Chamber News DCCI Review December 2019 - Dhaka Chamber of Commerce ...
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Chamber News DCCI Review December 2019
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Chamber News DCCI Review December 2019 2
Editorial Note DCCI Review December 2019
Capital shortfall
The capital shortfall that 12 banks are reported to have pressure on the banks to maintain the capital-to-risk
been mired in suggests that the issues of proper loan (weighted) assets ratio at 12.5 per cent, keeping to the
pricing have largely remained ignored. This also suggests Third Basel Standards, or Basel III.
a poor focus on issues of non-performing loans and
Many bankers think that an increase in the amount of non-
their recovery. The 12 banks are reported to be faced
performing loans is the main reason for the weakening
with about Tk 176.58 billion in capital shortfall, as of
capital base of the banks that has resulted in the capital
September 2019. After the April-June quarter that year, it
shortfall at hand. Bangladesh Bank data show that the
was 11 banks that had faced about Tk 160.01 billion in
amount of loans in default has increased by 23.83 per
capital shortfall. Reports in January 2019 show that only
cent, or Tk 223.77 billion, in the first nine months of
nine banks — six state-owned and three private — faced
2019, taking the amount of non-performing loans to
capital shortfall.
Tk 1,162.88 billion in September 2019 from Tk 939.11
The 12 banks in question are Community Bank billion in December 2018.
Bangladesh, which was not on the list of the previous
Economists as well as bankers have, therefore, come
quarter, Sonali Bank, ICB Islami Bank, Janata Bank, Agrani
to blame the government’s flawed policies such as
Bank, Bangladesh Krishi Bank, Rajshahi Krishi Unnayan
the introduction of loan rescheduling on easy terms
Bank, Bangladesh Commerce Bank Ltd, AB Bank, BASIC
and a lenient approach towards large, especially
Bank, Rupali Bank and the National Bank of Pakistan.
wilful, defaulters as major reasons for an increasing
Of the beleaguered banks, the capital shortfall in amount of non-performing loans. It is believed that the
Bangladesh Krishi Bank stands at Tk 90.78 billion, the announcement of the loan rescheduling policy and its
highest, against its capital-to-risk (weighted) asset of Tk subsequent adoption sent out a wrong signal that the
186.21 billion; the second highest of shortfall is in the government goes easy on loan recovery. While defaulters
state-owned Sonali Bank, with Tk 20.56 billion against willing to repay their loans may have stopped so doing,
its capital-to-risk (weighted) asset of Tk 568.64 billion. new borrowers might have chosen to follow suit.
Even Community Bank Bangladesh, set up in 2019, faces
Capital shortfall, considered a serious issue as it weakens
Tk 27 million in capital shortfall. Although the remaining
bank’s resilience, erodes depositor’s confidence and
46 banks have managed to maintain an adequate capital
other partners in the banking sector, and even outside,
against their risk (weighted) assets, putting up a capital
feel insecure in dealings with such banks. While capital
surplus of Tk 142.47 billion, the 12 banks with capital
shortfall stops banks from running with efficiency, it
shortfall have put at risk the banking sector on the whole.
also adds to the operating cost and reduces profitability.
The banks at hand have failed to maintain the minimum Partners outside the country may not feel confident about
capital adequacy ratio, which is critical in ensuring such banks and letters of credit opened with such banks
that they have enough cushion to absorb a reasonable may not be honoured in some cases. Inter-bank borrowing
amount of losses before they become insolvent and lose also becomes dearer for banks facing capital shortfall.
depositor’s funds. The overall capital-to-risk (weighted)
If the problem of capital shortfall is not attended to, early
assets ratio in the banking sector declined to 11.65 per
and in earnest, the existences of the banks may be at stake,
cent, as of September 2019, from 11.73 per cent three
finally leading to bankruptcy. Banks should, therefore,
months before.
shore up the issues of any drastic increase in loans and
The capital-to-risk (weighted) assets ratio in the banking advances, asset quality, restructuring non-performing
sector, however, increased to 11.41 per cent in March loans with less than required down payment and no
2019 from 10.5 per cent in December 2018. The protection against non-performing loans in disguise to
Bangladesh Bank has, in such a situation, mounted improve on the situation r
3
BUSINESS KALEIDOSCOPE
Entrepreneur…Intrapreneur…and ‘Ultrapreneur’
Electricity tariff hike move- challenges private sector prosperity
Energy is the much needed resource for all economies The current reserve and supply of natural gas looks slim
across the world. Affordable and uninterrupted energy is and downward. We are undergoing 1000 MMCFD gas
critical for industrial, trade development and economic supply shortage. Despite electricity production capacity
growth cycle of Bangladesh. Energy related economic increase, the gas based power generation plants are
operations enshrining power generation, transport, underperforming and electricity production trend remains
industry, commercial activities, fertilizer and domestic unutilized. On the other hand, many gas intensive
consumption largely depend on natural gas. Power industry investment is not expanding as expected due to
sector is the largest natural gas user followed by industry primary energy shortage.
and captive power in terms of consumption. It is worth
To meet the soaring gas demand, Government entered into
mentioning that with the gas shortage, power generation
import regime of expensive Liquid natural gas. Initially,
capacity reached to 22500 MW brining almost 92%
1000 MMCFD was planned to import and against that
people under electricity network.
600 MMCFD is being imported to ease the gas demand.
Our industry to GDP ratio reached 35.14% with 23.01% In this circumstance, 32.8% gas tariff hike was made in
manufacturing sector contribution indicates efficient 2019 to adjust the incremental gas tariff. Since natural
energy use and manufacturing expansion. Indeed, the gas is in the backward linkage of electricity production,
incremental power generation trend helped to a large the gas tariff may impact the power generation cost and
extent our economic growth evidencing 8 percent growth supply.
regime. Bangladesh is going through the economic Ahead of long-held vision of economic graduation by
transition towards economic graduation into a developing 2024, emergence into 28th largest economy by 2030 and
country and during this phase sustainable power supply UN SDG achievement, our investment to GDP ratio need
and tariff are inevitable. Private and public sector account to be enhanced around 40% from current ratio of 31%
for 55% and 45% respectively of total power generation with double digit GDP growth. To meet these investment
of country as of now though the situation may change targets, we need to obtain energy security. According
due to deep engagement of private sector. to revised Power Sector Master Plan (PSMP), the power
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BUSINESS KALEIDOSCOPE
demand will be increased to 27.4 GW in 2030 and Taking this entire private sector and economic state into
51 GW in 2041 to steer our game-changing economic account, hereafter some observations on power sector
visions. development and relevant issues are forwarded:
Against the escalating power production cost, all bulk • Coal reserve of Bangladesh is 7962 Million Mt
and retail electricity distributors and transmission equivalent to 70 TCF gas and this coal needs to be
companies claim the rationale of electricity tariff hike to used as an alternative cheaper fuel to produce power
balance operation cost. In the brief electricity tariff hike to rationalize the cost of power production and add
initiative, we have found that estimated 129924 million leverage in fuel mix. As a fuel importing country,
KWh electricity will be procured in 2020. As the main we have to rationalize power production cost using
producer and distributor, BPDB claimed that in bulk tariff alternative fuel mix.
level loss in selling price incurred ranging from TK. 1.50
to TK.2.28 per KWh through their bulk sale to distribution • Combined cycle power plants are more efficient
companies and system loss remained within 7%. BPDB for Bangladesh. Using combined cycle additional
also claims total distribution expense shortage around TK. electricity can be produced by 10-15%. All government
526 million with operation cost. plants need to be remodeled to combined cycle power
plants for operational efficiency. Dual fuel peaking
All other distribution and transmission companies also plants may be used. The declining trend of legacy gas
demanded tariff hike as they are dependent on purchase also threatens power generation cost and stimulate
from BPDP. PGCB claimed 50% transmission tariff hike power purchase tariff.
as their transmission network is not strong and sufficient
enough to support entire supply system. As a whole, BPDP • Off-shore blocs need to be allocated for new seismic
claimed tariff loss of TK. 8560 crore. Different Private survey and exploration works to improve gas supply.
sector stakeholders i.e. industry, consumer associations And, Local Exploration and Production companies
also raised deep concern on the potential impact of tariff need to be well-equipped technically and financially
hike in public hearing as plan of electricity tariff hike to better function gas production.
within 6 month time of gas tariff hike is a big blow to
• Long-term and predicable energy tariff needs to be
local industry.
determined for the greater interest of investment and
9. 82% lowest Private sector credit flow in a decade, economy and to keep the electricity tariff minimum.
consistent fall in capital machinery import and export
• New transmission and distribution lines need to be
trade indicate investment slump across the country. This
expedited and private sector can be engaged in these
proposed electricity hike will affect our competiveness
initiatives.
both in home and global market. Almost all power
intensive manufacturing industries may be adversely • IPP and RPP agreements can be revised and made
affected especially SME sector, steel re-rolling, textile timely and reduced corporate tax rate can be offered
sector may face average 5% to 8% production cost height. to support them instead of huge subsidy.
Especially, Small and medium business using 50 to 100
Kwh power will be severely affected. Echoing the pro-business promise of the Government,
private sector would like
In a cross-country power tariff scenario, Bangladesh has to urge for low cost energy
an advantage in competitive tariff with USD 0.09 cent
supply and innovative
compared to Thailand, Indonesia, India and Pakistan as
solutions to rationalize the
one of the salient strength of investment attraction which
power tariff. Indeed, low cost
will no longer be existent. This tariff hike will slim the
relocation of sunset industries from Japan, Korea and and uninterrupted electricity
China, hurt the massive infrastructure work, export supply is the enabler of private
competiveness and low cost-of-living and doing business. investment led economic
There has been tariff escalation in several occasions since growth towards long-cherished
2010 and if this hike continues we will lose our position economic vision of being a
from global competiveness map. developed country by 2041.
President’s Pick of the Month
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Chamber News DCCI Review December 2019
Shams Mahmud elected DCCI President for 2020
DCCI holds 58th AGM
Shams Mahmud N K A Mobin FCA, FCS Mohammad Bashiruddin
President Senior Vice-President Vice-President
Shams Mahmud has been elected also on the Board of Directors Bangladesh. He has been the
President of the Dhaka Chamber of of the Bangladesh Textile Mills’ government-nominated director
Commerce and Industry for 2020 Association, the Dutch-Bangla on the Biman Bangladesh Airlines
while NKA Mobin, FCA, FCS and Chamber of Commerce and Ltd board since 2016. Mobin is a
Mohammad Bashiruddin have been Industry and Vice-President of the member of the Gulshan North Club,
elected Senior Vice-President and Bangladesh-Philippines Chamber of the Uttara Club, the Baridhara Club
Vice President respectively for the Commerce and Industry. He received and the Kurmitola Golf Club. His
2020 tenure. the National Gold Export Trophy in expertise covers top management
2011–12, 2012–13 and 2013–14 and leadership, financial management
The new Board of Directors took over
the Silver Export Trophy in 2017–18. and project management skills, ERP
charge at the 58th annual general
He was awarded the Highest Export solutions and company secretarial
meeting of the DCCI held in its
Award by the Bangladesh Textile practices.
auditorium on December 23, 2019.
Mills Association in 2010–11.
The newly elected Vice-President
The newly elected directors are
The newly elected Senior Vice- Mohammad Bashiruddin was born
Arman Haque, Md Shahid Hossain,
President NKA Mobin is the in a respected Muslim family in Old
Md Zia Uddin, Monowar Hossain
Managing Director and CEO of Dhaka in 1962. Bashir is involved
and Engr Shamsuzzoha Chowdhury.
Emerging Credit Rating Ltd and has in food and bakery business,
The newly elected President Shams been engaged in credit rating of agribusiness, real estate development,
Mahmud is an eminent and leading corporate business houses, banks and import and restaurant chain. He is
business entrepreneur in the textile financial Institutions and insurance the Managing Director of Capital
and apparel sector. Mahmud is a business since 2009. He completed Agro Aqua Enterprise Ltd, Capital
Capstone Fellow of the National his BBA and MBA in finance from the Siraj Centre Shopping Mall, Canary
Defence College. He is the Managing University of Dhaka. He completed Ltd and Digital Agro Industries Ltd.
Director of Shasha Denims Limited, his triple EMBA from Stockholm
He is also director of Capital
Shasha Garments Limited, Shasha Business School, Sweden, the
Confectionery, Capital Consortium
Spinning Ltd. and Shasha Textiles National University of Singapore and
Ltd and Bamboo Castle Fast Food
Limited. INSEAD in France.
Shop. He is a member of the Rugby
He is the Honorary Consul of He is currently the Vice-President Federation and former executive
the Federal Democratic Republic and fellow member of the Institute committee member of Dhaka Samity r
of Ethiopia in Bangladesh. He is of Chartered Accountants of
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Chamber News DCCI Review December 2019
Skills development must to tackle automation job cut
DCCI holds seminar on skills development
Minister for Labour and Employment Begum Monnujan Sufian, MP (fourth from left) speaking at a seminar on “Future Skills Development
Required for Bangladesh” held on December 7. Principal Secretary, Prime Minister’s Office Md. Nojibur Rahman (fourth from right), DCCI
President Osama Taseer (third from left), President, Bangladesh Employers’ Federation Kamran T. Rahman (second from left), Senior Vice
President of BGMEA Faisal Samad (right), Additional Director General of Bureau of Manpower, Employment and Training Sheikh Rafiqul
Islam (second from right), Chairman of BSCIC Md. Mostaque Hasan (third from right) and Member of National Skills Development Authority
Mohammad Rezaul Karim (left) were also present.
The Dhaka Chamber of Commerce sector alone creates around 32.52 polytechnic institutes and allowed
and Industry organized a seminar on percent of jobs. the private sector to come forward
“Future Skills Development Required to establish more such institutes.
He said that traditional job
for Bangladesh” on December 7, She said that according to ILO, two
requirements will no longer be
2019 at the Sonargaon Hotel, Dhaka. million fresh educated young people
eligible and the criteria will be
enter the job market every year. But
The Minister for Labour and replaced with the knowledge of
to accommodate them in this 4IR
Employment Begum Monnujan technology, 4IR, robotics, internet
of things, big data, etc. “To create a transition period, “We have to train
Sufian, MP was present as chief guest
skilled work force that will be able them and develop their skills.
while Md Nojibur Rahman, Principal
Secretary, Prime Minister’s Office was to take the challenges of 4IR, we Our academic curriculum cannot
present as guest of honour. Kamran T must create an industry-academia create skills for jobs.” She said
Rahman, President of the Bangladesh collaboration from now and without that the manufacturing sector was
Employers’ Federation, was present any delay.” gradually adopting technology which
as special guest. He also said, “Our NRBs send may cut jobs but it will create more
$16.42 billion and contribute to innovative jobs as well.
The outgoing DCCI President Osama
Taseer in his welcome address said, our economy but countries such as Md Nojibur Rahman urged the
“In Bangladesh, we have a work India, Mexico and the Philippines formulation of a needs-based
force of 63.5 million young people earn more remittances through their
curriculum coming out of the
who contribute to our economic skilled work force.” Future jobs will
traditional system of education to
development.” He also said that have more high-tech orientation. “We
cater to the demand of the industry.
the Fourth Industrial Revolution has need to give significant importance
The world is going fast and adapting
changed the dynamics of employment to re-skilling and up-skilling to ready
to newer technological shift, so “We
generation. He said 6.58 percent of our work force for future jobs.”
should not waste our time.” He said
the total work force were engaged in Begum Monnujan Sufian said that the that according to a2i, 5.5 million
the industrial sector and the apparel government had established a few people in five sectors, which is 47
7
Chamber News DCCI Review December 2019
percent of the total work force, may General of Bureau of Manpower, The Fourth Industrial Revolution has
lose their job because of automation Employment and Training Sheikh already started. “We do not need
by 2041. “Skills development, re- Rafiqul Islam and BSCIC Chairman to worry about any job cut because
skilling, up-skilling, technology Md Mostaque Hasan also spoke as the 4IR like other revolutions that we
adaptation, training and research and panel discussants. saw in the past will create more job
development are some of the main opportunities.
areas where we should focus now.” The BSCIC chairman said that the
The agriculture sector is vast which agency would establish 50 industrial We just need to formulate a
will create more job opportunities parks by 2030. Faisal Samad technology-based curriculum and
but it needs to be modernized. underscored the importance of proper arrange technology-based training,
training for female apparel workers and skills development of the existing
Kamran T Rahman, President of the
to create leadership qualities among workers.”
Bangladesh Employers’ Federation,
them. Sheikh Rafiqul Islam urged
said that 80 percent of jobs are created DCCI Vice-President Imran Ahmed
more budget to conduct research and
in the industrial sector. He also offered the vote of thanks.
development both in the public and
stressed the need for diversification
private sectors.
of potential exportable items rather DCCI Directors Engr Akber Hakim,
depending solely on apparel. He also Mohammad Rezaul Karim, Member Alhaj Deen Mohammad, Enamul
said that skilled work force is one of of the National Skills Development Haque Patwary, Kh Rashedul
the main components that can attract Authority, presented the keynote Ahsan, KMN Monjurul Hoque, Md
foreign direct investment. paper. He said that 60 percent of total Rashedul Karim Munna, Mohammad
Senior Vice-President of the BGMEA work force in the apparel sector will Bashiruddin, Nuher L Khan and SM
Faisal Samad, Additional Director come under automation by 2041. Zillur Rahman were present r
DCCI donates blankets to cold-hit people
The Dhaka Chamber of Commerce
and Industry under its CSR
programmes donated warm clothes
and blankets, as it does every year,
to social organizations and trade
bodies for their distribution among
the distressed suffering cold across
the country.
The outgoing DCCI President Osama
Taseer handed over the clothes and
blankets to representatives of the
Dinajpur Chamber of Commerce and
Industry, the Nilphamari Chamber
of Commerce and Industry, the
Lalmonirhat Chamber of Commerce DCCI President Osama Taseer (fourth from left) seen handing over warm cloth to President
and Industry, the Chapainawabganj of Dinajpur Chamber of Commerce & Industry Suja Ur Rob Chowdhury (fifth from left) on
Chamber of Commerce and Industry, December 14. DCCI Vice President Imran Ahmed (fifth from right), Directors Shams Mahmud
Anjuman Mafidul Islam, Dhaka (sixth from right), Mohammad Bashiruddin (third from left), Hossain A Sikder (fourth from
right), Alhaj Deen Mohammad (third from right), Enamul Haque Patwary (left), former Senior
Mohanagar Samity, Dhaka Shilpa Vice President Alhaj Abdus Salam (second from left), former Vice Presidents M Abu Horairah
Malik Samity, Mizbah-ul Ulum (second from right) and Absar Karim Chowdhury (right) are seen in the picture.
Madrasha, Moitree Sangha, Hossai
Ali-Hasna Welfare Foundation, etc. DCCI Vice-President Imran Vice-President Alhaj Abdus Salam,
Ahmed, Directors Shams Mahmud, and former Vice-Presidents M Abu
The DCCI President called on all Mohammad Bashiruddin, Hossain Horairah, Absar Karim Chowdhury
well-to-do people of society to stay A Sikder, Alhaj Deen Mohammad, were present r
beside the cold-hit distressed people. Enamul Haque Patwary, former Senior
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Article
Chamber News DCCI
DCCI Review
Review December
December 2019
2019
Transfer of ownership of export bill
M S Siddiqui of title affects the parties’ rights in the event of total or
Legal Economist partial loss and damage or destruction of the goods. These
e-mail: mssiddiqui2035@gmail.com
are regulated by the “Incoterm’’ issued by International
I
n international trade, two important transfer of Chamber of Commerce and accepted and adapted by all
ownership facilitate cross border trade. On transfer stakeholders involved in international trade.
is for consignment and another is the payment or
The other part of the sales contract is the consideration or
consideration of the contract for export.
payment for of the consignment. The payment to be made
The transfer of ownership of consignment is specified by cash in advance, deferred payment for specified time
in the sales contract very explicitly. The cross border and specific instrument of payment such as open account,
sales contract certain specific points of products, origin, documentary collection/cash against documents, or letter
price, form and date of payment, delivery period, etc. of credit, revolving letter of credit etc. The right over the
The transfer of ownership of consignment is the point of payment also transferable. In all export transactions risk
accrued of payment. is a major consideration which needs to be minimised in
all business dealings.
The transfer ownership takes at a point of time and place
as agreed following the international law and practice. Some exporters, particularly smaller operations need
In cross border trade, it is specified in the international immediate cash after export/ sale on the other hand buyer
sale contract by statements like: Seller and buyer agree /importer benefited of delay of the payment. These two
that (a) title for the contact of goods will pass to the different option are well supported by Invoice discounting
buyer when the consignment have been shipped from the or sale of Invoice to any FI or finance company. The best
seller´s premises (ex-works), (b) that title for the contact of solution is Bill discounting or Invoice sale.
goods will pass to the buyer when they have been handed
over to forwarding agent at port of shipment (FOB) and These FIs provides collection service or purchase /
title will transfer while boarded on transport at certain discount Export Bills under L/C to allow exporters to use
port (C&F)”, or (c) tile will remain unchanged until the the money before actually receiving payment or before
consignment reached the country of destination and sale the payment due date from an overseas buyer.
by the importer /distributor (Consignment sales).
The FI and third-party financial company acting as
International trade has another contract between the the collector of directly from the buyer of goods/
Exporter and shipping (transport) company. This contract services — when the invoice is due. The option enables
reflected in the bill of loading (B/L) issued by Shipping the business owners to finance immediate working
company or their agent. International bill of loading are capital needs or improve cash flow situation by availing
air waybill, ocean bill of lading, rail bill of loading or credit based on bill discounting / account receivables.
truck bill of loading considering the mode of transport. Such a short term loan is unlike traditional bank loan. The
The document also includes Invoice, certificate of origin, traditional bank loan has many formalities and usually
packing list and others as per contract. should be secured by mortgage of property or other
In case of shipment by sea, there are two types: a straight valuables. In case of bill discounting, the FI facilitate
bill of lading, which is non-negotiable, and a negotiable the service to recover of bill from overseas buyer since
or shipper’s order bill of lading. The ownership of Bangladesh Foreign Exchange regulating act 1947 make
the consignment also transferable through transfer of the exporter liable for recovery of foreign exchange of all
ownership of B/L. The negotiable B/L can be bought, exports. Exporter must ‘get’ the payment within 4 months
sold, or traded while the goods are in transit. Transfer of export as per law.
9
Article
Chamber News DCCI Review
DCCI Review December
December 2019
2019
The payment terms of sales contract usually have terms
of deferred payment. The exporter can discount the
documents of payment for immediate payment. There are
many methods of the Invoice discounting is a different
way of obtaining an advance on invoices by discounting
or complete transfer of right over payment against the
Invoice. Most of the Financial Institutions are providing
discount of Invoice to their customers. Many overseas
institutions also pay advance to exporter and take the
responsibility of collection of payment on non-recourse
basis. In that case the ownership of invoice transferred to
the financing company.
whether by way of damages or otherwise, shall vest in
This transaction is a modern financial product of Banks, the transferee, whether such notice of the transfer as in
Non-Bank Financial Institutions and international trade hereinafter provided be given or not.
finance companies. Their transaction agreement has
The Financial trading companies operating in Bangladesh
three parties. The FI pay to the exporter advance against
were dealing such transaction without explicit law or
document and collect documents from the buyer. These
policy of legality of transfer of right over the invoice. The
international companies or financial institution extend
conservative foreign exchange law has indirect restriction
the advance against ownership of Invoice. They use the
on many transactions of foreign currency of modern days.
legal right over Invoice as security. They may even take
Bangladesh Bank have filled up the legal gap through
legal action against buyer /importer for enforcement of
the FE circular no 43 dated 17 November 2019 titled
original sale contract between exporter and importer for
“Discounting of direct or deemed export bills – transfer
payment etc.
of right”.
The laws and policies of Bangladesh were silent about
It has granted general permission for assigning rights to the
such transfer of ownership on Invoice. Under section 3
dues at maturity of a usage bill of export from Bangladesh
of the Transfer of Property Act, 1882, an actionable claim
in favor of a license bank / financial institution abroad
includes a claim to an unsecured debt. But there is no
by paying usance bill in full, final and without recourse.
interpretation whether Invoice or Bill receivables are
The circular also referred to the instruction at paragraph
considered actionable claim.
25, Chapter 8 of Foreign Exchange Transactions (GFET),
There is no definition of movable property in Transfer of 2018, which also allowed the overseas correspondent
Property Act, 1882. Movable property has been defined in institutions under subsection (b) stating that The ADs may
the General Clauses Act,1897 to mean ‘property of every arrange fund against the discounting of usnace bills in
description except immovable property’. The Registration foreign exchange through their own OBUs/correspondent
Act, 1908 defines movable property to include property banks, financial institutions abroad or international
of every description except immovable property, but financing Institutions. The overseas correspondent should
including standing timber, growing crops and grass. include the international financial trading companies
who are playing an import role in global export trade
Section 130 of the Transfer of Property Act, 1882 provides
finance.
that, the transfer of an actionable claim whether with
or without consideration shall be effected only by the The policy will facilitate export finance and also easy
execution of an instrument in writing signed by the collection of outstanding export bill and boosts export of
transferor or his duly authorized agent, shall be complete the country.
and effectual upon the execution of such instrument, and
thereupon all the rights and remedies of the transferor,
10National Economy DCCI Review December 2019
SMEs significant contributor to growth
The economic growth and
sustainable development of a country
by a large measure depends on SME
development. Speakers made the
observations at the 23rd International
Conference for SMEs on “Achieving
Inclusive and Sustainable Goal
Through SME 4.0 by Promoting
SMEs” in India recently. The World
Association for Small and Medium
Enterprises organised the event,
supported by the MSME ministry of
India, at the WASME International
Secretariat, Film City, Noida.
Zillur Rahman and Associate Editor the backbone of a country and the
Senior Chief Executive of Ministry of of Economic Times Pranbihanga economic growth and sustainable
Business and Enterprise Mauritius AN Borpuzari were present and also development of a country depends
Oozeer inugurated the conference spoke. on SMEs development.
as chief guest and addressed the
opening session which was followed WASME Secretary General Dr Gyan The 23rd ICSME was aimed at
by WASME Excellence Award Prakash Agarwal gave the welcome promoting SME development
session. address while its Senior Advisor initiatives and integrating it with the
Shailendra Kumar presented the 2030 agenda of achieving Sustainable
India’s State Minister for Health keynote. Development Goals (SDGs) set by
and Family Welfare Ashwini Kumar
the United Nations. The conference
Choubey attended the WASME In his address Zillur Rahman, also
comprised six technical sessions on
Excellence Award session. Besides, Director of Dhaka Chamber of
economy, strategy, technology, work
Ambassador of Mauritius to Germany Commerce and Industry, presented
force of SME 4.0 and UN’s SDG.
Kheswar Jankee, Director of United the SME status of Bangladesh
Founding Chairman of KCC Group
Nations ESCAP Dr Nagesh Kumar, and stated how the SMEs could
Dr Sharad Kohli moderated the
Vice-President (chief in Bangladesh) contribute more to development of
programme r
of the World Association of SMEs SM different countries. He said SMEs are
Apparel sector lashed by giant waves
A tale of two halves sums up best to restructure their capital product diversification. Even after
how the garment sector, Bangladesh’s expenditure, operating expenditure four decades, the country’s garment
main export earner, fared in 2019. and supply chain. “Then they will sector is still stuck in basic items: still
In the first six months of the year, have a very good future,” he added. 73 percent of the shipments consist
apparel shipments fetched $17.05 of T-shirts, trousers, sweaters, formal
But the general sentiment of experts
billion. And the trend continued shirts and jackets.
and analysts is that the slowdown
into fiscal 2019–20, which began
in apparel shipment is a reflection There has been a slow graduation
on July 1. But from August exports
of the waning competitiveness of towards value-added and high-end
started dipping and the trend appears
Bangladesh’s garment industry. garment items for upscale customers
to be continuing. Yet $13.09 billion
was received between July and For instance, Bangladesh’s apparel in the Western world. Bangladesh is
November, down 7.74 percent year- exports dropped 6.67 percent still lagging behind in production of
on-year. between July and October whereas technical and smart clothing items,
its closest competitor Vietnam’s grew due to which it could not tap into the
“I consider this is a correction,”
6.41 percent. global market for hospital clothing,
said David Hasanat, chairman and
school uniforms and armed forces,
managing director of Viyellatex Vietnam is honing in on Bangladesh’s
worth billions of dollars.
Group, a leading garment exporter. position as the world’s second largest
Companies can take this opportunity apparel supplier by focusing on Garment exporters and sector analysts
11National Economy DCCI Review December 2019
though blamed the strength of the “It was a happening year for the But looking ahead, garment
local currency against the US dollar garment industry,” said Rubana Huq, manufacturers are expecting a better
as the main reason for declining president of the Bangladesh Garment year in 2020. “It’s difficult to project
shipments from Bangladesh. Manufacturers and Exporters’ the trend since the global market
Association, adding that the year saw looks volatile due to the emergence
One US dollar now exchanges of a number of factors,” Huq said.
a number of positive developments.
for Tk 85. Another reason for
diminishing shipments is over- The end to the deadlock to the The EU-Vietnam free trade agreement,
reliance on traditional markets, Accord’s phase out from Bangladesh the strategic move by China to offset
the impact of punitive tariff by
which can be construed as laziness and formation of the national
lowering prices and the emergence
or complacency. Shipments to the safety monitoring regime the ‘RMG
of new sourcing destinations are
traditional markets of the US, the EU Sustainability Council’ were major
becoming sources of concern for
and Canada are on the wane due to breakthroughs.
Bangladesh r
economic slowdown there.
“Our journey to sustainability
But the emerging markets are continued with pride,” she said, Govt plans single-digit
providing a ray of hope: garment adding that the number of green interest rate
exports to non-traditional markets factories crossed 100, 25 of which
grew to nearly $7 billion from were platinum LEED-certified. Some The Bangladesh Bank is set to raise
somewhere between $400 million 500 more are waiting for certification. the loan-deposit ratio by 1 more
percentage point as it plans to reduce
and $500 million in 2008.
But despite all investments made the interest rate for the manufacturing
India, China and Japan are showing in workplace safety, compliance, sector and increase lendable fund of
big potential, with shipments to the implementation of new wage structure banks. At the same time, the finance
Fareast Asian nation crossing $1 and green industrialisation the unit ministry is taking a measure to bar
billion. The government’s 4 percent price did not see much improvement. government entities from seeking
incentive for shipments to new export The unit price to the EU and the US more than 6 percent interest rate on
destinations accelerated the process. increased 2.22 percent and 5.57 deposits from banks.
percent respectively in the first 10 The concerted moves come as part of
The US-China trade war can be a boon
months of 2019 and yet the price the government’s efforts to give a shot
for Bangladesh as China has been
level remains significantly lower on a in the arm to the embattled banking
losing its export orders. However,
five-year comparison, she said. sector. Notices on the two would be
in this case, Bangladesh will have
to improve the business climate and The price of apparel imported by the issued very soon, Finance Minister
productivity at the factory level. In US from Bangladesh between January AHM Mustafa Kamal said. The loan-
the near future, duty concessions and October was down 2.20 percent deposit ratio is now 85 percent for
in international trade will vanish as from five years earlier, according to regular banks and 90 percent for
the country is set to graduate from the Office of Textiles and Apparel. Islamic banks.
the least-developed bracket to the The same happened for EU: 1.94 In other words, for every Tk 100 of
developing bracket. percent, according to Eurostat. deposit regular banks can lend Tk 85.
But soon, they will be able to give out
Tk 86 and Islamic banks Tk 91.This
will cause a surge in loanable funds
by about Tk 10,000 crore, Kamal
said.
The central bank will also issue a
notice to cap the interest rate on
manufacturing loans, which is set to
go down to single digit in a couple
of days.The development comes after
the central bank formed a seven-
member committee earlier this
month to come up with ways to bring
12National Economy DCCI Review December 2019
down the interest rate to single digit “The production cost in the apparel accounts are expected to be worked
as per an instruction from the finance sector increased by 30 percent in the up within the next couple of days, he
ministry. last four years. Similarly, the export added. For developing countries a
earnings have continued a downward budget deficit is not unusual as the
Banks now charge interest rates
trend in recent period,” she said. government needs to spend big on
between 12 percent and 14 percent for
industrial loans, which manufacturers The move will help manufacturers building infrastructure to shore up
deem excessive.The committee set up new industrial units and future economic activities.
headed by its Deputy Governor SM expand the existing ones, said The government meets the gap
Moniruzzaman submitted a report Rubana, also the managing director between income and expenditure
to the finance ministry and the BB of Mohammadi Group. But banks are
through domestic and foreign
board on December 24, based on in a panic because of the single-digit
borrowing obtained as loans or
which the notices will be issued. interest rate as it will hit their profit.
grants.But keeping the deficit within
The lift in loan-deposit ratio is a “Every bank will see a profit decline 5 percent is recommended, and is
positive move of the government, Zaid ranging from Tk 150 crore to Tk in fact considered international best
Bakht, a member of this committee 200 crore per year because of the practice.
and chairman of Agrani Bank, said. implementation of the lower rate,”
said Syed Mahbubur Rahman, In Bangladesh, when the budget
Banks’ loanable funds will increase
chairman of the Association of is drafted a 5 percent deficit is
as a result and their cost of funds will
Bankers, Bangladesh, a forum of projected. The actual deficit turns out
come down too. Their profit margin
managing directors of private banks. to be about 4 percent every year as
will not reduce significantly due to
“The economy will get a boost but the ministries and divisions fail to use
the single digit interest rate as banks
banks will fall into a crisis,” said up their allocated funds.
will get benefits from the central bank
and the government, Bakht said. Rahman, also the managing director
Finance Minister AHM Mustafa
of Mutual Trust Bank r Kamal acknowledged that revenue
About 50 percent of the government
deposits will be kept in private banks growth was slow.
and the interest rate will be 6 percent, Budget deficit goes over
“But the government’s expenditure
Kamal said. This will bring down the 5pc boundary also increased for the implementation
banks’ cost of funds r Budget deficit, which is when of some mega infrastructure projects.
spending exceeds revenue, is set It was capital expenditure, which
Industrial loans to cross the sensible perimeter of 5 will ultimately bring benefits to the
percent of the GDP in fiscal 2018–19 economy,” he said. As a result, budget
Businesspeople welcomed the for the first time in 12 years on the deficit could not be contained to the
central bank’s initiative, saying the back of ebbing collections of the tax previous limit.
measure will give a shot in the arm administrator. Revenue collection
of the industrial sector, giving them grew 10.67 percent last fiscal year “But, this is a one-off,” he said, adding
respite from the burden of higher against the target of about 46 percent, that the deficit will be restricted within
interest rates.But bankers and experts according to provisional data of the 5 percent this fiscal year as revenue
expressed their concern and said National Board of Revenue. But, data is expected to grow.Last fiscal year
it would have a negative impact on from the Comptroller and Auditor coincided with the national elections,
the banking sector as lenders will General office shows that the growth so the government’s spending from
shy away from disbursing loans to was less than 10 percent. its own funds was higher than from
the industrial sector due to the lower foreign sources, said another finance
As per the finance division’s
interest rate. ministry official.This also had an
provisional data, the budget deficit
last fiscal year was 5.2 percent. “In effect in raising the budget deficit, he
“The decision to bring down the
the end, it may be even bigger,” added.
lending rate would help export-
oriented industries to mitigate said a finance ministry official upon Fiscal deficit in 2018-19 increased
existing crisis,” said Rubana Huq, condition of anonymity. due to both revenue shortfall and
president of the Bangladesh Garment It takes at least six months to work expenditure increases, said Zahid
Manufacturers and Exporters’ out the actual deficit after the Hussain, former lead economist of
Association. conclusion of the fiscal year. The final the World Bank’s Dhaka office.
13National Economy DCCI Review December 2019
Usually, shortfall in expenditures containers to the total handled till In the last one year, investors’ stock
buffers the revenue shortfall relative 8am on December 21, when the value lost Tk 81,494 crore, or 19.40
to the budget target, thus keeping the target was achieved r percent, pulling the overall market
deficit below the original 5 percent of capitalisation down to Tk 338,493
GDP budget target. crore.
Stock investors haunted by
“Last fiscal year was an exception trust deficit, liquidity crisis “The capital market was moribund
to this trend and it is most likely to and stock investors lost confidence
Stock investors passed a very
continue this fiscal year as well” r disappointing year in 2019 as the because of macroeconomic situation,
market was largely down by lack listing of low performing companies,
Ctg port on world’s ‘three of confidence, liquidity crisis and and a lack of corporate governance in
regulatory challenges, dwarfing the listed companies,” said Mizanur
millionaire’ list many measures that the government Rahman, a stock market analyst.
The Chittagong port has made it to took to prop it up.
In the last three to four months, the
the list of ‘three millionaire ports’ In the beginning, the market showed current account deficit widened
club in the world by handling 30 signs of hope on the back of political because of the rise of government
lakh twenty-foot equivalent units calmness aided by the peaceful expenditure and stagnant revenue
of containers this year. There are 60 national elections in December 2018, earnings, said Rahman, also a
such seaports in the world. policy consistency and stable macro-
professor of the accounting and
Earlier, the Bangladeshi port was economic indicators.The benchmark
information systems department at
index of the Dhaka Stock Exchange
ranked 64th in the list of the world’s top the University of Dhaka.
surged 8.87 percent to 5,950 points
100 container handling seaports by
within a month. “So, the central bank had to sell a
the maritime world’s internationally
recognised Lloyd’s Marine Survey But the following 11 months were huge amount of US dollars to save the
and Consulting.The calculations of upsetting, as the DSEX gave up taka from exchange rate fluctuation
container handling were recorded 1,531.18 points, or 25.73 percent, to that ultimately created liquidity
from January 1 to December 22 this fall to 4,418.83 at the end of the year, pressure in the market.”
year, said Md Omar Faruk, secretary the lowest in three and a half years.
Turnover, an important indicator of Professor Rahman said many
of the Chittagong Port Authority. companies were listed in the last
the market, averaged Tk 900 crore
The addition of modern equipment, daily in January but it fell to Tk 300 few years but they performed poorly.
including new gantry cranes, and crore in the end. Investors bought these shares at
increased capacity of the port have higher prices but did not get higher
The round-the-year liquidity crisis
helped the CPA a lot to achieve dividends.
in the banking sector, sell-offs of
the glory, he said. Most of the foreign investors and some policy There was a huge crisis of corporate
containers were handled at New changes were largely to blame. These governance in the banking and non-
Mooring Container Terminal and all created a huge confidence crisis banking financial sector. As a result,
Chittagong Container Terminal. The among the investors, bringing down non-performing loans rose and the
two contributed more than 17 lakh their investment. capital adequacy ratio suffered,
spooking investors’ confidence. The
NPLs stood at Tk 116,288 crore in
September, which was 11.99 percent
of the total outstanding loans in
banks.
Throughout the year, bank and
NBFIs said they did not have
enough funds to invest in the stock
market. Some institutional investors
reduced investment in the market.
But financial institutions with funds
suffered from a lack of confidence.
14National Economy DCCI Review December 2019
As of January, the excess liquidity 9 percent interest rate, just by making 2019 growth is something to
in banks stood at Tk 67,642 crore, 2 percent down payment. rejoice about
down 11.45 percent from that a
Rescheduling is a global practice The economy has faced a number of
month earlier and 13 percent year-
and helps businesses when they are new challenges on its business and
on-year, according to data from the in dire straits, Rahman said.“But,
central bank. In February, it dropped fiscal fronts in 2019, even though
many of our lenders are using the
to Tk 63,921 crore. The situation the political atmosphere has been
tool to mitigate their problems on a
deteriorated further later. As a result, peaceful, according to economists
temporary basis.
the private sector credit growth and businesses.The new challenges
dropped to a six-year low of 11.29 As a result, a good amount of are hefty borrowing from the banking
percent last fiscal year r rescheduled loans turn into defaulted system by the government, fall in
ones frequently,” said Rahman, also export receipts, continued pick-up in
the managing director of Mutual inflation rate and declining import of
Loan rescheduling hits Trust Bank. He said rescheduling raw materials.
new high usually goes up in keeping with the
rising trend of NPLs. “So, we should Besides, the economy also confronted
Banks rescheduled a record amount
check NPLs on a mandatory basis to a number of major problems such as
of defaulted loans in the first nine
contain the stressed assets.” soaring non-performing loans in the
months of 2019 as part of their efforts
banking sector and slow collection
to contain bad debt and manage The rescheduling of defaulted
hefty profit, albeit artificially. loans will allow banks not to keep of revenues and poor private sector
provisioning, meaning they will be credit growth in the year 2019.The
Between January and September, capital market passed another bad
able to show higher profits, a central
non-performing loans amounting to year, in terms of market capitalisation,
banker says.
Tk 31,175 crore were regularised, turnover and investors’ confidence.
the highest on record even for a The relaxed policy on rescheduling
single year.The previous record was has given a wrong signal to the But the GDP recorded a healthy
set in 2018, when banks rescheduled financial sector and may create 8.15 percent growth in the fiscal
Tk 23,210 crore. a moral hazard, said Mustafizur year 2018-19. Professor Dr Shamsul
Rahman, a distinguished fellow of Alam, member at the General
But the record amount of loan
the Centre for Policy Dialogue, a Economics Division at the ministry
rescheduling has failed to rein in the
think-tank. of planning, said that Bangladesh has
upward trend of defaulted loans for
Many good borrowers may feel been attaining “impressive growth”
want of corporate governance in the
discouraged to repay their loans on over the past four years.
banking sector, analysts said.
time because of the easy repayment “To my mind, GDP growth rate,
As of September, cumulative defaulted policy, he said.A reform programme
loans stood at Tk 116,288 crore, up increase in broad money and
should have been taken to improve other indicators have been playing
23.82 percent from December last the financial health of banks, he
year. The rescheduling of loans will an important role in economic
said, adding that the latest initiative transformation of Bangladesh,” said
escalate in the October-December will rather undermine the corporate
quarter because of the relaxed policy Dr Alam a senior secretary.
governance.
offered by the central bank, said Syed He, however, acknowledged that the
Mahbubur Rahman, chairman of the “The record amount of rescheduling
rate of inflation had been increasing
Association of Bankers, Bangladesh, will hit banks’ profitability as funds
over the past four months eroding
a forum of private banks’ managing remain stuck for long because of the
tool,” Rahman said. “Banks could real income.He, however, said: “The
directors.
have earned a good income and four months cannot be representative
Keeping to a High Court instruction, profit if they had recovered the funds for the entire year.”
the central bank had earlier extended on time. This also would have given Dr Alam underscored the need for
the deadline for defaulters several them chances to provide fresh loans.” conducting proper reforms in the
times to have their NPLs rescheduled
under the relaxed policy. The last The large amount of rescheduling capital market.“This is complex
deadline was October 20.Under the indicates that banks will face market and it needs policy that should
policy, defaulters got the opportunity liquidity crisis in the days ahead, be adopted very carefully.” Mustafa
to regularise their loans for 10 years, said Salehuddin Ahmed, a former K. Mujeri, executive director at the
including one year’s grace period, at governor of the central bank r Institute for Inclusive Finance and
15National Economy DCCI Review December 2019
Development, said the symptoms The Bangladesh Bank made the percent in 2018. The BB, however,
that the economy faced in 2019 point observations in its “quarterly” report. expressed its optimism that workers’
to “stagnation”. “Some headwind stemmed from remittance would help maintain the
slowed down export and import current trend of the economic growth
Stagnation is a situation in the
growth due to shrinking global rate which has already crossed 8.0
economy where the output falls amid
economic growth” may have a percent mark.
rising inflation. The inflation has been
rising but the official statistics shows negative impact on the country’s “But strong remittance inflow
the gross domestic product growth economic expansion outlook for the can minimize some risks through
at an 8.15 percent in the fiscal year financial year 2020, said the central buoyancy in the domestic activities,”
2019. bank publication. it added. Inflow of remittances
The report reviewed the economic jumped around 23 percent in the first
Dr Mujeri, who had served as chief
development in the first quarter five months of the current fiscal year
economist at the country’s central
(July–September) and highlighted the over that of the same period of last
bank, said that the banking sector has
possible trend of the economy in the fiscal.
suffered its worst period in 2019 due
to large default loans.Dr Mujeri was upcoming days. The data relating to The central bank, however, cautioned
critical of the high bank borrowing, different economic indicators are, about the rise in inflationary pressure.
arguing that the banking sector does however, now available beyond the
first quarter. “Although food inflation moderated
not have adequate money to feed
to 5.30 percent in September 2019
over Tk 5.23 trillion budget. Exports from Bangladesh declined by
from 5.40 percent in June 2019 with
7.60 percent in the first five months of
“Such type of borrowing by the the falling prices of rice and pulses,
the current fiscal year while imports
government is risk-free investment the possibility of the second-round
dropped by 3.20 percent in July-
for banks but it shrinks the investment effects arising from high prices of
October. The central bank linked the
opportunities for private sector some food items such as onion,
reduction in external trade growth
borrowers,” Dr Mujeri said.The fish and vegetables warrants close
with the slowdown in global trade as
country’s productive sector seems to attention,” it said.
well as the economy.
be facing a slump as raw materials
The World Trade Organisation has The Bangladesh Bureau of Statistics
imports have declined notably in the
already projected that global trade data showed that food inflation
outgoing year.
volume would shrink 2.60 percent in reached 6.41 percent in November
According to the Bangladesh Garment this year. “Headline inflation is likely
2019 while the same shrank by 3.0
Manufacturers and Exporters’ percent in 2018. The International to face upside risks in the near term
Association president Rubana Huq: Monetary Fund said global growth arising from crop loss resulted from
“The year was not a pleasant one for this year “recorded its weakest pace” recent cyclonic storm ‘Bulbul’,” the
export as growth had been faltering since the global financial crisis a central bank report added.
throughout the year and had a nose decade ago.
dive in the latter half.” The annual average inflation rate
The IMF projected 3.0 percent was 5.49 percent in September
“Slowdown in private sector credit growth of the global economy in which inched up to 5.56 percent in
growth has also become a concern the outgoing year which was 3.60 November r
as it hit a record nine-year low,” said
Abul Kasem Khan, former president
of the Dhaka Chamber of Commerce
and Industry r
Slower external trade may
impact growth
The slowdown in its external trade
might hurt the country’s pace of
economic growth in the current
fiscal year. But a robust growth of
workers’ remittance is likely to act
as counterweight in this regard.
16SAARC News DCCI Review December 2019
AFN 3-4b get out of use each year
Each year, 3–4 billion afghanis, the
Afghan currency or AFN, get out of
use each year. Although the Afghan
currency is made purely of cotton
and has the capacity of being folded
up to 3500 times, the wrong use of
it by the residents makes it get out of
use in a short time, the central bank
said.
“The Afghan money has the highest
physical quality in the region, but
annually 3 to 4 billion Afghanis get
out of use because of the wrong use.
To print an Afghani, 3.5 Afghanis will
cost,” said Shafiqullah Shafiq, the central bank for not raising awareness from the central bank, in the past
operating deputy of the central bank. among people regarding this issue. decade, more than 58 billion Afghanis
Meanwhile, economists blame the This comes as based on the statistics got out of use. r
Fuel price increases in Kabul
Compared with the previous years, and non-banks incurred a loss of Nu performing loans with 26.97 percent,
the fuel price increased by 20 1.19B for the same reasons. The loss followed by trade and commerce
percent to 25 percent, said the Kabul in June this year was recorded at Nu with 24.03 percent and housing with
residents. They want the government 1.49B. 12.28 percent.
to obviate the people who sell at a
This is according to the financial Compared with September 2018,
high price.
sector performance review of the non-performing loans in September
This comes as the Afghanistan Chamber central bank, which also reveals increased by Nu 10.27b, with the
of Commerce and Investment known service and tourism sector as the non-performing loans share of the
as ACCI confirmed and added that the highest defaulter.The services and services and tourism increasing to
main reason for this increase is the tourism sector recorded the highest 30.5 percent.
high demand of people. non-performing loans, which is
obvious considering the sprouting Non-performing loans are considered
“We have invited the sellers to ACCI
numbers of hotels and travel a bad loan, in which the debtor has
and encouraged them to keep the
businesses. not made the scheduled payments
prices as low as possible because of the
beyond 90 days. Some banks have
low economy of our people,” said Jan Analysis on the loan classification even stopped providing loan in these
Agha Noori the ACCI spokesperson. of the financial sector indicated sectors in urban and western region
He added that this problem is that both loans and non-performing
temporary and will be solved soon. since the number of hotels has grown
loans have increased by Nu 20.78B
Every year, in cold seasons, the price manifolds r
and Nu 8.89B respectively. Records
of fuel in Kabul rises r of sectoral non-performing loans
indicate that service and tourism has Bhutan’s FDI sector registers
Bhutan loses Nu 2.5b for NPL, the highest share with 31.12 percent, slower growth
high interest expense followed by trade and commerce The country recorded a slight decline
with 21.51 percent, production and
The financial sector in Bhutan in the number of foreign direct
manufacturing with 11.53 percent
has suffered a loss of Nu 2.54B in investment projects coming in with
and housing with 11.4 percent.
September this year due to increased only 12 projects approved as of
interest expense and non-performing Even in March, service and tourism November. In 2018, 16 foreign direct
loans. In March 2019, both banks had the highest share of non- investment projects were approved.
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