national income had risen the new wing at the central bank headquarters in the city. The by about 50% to reach US$ 690 in four years till June 2009. governor said that the BB in its five-year strategic plan has given 'Reaching the middle-income threshold of US$ 976 should not take priority to the SME sector. The new department reflects the more than four more years,' he said. (Source: The New Age, January commitment of the central bank. The governor also advised the 25, 2010) central bank's official to keep close monitoring of SME lending so the right people get the loan timely. (Source: The New age, January 1, Rangpur is declared as the 7th division 2010) The government has declared Rangpur the nation's seventh division. The decision was announced on January 25 by the National Major banks hit by global recession Implementation Committee for Administrative Reorganisation (Nicar), Banks with investment in stocks, techs romp home which is chaired by Prime Minister Sheikh Hasina. The new division Slowdown in exports and imports triggered by global meltdown cut comprises eight districts that were formerly under Rajshahi division -- through profits in major private banks in 2009 but the financial Rangpur, Kurigram, Dinajpur, Lalmonirhat, Gaibandha, Nilphamari, institutions that had invested heavily in stocks and technology ended Thakurgaon and Panchagarh. A committee was subsequently formed the year on a high note. Un-audited initial operating profits of the and its report on creating a new division was submitted to the country's 18 private banks have revealed extent of damages caused government on July 21. Bangladesh's six other administrative by the fallout of the global slump with the largest Islami Bank divisions are Dhaka, Chittagong, Rajshahi, Khulna, Barisal and Bangladesh Limited (IBBL) being one of the victims. The IBBL still Sylhet. (Source: The Daily Star, January 26, 2010) maintained its leadership in the private banking sector, but its operation profit - Tk 8.44 billion in 2009 against Tk 8.30 billion in 2008 - grew only 1.69%, the lowest in its recent history. According to the AGRICULTURE: provisional figures, Prime Bank and AB Bank maintained their second and third positions in terms of un-audited operating profit (OP) - both New subsidy scheme to boost farming gaining big ground on exposure to stock markets. Prime Bank's The government will give farmers a 25% subsidy on the cost of operating profit soared to Tk 5.80 billion in 2009 from Tk 4.30 billion buying agricultural implements to boost crops production and in the previous year while AB Bank's profit jumped to Tk 5.70 billion, minimise wastage. An Executive Committee of the National up from Tk 4.65 billion in 2008. Among the top-performers, Economic Council (Ecnec) meeting chaired by Prime Minister Sheikh Southeast Bank saw its operating profit rise by 55%, putting it among Hasina on January 21, 2010 approved a Tk 149 crore project to that the top five. The bank made operating profits worth Tk 4.64 billion in end. Titled “Enhancement of Crop Production through Farm 2009 against Tk 3.00 billion in the previous year. The OP of Pubali Mechanisation”, the project will primarily be introduced to 237 Bank, which has the largest number of branches among the private upazilas under 25 districts, said a planning ministry official. commercial banks, rose modestly to Tk 4.09 billion in the just Meanwhile, the agriculture ministry has proposed a Tk 1,400 crore concluded year from Tk 3.65 billion in 2008. National Credit and increase in farm subsidies in the revised budget for the current fiscal Commerce Bank Ltd (NCCBL) made Tk 3.14 billion operating profit in year. (Source: The Daily Star, January 22, 2010) 2009 compared to Tk 2.36 billion in 2008 and the profit of City Bank was Tk 2.30 billion in 2009. The operating profits of Dutch Bangla Bank Ltd (DBBL) - the most tech-savvy bank - rose sharply to Tk 2.70 billion, up from Tk 2.18 billion in 2008. Dhaka Bank also made similar profit. Among the Shariah-based financial institutions, Social Islami Bank Ltd (SIBL) made the biggest gain among private banks, as it operating profits spiked 100% to Tk 1.30 billion in 2009 from Tk 650 million in 2008. The EXIM Bank Ltd - the country's second largest Islamic bank - posted OP worth Tk 3.20 billion against Tk 2.67 billion a year ago. The OP of Uttara Bank was Tk 2.50 billion last year compared to Tk 2.18 billion in the previous year. Mutual Trust Bank made Tk 1.70 billion OP in 2009 compared to Tk 1.23 billion of the previous year. Shahjalal Islami Bank Ltd faced the heat of the global slump as its OP grew a meager 1.44% to end at Tk 2.10 billion in 2009, Al-Arafah Islami Bank's OP climbed to Tk 1.81 billion from Tk 1.60 billion in 2008 and that of the Standard Bank rose to Tk 1.81 billion from Tk 1.47 billion. Premier Bank earned operating profit worth Tk 1.60 billion in 2009 against Tk 1.45 billion in 2008 and the profit of First Security Bank Ltd. was Tk 790 million in 2009. (Source: Shrimps worth Tk 300cr prepared for export The Financial Express, January 1, 2010) A three-member delegation of the European Union (EU) arrives in Dhaka tomorrow to observe the shrimp industry, as freshwater shrimps worth Tk 300 crore have been prepared for export. The delegation of the EU's Food and Veterinary Mission will visit some shrimp processing factories, shrimp enclosures and hatcheries during their three-day visit. Export of freshwater shrimps to the EU resumes this month after six months' suspension since June last following detection of health-hazardous antibiotic Nitrofuran in consignments of exported shrimps in January 2009. The importers had cancelled over 50 consignments of lobsters bound for Europe. As a result, export of the frozen shrimps remained suspended, creating a crisis in the sector. Now, freshwater shrimps worth Tk 300 crore have been prepared for export. Bangladesh earned Tk 414.34 crore in shrimp export last fiscal year with Tk 300 crore from the EU countries. (Source: The Daily Star, January 23, 2010)

A Newsletter of Research & Development Division, Prime Bank Ltd.

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specialised, and see whether the banking sector is saturated or FINANCE & BANKING... there is scope for any new scheduled bank to operate, Muhith BB's data showed. The Sonali Bank recovered 13% of default said. The committee will also assess whether non-resident loans from their top 20 defaulters during January-September Bangladeshis (NRBs) could fully own the bank. In the case of period of the last calendar year while the Janata Bank realised ownership by NRBs, they would have to apply to the central bank 38% of such loans. During the same period, Agrani Bank and bring all capital in foreign currency from abroad. (Source: The recovered only 7.0% of the loans from its top 20 defaulters while Daily Star, January 11, 2010) the Rupali Bank realised 46% of the loans. Currently, the SCBs have 3389 branches out of total 7019 bank branches across the NBR plans e-pay for income tax country. (Source: The Financial Express, January 7, 2010) The National Board of Revenue (NBR) is set to introduce an e- pay system for income tax payers in July to reduce government Economists for reducing bank interest rate spread revenue losses and taxpayers' hassles. The board sent a letter Economists have suggested banks in Bangladesh should reduce to Bangladesh Bank (BB) in this regard, requesting amendments interest rate spread by increasing operational efficiency and to treasury rules. The treasury rules need to be revised to be able competitiveness for sustainable economic development. Monzur to accept e-payment, along with cash and cheques. “If we can Hossain, a BIDS research fellow who presented the key note initiate the e-payment system, it will help people pay tax without paper at a seminar, said that high administrative costs and non- hassles," said Nasiruddin Ahmed, chairman of the board. "This performing loans in the banking sector were responsible for will help us resolve procedural complexities and rescue large higher interest rate spread in the country. (Source: The New Age, sums of revenue that the government losses every year.” The January 8, 2010) NBR introduced the online tax filing system this month, which can work effectively once authorities launch online tax payment. NBR Bank, financial division created will be able to verify daily tax payment statistics for individuals The government has created a new administrative division on and companies in its tax circles after the system is introduced. banking and finance under the finance ministry. The new division (Source: The Daily Star, January 24, 2010) has been named as the Bank and Financial Division, an official handout said on Thursday. (Source: The New Age, January 8, 2010)

Banking goes aggressive, Credit-deposit ratio crosses 100% Banks' credit-deposit ratio continued to remain over 100% until the first four months of this fiscal year, much higher than Bangladesh Bank's norms of 82%. The ratio was above 100% in the first 11 months of last fiscal year, with 98.69 % in June. The trend indicates higher utilisation of loan-assets from deposits despite a sluggish investment demand amid the global crisis in 2009. BB's October 2009 statistics show average credit per bank branch at Tk 42 crore, while the figures were 41.15 crore, Tk 40.42 crore and Tk 40.14 crore in September, August and July. During the time, average deposits per branch were Tk 41.54 crore, Tk 41.25 crore, Tk 40.58 crore and Tk 39.86 crore respectively. As of June 30, 2009, the loan book of the banking Governor asks banks to invest more in disaster-prone areas industry showed that trade financing alone accounts over 35% of Bangladesh Bank Governor Atiur Rahman has called upon banks the total loans to the private sector worth Tk 209,050 crore, to increase investment in the disaster-prone areas, saying that followed by industry (except working capital) 21.59% and working poverty is now shifting from the northern region of the country to capital 17%. (Source: The Daily Star, January 10, 2010) the south. The central bank governor said poverty has intensified in the natural disaster-prone areas although it has seen a cut in the monga-hit places in the north. The BB boss said the private banks only collect deposits from the rural areas but do not make sufficient investment there. He urged the banks to identify sectors, which need investment on the basis of region, and make investment accordingly. (Source: The Daily Star, January 24, 2010)

Recession pares down BB profit Global financial crisis has taken a heavy toll on Bangladesh Bank's profit although the central bank's prudential measures have helped commercial banks avoid losses during the recession period. Bangladesh Bank's operating profit declined by 20.6% or Tk 650 crore in fiscal 2008-09 compared to that of a year ago. The central bank earned Tk 2,500 crore as operating profit in fiscal 2008-09. The profit was Tk 3,150 crore in 2007-08. During fiscal 2008-09, Committee to plan out for Expatriates Welfare Bank the BB deposited Tk 1,000 crore less to the government account A three-member committee led by Expatriates Welfare Secretary than that of the previous year. Out of the Tk 2,500-crore operating Ilias Ahmed has been assigned to design modalities for the profit, Tk 1,730 crore was transferred to the government and Tk Expatriates Welfare Bank. The committee has been asked to 770 crore to statutory funds, interest reserve account and other submit recommendations in a month. The committee will funds. (Source: The Daily Star, January 25, 2010) recommend whether the proposed bank would be scheduled or A Newsletter of Research & Development Division, Prime Bank Ltd.

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foreign commercial banks (FCBs) held 8.0% of the industry FINANCE & BANKING... assets in 2008, showing a declining trend by 0.2% age points over the previous year. However, the share of assets of BB approval is a must for banks in land purchase government-owned development finance institutions (DFIs) was Bangladesh Bank has directed all banks that they must take prior 6.7% in 2008 against 7.3% in 2007, the BB data showed. Total permission from it for purchasing land, floor space or any other deposits of the banks in 2008 rose to Tk 2561.4 billion from Tk permanent structure. BB sources said 15 private banks out of the 2148.9 billion in 2007 showing an overall increase of 19.2%, 30 purchased land worth about Tk 800 crore in last two years for according to the report. The share of four SCBs - Sonali, Janata, profit-making in violation of the Bank Company Act. A BB official Agrani and Rupali - in deposits decreased from 32.6% in 2007 to said of the 15 banks which went for land purchase, some bought 29.7% in 2008. On the other hand, 30 PCBs' deposits in 2008 land worth about Tk 100 crore and most others between Tk 50 amounted to Tk 1450.7 billion or 56.6% of the total industry crore and Tk 60 crore. The circular mentioned that some banks deposit against Tk 1150.2 billion or 53.5% in 2007. During the have been selling and purchasing land or permanent structures period, the FCBs' deposits rose by Tk 30.7 billion or 16.7% over without any logical ground or necessity which is a violation of the the previous year. In 2008, the DFIs' deposits were Tk 137.8 Act. (Source: The Daily Star, January 26, 2010) billion against Tk 115.6 billion in 2007 showing an increase of 19.2% over the year. (Souce: The Financial Express, January 27, Banks shift focus to home loans 2010) Commercial banks are increasingly coming forward to provide home loans, which they feel are more secure than other forms of DBH posts rise in earnings loan. The banks' outstanding home loans have doubled to Tk Delta Brac Housing Finance Corporation Ltd (DBH) has posted 12,360 crore in fiscal 2009 from Tk 6,400 crore in fiscal 2006. an 88% increase in its earnings per share (EPS) in the first six Private banks led the tally with Tk 7,490 crore outstanding loans months of the current financial year to December 31, 2009. The to the housing sector as on June 30, 2009, against just Tk 3,510 disclosure came yesterday from the company's half-yearly un- crore three years ago. Private banks' lending to the sector audited financial statements. According to the financial increased by over 113% in the three years to fiscal 2009. Housing statements, the company's operating profit stood at Tk 343.2 loans from four state-owned banks also rose by over 42% in the million for the six-month period against Tk 216.5 million in the same period. Outstanding housing loans by the four banks were same period of the previous year, showing 58.52% growth. Tk 2,580 crore in fiscal 2006, which rose to Tk 3,670 crore at the (Source: The Daily Star, January 27, 2010) end of fiscal 2009. According to Bangladesh Bank (BB) statistics, housing loans reached Tk 18,180 crore at the end of fiscal 2009 Bank spread comes down, 19 banks still beyond the limit from Tk 10,090 crore in fiscal 2006, a whooping 80% rise. Banks The overall spread in the banking sector has come down to five take 50-60% security against a home loan and charge up to 13% percent following a central bank directive, but it is still above the in interest. While commercial bank lending to the sector rose cap in 19 private and foreign commercial banks. The Bangladesh constantly, state-owned specialised housing loan provider, Bank (BB) in early 2007 directed all banks to bring down the Bangladesh House Building Finance Corporation (BHBFC), is spread (the difference between lending and deposit rates) below going down slowly. BHBFC's outstanding loan stood at Tk 2,490 five percent to reduce high interest on loans. According to BB crore at the end of fiscal 2009, which was Tk 2,630 crore in fiscal statistics as of September 2009, the overall spread in 48 2006. (Source: The Daily Star, January 27, 2010) commercial and specialised banks was 5.02%, which was 5.18% in September 2008 and 6.05% in December 2007. These banks are: The City Bank (5.21%), IFIC Bank (5.69%), United Commercial Bank (5.54%), Pubali Bank (6.67%), Uttara Bank (5.95%), Prime Bank (6.05%), Southeast Bank (5.47%), Dhaka Bank (6.30%), Social Investment Bank (6.32%), Dutch-Bangla Bank (7.08%), One Bank (5.79%), Premiere Bank (5.79%), Trust Bank (5.19%) and BRAC Bank (8.72%). Among the nine foreign commercial banks, the spread in five is above the limit. These are: Standard Chartered Bank (11.38%), Habib Bank (6.86%), Citibank NA (7.36%), Woori Bank (12.12%) and HSBC (9.04%). Most of the banks following the central bank directive brought down their average lending rate below 13%. They also lowered the spread by cutting the deposit rate. (Source: The Daily Star, January 28, 2010)

SCBs lose market to private banks The market share of state-owned commercial banks (SCBs) has declined while that of the private commercial banks (PCBs) increased gradually, officials said. "In 2008 the SCBs held 31.1% of the total industry assets against 33.1% in 2007. PCBs' share rose to 54.2% in 2008 against 51.4% in 2007," the central bank said in its annual report for the fiscal 2008-09, released on January 24, 2009. The SCBs held 33.1% of the total industry assets in 2007 against 32.7% in 2006 while PCBs' share rose to 51.4% compared to 47.7% of the previous year, according to the central bank statistics. Currently, the SCBs have 3389 branches out of a total of 7019 bank branches across the country. Nine A Newsletter of Research & Development Division, Prime Bank Ltd.

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drastically. They also consume more gas to generate electricity. FINANCE & BANKING... "The five units consume nearly 50 million cubic feet (mmcfd) of Bangladesh Bank prioritises branchless banking gas per day to generate maximum 228mw power. Utilising the Aiming at the speedy financial inclusion of rural people, same gas, we will operate the proposed two 600mw capacity Bangladesh Bank (BB) will give banks and other related units," he said. The company MD said they have planned to organisations more support to expand branchless banking. The invest Tk 23.10 billion to set up 600mw capacity two power units. central bank is supporting banks and some other financial The existing government and private sector power plants institutions to operate branchless services to cater to the major generate about 3800mw of power against the demand for over banking needs of rural and urban people. The branchless 5000mw per day. (Source: The Financial Express, January 7, banking, where some major banking services including disbursing 2010) loan and getting repayment, sending and receiving money and Power import from India to start thru' Kushtia border remittance, will be the BB's priority to expand rural banking Ramkrishnapur under Bheramara upazila in Kushtia has been services, Bank Governor Atiur Rahman told a programme on primarily selected for setting up of 250KV power sub-station aiming January 27. Other branchless banking services like smartcards electricity import from India. The government has 600 acres of free and point of sale (POS) terminals are at various stages of land under railway (west zone) in Ramkrishnapur while only 250 to implementation. He said banks could usefully go for technology- 300 acres of land is necessary for the new sub-station. Moreover, based branchless banking to disburse and recover loan the site is only 35 kilometers from Nadia, a border district of India, installments to and from small landholder farmers and rural non- they added. Besides, setting up of power station over there would farm enterprises cost effectively, with only occasional field visits reduce cost as a power network is already there due to Ishwardi to appraise borrowers and to complete documentations. (Source: sub-station. Only eight kilometers of cable connectivity will be The Daily Star, January 28, 2010) necessary to supply electricity to Ishwardi sub-station, said the Selected Financial Indicators sources. (Source: The Daily Star, January 22, 2010) Behind gas crisis; Neglect of nat'l companies causes short supply The country would not have faced any gas crisis now if the government paid a little attention to capacity building and modernising the companies under Petrobangla instead of becoming over-dependent on foreign oil companies to produce gas, experts say. Until recently, Bangladeshi companies possessed 78% of proven gas and foreign companies only 22%. In terms of reserve this means, national oil companies had 5.38 trillion cubic feet (TCF) gas and foreign companies 1.53 TCF. This estimate has drastically changed after Chevron submitted two studies on its Bibiyana gas field's reserve. The Bibiyana field was initially estimated to have 2.4 TCF recoverable gas (with 952 billion cubic feet proven reserve). Following studies and reassessment, Petrobangla recently increased its recoverable reserve to 5.76 TCF with its proved and probable reserve estimated at 7.43 TCF. (Source: The Daily Star, January 23, 2010) READYMADE GARMENTS: Indian countervailing duty hits Bangladesh RMG exports The country's readymade garment exporters have been counting additional duty to enter the Indian market, as the latter has imposed countervailing duty on subsidized export items of other countries, industry insiders said. Apparel items imported from Bangladesh are being subjected to countervailing duty on the basis of MRP (maximum retail price) instead of ad-valorem. Presently, Bangladeshi products are entitled to enjoy quota facility under which it can export 8.0 million pieces of RMG duty free. In the finance bill, 2009, it issued a general order imposing the additional duty," said a Customs official. Necessary clarification should be sought during the upcoming visit of Prime Minister Sheikh Hasina ENERGY: to India, he said. Duty on cotton garment imported from Bangladesh will increase to 11.8% or US$ 21.52 from 8.46% or Ashuganj Power Company to get 2 new units, shut 5 old US$ 15.43 per piece due to changes in tariff in the recent budget. ones (Source: The Financial Express, January 9, 2010) Ashuganj Power Stations Company Ltd (APSCL) would conduct a major up gradation by installing two gas-fired power units Bangladeshi RMG exporters want a machine in Indian market having a combined 600mw capacity. In the process, it will scrap The country's garment exporters have urged the Prime Minister to the existing five ailing units. The project is aimed at generating take up with the Indian authorities the issue of duty-free market additional power utilizing the same amount of gas, company access for Bangladeshi garments into Indian market during her officials said Thursday. The company officials said the existing current visit to India. In the fiscal year 2008-09 that ended in June five power units with a combined capacity of 274 megawatt were last year, Bangladesh's garment exports to the world market set up 30 to 40 years ago, the efficiency of which has declined A Newsletter of Research & Development Division, Prime Bank Ltd.

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been made effective, reports BSS. Clients can speak at Tk 6.00 READYMADE GARMENTS... per minute on land phone and mobiles to 23 countries. On the other hand, they could speak to 32 countries at Tk 6.00 per amounted US$ 12.35 billion but to the Indian market it was a minute on land phone and Tk 16 on mobiles. Second-placed paltry US$ 11 million. According to industry analysts, Indian retail Ranks Telecom almost doubled its user number last year to reach apparel market is worth more than US$ 40 billion dollars, 274,895 from 152,505. Although BTCL failed to add a new single potentially lucrative market that is expanding fast with prospect user to its subscribers' base in 2009, the former BTTB retained its for shares of imported clothing growing in equal pace. (Source: pole position as the country's top PSTN operator. BTCL has also The New Age, January 11, 2010) reduced call charge to India to Tk 12 per minute from Tk 18 previously. (Source: The Financial Express, January 18, 2010) Gas rationing in RMG units from Wednesday The country's main export earning apparel sector is being brought under gas rationing system from Wednesday with a view to increasing pressure of gas for industrial and household use. The MISCELLANEOUS: decision was made on January 21, 2010 at a follow-up meeting LEATHER between the leaders of the RMG and textile sectors and Tanneries must move to Savar unconditionally: Dilip Barua Petrobangla Chairman Hossain Mansur at the latter's office. Gas Industries Minister Dilip Barua January 26, 2009 urged the rationing was supposed to be implemented a lot earlier. The tannery owners to shift their units immediately and without any rationing of gas supply will start with RMG and textile units in condition from the city's Hazaribag area to the new tannery park Narsingdi and Ghorashal. Both industrial and household users at Savar. He also emphasised quick installation of the Central have been suffering from the low gas pressure caused by a Effluent Treatment Plant (CETP) at Savar, as the tanners have mismatch between supply and demand. The Petrobangla been demanding it to start shifting the immensely hazardous ultimately decided to ration gas to improve the situation and industry. The tannery sector leaders demanded the government's divided Dhaka and its adjacent areas into seven zones for the intervention in directing the banks to help them repay their loans. purpose, said a Petrobangla official. (Source: The Daily Star, They also expressed concern for delay in installing the CETP at January 22, 2010) Savar. (Source: The Financial Express, January 27, 2010) Industrial park underway for RMG: Barua The government has laid out a project to set up an industrial park PHARMACEUTICAL outside Dhaka for garment factories, said Industries Minister Dilip Pharma sector shakes off recession hangover Barua on January 28. Barua said the project is waiting for The country's medicine exports may witness an impressive jump approval from the government. “The government will also provide in 2010 thanks to the aggressive marketing the local loans to the factories to set up ETPs." (Source: The Daily Star, manufacturers pursued in the early days of the global economic January 29, 2010) crisis, the industry people said. Local pharmaceuticals' exports have received a blow at the start of the last fiscal year 2008-09 as many importing countries shied away as they were not able to TELECOMMUNICATION: continue their orders due to the recession. (Source: The Financial Express, January 30, 2010) Bharti agrees to buy 70% stake of Warid Bangladesh said on January 12 it had agreed to buy 70% of SHIPBUILDING Bangladesh's in its first overseas acquisition after Government moves on ship-breaking zone a failed attempt for a US$ 24 billion deal with South Africa's MTN. The government has tasked a technical committee to start work The top Indian mobile operator will make a fresh investment of on creating a separate ship-breaking zone along Bangladesh's US$ 300 million in Warid and will have management and board coast, following the prime minister's recent call for proper control of the company, while current owners Group regulation of the hazardous industry. The move comes in the will retain a 30% stake, Bharti said in a statement. (Source: New wake of renewed concerns for worker safety following a number Age, January 13, 2010) of deaths at ship-breaking yards and continued environmental worries over the industry located mainly in the coastal districts of Land-phone subscribers grow over 23% Sitakunda and Chittagong. The inter-ministry committee has been The country's land-phone subscribers grew more than 23% in tasked with formulating separate rules and regulations for ship- 2009 although the state-owned Bangladesh Telecommunication breaking and reprocessing industries, said the state minister for Company Ltd (BTCL) failed to add a single user to its name. Last environment and forests, Hasan Mahmud. (Source: The New year, 13 public switched telephone network (PSTN) operators Age, January 6, 2010) added 313,427 new subscribers to their customer base, up by Disclaimer 23.31% from 1,344,456 users of 2008. The total number of land- This newsletter has been prepared by the Research and phone users now stands at 1,657,883, according to the figures of Development (R&D) Division of Prime Bank Limited (“PBL”) for the the state-owned Bangladesh Telecommunication Regulatory benefit and use of the reader. The newsletter is proprietary to PBL Commission (BTRC). (Source: The Financial Express, January and readers are allowed to disseminate it in unabridged and original 16, 2010) form and reference should be made while quoting the newsletter. In preparing this newsletter, we have relied upon and assumed, without independent verification, the accuracy and completeness of BTCL reduces call charges for 55 countries all information available from public sources or which was provided Bangladesh Telecommunications Company Ltd (BTCL) has to us by or on behalf of the source of information cited in the reduced call charge of its land phones facilities to land phones newsletter. We do not accept any obligation arising out of any and mobile phones in 55 countries and the new tariff has already decision made from the contents of this newsletter.