Knitwear exports to EU countries face setback: Sluggish demand, devaluation of currencies to blame
Bangladesh’s knitwear exports to a number of European Union (EU) member-countries and some other non-traditional markets have been facing a setback in recent times. Exporters and experts have attributed this to a sluggish demand, change of rules of origin and devaluation of currencies in importing countries. Of 27 EU countries, knitwear exports to 10 including Denmark, Ireland, the Netherlands and Sweden witnessed a negative growth. Growth in exports to four other countries – Belgium, France, Germany and Romania – was slow, less than 4.0%, during the first 11 months of the current fiscal year, according to official data. Export earnings from knitwear during July-May period of Fiscal Year (FY) 2015-16 registered a 3.60% growth with earnings of USD2.35 billion in Germany, the single largest market for knitwear, data revealed. Out of USD11.92 billion export earnings from knitwear in July-May period of the current fiscal, USD8.39 billion came from the EU markets. This accounted for 70.39% of total knitwear earnings. Knitwear exports registered a 5.46% growth in EU markets during the same period. In FY 2013-14 and FY 2014-15, earnings from knitwear grew by 17.38% and 1.90% respectively.
Source tax from exports may double next fiscal year
The National Board of Revenue is set to log in about BDT 40.0 billion as source tax from export proceeds next fiscal year owing to the proposed hike in withholding tax rate to 1.5% from existing 0.6%. The amount will be double the earnings the tax authority expects in the current fiscal year. Taxmen said collections from exports are expected to be better this year than the previous year. In fiscal 2014-15, only BDT 10.7 billion came as source tax, down 49% from fiscal 2013-14, according to data from the NBR. Officials linked the slide in collection to the cut in source tax rate to 0.3% for apparel exports in fiscal 2014-15 from 0.8% a year earlier. The source tax rate was 0.6% for jute, leather goods and frozen food exports last fiscal year, according to NBR. Bangladesh earned USD 31.2 billion from exports in fiscal 2014-15, with garment products accounting for more than 80% of the receipts. This fiscal year, exports are expected to rake in a record sum of USD33.5 billion, meaning the taxmen stand to collect BDT 15.0 billion as source tax. In the first 10 months of the fiscal year, BDT 13.3 billion came as source tax, which has already exceeded last year’s total amount. Taxmen said the tax deducted by banks from export proceeds for apparel items has so far been treated as final settlement for export earners. Even though their earnings are soaring, many exporters show profits or incomes in line with the amount of tax deducted at source of their exports earnings to avoid having to pay additional tax.
Telcos urge government to revise tax structure for telecom sector
The Association of Mobile Telecommunications Operators of Bangladesh (AMTOB) urged the government on Saturday to revise the entire tax structure for the telecom sector. Saying that the new tax policies in the proposed budget for 2016-17 fiscal year are adverse and anti-investment, they demanded withdrawal of all types of surcharge and supplementary duty. The AMTOB General-Secretary pointed out that the overall industry revenue growth in 2015 is around 4.5% and the government has introduced an additional four% taxes (3% SD+1% SC), and that on top of that extra four% the new budget proposes additional two% increase in supplementary duty. The impact of the new supplementary duty on usage means that total usage tax will increase to almost 22.0%, from 15.0% last year.
Airtel, Axiata defer business merger pact
Telecom major Bharti Airtel and Malaysian firm Axiata have deferred the agreement for merger of their Bangladesh operations till September 26, 2016, according to a report by Times of India. The merger of their Bangladesh business was earlier expected to be completed in the first half of this year. “Bharti Airtel Limited and Axiata Group Berhad, have on June 24, 2016, agreed to further extend the Agreement until September 26, 2016, or such other date as the parties may agree,” Airtel said in a regulatory filing with reference to its earlier announcement relating to the merger. Axiata Group Berhad and Airtel on January 28 this year signed a Definitive Agreement to merge their respective telecom subsidiaries — Robi Axiata Ltd and Airtel Bangladesh Ltd — in Bangladesh.
Bangladesh Securities and Exchange Commission (BSEC) proposes preconditions
for stakeholders concerned to launch the financial derivatives
The securities regulator has set some preconditions for the stakeholders concerned to launch the financial derivatives through the country’s stock exchanges, officials said. The preconditions have been set in a directive issued by the Bangladesh Securities and Exchange Commission (BSEC) on June 20 last. All parties concerned will have to comply with the BSEC guidelines in respect of issue and operations of the financial derivatives. According to the BSEC guidelines, the stock exchanges will require regulatory permission along with establishing all infrastructures required for launching the derivative platform. In its directive, the securities regulator has not mentioned any timeframe for the bourses to establish required infrastructures for launching financial derivatives. The BSEC, however, said in its master plan that financial derivatives will be launched by 2018.
Brexit to hurt Bangladesh export
Britain’s exit from the European Union (EU) will hurt Bangladesh exports especially the RMG sector to its markets as it will cast shadow on the exchange rates, fear the economist and exporters. In a referendum held on June 23, the UK people decided to leave EU as 52.0% people voted for exit while 48 cast vote to stay with the union. “The short-term visible impact of the Brexit is devaluation of currency that has already witnessed an about 10.0% fall. Bangladesh will bear the brunt of the exit as it is the third largest single export destination for our products,” Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan told the Dhaka Tribune yesterday. In July-May period of the current fiscal year, Bangladesh exports to the UK stood at USUSD 3.5 billion, of which USD 3.2 billion came from the readymade garments sector. According to the forecast, Britain’s unemployment rate which is now at a 10-year low of 5.0% will be increased as soon as it leaves the EU although even after the previous financial crisis, Britain somehow managed to avoid job losses on the scale seen it other countries. On the other hand, there is a big question over the Generalised System of Preferences (GSP) as to whether Bangladesh will get it or not after the exit, said Salam urging the government to start negotiation to deal the issue bilaterally.
Bangladesh Bank steps in to keep exchange rate stable
Bangladesh Bank is continuing to purchase US dollars from commercial banks to keep the exchange rate stable. The central bank went on a buying spree recently amid an increase in the inflow of the greenback ahead of Eid-ul-Fitr, the biggest festival of Muslims. The move is also helping banks to avoid crossing the limit for their foreign currency holding. So far this month, data shows that the central bank has purchased around USD 350.0 million from different commercial banks to take this fiscal year’s tally to USD 3.9 billion. The official said imports are not rising though exports and remittances are witnessing moderate growth. BB data shows imports grew only 4.8% in July-April of the outgoing fiscal year. On the other hand, exports rose nearly 9.0% in the first 11 months of the fiscal year. Remittance is stable and the inflow will go up this month because of Eid spending. BB has been buying dollars for the past four fiscal years to manage the exchange rate and prevent the greenback from falling against the local currency. If the greenback falls, exporters and remitters would lose out on value, while importers would benefit. The BB bought dollars worth USD 3.8 billion in 2014-15, USD 5.2 billion in 2013-14 and USD 4.5 billion in 2012-13.
No gas crisis after 2018: Finance Minister
Finance Minister AMA Muhith said Thursday that there would be no dearth of gas after January 01, 2019 as the government has taken a set of measures including setting up of gas terminal and import of LNG and LPG to solve the nagging gas problem. The minister pointed out that both the government and private sector were working fast to have gas terminal and hoped that import of LNG and LPG will be much easier by the end of 2018. The minister also assured the FICCI delegation of consideration of some of their demands, including reduction of tax deposit before VAT appeal, which they placed before the finance minister for final consideration. The FICCI delegation, led by its president Rupali Chowdhury, submitted a set of suggestions to reduce tax burden in the proposed budget arguing that the measures would impact on investment and employment generation in the country.
Robust labor export shines light over declining remittance
Manpower export from Bangladesh has witnessed staggering growth in the first five months of 2016, thanks to surging demand by middle-east countries. The labor export growth momentum comes at a time when global macro risks have taken a toll on remittance inflow in Bangladesh. In the first 5 months of 2016, labor exports have gone up by 56.5% while remittance inflow has declined by 8.8%. The robust growth in manpower export has potential to have positive impact on remittance inflow in near future, say analysts. During the five-month period in 2016, a total of 310,770 Bangladeshi workers were sent abroad with jobs, which is 56.5% higher than 198,571 workers who were sent during the same period of 2015. Export growth was driven by Saudi Arabia (KSA), Oman, Qatar, Bahrain and Malaysia, according to data from Bureau of Manpower, Employment and Training. Data showed manpower exports to KSA grown by 5 times to 48,976, Oman and Bahrain by twice to 83,029 and 21,481 respectively. Manpower export to Malaysia has gone up from 1,047 during Jan-May 2015 to 23,608 during Jan-May 2016. The country’s remittance inflow has fallen further in May continuing its declining trend since January 2016. An amount of USD 1.2 billion was remitted in Bangladesh in May 2016, which is lower by 8.8% than that of USD 1.3 billion in May 2015.
Asian Infrastructure Investment Bank (AIIB) approves USD 165 million loan for Bangladesh power project
The Asian Infrastructure Investment Bank on Friday approved a loan of USD 165.0 million for the upgrade and expansion of power distribution system in Bangladesh. The board of directors of the multilateral development bank, for the first time, also approved three other loans to finance as many projects. Three of the four projects are co-financing operations with multilateral development bank partners, reports United News of Bangladesh. The three other approved loans are a USD 216.5 million loan for Indonesia, a USD 100.0 million loan for Pakistan and a USD 27.5 million loan for Tajikistan. The bank, which supports infrastructure development and regional connectivity in Asia, is targeting lending of approximately USD 1.2 billion in 2016. A USD 165.0 million loan to Bangladesh for a power distribution system upgrade and expansion project is designed to expand electricity coverage by providing 2.5 million new service connections in rural areas, and to upgrade two grid substations and convert 85 circuit-km overhead distribution lines into underground cables in northern Dhaka.
Loopholes expose national savings schemes to abuse
The National Savings Directorate (NSD) has recently sent a proposal to the Internal Resources Division (IRD) of the Ministry of Finance to lift the limit on investment in pensioners’ savings scheme meant for government employees. Substantial increase in retirement benefits of the government servants following the introduction of the new pay-scale has been shown as the reason for relaxation of the rules concerned, sources said. A pensioner is now allowed to invest a maximum amount of BDT 5.0 million in the scheme. He or she can also purchase three types of general NSD savings certificates — five-year Bangladesh Sanchayapatra, Three-monthly profit-based Sanchayapatra and Family Sanchayapatra — worth BDT 10.05 million in his/her individual name. He/she can also invest another BDT 3.0 million each in Five-year and Three-monthly savings instruments in joint name.
Asian Development Bank (ADB) earmarks USD 4.1 billion for 2016-19 period
The Asian Development Bank (ADB) has earmarked USD 4.1 billion for Bangladesh for the 2016-19 period subject to priorities and project readiness. Each year, the ADB provides on an average USD 600.0 million to Bangladesh as loans and grants. According to the memoire, some USD 680.0 million is available for 2016, USD 1.1 billion for 2017, USD 1.2 billion for 2018, and USD 1.2 billion for 2018. Of the total sum, USD 1.2 billion is available as Asian Development Fund and concessional ordinary capital resource. During the period, the ADB will provide USD 300.0 million for power generation, USD 194.0 million for rural infrastructure maintenance program, USD 350.0 million for SASEC road connectivity project-II, and USD 200.0 million for Chittagong-Cox’s Bazar railway project, officials said. Besides, the ADB has offered USD 150.0 million for natural gas development and distribution, USD 180.0 million for public-private infrastructure development program, USD 300.0 million for power system expansion and efficiency improvement program, and USD 200.0 million for Dhaka metro-rail project, they added. In fiscal year 2014-15, ADB’s aid disbursement to Bangladesh has been boosted to USD 711.0 million. From the beginning of its assistance in 1973 to 2012, the ADB provided 234 loans totaling USD 14.1 billion, and 389 technical assistance projects totaling USD 221.7 million.
Direct taxpayers to be 1.5 million next fiscal
Finance Minister AMA Muhith wants to see the number of direct taxpayers at 1.5 million in the upcoming fiscal year, up by 300,000 from the current figure, as the government has set an ambitious revenue target. Currently 1.2 million taxpayers pay the tax in the country of around 160.0 million-strong population. “By next two years, before end of the tenure of the present government, the number of taxpayers should be increased to at least 2.0 million,” he said at a dialogue on ‘budget for materializing dream’ organized by Bangladesh Study Trust (BST) at the National Press Club in the city Saturday. On high government expenditure, he said the misuse of government funds is increasing. The release of funds in the fourth quarter should be nominal to minimize the misuse, he suggested. Speaking at the program, the finance minister said the government will have to use about USD 20.0 billion of official development assistance from the foreign sources that lie in the pipeline.
Bangladesh opts for taking World Bank loans on tight terms
The government has finally decided to borrow hard-term loans offered by the World Bank (WB) from its ‘Scale-up Facility Fund’, overruling reluctance in financial circles. More than a couple of months ago, the World Bank (WB) offered Bangladesh the hard-term loan following the latter’s recent graduation to lower-middle-income country (LMIC) status. The Washington-based lender offered the money to Bangladesh from its USD 3.9 billion ‘Scale-up Facility’ fund in addition to loans from its concessional window-the International Development Association (IDA). The IDA under its current package-17 recently introduced an additional USD 3.9 billion ‘Scale-up Facility’ fund for its member-countries. Usually, the WB provides concessional loans under its IDA-17 package for the member-countries like Bangladesh on softer terms and conditions. Such soft lending will go on during the financial year (FY) 2014-15 to FY2017. The loan’s maturity will be 24 years to 30 years where the grace period will vary from five to nine years. Usually, the WB lends Bangladesh from its concessional window –IDA — at 0.75% interest rate. The maturity of such loans is 38 years with eight years’ grace period. Bangladesh is one of the top borrowers from the WB as the lender made commitment of nearly USD 2.0 billion worth of loans annually.
World Stock and Commodities
|Index Name||Close Value||Value Change||Percentage Change|
|Crude Oil (WTI)*||$47.64||(2.47)||(4.93%)|
|Crude Oil (Brent)*||$48.41||(2.5)||(4.91%)|
|Dow Jones Industrial Average||17,400.75||(610.32)||(3.39%)|
|USD 1||BDT 78.35*|
|GBP 1||BDT 107.18*|
|EUR 1||BDT 87.10*|
|INR 1||BDT 1.15*|
*Currencies and Commodities are taken from Bloomberg.