Important Business News Extracts – January 03 2017
Bankers meeting on good borrowers incentive policy today
Bangladesh Bank will discuss the non-compliance issue on good borrowers’ incentive policy at the bankers meeting scheduled to be held at its headquarters in the city today. “The issue will be raised at the meeting as most banks are reluctant to comply with the policy”. But the central bank took a hard line in implementing the policy. It will discuss the issue at the bankers meeting and banks may be warned against not paying incentive to good borrowers. Earlier in March last year, BB offered good borrowers 10% rebate on interest accrued against their loan accounts through issuing a circular. According to the incentive package, the borrowers whose loan accounts remained unclassified for three consecutive years and complied with all terms and conditions will be entitled as good borrowers. At the end of three years, the good borrowers will receive 10% rebate on their loan interest every last year. Bangladesh Bank found all the banks except the four – Islami Bank Bangladesh Limited, Mutual Trust Bank, Rajshahi Krishi Unnayan Bank and HSBC – did not comply with the policy.
The average rate of interest on lending declined below 10 per cent in November for the first time in the country’s banking history against the backdrop of the businesses’ persistent reluctance to borrow from banks amid a dull business situation in the country. Bangladesh Bank began logging the weighted average interest rates on lending and deposit in 1975 and the interest rate was never seen declining below 10 per cent since then. The BB data showed that the weighted average rate on lending stood at 11.27 per cent in 2015, 12.46 per cent in 2014, 13.42 per cent in 2013, 13.77 per cent in 2012, 12.80 in 2011, 11.34 in 2010, 11.51 in 2009, 12.40 in 2008 and 12.78 in 2007. Scheduled banks also cut their rates of interest on lending in November, the 23th month in a row, as the rate declined to 9.94 per cent in November from 10.03 per cent in October. Due to the lower credit demand from the businesspeople, banks are now having huge excess liquidity resulting that the banks also cut their interest rates on deposit products. The depositors are also suffering due to the lower rates on the banks’ products. The interest rate on the lending might decline further in the months to come if the existing sluggish business does not improve. The BB official said that as the banks had huge amount of deposits, they were now racing to lure customers by cutting the interest rates for all types of loans. The country’s banking sector was now facing excess liquidity of more than Tk 1 lakh crore.
Stocks, turnover keep soaring on foreign investment reports
Bullish vibe of Dhaka stocks extended to seventh trading session on Monday with the turnover on Dhaka Stock Exchange crossing Tk 1,400-crore mark for the second time in last five-and-a-half years amid significant rise in overseas investments on the bourse. DSEX, the key index of DSE, increased 0.70 per cent or 35.69 points, to close at 5,119.58 points, the highest after 5,173.23 points on October 30, 2014. Benchmark DSEX has increased 195 points in last seven trading sessions. Including only Tk 16 crore share transactions on the block market, turnover on the bourse increased 45.70 per cent to Tk 1,448.15 crore compared with that of Tk 993.70 crore in the previous trading session. Monday’s turnover was the second highest after Tk 1,804.73 on July 28, 2011. The turnover on the bourse was the highest Tk 1,478.18 crore on November 23 last year with a block transaction worth Tk 828.55 crore.
Remittance inflow slumped by about $2 billion in 2016 from a year earlier despite a 35 percent increase in migrant outflow during the period. The low oil price on the global market and rising preference for hundi by expatriate Bangladeshis have been blamed for the slide in remittance. In 2016, remittance inflow stood at $13.61 billion — the lowest in five years, according to central bank statistics. The amount is lower than 2015’s receipts by 11.13 percent. Migrant outflow, which, in theory, is positively correlated to remittance, was two lakh more last year. In 2016, 749,249 migrant workers went abroad for jobs in contrast to 555,881 in 2015, according to the Bureau of Manpower, Employment and Training.
Government will issue new Tk 5 note from January 5, reports BSS citing an official release on Monday. The colour of the note is violet. The front saide of the note has been inscribed with replica of Jatiya Smriti Soudho and portrait of the Father of the Nation Bangabandhu Sheikh Mujibur Rahman and the back side is portrayed with Naogaon Kusumba Mosque.
The government plans to add more 1,840 megawatts (MW) power from ten power plants this year. 10 power plants including eight from the public sector with generation capacity of 1,623 MW and two private plants with generation capacity of 217 MW are expected to be commissioned in 2017. Power generation capacity to 15,295 MW from 4,942 MW and per capita power generation capacity now reached to 407 kwh. Government is constructing eight power plants with 1,623 MW capacity. Of which, Shajibazar having capacity of 110 MW and Bheramara 414 MW in March 2017, Ashujanj 381 MW, Chapainawabganj 104 MW and Ghorasal 254 MW in June 2017, Siddirganj 135 MW in August, Sirajganj 150 MW in September and Shikalbaha 75 MW would go for commission in October 2017. Besides, Kamlaghat with 54 MW capacity and Kusiara with 163 MW capacity would come to operation in June and July respectively from the private sector.
Petrobangla, Summit may initial deal on LNG terminal
State-run Petrobangla (Bangladesh Oil, Gas & Mineral Corporation) is likely to initial its second contract today with Summit, a local private firm, on the use of a floating terminal to be set up at offshore island Moheshkhali in Cox’s Bazar. Summit LNG Terminal Company Pvt Ltd, a subsidiary of Summit Group, would develop the facilities in 18 months after signing the final contract at a later date to facilitate a maximum supply of 500 million cubic feet of natural gas per day from imported LNG, according to the draft contract. Summit would transfer the facilities to Petrobangla after 15 years of operation of those. Petrobangla will pay approximately $1.15 billion to Summit as service charge and its cost recovery in the 15-year contract period. The amount is $20 million less than the US firm Excelerate Energy would realise from Petrobangla under a similar 15-year build-own-operate-and-transfer contract signed on July 18, 2016. Petorbangla would sign the final contract with Summit after obtaining vetting from the law ministry and approval from the cabinet committee on the government purchase. Each of the projects would require an investment of approximately $450 million. The companies would borrow the funding from international financial system. Both the contracts have been awarded under the Speedy Supply of Power and Energy (Special Provisions) Act 2010, which facilitates awarding contracts avoiding tenders and indemnifies officials concerned against prosecution for making decisions.
The Minimum Wage Board has finalised the minimum wages for the pharmaceutical sector workers at Tk 8,050 as gross monthly pay from the exiting Tk 3,625. At a meeting at the Minimum Wage Board office in the city on Sunday, all the members of the board agreed on the amount of the wages. The government had formed the wage board on May 14, 2016 to review the wages of pharmaceutical sector workers that was last set in 2009. After a number of meetings the board published draft proposals on the wages in a gazette notification on November 23 seeking written objections against or suggestions on the recommendations in 14 days. After the 14-day time frame, the wage board on Sunday finalised the wages and sent its resolution to the labour ministry for gazette notification. The wage board has incorporated six grades for workers and four grades for employees in the pharmaceutical sector. For grade-six (unskilled) workers, the wage board has set Tk 8,050 as minimum monthly wage that includes Tk 4,500 as basic pay for district town areas, 50 per cent of the basic pay as house rent, Tk 700 as medical allowance and Tk 600 as travel allowance.
NBR moves to prevent misuse of tax benefit for small businesses
The revenue authority is preparing a list of traders who pay trade VAT and package VAT, in a bid to prevent misuse of a tax benefit given to small and medium businesses. The National Board of Revenue has already asked field offices, including those in Dhaka, to send the list of traders who pay package and trade VAT. The NBR is taking the step as it considers reducing the rate of package VAT to lessen the pressure on small and medium shops. The plan was made following a demand from businesses after the package VAT was doubled to Tk 28,000 a year for shops in Dhaka and Chittagong city corporations from this fiscal year. For shops in other city corporations, the package VAT rate was doubled to Tk 20,000. The NBR also raised the fixed amount of VAT for shops in municipalities. Insiders said the rate of package VAT, which is determined based on certain amount of value addition by shops, may be fixed 20 percent higher from the rate in the previous fiscal year, for example Tk 14,000 in Dhaka. Revenue officials said the government gets less than Tk 20 crore a year from the package or fixed VAT collected from thousands of small and medium businesses, including stores and restaurants. Many large shops and wholesalers also prefer to be in the fixed amount of VAT payment system despite logging in quite a handsome amount of turnover. Currently, shops with an annual turnover up to Tk 80 lakh are supposed to pay tax equivalent to 4 percent of their sales turnover. But many large shops tend to pay package VAT instead, due to which they do not need to show their annual turnover to the authority, according to revenue collectors.
The government plans to introduce one-stop service law to ensure prompt service to both local and foreign investors. “One-stop service law will be enacted for investors to ensure prompt service,” said Cabinet Secretary at a press conference of Bangladesh Investment Development Authority (Bida). Bida also issued a letter to all financial institutions on Monday seeking their opinions about the law and easing the cost of doing business in Bangladesh. The letter requested the authorities concerned to give their opinions to the Bida within five days of issuance of the letter. The main purpose of the law is to provide quick and hassle-free services to investors including developers of economic zones and industrial units. If anyone fails to act in accordance with the provisions under the law or neglect it, it will be considered as failure to comply with the order. The implementation of the strategy and the responsibilities of various ministries and agencies will be finalised at the next meeting.
Banglalink has sought permission from the telecom regulator to establish a subsidiary company for its network infrastructure such as towers, energy equipment and civil work. The new company will become an independent passive infrastructure provider. Bangladesh Telecommunication Regulatory Commission received a no-objection certificate application from the country’s third largest operator and is looking into the matter. In its application, Banglalink said it is sharing some of its passive infrastructure such as towers, energy equipment and civil work as per the BTRC’s guideline. Given the BTRC’s policy of encouraging infrastructure sharing, the operator now wants to establish the subsidiary, Banglalink Digital Communication Ltd, according to the application signed by Taimur Rahman, its chief corporate and regulatory affairs officer. All of Banglalink’s passive infrastructure will be transferred to the subsidiary, as well as the existing master agreements between Banglalink and any other licensee. The lease agreement between Banglalink and relevant landlords for each tower will also be transferred to the new company. The telecom regulator earlier allowed Robi to set up a similar subsidiary company, e.co, which has about 9,000 towers in its books.
The Bangladesh Telecommunication Regulatory Commission has turned down a Grameenphone’s plea for revision of the telecom regulator’s decision imposing Tk 30 crore in fine on the mobile operator on charge of violating rules while providing broadband services. The decision came from the BTRC’s commission meeting held last week. As per the decision, GP will have to pay the fine imposed on the entity for ‘illegal broadband service’ provided under the brand name of GO Broadband in partnership with two internet service providers — ADN Telecom Ltd and AGNI Systems Ltd.
Bangladesh lost $69 million due to internet shutdowns spreading over more than four weeks in the year that ended last June, according to a report by the Centre for Technology Innovation at Washington-based Brookings Institution. The estimate is conservative and considers only reductions in economic activity and does not account for tax losses or drops in investor, business and consumer confidence, said the century-old research organisation. The report, which highlights significant economic and social damage that internet service disruptions bring to countries, covered two internet shutdowns in Bangladesh between July 31, 2015 and June 30, 2016. The shutdowns lasted 25 days in total. On November 18, 2015 the government blocked internet and social media networks Facebook and online messaging and calling services WhatsApp and Viber after the Supreme Court rejected pleas to review the death penalties meted out to top war criminals Salauddin Quader Chowdhury and Ali Ahsan Mohammad Mojaheed. The shutdown on internet lasted only for an hour but the restrictions continued on Facebook, Viber and WhatsApp until December 12. Later in the same month, the government blocked Twitter, Skype and Imo for three days. Industry people could not come up with economic losses immediately, but they said internet blocking always directly impacts the ecosystem of the country, while social media blackout harms businesses and social life. The Brookings paper analysed the economic impact of temporary internet shutdowns. It examined 81 short-term shutdowns in 19 countries, identified their duration, scope and the population affected, and estimated their impact on the gross domestic product. The analysis found that between July 1, 2015 and June 30, 2016 the shutdowns cost at least $2.4 billion in GDP globally. The Brookings report said government officials in many countries around the world appear increasingly comfortable blocking access to online services and apps despite the significant economic and social damage that internet service disruptions bring to their countries. “Whether their ostensible motivations are public security or political self-preservation, government officials should understand the wide-ranging and destructive consequences of these moves.” “Shutting down access to popular services or to the whole internet — even for a short period of time — undermines economic growth, puts lives in jeopardy, separates people from friends and family and erodes confidence in the governments that take such drastic and ill-advised steps.”
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