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Monetary policy to focus on growth momentumSource: Daily Star

The central bank is set to announce the new monetary policy next week that will aim to maintain the private sector credit growth momentum. The objective of the forthcoming monetary policy is to keep pace with the government’s budgetary target of higher growth and lower inflation, said an official of the Bangladesh Bank. Economists are on board with the central bank’s stance to maintain the credit growth momentum, adding that the next monetary policy is most likely to be on the expansionary side. However, they emphasised giving the highest priority to ensuring the quality of credit. Zahid Hussain, lead economist of the World Bank’s Dhaka office, however, differed with them. “It will be important to maintain policy continuity on the side of caution rather than aggression, particularly when the fiscal policy is moderately expansionary.” A BB official said the central bank has already held meetings with representatives of different sectors and leading economists, including former BB governors, about the forthcoming monetary policy. During the meetings, the experts gave differing opinions and the central bank will prepare its next monetary policy incorporating the views. The government has set the economic growth target for the current fiscal year at 7.2 percent; it set the goal of containing inflation within 5.8 percent. The forthcoming monetary policy statement will face the difficult challenge of reducing inflation to 5.8 percent and increasing GDP growth to 7.2 percent in an uncertain global and domestic environment as well as the persistent supply side constraints, Hussain said. With a slow rate of expansion in the economy’s production capacity, higher growth tends to come with higher inflation in an expansionary policy environment. Given the current state of the economy, particularly a high rate of non-food inflation, monetary accommodation rather than expansion is likely to serve the economy better, he said. The government had set the private sector credit growth at 14.8 percent for last fiscal year. In May this year, growth crossed the target and stood at 16.4 percent, and the central bank estimates that by June it will have reached 16.5 percent.

Low-cost fund sought to modernise textile and power-loom industriesSource: Dhaka Tribune

Bangladesh Specialised Textile Mills and Powerloom Industries Association (BSTMPIA) demand-ed a single-digit loan facility to modernise the historic industry for producing quality products and increasing productivity. The association president Azizul Haque made the demand at a dia-logue titled “Public private dialogue on overcoming challenges towards modernisation of textile sector in the capital yesterday. Currently, there are 30,000 to 40,000 textile mills in the country, of which 20% to 30% are modernised and producing high quality export-oriented products while the rest 80% use traditional power-loom to produce saree, lungi, poplin, napkin, long clothes, shirting and suiting, said Azizul Haque. That is why, the sector needs low-cost fund to set up modern machinery by next 10 years, Haque said, calling for an allocation of low-cost foreign funds for the sector from Bangladesh Bank. He urged the government to set up textile village and take measures to discourage import of foreign clothes. In response to the demands of the sector people, Textiles and Jute Minister Md Emaz Uddin Pramanik assured the sector people that he would place the demands to Prime Minister Sheik Hasina. He was present as the chief guest at the event. State Minister for Finance and Planning MA Mannan was also present as special guest. The BSTMPIA leaders also sought withdrawal of 15% VAT on textile products imposed for the current fiscal year. “Specialised textile sector meets 70% local demands. A sudden imposition of 70% Value Added Tax (VAT) is a threat to the sector and it would hinder expansion and moderni-sation,” Md Haider Ali, a director of BSTMPIA, said.

United Group to set up economic zone for IT industrySource: Daily Star

United Group will set up a specialised IT-focused economic zone in Dhaka to attract foreign en-trepreneurs. The group will receive a prequalification licence today from the Bangladesh Eco-nomic Zones Authority to set up “United City Economic Zone” on 2.5 acres of land in the capital’s Satarkul area. Within a year of receiving the licence, United will have to do an environmental impact assessment, feasibility study and a master plan. Upon satisfactory completion of the pre-qualification exercises, it will get the full licence, which will make it eligible to enjoy tax exemp-tion for 12 years. It will be the first prequalification licence from Beza for an IT-focused economic zone, said an official of the economic zones authority. Apart from the developers, entrepreneurs also can get fiscal and financial incentives and other benefits that industrial units get in the ex-port processing zones. By setting up a unit in an economic zone, investors can get the tax exemp-tion facility for 10 years. They can also enjoy Bangladesh’s significant market access to developed and neighbouring countries, demographic dividends, the domestic consumer market and most importantly, the cheap labour force. United Group started its journey some 30 years ago with a few small ventures. The group has investments in sectors such as power, healthcare, education, real estate and construction, port and maritime, textile and other manufacturing industries. Beza has so far awarded licences to six local private sector companies to set up seven economic zones - one each to AK Khan and Company, Abdul Monem Ltd, Bay Group, Aman Group, Maisha Group, and two to Meghna Group. The government is also setting up four economic zones in the public sector: Mirsarai Economic Zone in Chittagong, Mongla Economic Zone in Bagerhat, Srihatta Economic Zone in Moulvibazar and Sabrang Tourism Park in Cox’s Bazar. Recently, China Harbour Engineering Company signed a deal with Beza to set up an economic zone, especially for Chinese investors, in Chittagong.

JULY 18, 2016

Market Snapshot

Yesterday's ClosingDSEX Index 4,558.9DS30 Index 1,783.9 DSES Index 1,121.2Turnover (BDT Mn) 3,741.4Turnover (USD Mn) 47.7

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BB to award Shimanto Bank licence within this monthSource: New Age

Bangladesh Bank will provide licence to Shimanto Bank, a proposed bank owned by the BGB Welfare Trust, within this month so that the bank of the Border Guard Bangladesh can com-mence its operation, BB officials said. The proposed bank has already submitted its five-year business plan, memorandum of association, memorandum of article, documents of approval of Registrar of Joint Stock Companies and Firms, and Bangladesh Securities and Exchange Commis-sion to the central bank. The proposed bank placed its business plan before the central bank’s board of directors on June 23 at the central bank headquarters in the capital. The BGB Welfare Trust has appointed Mukhlesur Rahman as the managing director and chief executive officer of Shimanto Bank. Before joining the proposed bank, Mukhlesur was the MD and CEO of NRB Bank.BGB director general Major General Aziz Ahmed is the chairman of the proposed bank’s board of directors and its total board member is eight. The proposed bank primarily set up its head office at the BGB headquarters located at the Shimanto Square in the capital. A BB official told New Age on Sunday that the central bank board accepted the business plan submitted by Shimanto Bank. The BB board gave BB governor Fazle Kabir power to provide licence to the proposed bank, provided that it submits all required documents in line with Bank Company Act 1991. The BB board gave letter of consent to the proposed bank on December 17, 2015. Shimanto Bank deposited its paid-up capital with AB Bank by giving lien in favour of the central bank. According to the business plan, the proposed bank will set up four branches in the first year of its business and it will increase the number of branches to 44 within next five years.

Loan repayment eats up remittances, says CPD executive directorSource: Financial Express

Dr Mustafizur Rahman, executive director of the Centre for Policy Dialogue (CPD), has said mi-gration cost of Bangladeshi workers going for jobs abroad is the highest in the world. A sizeable portion of workers’ wage earnings is being used to repay loans they take to pay for migration, he said. The CPD executive director was taking part in a roundtable discussion in Dhaka on Sat-urday. He said although 0.6 to 0.7 million Bangladeshis are going abroad each year, remittance earning has not increased. The country’s average remittance income is still 2.50 times less than that of India, he pointed out. The roundtable discussion on ‘Budget and Labour Migration’ was organised by Debate for Democracy, a non-governmental organisation. Dr Mustafizur Rahman said, among the SDG indicators, four are migration related. So, safe migration is a vital issue to achieve the goals. He also emphasised reduction of migration cost and said a significant amount of remittances is being used for repaying loan incurred while going for jobs abroad. “So, net income cannot see a healthy growth”. The CPD ED also stressed the need for job diversification and long-term plan for this sector. He suggested a proper budget allocation through relevant ministries and departments to this sector.

Bangladesh will negotiate for maximum benefit of LDCsSource: Financial Express

Bangladesh will play role as spokesperson and coordinator of the Least Developed Countries (LDCs) in the conference. “We would negotiate with the ministers of developed countries during different sessions in the conference to maximise the benefit for the LDCs”, Commerce Minis-ter Tofail Ahmed said. The minister is scheduled to leave Dhaka for Nairobi on Friday, leading 15-member team to the 14th Ministerial Conference of United Nations Conference on Trade and Development (UNCTAD). The conference will begin at Kenya’s capital city on July 17 w and will continue till July 22. “If we could convince the developed countries about our (LDCs) needs, it would reflect in different policy making decisions that might goes in favour of LDCs,” Tofail said. The week-long conference will bring together heads of state and government, ministers and oth-er prominent players from the business world, civil society and academia to tackle global trade and economic development issues. The conference will have debates, high-level round tables, thematic events, a World Investment Forum and a Civil Society Forum, among other events. The theme of the conference is “Moving towards an inclusive and equitable global economic envi-ronment for trade and development”.

SME defaulted loans soar to Tk 21,421cr in Jan-MarchSource: New Age

The amount of defaulted loans in the small and medium enterprise sector in the January-March period of this year increased by Tk 2,497.07 crore due to a dull business situation and a lack of effective loan recovery measures by scheduled banks and non-bank financial institutions. Ac-cording to the latest Bangladesh Bank data, the defaulted SME loans stood at Tk 21,421.17 crore as of March 31, 2016 — 13.19-per cent higher from Tk 18,924.10 crore as of December 31, 2015. A BB official told New Age on Thursday that the SME sector faced a setback in recent months due to political uncertainty and fragile law and order situation that ultimately caused the increase in the amount of the defaulted loans in the sector. The country’s overall business situation has been facing a stagnant situation for long as the entrepreneurs continue to show a reluctant at-titude towards expansion of their business due to the political uncertainty, he said. The official said some banks failed to recover their disbursed loans in the first three months of the FY16 that caused the increase in the amount of the defaulted loans.

JULY 18, 2016

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