Important Business News Extracts September 18 2016
BoP surplus erodes
The overall surplus in the country’s balance of payments eroded by more than half in the first month of the fiscal year from a year earlier due to a deep slide in exports and remittance. In July, the surplus stood at USD 481.0 million, which was USD 1.1 billion a year earlier, according to central bank statistics. “Though the surplus decreased slightly, it did not put pressure on foreign currency reserves. Rather the reserves set a new record and crossed USD 31.0 billion,” said an official of Bangladesh Bank. On September 7, the foreign currency reserves stood at USD 31.5 billion, enough to honor import bills for nine months. In line with the latest international standards, if the reserves are equivalent to five to six months’ import bills it is considered sufficient, the BB official said. Exports in July dropped 4.2%, while imports rose 2.9%, which led to a trade deficit of USD 236.0 million. Capital machinery imports slumped 24.9%, petroleum 33.5% and other imports 31.6%, according to the letters of credit settlement statistics. A pressure on food import may be experienced this year, which was low in the last few years. Food import soared 24 to 33% in July.
Two long-term T-bonds planned for employee pension funds
Bangladesh Bank is now working to introduce two more long-term treasury bonds to help the government and private organizations to keep their employees’ pension and provident funds with the instruments. The tenure of the two long-term treasury bonds will be 25-year and 30-year. The central bank has already referred about the two treasury bonds in its latest monetary policy statement for July-December of 2016. The central bank has taken the initiative in line with the government decision. A BB official told New Age on Thursday that the government now has no programme to manage the pension fund of its employees in a disciplined manner. The World Bank has agreed in principle to lend USD 80.0 million for the introduction of the comprehensive pension system for all. The government and private organizations will invest their employees’ pension and provident funds with the upcoming two long-term T-bonds. The central bank will complete the process of launching the two T-bonds in the shortest possible time, a BB official said. The government borrows from the banking sector through issuing T-bill and bonds to manage its budget deficit. The government has so far introduced three T-bills — 91-day, 182-day and 364-day — and five T-bonds — 2-year, 5-year, 10-year, 15-year and 20-year. The interest rates on T-bills and bonds are now between 3.4% and 8.5%.
Plan to take USD 600.0 million hard loan from World Bank
Bangladesh plans to take a hard loan of USD 600 million from the World Bank for a short term along with a soft loan for the country’s productive infrastructural projects, said official sources. The government has also taken an initiative to start the second phase of the Investment Promotion and Financing Facility (IPFF) project. Finance Division officials said the global lender has come up with a fresh proposal and the division and Bangladesh Bank are now reviewing that proposal. The loan will be taken from the “Scale-up Facility” fund of the World Bank Group’s International Development Association (IDA). The IDA-funded IPFF project has played a role in enhancing technical capacities of the Public-Private Partnership initiatives. However, the IDA’s soft loans will be reduced gradually and as a result the hard loans will be necessary for the development projects. With the help of the global lender, the government has been implementing the IPFF projects since 2007. Bangladesh Bank has executed the IPFF projects signing an administrative contract between Finance Fivision and Bangladesh Bank. The main objective of the project is to develop the infrastructure with long-term low-interest financing as there is a lack of capacity of the local banks and financial institutions. In the first phase of project, the World Bank gave a total of USD 50.0 million while USD 60.0 million came from the government, of which 98.0% used for the first three years.
Bangladesh Securities and Exchange Commission tightens financial disclosure norms
The move follows listed companies publishing quarterly financial statements in brief in newspapers without giving details, after which it created a confusion to read the financial statements of the companies. Publishing advertisements with details will be easier to understand them. The notification said the issuer must disclose, among others, comparative net asset value per share, earnings per share and net operating cash flow per share in respect of preceding comparable period for these parameters as declared for the current period’s financial statement. The board of directors of the issuer of a listed security will have to hold the board meeting involving price sensitive decision either after trading hour or on a holiday, it added. Besides, the listed companies, other than the insurance ones, shall submit financial statements within 45 days of the end of the first quarter and one month of the end of second quarter and third quarter to the commission and stock exchanges, according to the notification. It said the insurance companies will have to publish and submit quarterly financial statements (audited or unaudited) to the commission and stock exchanges within 90 days of the end of quarter one and one month of the end of the quarter two and three. At the same time, the companies will include the paragraph ‘The details of the published quarterly financial statements are available in the website of the company. The address of the website is…’ while publishing the quarterly financial statements in the newspapers.
The number of beneficiary owner’s (BO) accounts continued to decline as investors closed some 241,062 accounts in just two months (July 1 to September 8, 2016). To trade in the stock market and apply for primary shares, an investor has to open a BO account with the Central Depository Bangladesh Limited (CDBL) through a depository participant, which is usually a stock broker or a merchant bank. The total number of active BO accounts came down to 2,912,380 on September 8, 2016, which was 3,153,442 on July 1, 2016, according to statistics from the CDBL, which preserves electronic data of all individual and institutional investors. Most of the BO accounts were closed due to non-payment of renewal fees in recent times as June 30 was the fiscal year ending date. Currently, the annual maintenance fee for each BO account is BDT 450, of which CDBL gets BDT 100, a depository participant BDT 100, Bangladesh Securities and Exchange Commission (BSEC) BDT 50 and the state coffer gets the rest BDT 200.
The securities’ regulator has issued a uniform notification on mandatory requirements, including disclosure of significant deviation in any parameter, of publishing quarterly financial statements (audited or unaudited) by the listed companies. The officials of the Bangladesh Securities and Exchange Commission (BSEC) have said the quarterly requirements, which earlier were issued through more than one notification, came under a single notification to avoid any conflict with the listing regulations. The conditions were imposed on the listed companies in the backdrop of publication of quarterly financial statements in newspapers in a very concise form without showing details of some vital components of the financial statements. The securities’ regulator has issued the notification in exercise of power conferred by the Section 2CC of the Securities and Exchange Ordinance, 1969 for the sake of taking knowledgeable investment decisions by the investors. It also said the issuer shall disclose, among others, comparative net asset value (NAV) per share, earnings per share (EPS) and net operating cash flow per share (NOCFPS) in respect of preceding comparable period for these parameters as declared for the current period’s financial statement. The BSEC notification also said the board of directors of the issuer of a listed security will have to hold the board meeting involving price sensitive decision either after trading hour or on a holiday.
BDT 45.0 billion fund planned for Teletalk expansion
State-owned mobile operator Teletalk is set to receive BDT 45.0 billion in government funds and loans within the next two years to expand and upgrade its network. It will help the operator move to a vibrant position, State Minister for Telecom Tarana Halim said yesterday at the launch of Teletalk’s call centre in Gulshan. The Executive Committee of the National Economic Council has already approved a BDT 6.1 billion project for Teletalk. Meanwhile, the company has taken up a BDT 7.0 billion project with its own fund, she added. Within the next two years, the company will work on a series of projects under a master plan, Tarana said. Teletalk will expand its 3G network, especially on the highways, metropolitan cities and districts, and will also improve its 2G network this fiscal year under these projects. “After completing these projects, Teletalk will be a major contender in the telecom market.” Last month, the operator declared a two-year action plan, under which it aims to acquire 30 lakh new customers within this year and launch 4G services next year. As of July, the operator’s active customers stood at 44.37 lakh, according to a report of the telecom regulator.
National Board of Revenue (NBR) faces shortfall in income tax collection in first two months
Income tax collection fell short of target by BDT 5.4 billion in the first two months of the current fiscal year (FY) due mainly to sluggish trend of corporate tax collection from the large taxpayers. The Large Taxpayers Unit (LTU) under the income tax wing faced BDT 5.1 billion deficit in July-August period against the target set for the period, according to a provisional data of the National Board of Revenue (NBR). Net collection of the income tax department was BDT 55.4 billion until August against the target of BDT 60.84 billion. Although income tax collection registered 8.98% growth in July and August over the corresponding period, it missed target in the current FY. Income tax officials said slim growth of profit level of commercial banks, sluggish trend in business operations of telecom companies and a few budgetary measures in the previous FY caused slow growth of income tax collection. The government cut tax rate for commercial banks by 2.5% and waived upfront tax on securities that affected directly the LTU’s tax collection. Most of the income tax zones have missed their targets for the first two months.
Government plans to raise tax revenue to 14.1% of GDP
The government has drawn up a draft action plan for raising the volume of tax revenue equivalent to 14.1% of the gross domestic product (GDP) by fiscal year (FY) 2019-20. Under the plan, prepared by the Internal Resources Division (IRD), the total revenue collection has been projected to be raised to BDT 4.6 trillion by the FY’20. The action plan is a consolidated form of revenue structure laid down in the seventh five-year plan for national development and the UN-designated sustainable development goals (SDGs). In the draft action plan, total revenue is projected to be equivalent to 16.1% to the country’s GDP (gross domestic product). The tax-revenue collection by the National Board of Revenue (NBR) is projected to reach 13.7% of the GDP by the terminal fiscal year (FY20) of the seventh plan from 10.3% in FY16. The plan earmarks growth of customs duty, Value Added Tax (VAT), Supplementary Duty (SD), income tax, non-NBR tax, non-tax revenue from FY16 to FY20. VAT and SD are expected to grow to 7.0% of GDP from 5.4% in FY16.
China’s decline in EU, US apparel markets: Bangladesh fails to tap advantage, sufficiently
Vietnam fills the vacuum with higher trade volume as China slows apparel export to the European Union (EU) and the United States (US) while Bangladesh failed to tap the full advantage. Some official data reveal that the Asian competitor has posted higher growth in its apparel trade on the two western markets in recent months. Chinese clothing exports to the EU and the US faced almost a double-digit negative growth during the first half of the current calendar year, according to the official statistics of the two major markets. Bangladesh apparel exports to the US during the first seven months of 2016 registered 1.1% growth while Vietnam’s 3.2% growth over the same period of 2015. Vietnam fetched USD 6.13 billion from the US market in January-July period of 2016, while Bangladesh was lagging far behind its rising competitor with USD 3.2 billion, according to US official data of Otexa. Though Vietnam’s export to the EU market is significantly lower than Bangladesh’s volume, its growth is higher. Shipments of apparel products, including knit and woven, from Bangladesh to the EU stood at USD 5.8 billion in January-April 2016 against USD 5.32 billion in the same period of last year, registering an 8.9% growth. Vietnam’s exports were worth USD 1.04 billion to EU during the first four months of this year, posting an 11.2% growth over the same period of 2015. EU’s six or seven months’ data on clothing imports this year are not yet available.
Local spinners upset over rising cotton yarn import: India ‘dumping’ surplus yarn at low prices
Cotton yarn import has increased by more than 25.0% during the first seven months in 2016, which local spinners termed a threat for the sub-sector of the country’s primary textile industry. Industry insiders apprehended that if the trend continues, it would badly affect the backward linkage industry that meets nearly 80.0% requirement of the local knit sector. Bangladesh imported 207,644 tons of cotton yarn from January to July this year. It imported 165,076 tons of cotton yarn during the same period of 2015, according to the data of Bangladesh Textile Mills Association (BTMA). In 2015, a total of 295,330 tons of cotton yarn was imported, which was 280,283 tons in 2014, BTMA data showed. Major portion of the yarn has been imported from the neighboring India. In recent times yarn is also being imported from Indonesia, industry insiders said. A few grades of yarn, used for producing high value added products, are not produced here, but it is insignificant, he added. The local millers can meet 35 to 40.0% of the woven sector’s fabric requirement, and the rest is met through import, he explained. Some 430 local spinning mills supply more than 80% of the raw material for the country’s knitwear sector and 35 to 4% of the woven sector, according to BTMA.
Trade gap with China rises by 18.8% to USD 8.8 billion in FY16
The country’s trade gap with China increased by 18.8% to USD 8.8 billion in last financial year from USD 7.4 billion in the FY 2015-16 despite a zero-tariff export facility for a number of items to the Chinese market. An economist and Bangladesh Bank officials said the trade gap with China continued rising in recent years as Bangladesh failed to attract the Chinese consumers to its products due to lack of product diversification. Bangladesh’s imports from China stood at USD 9.6 billion in FY16 whereas exports stood at USD 808.1 million during the financial year. The trade gap in FY15 was USD 7.4 billion with exports worth USD 791.0 million and imports worth USD 8.2 billion. The country’s trade gap with China stood at USD 6.8 billion in FY14 and USD 5.9 billion in FY13. Centre for Policy Dialogue executive director Mustafizur Rahman told New Age on Thursday that it was a bad sign that the country’s trade deficit with China continued rising in recent years.
Bangladesh Export Processing Zones Authority (BEPZA) has achieved 8.0% growth in terms of employment generation in 2015-16 fiscal year compared to the previous fiscal year. “The Export Processing Zones (EPZs) under BEPZA created employment opportunities for 33,551 Bangladeshi nationals. The figure was 31,084 in the fiscal year 2014-15,” a BEPZA press release said yesterday. Among the 33,551 new employments in the last fiscal year, 8306 manpower was added in Karnaphuli EPZ, 7,124 in Uttara EPZ, 6,154 in Chittagong EPZ, 6,368 in Adamjee EPZ, 3,330 in Dhaka EPZ, 2,522 in Comilla EPZ and 15 in Mongla EPZ. The BEPZA press release said: “Currently 4, 53,652 Bangladeshi nationals are working in 461 enterprises of EPZs under BEPZA, with 64% being female workers indicating EPZs role in women empowerment in the country.”
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