Import, export cost goes up as freight rates rise
Freight charges have risen in the last few weeks due to the adverse effects of Covid-19 on the global shipping sector, pushing the cost for importers and exporters in Bangladesh.CMA-CGM, the fourth largest container shipping line in the world, has recently announced that it would implement new freight charges for the routes between base ports in Northern Europe and the Indian subcontinent. The new rates are set to come into effect on January 1.Similarly, the operators running feeder vessels between Chattogram and various hub ports such as Colombo, Singapore and Port Klang of Malaysia, last month increased the freight charge by imposing an emergency cost recovery surcharge of $75 for each loaded container and $37.50 for an empty container.Last month, I paid $3,200 to ship a single 40-foot container from China. Now, the freight charge has risen to $4,200 for the same container. Shipping liners from these countries now charge $4,000 on average for each 40-foot refrigerated container from $1,400 previously. Earlier this week, CMA-CGM informed its customers that it would not take bookings for cargoes bound for ports in southern China for several weeks in early 2021 due to the suspension of feeder services.The impact on the export costs will be felt in the next season when buyers will have to adjust the additional freight charges with the prices of their next order.
Negotiations for FTA with Asean underway
Bangladesh has formally initiated negotiations with the Association of South-East Asian Nations (Asean) to sign a free trade agreement to enjoy greater market access in the bloc after graduating from the least developed country grouping.Bangladesh has launched the negotiations mainly for three reasons. First is because the Asean is a big market where Bangladesh can do well while the second is to safeguard the duty privilege after graduation. Third, if Bangladesh can sign an FTA with the Asean, it does not need to sign any bilateral agreement with any of the 10 member countries of the bloc.Bangladesh has been a member of the Asean Regional Forum since 2006, which would be an advantage for the country during negotiations. The Asean has become a vital market for Bangladesh due to its immense size. The southeast Asian nations are also an important source of raw materials for the country’s garment sector and other industries. The Asean has a huge consumer base of 642 million people and a burgeoning middle-class with newfound spending capabilities. By 2030, the Asean region will be the fourth-largest economy in the world. Its GDP increased from $2,373 billion in 2007 to $4,034 billion in 2016, according to a study titled ‘Bangladesh A story of a Phoenix.’ Booming cities in the Asean member countries account for more than 65 per cent of the region’s collective GDP, while a further 90 million people will be added to the market by 2030 when there will be 163 million households of ‘consuming’ class. The region’s total expenditure on clothing and footwear totalled $51.2 billion in 2017. Its digital economy generated $150 billion in revenue every year and will add an estimated $1 trillion to the regional GDP in the next 10 years.The Asean currently has 200 million digital consumers and 230 million online customers, but this is expected to expand by an average annual growth of 7.3 per cent to reach $721.7 billion in 2022. As per the country’s previous economic development records, the UN Committee for Development Policy (UN CDP) is scheduled to complete the final round of assessment for Bangladesh’s LDC graduation in 2021. If the UN CDP finds its assessment of Bangladesh to be positive, the country will graduate to a developing country in 2024. Once the country graduates, all tariff benefits will be lifted. Only the EU will allow its tariff benefits for Bangladesh for a grace period of another three years. This means that Bangladesh will have duty-free access to the EU until 2027. As an LDC, Bangladesh currently enjoys zero-duty benefits, preferential trade benefits and regional trade benefits on exports to 38 countries, including 28 in the EU.
Stocks ride on blue-chip, multinationals
The stock market rose yesterday riding on the blue-chip stocks and multinational companies. The DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), rose 31 points, or 0.62 per cent, to 5,126.43. Stocks of most of the multinational companies rose more than 4 per cent thanks to higher demand from institutional investors ahead of dividend declarations.Of the 12 multinationals listed with the DSE, seven witnessed a rise of over 4 per cent and three by 1 to 2 per cent. The remaining two saw no change.Among the multinationals, HeidelbergCement rose 7.23 per cent, Berger Paints was up 5.33 per cent, and Unilever advanced 5 per cent. GlaxoSmithKline Bangladesh was recently renamed Unilever Consumer Care following the purchase of 82 per cent of its shares by Unilever Group.Turnover, another important indicator of the stock market, amounted to Tk 1,003 crore yesterday, up from Tk 936 crore a session ago. Maksons Spinning Mills topped the gainers’ list rising 10 per cent followed by Dominage Steel Building Systems, MI Cement Factory, Alif Industries, and IFIC Bank. IFIC Bank’s stocks were traded the most, amounting to Tk 67.27 crore, followed by Beximco Pharmaceuticals, Beximco, Rupali Insurance Company, and Fortune Shoes. Of the 354 companies to witness trade, stocks of 141 advanced, 153 declined, and 62 remained unchanged. Keya Cosmetics shed the most, 10.29 per cent, followed by Esquire Knit Composite, Bangladesh National Insurance Company, Nitol Insurance Company, and Vanguard AML Rupali Bank Balanced Fund.
Tk 1,000cr fund for factories’ tech upgrade
Bangladesh Bank is forming a Tk 1,000 crore fund to provide cheap loans to export-oriented industries to upgrade technologies they currently use. The eligible industries are of 32 types, all falling under top-priority and special development sectors.They include readymade garment factories making high-value additions in production, pharmaceuticals, software and IT-enabled services, jute goods and footwear and leather goods. The fund will run under a refinancing scheme, meaning banks will first give out the loans before being reimbursed by the central bank. The interest rate will range between 5 per cent and 6 per cent, according to a central bank document.Banks will be allowed to charge borrowers a maximum three percentage points higher than the rate at which they avail the fund. The tenures would range from three years to 10 years. The interest rate for a borrower will depend on the time within which it makes the repayment. It is 5 per cent for less than five years, 5.5 per cent for between five years and less than eight years, and 6 per cent for eight years to 10 years. Clients will also enjoy a maximum of one year’s grace period before they start paying the instalments. A 7:3 debt to equity ratio will have to be maintained, which means that a borrower can avail 70 per cent of the upgradation cost from the lender while the remaining 30 per cent has to come from its pocket.