Loan Rescheduling – National, Islami in desperate bid
National Bank and Islami Bank Bangladesh went on a loan reschduling spree in 2017, in what can be viewed as a stunning example of financial engineering to cover up their ailing financial health. Of the BDT 191.20 billion rescheduled by the 57 banks in 2017, the two first-generation banks accounted for 39%. National Bank rescheduled BDT 43.33 billion and Islami Bank BDT 30.99 billion. In a brazen move, National rescheduled BDT 40.11 billion in the final quarter of 2017 without following Bangladesh Bank instructions properly. As per Bangladesh Bank (BB) rules, to reschedule a loan a bank must take 5 to 15% as down payment for the outstanding loans. The down payment requirement will increase to 50% if the defaulted loan is rescheduled for the second or third time. In case of a waiver from down payment or relaxing the repayment period, a bank must take prior approval from the BB for rescheduling the loan. National Bank had taken the BB’s permission to reschedule a maximum of BDT 5.00 billion, meaning it rescheduled an additional BDT 35.11 billion in the final quarter of last year, according to BB officials. But in so doing, National was able to slash its total default loans down to BDT 16.11 billion from BDT 30.27 billion a quarter earlier. And with it, its provisioning requirement also lessened. Still it was not enough to prevent National from logging in a 14.44% decline in net profits from a year earlier: BDT 4.80 billion. Still it was not enough to prevent National from logging in a 14.44% decline in net profits from a year earlier: BDT 4.80 billion. Islami Bank usually reschedules non-performing loans in the last quarter of a year to book higher profit by averting provisioning against bad loans, said deputy managing director of the bank.
Remittance using mobile financial services rises in March
Inward remittance using mobile financial services (MFS) has increased by 20.8% to BDT 66.2 million in March, compared to February’s BDT 54.8 million, according to the latest Bangladesh Bank data. The central bank revealed the data on Wednesday that shows a total transaction through MFS also rose by 10.2% to BDT 313.39 billion in March, from BDT 284.55 billion in February. At present, 17 of the 19 banks granted permission to run MFS are providing services and of these, Brac Bank’s bKash, and Dutch Bangla Bank’s Rocket, topped the list in service providing. According to the central bank data, the daily average transaction, however, declined by 0.5% to BDT 10.11 billion in March, while it was BDT 10.16 billion in February. The number of total transactions made in March was 181 million, while in February, 16.2 million transactions were made through mobile banking. At the end of March the number of total MFS users reached 60.10 million, while the number of active users was 20.30 million. Industry insiders said the Bangladesh Bank move hardly had any negative impacts on the overall volume of MFS transactions as users who previously used 10 SIMs for their transactions, now have 15-20 SIMs.
Dollar surge raises hopes for volatile FX
The US dollar’s unexpected surge over the past month is encouraging currency traders to pray for a return of lucrative but long-dormant price volatility on the main foreign exchanges, although early signs on that are strangely subdued. Extra volatility – how much markets fluctuate up or down – opens up pricing gaps and anomalies that give traders more opportunities to make money, brokers more volume, and seeds greater demand for hedging services from multinational companies and cross-border investors. But recent years have seen big currency swings evaporate as record-low interest rates converged toward zero and central bank money-printing weakened the cues exchange rates take from monetary policy trends and economic divergence. That in turn has hammered profits at hedge funds and banks’ FX trading divisions, though some are asking whether the dollar’s blistering 5 percent rally since mid-April will mark a turn for vol, as known in market parlance. “FX is back to life. We will have to wait through a few more months of low volatility but the time will come and it is getting more attractive,” said Andreas Koenig, head of global FX at Amundi Asset Management. So far there is little sign of this. Markets broadly look at two gauges of currency volatility — a daily swing in actual spot prices and an implied gauge derived from options markets on what traders expect volatility to be. Three-month implied volatility in the euro has completely unwound its February surge and is heading back below 6, levels not seen since 2014, while actual currency market swings remain comparatively elevated.
No headway in new VAT law implementation
No notable progress has been made in narrowing down the differences between businesses and the revenue authorities on the VAT law 2012 although one year has passed since the government deferred its implementation by two years. The plan to automate the VAT system under the existing law is yet to take off as the National Board of Revenue could not finalise the revised rules owing to opposition from the Federation of Bangladesh Chambers of Commerce and Industry. As of now, there has been some headway in only two areas. The government has revised upwards the cost and tenure of the VAT Online Project (VOP) that it took in 2013 to implement the new VAT and Supplementary Duty Act 2012 through automation of the VAT system. The cost of the scheme has increased 25.11 percent to Tk 690 crore. Its tenure has been extended until 2020.
And the NBR formed a joint panel with representatives from the FBCCI to review the Act and resolve the standoff related to the new VAT law. Since April 30, the panel has held two meetings, where it was decided that a study on the impact of the much-talked about Act on business and the economy would be recommended.
Korean EPZ’s exports gain momentum
Exports earnings of the Korean Export Processing Zone (KEPZ) are gaining momentum as investment flow brings factories in the Chittagong-based industrial zone to shape and enable them to optimise production. South Korea’s Youngone Corporation, which established the country’s first private EPZ, alone shipped products worth $200 million in 2017, a stark contrast to the five initial years since production started in 2012 when $197 million was brought in. With $100 million already earned in the past four months, it hopes to rake in $220 million this year and double that in 2021. That’s not a far-fetched idea as nine new factories will go into operations this year, joining the existing 25 in the zone located in Anwara upazila. By 2021, Youngone plans more than 36 factories to be up and running and the foundations ready for 100 in total. On the export earnings, Mohammad Shahjahan, executive director of the Kepz, credited the rise in the number of clients by some 10-15 to reach 25. He said the journey started with just one shoe factory and now there are 24 others for textiles. Companies like Samsung and LG are interested to invest in the EPZ but are being deterred by the delay in land mutation, Shahjahan said. He hopes the formalities would end soon. The company has already invested about $300 million and says $1.2 billion will be gradually poured into the zone in total.
Pharma ingredient-makers to get corporate tax holiday till 2032
Active pharmaceutical ingredients (API) and laboratory reagents manufacturers of the country will get corporate tax holiday till 2032 along with a set of other incentives, according to a national policy on the sector. The commerce ministry published the National Active Pharmaceutical Ingredients (API) and Laboratory Reagents Production and Export Policy on Sunday after getting approval of the government high-ups. The policy comes into force immediately, the ministry said in a notification Currently, local industries meet 98% of domestic demand for medicine, according to the preamble of the policy. In 2017 the total turnover of the sector surpassed BDT 160.00 billion in local market, which was only BDT 1.70 billion in 1982 when the pharmaceutical industry in the country was at an infant stage. In addition, Bangladesh-made medicines are being exported to over 100 countries. Currently, local entrepreneurs need to import more than 95% of raw materials from China, Korea and India to meet the domestic demand. Self-efficiency in producing quality API would help the sector sustain beyond TRIPS [Agreement on Trade-Related Aspects of Intellectual Property Rights] regime under which Bangladesh as a least developed country (LDC) is exempted from obligation of IPR issues including patent up to 2032. As per the policy, locally registered producers of API and laboratory reagents, including joint venture companies, will get unconditional tax holiday or 100% corporate tax exemption, till fiscal year 2021-2022. Tax holiday will be extended till 2032 for companies which will produce at least five API molecules every year. If a producer can manufacture at least three API molecules every year, it will get 75% tax exemption till 2032. Entrepreneurs will also enjoy exemption from paying advance income tax (AIT), value-added tax and VAT deduction at source on purchase and sales of raw materials and spare parts till 2032. Manufacturers will also get duty-free facility in import, priority in getting land allocation at the government’s special economic zones and export processing zones. The government will also provide 20% cash incentive on export of API and laboratory reagents.
Most energy cos report better earnings in January-March quarter
Most of the listed companies under fuel and power sector reported increased earnings per share (EPS) for the January-March (Q3) quarter of 2018 compared to the same period of previous year. Out of the 19 companies under the sector, three reported positive EPS for the quarter against the losses the companies incurred in the same period of the previous year. Linde Bangladesh has reported EPS of BDT 17.45 for January-March, 2018 as against BDT 16.16 for January-March 2017 while MJL Bangladesh has reported consolidated EPS of BDT 2.13 against BDT 1.96
Atlas-TVS to tie up for motorcycle assembling
Following the footprints of a number of Indian brands like Hero and Ashok Layland, Indian TVS would assemble its motorcycles in Bangladesh with a view to getting tax benefits and becoming more competitive in the market. To assemble TVS-branded motorcycle in Bangladesh, TVS Auto Bangladesh would sign an agreement with state-owned Atlas Bangladesh Limited today. An industry ministry media invitation said that a memorandum of understanding between TVS Auto Bangladesh and Atlas Bangladesh, also a listed company at the Dhaka Stock Exchange, would be signed on Thursday (today). Under the MoU, Atlas Bangladesh would assemble motorcycles for TVS. Atlas Bangladesh assembled Hero-branded motorcycles for a period of time before Hero MotoCorp signed an agreement with Nitol Niloy Group in April, 2014 in this connection. The state-owned entity is now manufacturing motorcycles for a Chinese brand. Meanwhile, Japanese brand Honda has already set up its plant at the Abdul Monem Economic Zone in Munshiganj with the aim of starting production of motorcycles by this year.
Bangladesh’s shipbuilding industry: How breakers turned into builders
With an increasing number of orders from both local and global buyers, the shipbuilding industry of Bangladesh is flourishing rapidly, contributing to diversification of the country’s export basket and generating employment opportunities. Since 2009, Bangladeshi shipbuilders have earned $170 million by exporting small- and medium-sized ships to 14 countries. All types of inland and coastal vessels are being built in Bangladeshi shipyards. Currently, shipbuilders in the country have 30 orders from local buyers and eight from foreigners. Local shipbuilders are expecting more and more work orders, as global shipbuilding industries are overbooked with orders from numerous buyers from all over the world. If the government provides long-term facilities to this sector, including block allocations, we will certainly be able to grab an even bigger share of the global market within a few years. Currently, some 30,000 people have been employed in the shipbuilding sector. There would be job opportunities for 20,000 more people in the industry within the next five years and for 100,000 within 15 years.
Gas supply from imported LNG in Bangladesh delayed
Beginning of gas supply from imported liquefied natural gas has been delayed further as the US operator, Excelerate Energy, of the LNG re-gasification vessel anchored near Moheshkhali Island in Cox’s Bazar is yet to fix a connection of a subsea pipeline properly to the main pipeline. The government is now expecting to begin gas supplies from June 5 as Excelerate has assured of fixing the problem by then, an Energy Division official told New Age on Wednesday on anonymity. Officials of Petrobangla refused to comment on the matter. It requires a seven-kilometre long with 24-inch diameter pipeline connected properly to the 91-km pipeline before beginning of gas supplies from the re-gasification vessel, the Energy Division official said. Government-favoured Excelerate has so far rescheduled commissioning of its floating storage and re-gasification unit, which is actually a vessel, from February to April, then to May and now to June this year, said officials concerned. On April 24, the Excelerate’s vessel anchored near the Moheshkhali Island.
Gold import made easier
The government yesterday approved the draft gold policy, much to the delight of businesspeople in the sector, as it will make the import of the precious metal easier. The cabinet committee on economic affairs gave its nod to the Gold Policy, 2018 at a meeting at the cabinet division chaired by Finance Minister AMA Muhith. After the meeting, Muhith said the policy would allow the country to import gold. “Till date, gold was not imported; rather it was smuggled into the country.” Usually, policies are not sent to the cabinet. But as it is an important policy, it will be sent to the cabinet seeking consent, said the minister. Under the draft policy, only authorised dealers of the Bangladesh Bank will be allowed to import gold.
Banglalink’s revenue falls for 7th quarter
Once a spirited mobile operator, Banglalink is progressively becoming a bit-part player, with its revenues declining for the seventh consecutive quarter now. At the end of March, Banglalink’s revenue stood at $129 million, in contrast to $157 million at the end of September 2016, according to Veon, the operator’s parent company. Its average revenue per customer a month now stands at Tk 109, down from Tk 133 in the third quarter of 2016. The operator’s customer growth has been declining in the last few quarters too, according to the report, which was published last week. At present, the operator’s market share is about 22.17 percent, which was 24.75 percent at the end of the third quarter of 2016. Banglalink entered the market in 2005 as the fourth player and within a few years’ time jumped to the second riding on its aggressive marketing. Now, it is languishing in the third spot with some distance between the first and second positions.
Local and Global Stock Indices *
|Index Name||Close Value||Value Change||Percentage Change|
|DSEX||5361.09||↓ 30.8||↓ 0.57%|
|DJIA||24,886.81||↑ 52.4||↑ 0.21%|
|FTSE100||7,788.44||↓ 89.01||↓ 1.13%|
|Nikkei 225||22,439.54||↓ 250.2||↓ 1.10%|
World Commodities *
|Commodity||Close Value||Value Change||Percentage Change|
|Crude Oil (WTI)||$71.65||↓ 0.19||↓ 0.26%|
|Crude Oil (Brent)||$79.54||↓ 0.26||↓ 0.33%|
|Gold Spot||$1,295.24||↑ 1.83||↑ 0.14%|
Major Currencies Exchange Rates Movement in Last Seven Days *
|USD 1||BDT 83.70|
|GBP 1||BDT 111.81|
|EUR 1||BDT 97.92|
|INR 1||BDT 1.22|
*CURRENCIES AND COMMODITIES ARE TAKEN FROM BLOOMBERG.