Bangladesh: Export Earnings

EPZs contribute $1.55b to Country’s Export Earnings

Country's Export Processing Zones (EPZs) have contributed 1.55 billion US dollar to the country's total export earnings of 8.65 billion US dollar in fiscal 2004-05, reports BSS.

Among the 6 (six) running EPZs, Chittagong EPZ registered the highest earnings with 772 million US dollar and Dhaka EPZ exported goods worth about 758 million US dollar, a high official source said.

Presently there are 6 (six) running EPZs, which are situated in Dhaka, Chittagong, Comilla, Mongla, Ishwardi and Nilphamari. A total of 221 industries are now in operation in these EPZs.

Investors from South Korea, Japan, Hong Kong, China, USA, UK, Germany, Pakistan, Malaysia, Taiwan, India, Panama, Denmark, Thailand, Sweden, Italy, Belgium, Switzerland, the Netherlands, France, Singapore, Nepal, Australia, Canada, Sri Lanka, Mauritius, New Zealand have so far invested in the EPZs with a total amount of over 860 million US dollar in addition to local investment.

A wide variety of products including readymade garments, garment accessories, other textile products, electronics and electrical goods, agro products, footwear and leather goods, metal and plastic products, paper products and sports items are being exported to some 186 destinations across the world.

World famous brand products like Nike, Reebok, Walmart, Kmart, Mother Care, Addidas, Hi-tech and others have been sourcing from these EPZs. Besides, many industries have been acting as out- source to Konika, Minolta, Sony, Nissan, Mitsubishi, Hino and other reputed multinational companies.

Bangladesh: FDI 2005

$800m FDI Received in 2005, BOI Executive Chairman tells FICCI meet

Declaring a bright prospect of foreign direct investment and higher economic growth in the country, Board of Investment Executive Chairman Mahmudur Rahman yesterday said an increased amount of US$ 800 million was received in FDI.

"In 2005, the provisional FDI inflow was 800 million US dollars while the amounts were US$ 460 million and US$ 268 million in 2004 and 2003," he told the monthly luncheon meeting of Foreign Investors' Chamber of Commerce and Industry (FICCI) in Dhaka.

The BOI chief executive also mentioned that every year the country is getting a significant amount of FDI for energy sector. Investment promotion is a long-term process, he observed.

Describing a positive result of the growing amount of foreign capital investment in productive sectors, Rahman said as per Bangladesh Bank statistics, in the first three months of this fiscal year, the manufacturing and industrial growth was more than 10 percent and nearly 10 percent.

He stressed the need for first-class government infrastructure as essential one for attracting more FDI.

"Impartial administration, dynamic and credible public institutions and transparent policy are the main elements for first-class investment-friendly government infrastructure. Investment decision is not a simple decision for the investors, it is related to many things," he said.

Describing present condition of the country as the best for FDI, he said there are three excellent elements now the country has got--energy resources, excellent bunch of people as workforce and market access.

"But we have to work together irrespective of party affiliation. FDI is not a matter of BNP, AL, JP or any other party--it is a matter of the country," he told his business audience, adding that the country now needs physical infrastructure, government infrastructure and aggressive promotion around the world for attracting investment.

Replying to the criticisms by some economists about the FDI, he said, "They did not come up with statistics, and statement without statistics is political."

The FICCI president said although the investment climate in the country is favorable compared with most South Asian countries, particularly in terms of its competitive labor costs and flexible labor laws, the cost of doing business in Bangladesh is perceived to be high.

"High costs are reflections of corruption, weak law-and-order, inadequate infrastructure and services and distressed financial markets", he said.

He pointed out the imposition of 10 percent tax at source on royalty, technical know-how fees and technical assistance fees in excess of 2.5 percent of profits by Income Tax authorities created "discontent of foreign investors".

Bangladesh: CSR Award 2005

Unilever Bangladesh Ltd and Dhaka Bank Ltd., the winner of StanChart-Financial Express CSR Award 2005

President Iajuddin Ahmed yesterday called upon corporate houses to make contribution to economic development by improving the quality of life of their workforce.

"Corporate social responsibility (CSR) is a crucial need for promoting sustainable development and long-term advancement of business," the president said at the Standard Chartered-Financial Express Corporate Social Responsibility Award 2005 ceremony in Dhaka.

Unilever Bangladesh Ltd and Dhaka Bank Ltd have been adjudged this year's winners in manufacturing and services sector categories.

Economist Wahiduddin Mahmud, chairman of the Standard Chartered-Financial Express Corporate Social Responsibility Award Trust, chaired the programme. Osman Morad, chief executive officer of Standard Chartered Bank Bangladesh, and Moazzem Hossain, editor of The Financial Express, also spoke.

The president also said as CSR is a growing demand, businesses competing in the global economy can no longer afford to ignore the issue.

Iajuddin said Bangladesh has been making relentless efforts to adopt operational principles of corporate governance in line with the international best practices.

"The regulatory agencies have incorporate many of the relevant issues into their respective operational framework and the process is still on," he added.

Wahiduddin Mahmud said companies worldwide are increasingly paying attention to CSR in their business approaches by attempting to address social issues and engaging themselves in not-for-profit community welfare activities.

Sanjiv Mehta, chairman and managing director of Unilever Bangladesh Ltd, and Shahed Noman, managing director of Dhaka Bank, received the awards.

Bangladesh: Banking 2

11 PCBs reduce Tk 500cr classified loans

Some 11 private commercial banks (PCBs) have been able to reduce their non-performing assets by cutting Tk 500 crore classified loans in a single year.

Classified amount of these PCBs was around Tk 2,900 crore in December 2004 but these banks were able to cut Tk 500 crore of the amount by December 2005, senior executives of these PCBs told Bangladesh Bank (BB) at a meeting yesterday. Managing directors and senior executives of following banks were present at the meeting.

1. Pubali Bank Ltd,
2. Uttara Bank Ltd,
3. National Bank Ltd,
4. AB Bank Ltd,
5. IFIC Bank Ltd,
6. City Bank Ltd,
7. Social Investment Bank Ltd,
8. Al-Arafah Bank Ltd,
9. Oriental Bank Ltd,
10.First Security Bank Ltd and
11.Bangladesh Commerce Bank Ltd

Banks eye to lower their average classified amount to 10 percent by December this year, which is now 13 percent. Managing directors and senior executives of the PCBs attended the monitoring meeting with Mohammad A (Rumi) Ali, BB deputy governor, in the chair.

At the meeting the central bank also asked these PCBs to submit their loan status of the 2001-02 financial year within a month. Classified loan of Oriental Bank has come down to 23 percent from 28 percent earlier, Social Investment Bank's 7.4 percent from 11 percent and First Security Bank's 15 percent from 19 percent earlier, meeting sources said.

Oriental Bank was given the problem bank status much earlier but the Social Investment Bank and First Security Bank were given the status in the recent years. According to official statistics, performances of these banks are improving after bringing them under the problem bank unit of the BB.

Bangladesh: GDP growth

BBS Projects 6.86pc GDP rise in FY06

The country may strike the highest-ever GDP growth of 6.86 percent this fiscal year thanks mainly to a strong performance of the agriculture sector, according to a preliminary estimate of the Bangladesh Bureau of Statistics (BBS).

The BBS made the estimation based on the data of the first half of FY06. Although the BBS previously used to make the yearly forecast on the basis of data of the first three quarters, this time it made it earlier as part of its drive to develop a system of making quarterly economic growth projections.

The estimate will be tabled at the current session of parliament as well as sent to the Bangladesh Bank to assist it in its policy review, said a planning ministry source.

The average level of annual GDP growth was around 3 percent in the 1970s, 4 percent in 1980s and 5 percent in 1990s. The highest annual GDP growth so far has been posted in FY04 at 6.27 percent.

The BBS also has made an upward revision of its GDP growth calculation for FY05 from 5.38 percent to 5.61 percent.

Agriculture contributes 17 percent to the GDP (gross domestic product). The BBS projects a 5.01 percent growth in agriculture in FY06, which was as low as 0.78 percent in FY05, due to the devastation by severe flooding.

This year's aaush production has been 17.45 lakh metric ton (MT), up by 16.03 percent from that in the previous year.

The aman production has been projected at 1.10 crore MT, 12 percent more than FY05's. Because of the flooding, aman production in FY05 was only 98 lakh MT, down by 15 percent from FY04's.

The projected boro production in FY06 is 1.40 crore MT, 1.18 percent more than FY05's.

Industries that contribute about 27 percent to the GDP may achieve an 8.98 percent growth this year.

Among the industries, the manufacturing sector accounts for almost 17 percent of the GDP. This year, large and medium industries are estimated to score a 9.2 percent growth, which was 8.2 percent in FY05. Small industries are reckoned to grow by 8.8 percent in FY06. The rate was 7.9 percent in FY05.

According to the BBS projection, food, knitwear, cotton, textiles, leather, pharmaceuticals, cement and plastic industries will see substantial growth this year. It estimates the construction sector to witness an 8.96 percent growth in FY06, which was 8.76 percent in FY05.

The gas production will grow this fiscal year by 9.14 percent, which was 8.87 percent in FY05.

However, the bureau reckons the power sector's growth will go down from 8.58 percent in FY05 to 8.07 percent.

Bangladesh Institute of Development Studies Research Director Zaid Bakht said the estimated growth of the BBS is probable, as it largely based on the agricultural growth, mainly in the aman production.

Over the last two years the import of capital machinery as well as the industrial credit has seen a substantial rise, so the industrial production this year will also rise, he observed.

Zaid however pointed out three risk factors. Firstly, the World Bank and the International Monetary Fund (IMF) have been pressurising the government to adjust the domestic oil prices with the international ones. Though the government so far has managed to avoid their insistence, it may not succeed to do so for long. And if the government goes for any further upward adjustment of oil prices it may have a negative impact on the economy, particularly on the boro production.

Secondly, Zaid said, there is an uncertainty in the export sector. If export does not pick up in the coming months the GDP growth may fall short of the estimate.
Thirdly, the political situation in the last half of this fiscal year may become volatile and slow down the economic growth, he told The Daily Star.

On a query on the probable impacts of the ongoing controversies over the Election Commission, he said the government should not do anything that would heat up the political situation and ultimately affect the economy.

Bangladesh: Banking 1

Banks record 29% operating profits in 2005

The country's private commercial banks (PCBs) witnessed a hefty growth -- by about 29.10% -- of their aggregate operating profits in calendar year 2005 over those of the previous one.

The operating profit of the 29 PCBs out of a total of 30 increased by over Tk 6.0 billion to Tk 28.24 billion in calendar 2005, from Taka 21.88 billion in calendar 2004. The profit figure of the Oriental Bank Ltd was not available. Most of the third generation banks, which started operation in the late 1990s, performed well in terms of operating profit, the provisional data indicated.

Sources, however, said the operating profit does not indicate the real financial position of a bank. Because, the banks have to leave aside provisioning against bad debts and taxes that are paid to the government from the operating profit.
According to the central bank statistics, at least 8 PCBs faced provisioning shortfall amounting to Tk 4.02 billion as on September 30, 2005.

The Islami Bank Bangladesh Limited held the top position among the PCBs, earning Tk 2.89 billion in operating profit in 2005 against Tk 2.39 billion in the previous 2004. The Prime Bank Ltd., however, was in 2nd position with an earning of Tk 1.66 billion in operating profit in the last year against Tk 1.37 billion in the previous one. The Uttara Bank Ltd. secured the 3rd position with Tk 1.61 billion in operating profit last year compared to Tk 1.24 billion in the previous year.

Meanwhile, at least 2 PCBs - the Social Investment Bank Ltd. (SIBL) and First Security Bank Ltd. - out of 29 under report, recorded lower operating profits last year due mainly to higher bad debts and thin business, the sources noted.

The operating profit of the SIBL dropped to Tk 210 million in 2005 from Tk 420 million in 2004, while that of the First Security Bank Ltd, from Tk 390 million in 2004 to Tk 13.51 million in 2005. The operating profits of the Southeast Bank Ltd. and Pubali Bank Ltd. were Tk 1.54 billion and Tk 1.52 billion respectively in 2005 against Tk 880 million and Tk 750 million in the previous year.

The City Bank Ltd. earned Tk 1.35 billion in operating profit in 2005 followed by the United Commercial Bank Ltd. (UCBL) with Tk 1.20 billion. The amounts were Tk 950 million for the City Bank Ltd. and Tk 900 million for the UCBL in 2004. The operating profits of the National Bank Ltd. (NBL) and the EXIM Bank Ltd. were Tk 1.20 billion and Tk 1.15 billion respectively in 2005 against Tk 1.12 billion and Tk 830 million in 2004.

Arab Bangladesh (AB) Bank Ltd. earned Tk 1.05 billion in operating profit in 2005 followed by the Mercantile Bank Ltd. with Tk 1.03 billion. The amounts were Tk 720 million for the AB Bank Ltd. and Tk 870 million for the Mercantile Bank Ltd. in 2004.

The operating profits of the Dhaka Bank Ltd. and the National Commerce and Credit Bank Ltd. (NCCBL) were at the same level -- at Tk 1.02 billion in 2005 -- against Tk 850 million and Tk 720 million in the previous year.

On the other hand, the operating profits of the Dutch-Bangla Bank Ltd. and the Eastern Bank Ltd (EBL). were also at the same level -- at Tk 1.01 billion in the last year -- compared to Tk 680 million and Tk 910 million in the previous one.

The Premier Bank Ltd. earned Tk 900 million in operating profit in 2005 followed by the Bank Asia Ltd., with Tk 810 million. The amount was Tk 930 million for the Premier Bank and Tk 660 million for the Bank Asia in 2004. The operating profits of the BASIC Bank Ltd. and the IFIC Bank Ltd. were Tk 800 million and Tk 780 million respectively in 2005 against Tk 720 million and Tk 780 million in 2004.

The Mutual Trust Bank Ltd. made operating profit worth Tk 670 million in 2005 against Tk 520 million in 2004, while the figure for the Standard Bank Ltd. stood at Tk 630 million against Tk 490 million in 2004. The operating profits of the One Bank Ltd. and the BRAC Bank Ltd. were Tk 610 million and Tk 600 million respectively in 2005 against Tk 490 million and Tk 210 million in the previous year.

The Al-Arafah Islami Bank Ltd. earned Tk 600 million in operating profit in 2005 followed by the Shahjalal Islami Bank Ltd. with Tk 501 million. The amounts were Tk 370 million for Al-Arafah Islami Bank and Tk 120 million for the Shahjalal Bank in 2004.

The Jamuna Bank Ltd. made operating profit worth Tk 450 million in 2005 against Tk 320 million in 2004, while the figure for the Trust Bank Ltd. stood at Tk 310 million in 2005 compared to Tk 28 million in 2004.

Bangladesh: Pharmaceuticals

WTO/TRIPS agreement comes as a blessing in disguise, New Year brings fresh hopes for pharma sector

Bangladesh has already entered a regime of huge export potentials in pharmaceutical sector, albeit silently, from day one of 2006 as a WTO/TRIPS agreement, beneficial to the country, came into effect from Saturday.

"The country has now entered into a favorable business environment under the auspices of the relevant World Trade Organization (WTO)/Trade Related Intellectual Property Rights (TRIPS) agreement on drug," a senior Executive of Beximco Pharmaceuticals told Sunday.

The WTO council responsible for intellectual property on 27 June 2002 approved a decision extending until 2016 the transition period during which least-developed countries (LDCs) do not have to provide patent protection for pharmaceutical products.

It also approved a waiver for LDCs on exclusive marketing rights for any new drug during the period."As per the agreement, the LDCs including Bangladesh would be able to manufacture and export patented drugs until 2016," President of Bangladesh Association of Pharmaceutical Industry (BAPI) SM Shafiuzzaman said.

Other non-LDC countries, including India, China and Pakistan, will not be able to manufacture and export patented drugs, as the facility will be reserved for LDCs until 2016, he explained.

Among the 49 LDCs, Bangladesh fortunately is the only country, which has a strong pharmaceuticals manufacturing base.

"If Bangladesh can avail itself of the opportunity, it could export up to Tk 100 billion worth of drugs annually," the BAPI leader claimed.

The BAPI sources said to grab the opportunity, the government needs to ensure that the country's existing Patent Act of 1933 complies with the WTO/TRIPS agreement.

In the Patent Act, there is a provision of not allowing the local companies to manufacture patented drugs, which presently contradicts the WTO/TRIPS provision.

The government also has to take advantage of compulsory licensing and parallel import to tap the huge potentials of pharmaceutical sector, the BAPI leaders pointed out.

Bangladesh's pharmaceutical industry now exports drugs to 62 countries, including Germany, Taiwan, Singapore, the UK, the Netherlands, Chile, France, Pakistan, Kenya and Sudan.

The country has over 200 companies comprising small, medium, large and multinational companies, which control around 95% of the country's pharmaceutical market.

The pharmaceutical industry recorded nearly 15% - 20% annual growth in recent times. To avail the opportunities under TRIPS/WTO provision, a good number of new pharmaceutical companies initiated operations in the country.

Many pharmaceutical industries including Square, Beximco, Novartis invested huge amounts to enhance their production capacity. Investments in the country's pharmaceutical sector were over US$ 1.0 billion in last several years, the BAPI sources said.

Foreign pharmaceutical companies including those of India have already successfully penetrated the Bangladesh market and many more are in the pipeline to reap the benefit of the WTO agreement, said sources. Bangladesh, however, initiated pharmaceutical export in late the 1980s.

Despite the fact that there was no support or incentive from the government, a few companies with their own initiatives started exporting finished formulations to some of the less-regulated overseas markets like Myanmar, Sri Lanka and Nepal.

After being successful in these less-regulated markets, in early-90s a number of major Bangladeshi companies also took initiative to explore some of the more-regulated markets like Russia, Ukraine, Georgia and Singapore.

Success in registering and marketing these products in these countries was a major breakthrough for Bangladesh pharmaceuticals industries.

This was a clear testimony not only to the product quality, but also to the capabilities to meet stringent regulatory requirements. Currently, Bangladesh is exporting a wide range of pharmaceutical products covering all major therapeutic classes and dosage forms.

Alongside regular brands, it is also exporting high-tech specialized products like inhalers, suppositories, nasal sprays, indictable and infusions.

Apart from overseas retail customers, the country is also supplying to world-renowned hospitals and institutions like Raffles Hospital of Singapore, Jinnah Hospital of Pakistan, MEDs of Kenya, SPC of Sri Lanka and KK Women & Children Hospital of Singapore, the BAPI sources said.

Bangladesh: Agriculture

Rice production in Bangladesh doubled in three decades

Bangladesh's rice production has been more than doubled in the last three decades, increasing from 11 million tons in 1975 to 25 million tons in 2003, a 3.3% growth per year, official news agency BSS reported Sunday.

Cereal production more then doubled from 11.5 million tons in 1975 to 27 million tons in 2003, a 3.8% growth per year, according to a recent World Bank report titled "Promoting the rural non-farm sector in Bangladesh-05."

The report detected three major reasons behind this huge growth: Biological yield per hectare doubled between 1975 and 2002; Use of shallow tube-well irrigation pumps as irrigated area increased from 2.8 million hectares to 4 million hectares; and Adoption of mechanical tillage, allowing more timely cultivation and increased labor productivity.

In the early 1970s, there were about 26,000 irrigation pumps in the country whereas it is now 8,53,728 all together. On the other hand, in the late 1980s, there were only about 3,000 power tillers but the number raised to nearly 240,000 currently, the report said.

The expansion of agriculture sector has also generated a massive pace in rural non-farm growth, making 42% of total rural employment. The report indicated that nearly half of household income in rural areas is generated in the various non- farm activities including manufacturing and maintenance services, inputs and grain trade, crop and food processing, and rural transport.

Bangladesh: Economic Freedom

Bangladesh and The Index of Economic Freedom 2005

TRADE POLICY
Score: 5–Stable (very high level of protectionism)

The U.S. Department of Commerce reports that “business people consider Customs to be…a thoroughly corrupt organization in which officials routinely exert their power to influence the tariff value of imports and to expedite or delay import and export processing at the ports.”

FISCAL BURDEN OF GOVERNMENT
Score—Income Taxation: 2.5–Stable (moderate tax rates)
Score—Corporate Taxation: 4–Better (high tax rates)
Score—Change in Government Expenditures: 3.5–Stable (low increase)
Final Score: 3.5–Better (high cost of government)

Bangladesh’s top income tax rate is 25 percent. The top corporate tax rate is 30 percent, down from the 40 percent reported in the 2004 Index.

GOVERNMENT INTERVENTION IN THE ECONOMY
Score: 3.5–Stable (high level)

According to the World Bank, the government consumed 5 percent of GDP in 2002, up from the 4.5 percent reported in the 2004 Index

MONETARY POLICY
Score: 2–Worse (low level of inflation)

CAPITAL FLOWS AND FOREIGN INVESTMENT
Score: 4–Worse (high barriers)

Foreign investors receive national treatment and are allowed full ownership in most sectors. The International Monetary Fund reports that foreign investments, with the exception of investments in the industrial sector, require approval. Most of the barriers that remain are informal or involve inadequate implementation of existing laws.

BANKING AND FINANCE
Score: 5–Worse (very high level of restrictions)

According to the Economist Intelligence Unit, “State-owned banks—known as nationalised commercial banks, or NCBs—dominate the financial sector. Given that the government is the owner, regulator and major customer of the NCBs, there has been ample opportunity for mismanagement and political interference…. [T]he banking sector remains hampered by poor credit discipline, an archaic loan recovery system, corruption, inefficiency, overstaffing and unionisation.”

WAGES AND PRICES
Score: 3–Stable (moderate level of intervention)

The government affects prices through its many state-owned monopolies.

PROPERTY RIGHTS
Score: 4–Stable (low level of protection)

The constitution provides for an independent judiciary; however, reports the Economist Intelligence Unit, “The legal framework is archaic and court procedures are often cumbersome.

REGULATION
Score: 5–Stable (very high level)
Corruption is the largest burden on business. Other problems include a bureaucracy characterized by vested interests, lack of transparency, and outdated business laws that do not protect private contracts.

INFORMAL MARKET
Score: 4.5–Stable (very high level of activity)