US Credit Crunch and Global Financial Crisis…

Hi, Friends, Look at the news sources like Economist, BBC News, The Daily Star, Reuters etc. US Credit Crunch and Global Financial Crisis can be look like:

The Federal Reserve gave America’s last two big investment banks, Goldman Sachs and Morgan Stanley, permission to change their status to bank holding firms. They will be subject to stiffer regulation, but allowed to take deposits. Goldman Sachs raised $5 billion to shore up its capital by selling shares to Berkshire Hathaway, the firm run by Warren Buffett, a celebrated investor. The next day, it raised $5 billion more from a share offering. Mitsubishi-UFJ, Japan’s largest bank, agreed to buy up to 20% of Morgan Stanley for $8.4 billion.

Nomura, a Japanese investment bank, offered to buy bits of the European, Middle Eastern and Asian divisions of Lehman Brothers, an American rival that declared itself bankrupt last week, for an undisclosed sum. Barclays, a British bank, bought Lehman’s main American unit for $250m, and several of its properties for $1.29 billion.

The Federal Bureau of Investigation said it was looking into 26 cases of potential fraud related to the collapse of America’s mortgage industry. The financial institutions under investigation are said to include the now-defunct Lehman Brothers, as well as three failing firms recently taken over by the American government: American International Group, Fannie Mae and Freddie Mac.

Moody’s, a rating agency, lowered its outlook for 12 Russian banks, despite a government rescue package worth$120 billion. The state-owned Development Bank said it would take over Svyaz Bank, a struggling private one. Meanwhile a fund controlled by Mikhail Prokhorov, a former mining magnate, agreed to buy half of Renaissance Capital, a big Russian investment bank, for $500m.

Citigroup to take over Wachovia banking assets: Citigroup agreed to a takeover of Wachovia Bank in a deal backed by regulators and which gives the government a stake in one of the nation's biggest banks.

The takeover marks another shakeup for the troubled US banking sector saddled with heavy losses from the bursting of the real estate bubble.

It came as Wachovia faced a near collapse of its share price and weakening confidence because of its exposure to troubled mortgage assets.

First news of the deal came from the Federal Deposit Insurance Corp. the banking industry regulator, which helped facilitate the takeover.

"Wachovia did not fail; rather, it is to be acquired by Citigroup Inc. on an open bank basis with assistance from the FDIC," the government agency said.

The engineered bailout came a day after President George W. Bush's administration and Congress struck a deal on a landmark 700-billion-dollar bailout of the banking system in a bid to avert a wider economic crisis.

The government will get a stake in Citigroup in exchange for guaranteeing a large portion of the distressed Wachovia assets linked to housing.

Citi will assume up to 42 billion dollars of losses from a pool of 312 billion dollars of loans held by Wachovia; the FDIC will absorb losses beyond that and take a stake in Citigroup for the guarantee.

Citigroup granted the FDIC 12 billion dollars in preferred stock and warrants to compensate the agency for bearing this risk.

Under the agreement, Citigroup will pay 2.1 billion dollars in stock to Wachovia and assume the senior and subordinated debt of Wachovia Corporation, the companies said.

Crisis slams European banks: Belgian-French bank Dexia is the latest in line after Fortis and Bradford & Bingley.

Several European banks were being rescued or were under stock market attack Monday, with Belgian-French bank Dexia the latest in line after Fortis and Bradford & Bingley.

Suspicion and fear swept onwards despite the revised bailout for US banking stitched together by US lawmakers, despite European government rescues for Fortis and Bradford & Bingley and despite renewed central bank infusions to sustain interbank funding.

And stock markets slumped in a strong vote of skepticism about prospects for the global economy, and uncertainty about Congressional approval for the bailout. But the dollar jumped, and in London the euro was at 1.4362 dollars from 1.4613 here late Friday.

Barclays Capital analyst David Woo said the bailout deal "reduces the risk of a systemic collapse" but "many downside risks remain -- not least those related to a protracted slowdown in the global economy."

In addition "financial market turbulence is seriously affecting the European financial system" and "weakness in equities ... suggests the market is pessimistic about the likely effectiveness of the (US) Treasury's plan."

UniCredit economist Marco Annunziata said in London that Congressional approval could take a few days and although the package "pulls us back from the brink," extreme dislocations in money markets were a source of "serious stress in the financial sector."

UniCredit said that money market interest rates were "symbolic" rather than meaningful, and central banks "are trying their best" to provide emergency funding.

The European central Bank announced a special 38-day loan to eurozone banks, and the Bank of Japan injected 1.9 trillion yen (17.8 billion dollars) in Tokyo.

Financial shares led European stocks downwards. Shares were down 2.49 percent in London, 2.83 percent in Paris and 2.84 percent in Frankfurt, after falls of 4.3 percent in Hong Kong and 1.26 percent in Tokyo.

"In this market, no-one is taking any chances and we must wait until the vote to confirm it (the plan) has passed," said City Index market strategist Joshua Raymond.

"Then we must see if it ticks all boxes for a recovery, and that means the market understanding how it is going to work fundamentally."

President George W. Bush said the rescue "sends a strong signal to markets around the world that the United States is serious about restoring confidence and stability to our financial system."

But some conservative Republicans and liberal Democrats steadfastly opposed the plan, which includes the immediate release of 250 billion dollars to enable the government to buy up troubled assets.

Central banks again pumped funds into money markets because, analysts say, interbank lending is being strangled to an "apocalyptical" extent, with massive potential repercussions on lending to businesses and consumers. Interbank lending rates rose even further Monday, in defiance of the agreement in Washington.

The Belgian government said it would stand by Dexia bank, a leading European lender to municipalities, as its shares plunged by 23.0 percent and it rushed out a statement assuring "our liquidity is very good."

German Bank Hypo Real estate was rescued by other banks as was small Danish bank Bonusbanken.

Shares in Fortis, one of the biggest banks in northern Europe, plunged again despite the weekend nationalization, and stocks in leading Swiss bank UBS also slumped more than seven percent.

Meanwhile French President Nicolas Sarkozy called a meeting of the heads of top French financial groups to "review the situation of financial institutions and the credit level of households and business," his office said.

The US bailout plan is the biggest state intervention since the Great Depression, but the wave of failure and distress in European banking is also assuming unprecedented proportions.

Any relief internationally from the tentative US rescue agreement came too late for Fortis, rescued by Benelux governments for 11.2 billion euros (16 billion dollars) at the weekend. Fortis shares slumped 18.9 percent in Amsterdam after crashing last week.

Fortis's problems are "weighing on European banking stocks," a Zurich-based trader told AFP, adding "UBS is much more exposed than Fortis."

In Paris, shares in Credit Agricole fell 6.84 percent and in BNP Paribas by 6.27 percent.

In London, Royal Bank of Scotland stock shed 13 percent, HBOS dived 8.94 percent, and Barclays dipped 6.55 percent. Bradford & Bingley was rescued at the weekend with a part takeover by Spanish Santander bank and 612 pounds (773 million euros, 1.1 million dollars) by the British government.

Monday, German banks extended a life-saving multi-billion-euro credit line to Hypo Real Estate (HRE), and small Danish bank Bonusbanken was rescued by Vestjysk bank.

Motomi Hiratsuka, a trader at BNP Paribas, said: "We know that we are most likely to avoid a meltdown in the US financial sector, but what matters now is negative news from new regions."

House rejects $700b bailout in stunning defeat: In a vote that shook the government, Wall Street and markets around the world, the House on Monday defeated a $700 billion emergency rescue for the nation's financial system, leaving both parties' lawmakers and the Bush administration scrambling to pick up the pieces. Dismayed investors sent the Dow Jones industrials plunging 777 points, the most ever for a single day.

"We need to put something back together that works," a grim-faced Treasury Secretary Henry Paulson said after he and Federal Reserve Chairman Ben Bernanke joined in an emergency strategy session at the White House. On Capitol Hill, Democratic leaders said the House would reconvene Thursday, leaving open the possibility that it could salvage a reworked version.

Senate leaders showed no inclination to try to bring the measure to a vote before they could determine its fate in the House. President Bush, meanwhile, was scheduled to make a statement on the rescue plan Tuesday morning, the White House said.
All sides agreed the effort to bolster beleaguered financial markets, potentially the biggest government intervention since the Great Depression, could not be abandoned.

But in a remarkable display on Monday, a majority of House members slapped aside the best version their leaders and the administration had been able to come up with, bucking presidential speeches, pleading visits from Paulson and Federal Reserve Chairman Ben Bernanke and urgent warnings that the economy could nosedive without the legislation.

In the face of thousands of phone calls and e-mails fiercely opposing the measure, many lawmakers were not willing to take the political risk of voting for it just five weeks before the elections. The bill went down, 228-205. The House Web site was overwhelmed as millions of people sought information about the measure through the day.

US President George W Bush warns the US economy is at a "critical moment" after his bail-out plan was defeated.

Last of all, as a student from Finance at Dhaka University and Banker as profession, based on above news, facts, figures, we can sum up as:

1.GLOBAL BANK LOSSES: Banks and other financial institutions could lose $1 trillion from the credit crisis as mortgage-backed assets have lost most of their value.

2.COLLAPSING HOUSING MARKETS: Underlying the financial market wobbles is a real decline in US house prices nationwide for the first time since the 1930s.

3.JITTERY STOCK MARKETS: Stock markets around the world - from Shanghai to London - have plunged, while in the US the Dow Jones industrial average has made big losses this year.

Sources: Economist, BBC News, The Daily Star, Reuters

Bangladesh Bank set to make bank services less costly

Customers will be able to take balance confirmation certificates from banks for free twice a year, according to a decision of Bangladesh Bank (BB).

Also, the banks will be allowed to charge only Tk 100 for a certificate to be used to open a beneficiary owner account, down from a rate that ranges between Tk 200 and Tk 500 now.

“The BB has taken the decision in consultation with the Bankers Association of Bangladesh (BAB) and Association of Banks, Bangladesh (ABB),” a senior official with the central bank told The Daily Star yesterday.

A circular is expected to come out today.

The central bank's directives asked all scheduled banks to rationalize its charges, fees and commissions, which businessmen say are too high.

Different banks charge customers for 51 categories of service in transactions, which, according to the BB, increases the prices of both export products and local consumer items.

BB officials said the banks take 25 types of charges and commissions for import-related transactions and 14 types for export transactions. In addition, 12 types of fees are charged for local transactions.

The new BB directives said the banks must issue balance confirmation certificates for free twice a year. "If anyone asks for a statement more than twice a year, they may be charged a maximum of Tk 200," the BB said.

The central bank lifted charges on foreign correspondence (local part) and cancellation of letters of credit (LCs) or expired LCs.

Costs of mailing, courier, telex and SWIFT must be on the basis of actual expenditure for LC transmission, amendment, confirmation, cancellation and foreign correspondence charge, according to the BB instructions.

The central bank also reset the quarterly commission for LC opening at 0.50 percent.

LC advising charges may be a maximum of Tk 1,000 and the charges for LC acceptance will be 0.40 percent on a quarterly basis. The charges for issuing back-to-back LCs, C&F certificates and certificates for realization of export prices have been set at Tk 500.

“Banks will be asked to send in a list of the charges and fees on a half yearly basis -- in July and January,” the draft of the circular said.

In case of any change in charges and fees, banks have to inform the related division about it and post information on banks' websites.

The BB could further rationalize the charges in consultation with banks, it said.

Although the BB cut some charges, it did not take any move on "high charges" for closing a bank account, customers said.

Earlier in a report, the central bank said a government-owned bank did not charge clients for account closure while private commercial banks charge from Tk 300 to Tk 500. Foreign commercial banks took as high as Tk 1,000.Source: The Daily Star, Dhaka, Bangladesh, September 30, 2008

Orange, SK Telecom, Etisalat eye investment

Delegates of three big telecoms companies-- UK-based Orange Telecom, South Korean SK Telecom and UAE's Etisalat -- start meeting telecoms regulator tomorrow to investigate investment opportunities in Bangladesh.

High officials of the three companies will meet Bangladesh Telecommunication Regulatory Commission (BTRC) chief between tomorrow and Wednesday to explore investment potentiality in submarine cable and WiMAX technology and mobile phone as well.

The news came at the moment when the BTRC forecast that the number of mobile phone subscribers would be doubled to 7 crore by 2010 and the sector's turnover would also reach to Tk 50,000 crore by 2011."We have got huge responses from the world's telecoms giants. And the visit of these companies to the country means how Bangladesh has become a significant hub for telecoms," Major General (retd) Manzurul Alam, chairman of BTRC, told reporters yesterday.

The telecoms regulator said perhaps the companies are coming to explore opportunities in WiMAX, private submarine cable and joint ventures in existing mobile operators."We will introduce a service for telecoms investors under which maximum procedures will be completed by the BTRC so that investors can decide to invest here sitting in one office," Alam said.BTRC has taken up initiatives to bring back discipline in the telecoms sector.

The BTRC is working hard to introduce the latest technologies like WiMAX and third generation mobile phone, Alam said.India's Reliance, Tata and Singapore-based Singtel also visited Bangladesh and basically investigated the potentiality to participate in the bidding process of private submarine cable. BTRC said some 65 companies including 15 foreign ones already showed their interest to participate in the submarine cable bidding.

Orange could show interest in introducing Wimax technology in Bangladesh, BTRC officials said. WiMAX is a wireless digital communications system, that is intended for wireless "metropolitan area networks". WiMAX can provide broadband wireless access up to 30 miles (50 km) for fixed stations, and 3 to 10 miles (5 - 15 km) for mobile stations. SK Telecom already showed interest to buy stakes in the state-run Teletalk, BTRC officials said but failed to confirm Etisalat's intention.

Bangladesh's telecoms sector has been growing since 1991 after introducing mobile telecommunications. With having telecoms penetration rate of 29 percent, at present, the country has 38million mobile and 11 million land phone customers. The revenue from the telecoms sector also increased to Tk1345crore till yesterday, which was Tk500crore in the last fiscal year.

The telecom regulator said this year revenue basically increased mainly because of getting compensation of Tk631crore from different mobile and fixed line operators for their illefgal involvement in international call termination through using VoIP technology.However, the regulator hope the average revenue from telecoms sector will be Tk1500crore a year.

Source: The Daily Star, April 27, 2008

Bangladesh among least free economies, 143rd among 157 countries

Bangladesh's economy is one of the least free in the world, according to Heritage Foundation, a right-wing American think tank.

The organisation in its Index of Economic Freedom based on 10 criteria, said Bangladesh secured 27th position out of 30 countries of Asia and the Pacific Rim and secured 143rd place out of 157 countries brought under the survey.

According to the foundation, Bangladesh's position in economic freedom appeared nearly at the bottom of the ranking mainly due to "extreme barriers to trade, excessive corruption, bureaucratic procedures, underdeveloped financial system and weak property rights."

The foundation, however, also focused on Bangladesh's positive areas of economic freedom in its 2007 assessment.

It said Bangladesh's economy was relatively free in terms of fiscal measures and freedom from the government. Monetary freedom, labour freedom, and business freedom are also relatively positive, it said.

The foundation examined openness of Bangladesh's economy based on business freedom, trade freedom, fiscal freedom, freedom from government, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labour freedom.

It said Bangladesh has extreme barriers to trade freedom and tariffs are prohibitively high. It is also weak in investment freedom, property rights, and financial freedom.

"Corruption is rampant," the Heritage Foundation said, adding that chaotic regulations and restricted market sectors also impede greater foreign investment in the country as does a haphazard and politicised approach to the rule of law.

The banking sector is plagued with similar problems, the foundation observed.

It, referring to Bangladesh's weighted average tariff rate at 55.8 percent in 2005, said barriers to trade include prohibitions and restrictions on imports, restrictive labelling requirements, and ineffectively operated customs procedures.

Referring to "widespread corruption", the think tank said, "Corruption serves as a non-tariff barrier… It [corruption] is cancerous to all other economic freedoms, this is the key area that needs improvement.”

"Starting of a business in Bangladesh takes an average of 37 days, compared to the world average of 48 days. Entrepreneurship should be easier for maximum job creation. Obtaining a business licence is relatively simple but closing a business is difficult."

It said the overall freedom to start, operate, and close a business is relatively well protected by the national regulatory environment.

Source: The Daily Star Website, January 2, 2008.

Private banks Profit shoots up 41pc in the year 2007

Despite a stagnant situation in the country's business sector, private commercial banks (PCBs) made 41 percent more profit last year compared to that in 2006 mainly by charging high interest rates on loans.

Available data of 26 PCBs, out of 30, show that the banks made a total of Tk 4,814 crore operating profit in 2007 while that of all the PCBs in the previous year totalled Tk 3,404 crore.

“High interest rates on credits is the main reason for such a huge business by the private commercial banks,” said a top banker.

He said there were hardly any expansion plans by the big business groups of the country last year, and 'we did not see any take out of big loans by any business group'.

According to Bangladesh Bank (BB) data, credit growth in commercial banks decreased by 8.01 percentage points in the first 10 months of 2007 compared to the corresponding period of 2006.

In July-October period of the current fiscal year, import of capital machinery decreased by 8.33 percent, which illustrates the downward trend in investment.

“Decrease of import of capital machinery means there were low investments in the business sector last year,” said a top official of the central bank. The PCBs and foreign commercial banks (FCBs) made the profit on very high interest rates on credits.

As per the BB data, the average lending rate of banks was 12.60 percent in December 2006 while the figure was 12.77 percent in June last year.

On the other hand, average deposit rate during this period declined. The rate was 6.99 percent in December 2006 and it reduced to 6.85 in June 2007.

The Annual Report (2006-2007) of the BB, released last week, said aggregate Net Interest Income (NII) of the PCBs and FCBs has been very high over the period 1999 through 2006.

“Overall industry NII shows a consistently upward trend. The trend of NII indicates that the PCBs and the FCBs are charging interests at very high rates on their lending as compared to the interest they are paying to the depositors,” the BB report says.

The PCBs' NII in 1999 was Tk 300 crore, which jumped to Tk 2,540 crore in 2006. In the case of FCBs, the NII in 1999 was Tk 180 crore, which jumped to Tk 820 crore in 2006

The spread (difference between interest rates on lending and deposit) is much higher in Bangladesh compared to international standard. Normally, 'spread' in banking business should be 2-3 percentage points but in Bangladesh the rate is 6-7 percentage points, and in June 2007 it was 5.93 percentage points.

BB sources said they have initiated steps to reduce the spread of banks in a bid to decrease business costs.

The PCBs and FCBs have already been asked to give a work plan on how they would reduce their spread.

Source: The Daily Star Website, January 2, 2008.

Tk 500cr Jamuna Bridge securitised bonds proposed

Investment Corporation of Bangladesh (ICB), responsible for offloading shares of government entities, recently proposed to the government to securitise Jamuna Bridge, the country's largest civil engineering project, by issuing Tk 500 crore bonds to be traded on the stock market.

Of the total amount, Tk 450 crore will be raised through issuance of bond securitisation in private and institutional placement, while Tk 50 crore will be raised from public.

Of the money to be raised, Tk 200 crore will be invested as equity for construction of Padma Bridge, while the rest of the amount will be invested in other areas such as building infrastructure and developing tourism.

Securitisation is a structured finance process in which assets, receivables or financial instruments are acquired, classified into pools, and offered as collateral for third-party investment. It involves the selling of financial instruments, which are backed by the cash flow or value of the underlying assets.

As per the proposal, the JMBA will raise Tk 300 crore against the security of its future tolls receivable in the next 10 years, while Tk 200 crore will be raised against the security of JMBA's fixed deposit receipt (FDR) worth Tk 200 crore.

Jamuna Multipurpose Bridge Authority (JMBA), which supervises the operational activities of the bridge over the Jamuna River, pursued the ICB to formulate the modalities for offloading shares.

The communications ministry has also sent a letter to the finance ministry for its consent to start the Jamuna Bridge securitisation process.

Earlier the JMBA, a concern of communications ministry, has submitted the securitisation proposal, sources said.

“After getting the approval, we will start the securitisation procedures,” said a JMBA official.

The securitised bonds will be offloaded as 'approved security' so that the financial institutions can keep the bonds as statutory liquidity requirement (SLR), according to the proposal.

Welcoming the initiative, Chief Executive Officer of Dhaka Stock Exchange Salahuddin Ahmed Khan said through securitisation the country can reduce its dependency on donors to build big infrastructure projects such as Padma Bridge or Karnaphuli Bridge.

Jamuna Bridge was inaugurated in June 1998. With a length of 4.8 kilometer and width of 18.5 meter it is the longest bridge in Bangladesh as well as in South Asia. Around Tk 3900 crore was spent on construction of the bridge.

Revenue from the bridge was Tk 107 crore in 2001-02, while the income was Tk 170 crore in 2002-03, Tk 160 crore in 2003-04 and Tk 180 crore in 2004-05, according to sources. Of the income, 70 percent came from toll collections.

Source: The Daily Star Website, January 1, 2008.

Cellphone subscriptions reach 33.1m until November, 2007

The total number of mobile phone subscribers of the country's six cellphone operators has reached 33.10 million at the end of November 2007.

According to the latest update by the website of Bangladesh Telecommunication Regulatory Commission (BTRC), Grameenphone Ltd leads the subscriber mark with 16.01 million users followed by AKTEL with 6.53 million and Sheba Telecom Ltd (Banglalink) with 6.51 million.

The newcomer, Warid Telecom International LLC (Warid), was placed in the fourth position as it bagged 1.95 million subscribers followed by CityCell with 1.38 million and state-run Teletalk with 0.72 million.

The subscribers' numbers were declared by the mobile phone operators themselves, according to the BTRC website.

Source: BTRC Website, January 1, 2008.

Nobel Peace Prize' 2006

Chairman of the Norwegian Nobel Committee Ole Danbolt Mjoes announced the Nobel Peace Prize yesterday in Oslo. Bangladesh's Dr. Muhammad Yunus, dubbed the "Banker to the Poor", and founder of the Grameen Bank, which doled out small-scale loans to more than 6 (six) million borrowers won the Nobel Peace Prize'2006., AFP

Full list of Nobel Peace Prize laureates from 1901:

2006: Muhammad Yunus (Bangladesh) and the Grameen Bank
2005: International Atomic Energy Agency and Mohamed ElBaradei (Egypt)
2004: Wangari Maathai (Kenya)
2003: Shirin Ebadi (Iran)
2002: Jimmy Carter (US)
2001: Kofi Annan (Ghana) and the United Nations
2000: Kim Dae Jung (South Korea)
1999: Medecins Sans Frontieres (Doctors Without Borders)
1998: John Hume and David Trimble (Northern Ireland)
1997: Jody Williams (US) and the International Campaign to Ban Landmines
1996: Carlos Filipe Ximenes Belo and Jose Ramos-Horta (East Timor)
1995: Joseph Rotblat (Britain) and the Pugwash movement
1994: Yitzhak Rabin, Shimon Peres (Israel) and Yasser Arafat (PLO)
1993: Nelson Mandela and Frederik de Klerk (South Africa)
1992: Rigoberta Menchu (Guatemala)
1991: Aung San Suu Kyi (Burma)
1990: Mikhail Gorbachev (Soviet Union)
1989: Dalai Lama (Tibet)
1988: United Nations Peacekeeping Forces
1987: Oscar Arias Sanchez (Costa Rica)
1986: Elie Wiesel (US)
1985: International Physicians for the Prevention of Nuclear War
1984: Desmond Tutu (South Africa)
1983: Lech Walesa (Poland)
1982: Alva Myrdal (Sweden) and Alfonso Garcia Robles (Mexico)
1981: Office of the United Nations High Commissioner for Refugees
1980: Adolfo Perez Esquivel (Argentina)
1979: Mother Teresa (Albania)
1978: Anwar Sadat (Egypt) and Menachem Begin (Israel)
1977: Amnesty International
1976: Betty Williams (Britain) and Mairead Corrigan (Northern Ireland)
1975: Andrei Sakharov (Soviet Union)
1974: Sean Mac Bride (Ireland) and Eisaku Sato (Japan)
1973: Henry Kissinger (US) and Le Duc Tho (Vietnam, declined)
1972: Reserved
1971: Willy Brandt (Germany)
1970: Norman Borlaug (US)
1969: International Labour Organisation
1968: Rene Cassin (France)
1967: Reserved
1966: Reserved
1965: United Nations Children's Fund (UNICEF)
1964: Martin Luther King Jr (US)
1963: International Committee of the Red Cross and the League of Red Cross Societies
1962: Linus Carl Pauling (US)
1961: Dag Hammarskjoeld (Sweden)
1960: Albert Lutuli (South Africa)
1959: Philip Noel-Baker (Britain)
1958: Georges Pire (Belgium)
1957: Lester Pearson (Canada)
1956: Reserved
1955: Reserved
1954: Office of the United Nations High Commissioner for Refugees

1953: George Marshall (US)
1952: Albert Schweitzer (France)
1951: Leon Jouhaux (France)
1950: Ralph Bunche (US)
1949: Lord (John) Boyd Orr of Brechin (Britain)
1948: Reserved
1947: Friends Service Council (The Quakers), American Friends Service Committee (The
Quakers)
1946: Emily Greene Balch (US), John Raleigh Mott (US)
1945: Cordell Hull (US)
1944: International Committee of the Red Cross
1943: Reserved
1942: Reserved
1941: Reserved
1940: Reserved
1939: Reserved
1938: Nansen International Office for Refugees
1937: Viscount Cecil of Chelwood (Britain)
1936: Carlos Saavedra Lamas (Argentina)
1935: Carl von Ossietzky (Germany)
1934: Arthur Henderson (Britain)
1933: Sir Norman Angell (Ralph Lane) (Britain)
1932: Reserved
1931: Jane Addams (US) and Nicholas Murray Butler (US)
1930: Nathan Soederblom (Sweden)
1929: Frank Billings Kellogg (US)
1928: Reserved
1927: Ferdinand Buisson (France) and Ludwig Quidde (Germany)
1926: Aristide Briand (France) and Gustav Stresemann (Germany)
1925: Sir Austen Chamberlain (Britain) and Charles Gates Dawes (US)
1924: Reserved
1923: Reserved
1922: Fridtjof Nansen (Norway)
1921: Karl Hjalmar Branting (Sweden) and Christian Lous Lange (Norway)
1920: Leon Victor Auguste Bourgeois (France)
1919: Thomas Woodrow Wilson (US)
1918: Reserved
1917: International Committee of the Red Cross
1916: Reserved
1915: Reserved
1914: Reserved
1913: Henri La Fontaine (Belgium)
1912: Elihu Root (US)
1911: Tobias Michael Carel Asser (The Netherlands) and Alfred Hermann Fried (Austria)
1910: Permanent International Peace Bureau
1909: Auguste Marie François Beernaert (Belgium) and Paul Henri Benjamin Balluet, Baron
d'Estournelles de Constant de Rebecque (France)
1908: Klas Pontus Arnoldson (Sweden) and Fredrik Bajer (Denmark)
1907: Ernesto Teodoro Moneta (Italy) and Louis Renault (France)
1906: Theodore Roosevelt (US)
1905: Baroness Bertha Sophie Felicita von Suttner (Austria)
1904: Institute of International Law
1903: William Randal Cremer (Britain)
1902: Elie Ducommun (Switzerland) and Charles Albert Gobat (Switzerland)
1901: Jean Henri Dunant (Switzerland) and Frederic Passy (France)

>> Source: The Daily Star, 13.10.2006

Bangladesh: Development Issue 4

Bangladesh: Public Expenditure Management

Md. Matiur Rahman and Dr. Haripada Bhattacharjee*

BANGLADESH raised between 1972 and 2003 its dollar per capita income fourfold, reduced poverty by more than a third, increased life expectancy by more than 40%, and enhanced gross primary enrollment by over 80 per cent during the same period (World Bank, 2005). This remarkable progress is a testimony to the resilience and determination of a dynamic young nation and gives hope that with continued determined effort Bangladeshis can look forward to further gains in respect to development.

Notwithstanding past progress, Bangladesh is still amongst the poorest countries in the world with only $400 per capita income. It will take over 40 years of growth at this pace to reach the current per capita income level of Malaysia even though the recent per capita growth of Bangladesh rose from 3.7 per cent to 6.0 per cent. The World Bank estimated that Bangladesh could aspire to become a middle-income nation over the next 15-20 years if per capita growth rate rose by around 5.5 per cent. To achieve this, Bangladesh needs, among others, a sound public expenditure management.

Generally, economic management in Bangladesh has been sound over the last decade. Bangladesh achieved decent rates of growth, a steady reduction in poverty incidence, relatively low inflation, and a fairly stable domestic debt, interest, and exchange rates. Allocation of public expenditures of Bangladesh in broad categories -- such as interest payments, education, health, agriculture, transport, public order and safety, and others -- is much better than in India, Pakistan and Sri Lanka.

Each of these countries spends over 6.0 per cent of the GDP on interest payments. Defence spending in Bangladesh is also much low at 1.3 per cent of the GDP. India, Pakistan and Sri Lanka spend 2.4, 4.5 and 4.9 per cent respectively of their GDPs on defence (World Bank, 2005). The role of Bangladesh's defence forces in international peace keeping is a source of significant foreign exchange earning.

One notable feature in public expenditure of the government has been the shift of spending from agriculture and industries to the social sectors. Total expenditures on education, health, the social safety net and disaster management are currently about one third of total budgetary expenditures (see table 1). Outcomes in the social sectors have been good and much better than in the physical infrastructure areas.

Bangladesh's budgetary expenditures have not been characterised by high share of interest payment. Bangladesh has avoided excessive reliance on domestic and foreign borrowing, unlike its neighbours. Debt servicing has increased significantly, reflecting the increasing cost of domestic borrowing through nationalised commercial banks and foreign suppliers' credit. The GOB spends the equivalent of less than one per cent of the GDP on the safety net programmes.

However, the ratio of expenditures on safety net programmes as percentage of the GDP and public expenditures has been declining. While expenditure on social sectors has remained fairly constant since the mid-1990s -- in the range of 3.5 to 4.0 per cent annually, safety net expenditures now make up less than 20 per cent of all social sector expenditures, down from 30 per cent in the late 1990s -- indicating a crowding out of social assistance.

Safety net programmes roughly cover below 10 per cent of poor individuals and are administered by a large of number of agencies. Benefit incidence analysis of the safety net programmes reveals that these programmes are essentially the pro-poor. For example, Food for Work Programme created about 75,000,000 hours of works in rural areas, vulnerable group development programme assisted about 480,000 households by providing food to the poor, national nutrition programme helped significant reductions in poverty, improved in school enrolment, particularly of girls and in raising the marriage age (World Bank 2006).

Another study by the World Bank (2005) shows that the overall system of public expenditures on education and health are strongly pro-poor. For example, primary education (40 per cent of all current educational spending) is strongly pro-poor. The share of the poor people in all public health expenditures has been increasing and currently it is estimated to 45 per cent. The essential service package (ESP) allocations to "Child Health" are the most equitable and strongly pro-poor.

There are some weaknesses in Bangladesh's public expenditures programme. Low effectiveness of capital spending, inadequate attention to operations and maintenance, inappropriate employment and pay policies, and the existence of fairly large subsidiaries, etc., are the most important factors that affect sound economic management.

The weak expenditure management combined with other institutional weaknesses, has compromised the quality of public services. The most glaring examples of poor public service delivery are the deteriorating law and order situation; the high perception of corruption and citizen's dissatisfaction with services; and an inefficient bureaucracy that still maintains highly tight controls over critical business processes.

Moreover, the Annual Development Programme (ADP) includes many projects that are questionable. Questionable projects regularly find their way into the ADP mainly because of the weaknesses in the system of project management. For example, the ADP expenditures under Roads and Highways Department include about 800 sub-projects with annual ADP allocations of about 2.0 to 3.0 per cent of their project costs, implying that it would take 30 to 50 years to complete these projects (World Bank 2005).

Another area of weak public expenditure management is the large hidden subsidies and growing contingent liabilities, which are not reflected in the budget. Direct subsidy currently amount to less than 0.5 per cent of the GDP and is given on school textbooks, fertiliser distribution and several non-traditional export items. Indirect subsidy is estimated at 2.6 per cent of the GDP and is given on gas and electricity prices. Large contingent liabilities have accumulated on account of state-owned enterprises.

Despite all these weaknesses, public expenditure management in Bangladesh is broadly consistent with the government's economic and social development policy objectives. The successes in the social sector can be attributed to three factors: (i) the priority given by successive governments, (ii) strong support of various stakeholders in pursuing human development objectives, and (iii) an improved policy framework that enabled considerable innovation.

Recently government has taken efforts to prepare a medium-term expenditure framework. Experiences of other countries suggest that this can be a powerful tool to improve the effectiveness of public spendings provided projected activities well implemented.

>> Source: The Daily Financial Express, Bangladesh, July 20, 2006

* Md. Matiur Rahman is Director of Customs Intelligence and Investigation and Dr. Haripada Bhattacharjee is Professor of Department of Marketing, Dhaka University

International Banking

Bank size information

Top ten banking groups in the world ranked by tier 1 capital
Figures in U.S. dollars, and as at end-2004

1. Citigroup — 73 billion
2. JP Morgan Chase — 69 billion
3. HSBC — 67 billion
4. Bank of America — 64 billion
5. Credit Agricole Group — 63 billion
6. Royal Bank of Scotland — 43 billion
7. Mitsubishi Tokyo Financial Group — 40 billion
8. Mizuho Financial Group — 39 billion
9. HBOS — 36 billion
10. BNP Paribas — 35 billion

Top ten banking groups in the world ranked by assets
Figures in U.S. dollars, and as at end-2004

1. UBS — 1,533 billion
2. Citigroup — 1,484 billion
3. Mizuho Financial Group — 1,296 billion
4. HSBC Holdings — 1,277 billion
5. Crédit Agricole — 1,243 billion
6. BNP Paribas — 1,234 billion
7. JPMorgan Chase & Co. — 1,157 billion
8. Deutsche Bank — 1,144 billion
9. Royal Bank of Scotland — 1,119 billion
10. Bank of America — 1,110 billion

Top ten bank holding companies in the world ranked by profit
Figures in U.S. dollars, and as 2003

1. Citigroup — 21 billion
2. Bank of America — 15 billion
3. HSBC — 10 billion
4. Royal Bank of Scotland — 8 billion
5. Wells Fargo — 7 billion
6. JP Morgan Chase — 7 billion
7. UBS AG — 6 billion
8. Wachovia — 5 billion
9. Morgan Stanley — 5 billion
10. Merrill Lynch — 4 billion

Top ten bank holding companies in the U.S. ranked by assets
Figures as of March 31, 2006, in U.S. dollars

1. Citigroup Inc. — 1.586 trillion
2. Bank of America Corp. — 1.375 trillion
3. J.P. Morgan Chase & Co. — 1.273 trillion
4. Wachovia Corp. — 541 billion
5. Wells Fargo & Co. — 492 billion
6. HSBC North America Holdings Inc. — 441 billion
7. Taunus Corp. — 391 billion
8. U.S. Bancorp — 209 billion
9. SunTrust Banks, Inc. — 178 billion
10. Countrywide Financial Corp. — 177 billion

Top ten bank holding companies in the U.S. ranked by deposits
As of June 30, 2004 in U.S. dollars. These are U.S. deposits only. This is not a ranking of the largest U.S.-based global banks.

1. Bank of America Corp. — 526 billion
2. Wells Fargo & Co. — 256 billion
3. Wachovia Corp. — 238 billion
4. J.P. Morgan Chase & Co. — 227 billion (1)
5. Citigroup Inc. — 193 billion
6. Bank One Corp. — 150 billion (1)
7. U.S. Bancorp — 112 billion
8. SunTrust Banks, Inc. — 78 billion
9. BB&T Corporation — 67 billion
10. National City Corp. — 64 billion

(1) Since this report, J.P. Morgan Chase & Co. has acquired Bank One Corp., making the combined 6/30/04 deposit total for the merged company $377 billion, vaulting it to second place on the list.

>> wikipedia.org

Bangladesh : Banking 3

BANKING SERVICES:

Current Deposit (CD) Account:

Generally this sort of account opens for business purpose. Customers can withdraw money once or more against their deposit. No interest can be paid to the customers in this account. If the amount of deposit is below Taka 1,000 on an average the bank has authority to cut Taka 50 from each account as incidental charge after every six months. Against this account loan facility can be ensured. Usually one can open this account with Taka 500. One can open this sort of account through cash or check/bill. All the banks follow almost the same rules for opening current account.

Savings Bank Deposit (SB) Account:

Usually customers open this sort of account at a low interest for only security. This is also an initiative to create people's savings tendency. Generally, this account is to be opened at Taka 100. Interest is to be paid in June and December after every six months. If money is withdrawn twice a week or more than Taka 10,000 is withdrawn (if 25% more compared to total deposit) then interest is not paid. This account guarantees loan. Almost all the banks follow the same rules in the field of savings account, except foreign banks for varying deposit. On an average, all the banks give around 6 (six) percent interest.

SPECIAL SERVICES:

Some Banks render special services to the customers attracting other banks.

Internet Banking:

Customers need an Internet access service. As an Internet Banking customer, he will be given a specific user ID and a confident password. The customer can then view his account balances online. It is the industry-standard method used to protect communications over the Internet. To ensure that customers' personal data cannot be accessed by anyone but them, all reporting information has been secured using Version and Secure Sockets Layer (SSL).

Home Banking:

Home banking frees customers of visiting branches and most transactions will be automated to enable them to check their account activities transfer fund and to open L/C sitting in their own desk with the help of a PC and a telephone.

Electronic Banking Services for Windows (EBSW):

Electronic Banking Service for Windows (EBSW) provides a full range of reporting capabilities, and a comprehensive range of transaction initiation options. The customers will be able to process all payments as well as initiate L/Cs and amendments, through EBSW. They will be able to view the balances of all accounts, whether with Standard Chartered or with any other banks using SWIFT. Additionally, transactions may be approved by remote authorization even if the approver is out of station.

Automated Teller Machine (ATM):

Automated Teller Machine (ATM), a new concept in modern banking, has already been introduced to facilitate subscriber’s 24-hour cash access through a plastic card. The network of ATM installations will be adequately extended to enable customers to non-branch banking beyond banking.

Tele Banking:

Tele Banking allows customers to get access into their respective banking information 24 hours a day. Subscribers can update themselves by making a phone call. They can transfer any amount of deposit to other accounts irrespective of location either from home or office.

SWIFT:

SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a bank owned non-profit co-operative based in Belgium servicing the financial community worldwide. It ensures secure messaging having a global reach of 6,495 Banks and Financial Institutions in 178 countries, 24 hours a day. SWIFT global network carries an average 4 million Message daily and estimated average value of payment messages is USD 2 trillion.

SWIFT is a highly secured messaging network enables Banks to send and receive Fund Transfer, L/C related and other free format messages to and from any banks active in the network. Having SWIFT facility, Bank will be able to serve its customers more profitable by providing L/C, Payment and other messages efficiently and with utmost security. Especially it will be of great help for our clients dealing with Imports, Exports and Remittances etc.

Banking Sector: CAMEL Rating 2005

Introduction

The Jews in Jerusalem introduced a kind of banking in the form of money lending before the birth of Christ. The word 'bank' was probably derived from the word 'bench' as during ancient time Jews used to do money -lending business sitting on long benches.

First modern banking was introduced in 1668 in Stockholm as 'Svingss Pis Bank' which opened up a new era of banking activities throughout the European Mainland.

In the South Asian region, early banking system was introduced by the Afgan traders popularly known as Kabuliwallas. Muslim businessmen from Kabul, Afganistan came to India and started money lending business in exchange of interest sometime in 1312 A.D. They were known as 'Kabuliawallas'.

Bangladesh Bank

Bangladesh Bank (BB) has been working as the central bank since the country's independence. Its prime jobs include issuing of currency, maintaining foreign exchange reserve and providing transaction facilities of all public monetary matters. BB is also responsible for planning the government's monetary policy and implementing it thereby.

The BB has a governing body comprising of nine members with the Governor as its chief. Apart from the head office in Dhaka, it has nine more branches, of which two in Dhaka and one each in Chittagong, Rajshahi, Khulna, Bogra, Sylhet, Rangpur and Barisal.

Banking Sector and CAMEL Rating:

14 A-class, 11 B-class, 12 C-class, 8 D-class & 3 E-class banks

A total of 48 scheduled commercial banks including 8 (eight) foreign banks have been operating business in Bangladesh through 6,383 Branches. Out of total business 56.5% handled by private commercial banks (PCBs) and rest 43.5% dealt by nationalized commercial banks (NCBs).

Deposit in banking system in 2005 stood at Tk 1,426 billion, registering 15% growth. Total assets increased by 14%, of which 8.2% in NCBs and 21.2% in PCBs. Total loans and advances during the year was Tk. 1,047 billion against total assets of Tk 1,725.5 billion. The cash balance in hand was Tk. 15.5 billion including the deposit with Bangladesh Bank (BB) of Tk. 86.3 billion. The total liability deposit of banking sector in 2005 was Tk. 1,725.5 billion including Tk 92.7 billion capital and reserve.

The total operations of every bank were assessed according to five fixed criteria. These criteria are capital adequacy, asset quality, Management Efficiency, Earning capacity and Liquidity (CAMEL).

Capital Adequacy: For the safety and protection of depositor’s benefit, capital adequacy must be maintained at 9%. It is also the coverage of financial debacles like loan loss, share market loss, foreign currency dealing loss, interest rate fluctuation loss and the protection for off balance sheet affairs hit. During the year 2005 the banking sector of Bangladesh has been able to keep an average 8.7% capital adequacy against the minimum requirement of 9%.

Asset Quality: A total of 60.7% assets of banking sector were used as loans and advances. But the high rate of classification has enhanced vulnerability of assets. In 2005, the classified loan of NCBs was 14.6% against the asset, which was 5.6% for PCBs, 0.9% for foreign banks and 26.6% for specialized banks. A good number of banks have not been able to keep required provision against the classified loan risk from the profit during the year.

Management Efficiency: Management is the key to the development and expansion of a bank. Management efficiency judged on the basis of the ratio of total expenditure to income, operational expenses and total expenses, per head employee income & expenditure and interest rate spread. The average expenditure-income ratio during the year 2005 was 102%, which is a painful scenario for our banking management.

Earning Capacity: Strong earning and high profitability is the good sign of a bank’s present and future strength. Any loss can be compensated from the profit of a bank. Earnings calculated on the basis of return on asset (ROA), return on equity (ROE) and Net interest margin (NIM) ratios.

Liquidity: The banks have to keep 16% SLR against their deposit with central bank, of which 4% average in the form of CRR. The central bank - Bangladesh Bank (BB) keeps CRR in current account and rest of SLR in cash and government securities. Islamic banks have to keep 10% SLR and specialized banks are given exemption of keeping the SLR but they have to keep 4% CRR.

CAMEL Rating: Analyzing the overall operational activities of all commercial and specialized banks; central bank, the regulatory authority of country’s banking sector has ranked 14 ‘A-class’, 11 ‘B-class’, 11 ‘C-class’, 9 ‘D-class’ and 3 ‘E-class’ banks by the end of 2005, which was completed recently.

A-Class banks: The 14 ‘A-class’ banks are Prime Bank, Mutual Trust Bank, Dutch-Bangla Bank, Bank Asia, Exim Bank, Mercantile Bank, Jamuna Bank, Dhaka Bank, BASIC Bank, Standard Bank, Commercial Bank of Ceylon, Citibank N.A, State Bank of India and HSBC.

B-Class banks: The ‘B-class’ banks are Eastern Bank, Premier Bank, The Trust Bank, BRAC Bank, Southeast Bank, NCC Bank, One Bank, Standard Chartered Bank, Woori Bank, Bank Alfalah and National Bank of Pakistan.

C-Class banks: Islami Bank Bangladesh Limited, Pubali Bank, Uttara Bank, National Bank, The City Bank, UCBL, Shahjalal Islami Bank, Al-Arafah Islami Bank, IFIC Bank, AB Bank, First Security Bank and Habib Bank.

D-Class banks: The ‘D-class’ banks are Social Investment Bank, Bangladesh Commerce Bank, Agrani Bank, Janata Bank, Rupali Bank, Sonali Bank, BSRS and RAKUB.

E-Class banks: Bangladesh Krishi Bank, Bangladesh Shilpa Bank and The Oriental Bank. It is revealed by the analysis that the top ranking banks were able to bring best results managing credit and asset efficiently.

>> Source: Weekly Industry, Issue: July 2, 2006, Bangladesh

NewsWeek Report

Bullish on Bangladesh

The headlines are grim. But they mask what is shaping up to be one of the world's most amazing turnarounds.

These days, it's not easy to be bullish on Bangladesh. Last month militant labor unions declared war on the country's vital textile industry, attacking dozens of mills and torching several in a struggle for wage hikes and new benefits. And just last week opposition parties bent on toppling Prime Minister Khaleda Zia staged a two-day national strike to demand electoral reforms ahead of parliamentary contests slated for early 2007. Their street actions temporarily closed the country's main port, halted public transport and triggered bloody clashes with riot police armed with tear gas, truncheons and rubber bullets. Observers warn that tensions could escalate as election season approaches; Britain's top diplomat in Dhaka, Anwar Choudhury, has voiced "grave concerns about the level of politically motivated violence."

Civil unrest is always worrisome in a densely populated nation that still ranks among the world's 50 poorest, to be sure. Yet what's remarkable about the grim headlines emanating from Dhaka of late is how little they threaten the country's stubbornly robust national economy. In spite of sporadic unrest, rampant corruption and a polarized political system that's all but dysfunctional, Bangladesh finds itself in the midst of a sustained boom. On June 8, Finance Minister Saifur Rahman forecast that the national economy would grow by 6.7 percent in 2006. The main drivers: surging export growth and a robust service sector.

In textiles, the country's mainstay manufacturing industry, export earnings rose by 17 percent last year to $7.5 billion, confounding forecasts that Bangladesh would lose market share to China once World Trade Organization textile quotas expired at the end of 2004. This year Bangladesh's garment makers expect to garner $10 billion abroad. Foreign investment is rising, too. The attraction is an economy that has expanded by 4 percent or more yearly since 1991, cutting the national poverty rate by 15 percent in the process. "Bangladesh is no more a country of despair," declared Rahman during his annual budget address earlier this year. "It is a country of hope and potential."

The Bangladesh boom defies some of development theory's central tenets. For decades, experts have identified political stability and effective governance as critical prerequisites for economic takeoff. But this lowland nation of 145 million is making tangible progress largely without them. Bangladesh now leads South Asia in most social-welfare indicators—including female literacy and poverty reduction. Its fertility rate is near replacement level. And Bangladesh is the only South Asian country on track to meet its United Nations-mandated Millennium Development Goals of reducing poverty by half by 2015. "When I go to India or Pakistan from Bangladesh, people ask, 'What is it you do, cook up all your statistics?' " says Muhammad Yunus, founder of microlender Grameen Bank. "They ask, 'Why are we falling behind when we're doing the right things, while you are doing the wrong things but getting the right answer?' "

There's no pat explanation for Bangladesh's unlikely success. Certainly, experts agree that the country urgently needs better governance to achieve its full potential of double-digit annual growth. Yet the country has disproved one assumption: that Asia's dynamic twin giants—China and India—would grow at the expense of their less efficient, less open neighbors. Instead, Bangladesh looks attractive as a cost-beating sweatshop economy precisely because China and India are thriving. Both have grown more expensive as manufacturing bases relative to Bangladesh, and rising domestic demand within each makes them attractive destinations for Bangladeshi exports.

In textiles, for example, Bangladeshi workers earn less than $1 a day to start, the lowest in the world, according to the International Labor Organization. Exploitation is rife, to be sure, but the mills nonetheless have given more than 2 million people—the vast majority women—nonagricultural wage jobs. In response to last month's factory raids, the government, industry bosses and labor unions cut a deal to raise wages in a pact announced last week, reducing the risk of further unrest. "As wages rise in China, Bangladesh will increasingly fill in the void," says Debapriya Bhattacharya, executive director of the Center for Policy Dialogue (CPD), a private think tank. "Bangladesh will not only successfully compete with Indian products abroad, but has a high potential to expand its market within India itself."

Funds critical to the nation's development often come from an unconventional source—broad-based microcredit schemes targeting the poor. Pioneered by Grameen Bank after Bangladesh's killer famine of the early 1970s, the strategy is to promote grass-roots development with collateral-free loans to poor households for investment in seeds, livestock, irrigation or village-level businesses. Today, an estimated 80 percent of households participate in some form of microcredit from Grameen or nongovernmental organizations.

That makes Bangladesh the test case in a new development-financing model. Experts laud microlending for a string of positive side effects. By targeting women (who have proved more reliable borrowers than men), lending schemes have pushed female participation in the labor force to among the highest in the developing world. As a result, Bangladesh's birthrate has plummeted, poor families have opted to put their girls as well as boys in school and women have taken a large role in local government—all in a predominantly Muslim country. "At the grass roots things have worked quite well," says Ifzal Ali, chief economist for the Asian Development Bank in Manila. "Rural literacy, basic health, provision of water [are] beginning to pay dividends. Compared to 3 to 4 percent growth earlier, there is now 6 to 7 percent. They're doing something right, no doubt about it."

But a concerted clean-hands campaign is needed to kick the economy into high gear. Corruption largely explains the endless red tape, crumbling ports and barriers to foreign investment that keep the country from achieving its full potential. "It's a barrier to every step we need to take," says Yunus, who adds without irony: "If we can bring down our corruption to the prevailing level in South Asia, our growth rate would be 9 to 10 percent."

Should Bangladesh experience destabilizing political turmoil in the coming weeks or months, its economy would certainly suffer. Tension in the garment industry remains high. Abdus Salam Murshedy, vice president of the Garments Manufacturers and Exporters Assocation, warns that the government "must protect our factories [from protesters], or else our achievements will be reduced to zero."

Yet even now, foreign investors have multibillion-dollar projects on the drawing board in Dhaka. The Indian conglomerate Tata has proposed building a steel mill and a power plant worth $2.5 billion in the area. And the government remains upbeat. "We could accelerate the growth momentum remarkably without destabilizing macroeconomic fundamentals," says Rahman, the Finance minister. Then, perhaps, Bangladesh would make headlines for something other than killer cyclones or riots in Dhaka's streets.

>> Source: George Wehrfritz and Hassan Shahriar, Newsweek Int’l, Issue: June 26, 2006

India vs Bangladesh: Issues 1

India seeks Bangladesh's support for UN Secretary General post

India has sought Bangladesh's support in favor of her candidate to the post of the next Secretary General of the United Nations.

Indian High Commissioner to Bangladesh Venna Sikri sought the support while she met Foreign Minister of Bangladesh, Morshed Khan in Dhaka Wednesday, Bangladesh Observer reports from Dhaka quoting a foreign ministry Press release.

Veena Sikri informed the Foreign Minister that India has nominated UN Under Secretary General Shashi Tharoor as her candidate for the top post of the UN. On an inquiry, she explained to the minister about Indian's recent ban on the export of rice, lentil and sugar.

She said it is not only applicable to Bangladesh but also to all. The measure has been taken in order to maintain good supply line in the country as they have some shortage of these items domestically.

Regarding imposition of countervailing duty on Bangladesh's four tems -hilsha fish, saree, medicine and porcelain, she said it has also been done universally on all imports for revenue purpose.

>> Source: New Delhi, June 29, IRNA

Bangladesh & WTO Issue

Bangladesh lists products for duty-free market access under WTO

Bangladesh has finalized a list of 1,017 products to try to get duty-free market access to the WTO member countries. It was agreed at the last WTO ministerial meeting in Hong Kong that 97% of products from the least-developed countries (LDCs) would be allowed duty-free access to the markets of WTO member nations.

Dhaka also identified 276 other products intended to be put under the sensitive list of the developed countries, which makes up the remaining 3% of products. But Bangladesh would demand a timeframe of phasing out these products from the restrictive list as per a WTO decision.

"We should have second and third lists of products as alternative options," Commerce Minister Altaf Hossain Chowdhury said Monday, after a meeting of the high-powered committee the government formed in this regard.

The committee convened the meeting for the first time after it was formed by the Cabinet Division on March 16 to finalize the list of products and the country-strategy in any future negotiation of the World Trade Organization (WTO).

The sub-committee on market access, headed by EPB Vice-Chairman Mir Shahabuddin Mohammed, prepared the lists of products. The next WTO negotiations would focus on how the member nations would settle which products would fall into the duty-free list of 97% and which into the sensitive or restrictive lists.

The decision would come from two meetings -- one scheduled to be held in Geneva and another in Washington. Meanwhile, the developed countries have decided to settle the lists by September and developing countries by December this year.

Altaf, who is heading the committee of 30 members comprised of public and private sector representatives, said an expert group to be formed out of the committee members would work to make the strategy concrete.

Besides, Bangladesh's Embassy in Washington would be assigned to further push US authorities to consider the Bangladesh cause while efforts by lobbyists already working there would be intensified.

The Committee meeting also considered the possibility of appointing lobbyists in Geneva, the headquarter of WTO, besides strengthening Bangladesh's mission there.

The country would also discuss LDCs causes with Asian LDCs as well as countries enjoying trade preferences under the African Growth and Opportunity Act (AGOA) and CBI, said the minister.

"The lists were prepared taking into consideration the existing exports, GSP facilities, lists of imports by importing countries and products having export potentials in the near future," Director General of WTO cell in the Ministry of Commerce said.

He said the committee would try to keep all the country's exportable items in the duty-free list of 97% as the country has the scope to negotiate.

He further said that Bangladesh would try to negotiate determining the duty-free items on the basis of USA's imports from LDCs, which would constitute only 50 items to put in their sensitive list.

If it has to accept the basis of calculating the items on USA's global import, some 308 items of Bangladesh would be included in their sensitive lists, he said.

Regarding Japan, he said the country has informally assured Bangladesh of a relaxed approach beyond their already offered 98.6% duty-free items. Bangladesh would try to bring leather and fish items out of their sensitive list.

In his introductory remarks, the Commerce Minister apprised the meeting that the sub-committee on services sector already submitted its report to the Ministry of Commerce but expressed dissatisfaction that the other sub-committee on export diversification is yet to submit its report.

He asked the sub-committee to submit their report urgently so that the national committee could set the country strategy. "We're looking eagerly to see results out of these reports," said the minister.

Commerce Ministry Adviser Barkat Ullah Bulu, Commerce Secretary Mohammed Abdul Karim and committee members both from public and private sectors were present at the meeting.

Source: OneWorld.Net, 20 April 2006

Bangladesh: Development Issues2

Rebuilding Bangladesh

A nation long plagued by natural disasters, poverty, corruption and violence may finally be on the verge of a happier future
By Alex Perry

Source: TIME Asia, April 3, 2006

As Lutfozzaman Babar, Bangladesh's Home Minister, tells it, the call he'd been awaiting for months came at 3 a.m. on March 6 while he was grabbing some sleep in a Singapore hotel during a whistle-stop tour of Asia. "It's him, it's Bangla Bhai," came the voice of a commander in the Rapid Action Battalion (R.A.B.), Bangladesh's élite antiterror squad. "He's surrounded." Babar, the leader of a government drive to rein in Islamic militancy, was instantly awake. "Don't shoot! Don't shoot!" he urged. "We need him alive. We need to know what he knows."

Bhai, whose real name is Siddiqul Islam, was the prime target in the government's crackdown on terrorism. A veteran of the mujahedin war against the Soviets in Afghanistan who later drifted through the Middle East as a nightclub bouncer, Bhai had returned to Bangladesh to help found two extremist groups. Over the past three years, he was believed to be a central figure behind a host of bombings, assassinations and suicide attacks that culminated last Aug. 17 in 500 near-simultaneous explosions across the country. It wasn't a surprise, then, to find that Bhai had no intention of meekly surrendering. When an R.A.B. officer opened the door of the house where Bhai was hiding in the northeastern village of Rampur, Bhai opened fire with a pistol, grazing the man's temple. Then, with the house surrounded, Bhai detonated a bomb inside, apparently hoping to kill himself and his assailants; he succeeded only in setting fire to the house. Looking charred and raw-skinned, he was led out of the burning building and pushed into a waiting truck.

Babar put in a triumphant call to the secure red phone in Prime Minister Khaleda Zia's office. "She was very excited," he recalls. She still is. In an interview with TIME, Zia purrs over how the war against radical Islamists is going. "We've broken their back," she says. "We will catch all of them. They'll get life sentences, or death."

Zia can be forgiven for a little crowing. At the best of times, governing Bangladesh is one of the toughest political challenges on earth. Its 144 million people are crammed into a country the size of New York State, with 70 million of them living on less than $1 a day. As the world's biggest delta, Bangladesh is also plagued by floods and cyclones, and by the steady poisoning of tens of millions of people who drink water contaminated by naturally occurring arsenic.

Man hasn't done Bangladesh many favors either. The country was born from the ruins of East Pakistan 35 years ago after a war of independence in which India-backed nationalists—unhappy at being ruled from what was then West Pakistan—fought Islamists loyal to Islamabad. Three million people were slaughtered in eight months before the Pakistanis conceded. Those were the days before truth and reconciliation commissions and international criminal tribunals, and the world left Bangladesh largely alone to heal and rebuild. Success has been limited. Democracy is strangled by a poisonous political war between Zia's right-of-center Bangladesh National Party (B.N.P.) and the left-leaning Awami League. Rejecting any notion of bipartisanship, both parties seem to keep the nation perpetually on the verge of chaos, alternating between state repression or crippling national strikes aimed at toppling the government, depending on who is in power. With politics often reduced to little more than a big brawl, violence infects much of daily life. Gangs armed with barbers' razors roam city streets, extortion is widespread, beatings are routine.

A TIME reporter who traveled to Rajshahi to interview a lawyer found on arrival that the man had been murdered. Bangladesh's courts, police and bureaucracy, moreover, are so weak that the country has come last in Transparency International's world corruption index five years in a row. Zia's most popular initiative has been forming the R.A.B., a police force that draws support in part for its willingness to kill. "It's been a crazy few years since I've been here," says Larry Maramis, the U.N. Development Program's deputy resident representative. "The country could easily have fallen into being labeled a failed state."

The scale of the Aug. 17 blasts—when hundreds of bombs were detonated in an hour—demonstrated how close Bangladesh could have come to falling apart. The ingredients for disaster were all there. While the country was founded on secular principles, a Western diplomat in Dhaka says it "has become noticeably more pious in the last few years" due to an explosive growth in radical madrasahs funded by Middle Eastern charities. It doesn't help that Bangladesh lies on a gun-smuggling route from East Asia; in April 2004, police discovered a boat in the southern port of Chittagong unloading enough AK-47s, grenades and ammunition to fill 12 trucks that were presumably destined to deliver the ordnance to insurgent groups in Bangladesh and possibly beyond. Responding to scattered reports of Islamic fighters from overseas using Bangladesh as a safe haven, the then U.S. State Department coordinator for counterterrorism, Cofer Black, warned in the fall of 2004 that the country could become a "platform to project terror."

Until the August bombings, however, Zia's government had denied the presence of Islamic extremists in Bangladesh. The opposition accused her of avoiding the issue because two hard-line Islamic parties, the Jamaat-i-Islami and Islami Oikya Jote, were partners in her ruling coalition. Zia insists the government's inaction was merely due to a lack of information. "We did not know they were there," she says of the militants. "After the Aug. 17 bomb blasts, we knew."

And they acted. Zia made combating the insurgency the defining mission for Home Minister Babar and the R.A.B., formed in 2004 from 9,000 top officers in the military and police. The Bangladeshi authorities solicited forensic help from the FBI and Scotland Yard, which was particularly interested in a May 2004 bomb attack that injured British High Commissioner Anwar Chowdhury; the R.A.B. also exchanged information with Interpol and Western intelligence agencies. Meanwhile, Zia demanded, and received, public support for an antiterror drive from Bangladesh's religious leaders and from her Islamist coalition members. The government also targeted bank accounts operated by suspect Islamic foundations in order to cut off funding to terrorists.

In addition to Bhai's capture, this antiterrorism campaign has led to nearly 1,000 arrests over the past eight months. Five of the seven top leaders of one terror group, the Jama'atul Mujahideen Bangladesh, have been caught, including Bhai's alleged co-conspirator Sheikh Abdur Rahman. Only two months ago, says the Western diplomat, "I was telling people back home it was just a matter of time before we had the first car bomb or first attack on a foreigner." The "nightmare scenario that could have unhinged the entire country," he adds, was for terrorist attacks to escalate during what is already expected to be a tense general election in early 2007—but that now seems "pretty remote. What we're seeing looks like the implosion of the entire [militant] organization."

Bangladesh, dubbed in the 1970s by Henry Kissinger as a "bottomless basket," is making surprising progress on other fronts, too. According to the U.N.D.P., the country now scores higher than neighbor India on several key barometers of social development, such as infant mortality, child vaccination, and employment of women—a striking turnaround over the past decade or so. The country's much-praised microcredit scheme, operated by the Grameen Bank, has lent an average of $120 each to 5.8 million people. And the government says 100% of young children are now enrolled in primary school, and that girls at last have equal access to education—goals that Zia, as a woman leading a conservative Muslim nation, had made a priority. "If we want to progress as a country, to remove poverty and spread awareness of family planning, we have to give [girls] equal rights," she explains.

The economy is looking up, too. GDP has grown by at least 5% for three years running, and the Asian Development Bank predicts that growth will hit 6.5% in 2006. Foreign direct investment rose from $138 million to $454 million in the first six months of last year compared to the same period the previous year. The number of cell-phone users rose by 144% in a year. And Goldman Sachs has rated Bangladesh as one of 11 developing nations that, in the long term, could emulate the success of China, India, Brazil and Russia. Mahmudur Rahman, Zia's executive chairman of the Government Board of Investment, can scarcely hide his delight, describing Bangladesh's recent economic success as "nothing short of a miracle."

That might be overstating it. But Christine Wallich, World Bank country head, says that in the past 12-18 months international opinion has indeed gone through a sea change. Bangladesh, she says, is now seen as "the little engine that could." Dramatic proof of that comes in plans by India's biggest business group, Tata, for a $2.5 billion investment in Bangladesh in steel, gas, coal and power. If it proceeds as planned, that would exceed the total foreign direct investment the country has attracted since independence. Wallich says the effect on Bangladesh of such a vote of confidence would be "transformative." Group chairman Ratan Tata says that while the deal makes good business sense, he hopes it could also kick-start the country. "If somebody doesn't make a move," he told TIME, "Bangladesh will always remain where it is today. Somebody has to make a leap of faith."

Salim Chaklader, 45, is part of the rising tide of Bangladeshis who have escaped from subsistence living and joined the happier ranks of the urban middle class. Born in a village outside Dhaka, he and his family moved to the capital in 1973 and set up a shop importing cloth from Thailand and China. The family now has six shops and 40 employees, and Chaklader hopes to send his two sons, 18 and 16, to university. "We're pretty confident of the future," he says. His conviction is echoed by Alan Rosling, executive director of Tata Sons and a prime mover behind Tata's investment in Bangladesh. "There is poverty," he says, "but there's also a fast-developing middle class, which makes it an attractive market. People tell us we're taking a big risk. But we've had a long, hard look at Bangladesh and while, yes, there are issues, there's nothing we see there that we don't see in most countries."

Rosling, deep in negotiations with the government over Tata's investment, is coy about specifying the "issues." Chaklader is less diplomatic. None of his confidence in the country's future, he says, derives from its political leadership: "It's small businessmen like me that boost growth. I've given a living to 40 families. The politicians just get rich." To the average citizen, claims Chaklader, the primary function of the state can seem to be extracting bribes. "I pay a $30 bribe for a telephone line. I pay another $50 bribe for my trading license. When I put my children in school, I had to give a $100 'donation.' These are not people that are thinking about the progress of the country." Chaklader fingers corruption, and the sharply uneven development that accompanies it, as the main cause of militancy. The swanky new apartment blocks, gelato houses and Thai restaurants in Gulshan, Dhaka's smartest neighborhood, he says, are a cause of frustration and alienation for many less fortunate Bangladeshis. Indeed, Jamaat-i-Islami explicitly appeals to that dissatisfaction in its party literature, casting its leaders as "honest men" working for a more equitable distribution of wealth. "A lot of people are deprived," says party spokesman Mohammad Kamruzzaman, "and so our support is increasing."

The bilious feud between Bangladesh's two leading women also hobbles the country. Asked about the hostility between her and Awami League leader Sheikh Hasina, Zia replies: "Ask her." For her part, Hasina accuses Zia of everything from staging "a drama" with the militant arrests to secretly being behind an attempt to have her assassinated in 2004 when a bomb killed 22 people at an Awami League rally. Politics in Bangladesh has always been a highly personal and perilous blood sport. Zia's husband, former President Ziaur Rahman, was assassinated in May 1981; Hasina's father Sheikh Mujibur Rahman, leader of the independence movement and the nation's first free government, was killed along with much of her immediate family in a military coup in 1975.

This history of personal tragedy has intensified the distrust and recriminations that characterize Bangladeshi politics. In March, Zia took a TIME correspondent by helicopter to a public rally at Pabna, a town west of Dhaka, to witness the popular support she attracts. The crowds were indeed impressive, even adoring, throwing themselves over fences, spilling into rivers and falling out of trees as they raced to catch a glimpse of the Prime Minister. But the day was also notable for the extravagant venom of Zia's speeches. She accused Hasina's party of bringing terrorism to Bangladesh, running a national network of criminal "godfathers," and being linked to the arrested militant leaders. In an interview the previous night at her home in Dhaka, Hasina spoke of Zia as the mastermind behind the Islamist conspiracy—"it's her baby," she said—and accused her Bangladesh National Party of torture, murder and rape. Needless to say, each of the women dismisses the other's allegations.

The price of this political hatred is incalculable because the instability spills over into the economy. "It's the single biggest issue holding back development," says the World Bank's Wallich. Even the Board of Investment's Rahman agrees: "The intensity of the political rivalry is definitely hurting the nation." It erodes faith in state institutions, which are co-opted into the fight at the expense of governance. The gloves-off bitterness also makes almost anything acceptable in Bangladeshi politics. Both the B.N.P. and the Awami League employ violent student wings, and both parties have wooed fundamentalists over the years to help defeat the opposition. Many B.N.P. members even allied themselves publicly with Bangla Bhai in his earlier days when he became an underworld hero by allegedly killing extortionists operating in the country's lawless western badlands. Asked about these embarrassing links, Home Minister Babar is visibly uncomfortable: "You have to understand that this was only local criminal activities. Bangla Bhai was fighting criminals. It wasn't jihad then."

Perhaps the biggest cost of the political feuding is that 35 years after its bloody birth, the country's tortured soul remains unhealed. Neighbors, colleagues, even members of the same family who support different parties commonly refuse to speak to one another. Truth is often lost in the chasm between these divisions. Depending on who you talk to, the arrest of a journalist is an attack on press freedom or the welcome detention of a professional blackmailer; a new flood-defense project is evidence of good governance or of pork-barrel corruption; even tax evasion can be hailed as a good thing if it keeps the money out of a particular government's hands.

Bangladesh may never truly leave behind this legacy of bloodshed, corruption and distrust. But in what was once one of the sorriest places on earth, there is new hope. From the slow but marked gains in foreign investment to Zia's decision to fight Islamic militancy head-on, Bangladesh has achieved progress that few outsiders, or even Bangladeshis, believed possible a few years ago. "All we need," says University of Dhaka Professor of Economics Abul Barkat, "is five years of good governance, and we'd be away." Surely no nation ever deserved it more.

—With reporting by Sayem Mehmood/Rajshahi

Bangladesh: Investment

20 textile units shift production units to Bangladesh for cutting production cost

ISLAMABAD, March 28 (Online): As many as 20 textile units have finally decided to shift their production units to Bangladesh in an aggressive move to cut their production cost, which they say is almost half of that of Pakistan as Bangladesh has offered a tax-free investment opportunity to the Pakistani textile industry, sources said on Monday.

They said the offer of a tax free-investment has attracted some of the prominent textile industrialists, who now plan to shift their production units.

Representatives of different textile associations claimed about 20 units of bed linen, readymade garments and knitwear had finalized plans to shift to Bangladesh and it could take a month or two to set up or acquire any of the already running units in Bangladesh.

However, the situation has pushed the authorities of government of Pakistan to offer incentives to the over $8 billion-export industry, otherwise it could trigger capital flight from the country.

Sources said major interest of the textile units, planning to operate from Bangladesh, was to get broader market access, as that country did not face tariff barriers like Pakistan.

"So the issue is not the production cost, it is the market share, which one can get better while exporting textile goods from Bangladesh compared with Pakistan," they added.

The Bangladesh government offered a tax-free investment environment to the Pakistani textile industry as the developing Asian country is eyeing $1 billion foreign investment within a year.

The Bangladesh offer did not go unheard as a 10-member delegation of leading bedwear manufacturers and exporters visited Bangladesh in early November 2005 and held a series of meetings at the Bangladesh Board of Investment, the ministry of commerce and the ministry of industries.

The beadwear exporters witnessed a sharp decline in orders from European countries after the EU in March 2004 imposed a 13.1 percent anti-dumping duty on imports from Pakistan, claiming the cheap Pakistani products were harming the local textile industries.

Pakistan, which entered the WTO regime in January 2005, is among top five textile goods exporters of the world. On an average, the country exports textile products worth more than $8 billion every year-end.

Source: paktribune.com
Monday March 27, 2006