Important Business News Extracts September 21 2016
Agrani loses BDT 6.8 billion on fake LCs sans security money
The state-owned Agrani Bank suffered a loss of BDT 6.8 billion in two fiscal years due to its financial irregularities. The parliamentary standing committee on public accounts found this in 24 audit objections Tuesday, made in a special report of the Comptroller and Auditor General of Bangladesh (CAG) for the FYs 2009-10 and 2010-2011. The loss occurred as high officials of the bank had given opportunity to various unscrupulous traders to open fake letters of credit (LCs) without taking any security money. The parliamentary body unearthed these irregularities during the 55th meeting of the committee at the parliament secretariat with committee chairman Mohiuddin Khan Alamgir in the chair. The committee recommended the Banking and Financial Division to immediately settle the audit objections. Besides, the committee recommended identifying the officials involved in the crime, taking legal actions against the sacked officials, vacating writ petition and taking necessary steps so that the fraud companies cannot open LCs in other banks using different names. The government incurred a loss of BDT 1.5 billion as Agrani Bank authority failed to realize the liabilities from another trader M/S Rahman Haque. Another BDT 601.0 million was lost as the bank frequently rescheduled and failed to cover the cost of fund and waive interest on various companies. The companies paid only BDT 261.0 million in 18 instalments.
Merchant banks seek special fund to prop up stocks: Bankers meet Muhith on BDT 60.0 billion lifeline
Merchant bankers yesterday sought a BDT 60.0 billion special fund from the government to increase money supply to the capital market, which is suffering from high volatility since the price crash in early 2011. If granted, the merchant banks will take loans from the fund at 3.0% interest rate and then lend it to their clients or investors at 5.0% interest rate. At present, there is a huge amount of negative equity in the market due to erosion of share prices. The amount of outstanding margin loan stood at around BDT 150.0 billion in December last year. Of the amount, negative equity is around BDT 60.0 billion, according to the Bangladesh Merchant Bankers Association, which placed a set of recommendations to Finance Minister AMA Muhith at his office at the secretariat. The merchant banks, which are considered major market intermediaries, are facing huge losses and are unable to recover them as well. The BMBA also recommended an alternative to the special fund: the government can issue BDT 50.0-BDT 60.0 billion bonds at 5.0% interest or coupon rate.
The government has announced a list of 20 exportable products, including three new ones, for receiving cash subsidy in the current fiscal year (FY), 2016-17, officials said. The new three products, which have been included in the list, are carbon made from jute, intestines and others selective organs of cow and buffalo, and seeds of vegetables and crops. Besides, the crust and finished leather exporters, who have shifted their industries to Savar, will get 5.0% extra cash incentive from FY 17. However, cash subsidy for two products, including potato, has been reduced, while the same number of items will get higher incentive. The exporters will receive cash subsidy on the products against net repatriation of FOB (free-on-board) prices from July 1, 2016 to June 30, 2017. The central bank issued a circular in this connection on Tuesday, and asked the commercial banks to follow its provisions for providing cash subsidy for the exportable products.
Garment exports to India rose 30.9% year-on-year to USD 136.4 million in fiscal 2015-16 thanks to rising demand from Western brands operating in the neighbouring country. Of the total earnings, woven items brought in USD 102.2 million and knitwear USD 34.4 million, according to Export Promotion Bureau of Bangladesh. Although Bangladeshi goods enjoy duty-free benefit in the Indian market, garment exports to India did not rise much due to the imposition of 12.5% countervailing duty on apparel items from Bangladesh. Bangladeshi garment exporters also face provincial taxes and non-tariff barriers in India, which has an apparel market worth nearly USD 40.0 billion. Though India in 2011 allowed duty-free benefit to almost all Bangladeshi goods except 25 alcoholic and beverage items, it imposed the countervailing duty on apparel, Bangladesh’s main export item, the following year. However, garment exports to India have been showing signs of pickup from last year when many Western clothing retailers started operating in that market. US retail giant Walmart and Swedish retailer H&M opened a good few stores in India in the last few years. Walmart India owns and operates 21 Best Price Modern Wholesale stores in nine states across India and plans to open another 50 by 2020, according to its website. H&M said it would double the number of its stores in India by the yearend from six now.
The telecom regulator has suspended its much-awaited auction for mobile number portability licence scheduled for September 28, as some procedural tasks have still remained unfinished. Mobile number portability (MNP) enables customers to switch their operator anytime without changing the existing number. The initial date for the auction was September 21, which was later postponed. In a notice published yesterday on its website, Bangladesh Telecommunication Regulatory Commission said it has decided to suspend all the proceedings of the auction. Some work related to the auction is still incomplete, which prompted the regulator to suspend the process, said Md Sarwar Alam, spokesman for BTRC. He said the commission will fix a new date for the auction soon. On September 7, the regulator declared the names of five joint venture companies, which can take part in the auction. Later, the BTRC sent the names of the companies to a law-enforcement agency to get security clearance, said a senior official of the regulator requesting anonymity.
Prime Minister urges US to grant RMG duty-free access
Prime Minister Sheikh Hasina has stressed the need for the US government to give readymade garment (RMG) products from Bangladesh duty-free and quota-free access to its market in order to help expand the apparel industry base of her country, reports bdnews24.com. She said this move would also be vital for the US in helping to increase employment and promote empowerment of more women, thereby establishing a modern society in Bangladesh. Her remarks came at a luncheon meeting hosted by the Business Council of International Understanding (BCIU) at Hotel Waldorf Astoria in New York on Monday, according to Press Secretary to the Prime Minister Ihsanul Karim. She said 52 other countries, including Australia, Canada, New Zealand, China, Japan and India as also the European Union, have provided Bangladesh with duty and quota-free access to their markets. The US, she noted, should be just as fair. Bangladesh used to enjoy duty-free access to the US market for around 5,000 items under the preferential trade scheme.
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