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GP, Robi to get back bandwidth
17 Jul 2019
Source: The Daily Star

The telecom regulator is set to lift the partial block on the bandwidth capacity of Grameenphone and Robi after the government stepped in to give relief to the crores of internet users of the two operators.

The development comes after Prime Minister’s ICT Affairs Adviser Sajeeb Wazed Joy held a meeting with the telecom division and its other wings, including the Bangladesh Telecommunication Regulatory Commission (BTRC) yesterday. Telecom Minister Mustafa Jabbar presided over the meeting.

“It was not a good decision. You should think about other tougher alternatives,” said a senior official who attended the meeting quoting Joy.

On June 4, the telecom regulator slashed Grameenphone’s bandwidth by 30 percent and Robi’s by 15 percent for non-payment of dues detected in audits -- enough to slow down the internet speed and raise the call drop frequency of the two operators.

According to the BTRC’s audit claim, Grameenphone has Tk 12,579.95 crore pending and Robi Tk 867.24 crore and they had issued demand notes to the respective operators several times but they fell on deaf ears.

Officials who attended the meeting said now the telecom division will withdraw their previous decision of bandwidth capping and come up with a new course of action.

Md Jahurul Haque, chairman of the BTRC, said they will sit again on the issue.

Joy asked the telecom watchdog to rethink its decision on bandwidth capping as it affects the customers, who should be the top priority, Haque said.

Senior officials of the two operators, who are the top two in the country, said the capping of bandwidth severely affected their internet service. Some parts of the country were cut off from internet use and in some cases the speed became slow.

“Blocking any kind of no-objection certificate (NOC) would be our next step and after that appointing an administrator, as they are allowed by the telecom act,” he added.

Earlier, the regulator has suspended issuing NOC to the two operators from even importing equipment to run the network.

Officials present said the ICT adviser also directed the BTRC to take VAT registration from the National Board of Revenue within the next one week. He asked Telecom Secretary Ashoke Kumar Biswas to consult with the NBR chairman on the matter. Earlier in last week, the telecom regulator refrained from receiving mobile operators’ various payments for the April-June quarter -- amounting to about Tk 1,000 crore -- after the latter declined to include the associated VAT in the sum.

The mobile operators said they will furnish their payments without VAT and when the BTRC gets its VAT registration they will pay the VAT then. 

At the meeting, Joy also directed Teletalk to evaluate the investment proposals it has received from international agencies and take the best possible action.

Stock investors want BSEC chair to resign
17 Jul 2019
Source: The Daily Star

Stock investors have demanded resignation of the chairman of Bangladesh Securities and Exchange Commission, as the market has lost 260.48 points or Tk 16,863 crore since July 2, the first trading day after the budget was passed.

A group of investors have been demonstrating in front of the Dhaka Stock Exchange (DSE) for the last five days, as the commission boss has failed to boost the market confidence.

At the protest site, Mizanur Rahman, an investor, said the chairman has failed to implement the rules and regulations the BSEC has formulated to establish accountability in the market. 

The BSEC has also not taken any strict measure against the directors of the listed companies who have failed to hold at least 2 percent shares in their companies, he added. 

According to the rules, the directors of listed companies must hold at least 2 percent shares individually and 30 percent jointly.

Monir Hossain, another investor, said he does not blame the chairman of the BSEC for the rise or fall of the index. 

“The chairman has failed to punish the gamblers.”

Abu Ahmed, a former chairman of the economics department of the Dhaka University, said the present commission has failed to boost investors’ confidence.

Instead, it spooked investors’ confidence on the mutual fund sector by allowing return on unit (a form of stock dividend) and enhancing their tenure by 10 years, he said.

“The commission has failed to punish the sponsors who sold off shares without informing investors. It could not bring good stocks to the market as well.”

However, the stocks bounced back slightly yesterday, ending a seven-day falling streak.

The DSEX, the benchmark index of the DSE, edged up 32.96 points or 0.64 percent to 5,124.48.  

Turnover, another important indicator of the market, however, fell by a staggering 11.2 percent from the previous session, to Tk 271.76 crore, the lowest in two months. 

Market insiders say the regulator should talk to the institutional investors informally and encourage them to provide support to the market so that the index goes up.

UCB Capital, one of the leading stockbrokers, said in its market analysis that the market closed in the green, breaking the week-long losing streak as investors opted for buying attractive and fundamentally sound stocks.  

However, there was volatility throughout the session, it added.

Of the traded issues, 222 securities advanced, 94 declined and 36 closed unchanged. Sea Pearl Beach Resort & Spa, which debut on the day, dominated the turnover chart with 50.13 lakh shares worth Tk 15.41 crore changing hands, followed by Fortune Shoes, Brac Bank, Bangladesh Shipping Corporation, and Sinobangla Industries. 

The five-star hotel was the day’s best performer with a 269 percent gain, while First Finance was the worst loser, shedding 10 percent. 

Chattogram stocks also rose with the bourse’s benchmark index, CSCX, increasing 49.31 points, or 0.59 percent, to finish the day at 9,537.30. 

Gainers beat losers as 152 securities advanced, 89 declined and 27 finished unchanged on the Chittagong Stock Exchange. 

The port city bourse traded 68.92 lakh shares and mutual fund units worth Tk 16.44 crore.

 

Record loan rescheduling at Social Islami Bank
17 Jul 2019
Source: The Daily Star

Social Islami Bank rescheduled a record amount of loans in the first quarter of 2019 and yet failed to arrest its default loans from spiralling, in a worrying development for the bank that saw a hostile takeover from a controversial business group last year.

Between the months of January and March, SIBL rescheduled Tk 2,950 crore, which is exponentially more than what it had been rescheduling in a year.

For instance, it rescheduled Tk 390.31 crore in 2018, Tk 375 crore in 2017 and Tk 188.28 crore in 2016, according to data from the central bank.

And yet, SIBL’s default loans are racing ahead: in the first three months of the year its default loans soared 11.70 percent to Tk 1,559 crore.

The bank also failed to keep the required provisioning against its loans -- an indication that its financial health is wobbly.

At the end of March, SIBL’s provisioning shortfall was Tk 275 crore.

The lender took 28 special approvals so far this year from the central bank to reschedule their default loans but those do not amount to Tk 2,950 crore, said a central bank official with strong knowledge on the matter.

“This means the bank regularised a big chunk of its bad loans at its own risk.”

To reschedule a default loan, banks must take down payment ranging from 10-50 percent of the default loan.

But when the lender fails to secure the requisite down payment or wants to set an uncommon repayment tenure it must take special approval from the BB to reschedule the loans, he said.

“Had the lender rescheduled the loans by taking the requisite down payment, its default loans should have decreased and there would not have been a provisioning shortfall.”

A central bank inspection team should look into the matter, the official added.

In October 2017, a Chattogram-based business group took over the bank by replacing the previous board members and high officials. But the loans that got bad or rescheduled were disbursed at least three years ago, according to an SIBL official.  

Quazi Osman Ali, managing director of SIBL, did not respond to The Daily Star’s request for comment.

Between January and March, all banks rescheduled Tk 5,839 crore -- and 50.52 percent of the sum is attributed to SIBL.

Never before was such a big sum rescheduled in the first quarter of a year, when banks typically take it slow following largescale rescheduling in the previous quarter to show a flattering full-year performance.

“The wholesale rescheduling that is taking place in the banking sector will have a serious negative impact later on,” said Salehuddin Ahmed, a former central bank governor, adding that ongoing liquidity crunch is because of the rescheduling.

The central bank should have monitored the banking sector more strongly. In its absence the loan disbursement capability in many banks have eroded.

“The banking sector will have to face dire consequences if the central bank continues to maintain its silence on the matter,” Ahmed added.

Export target to be 15pc higher: Munshi
17 Jul 2019
Source: The Daily Star

The government is likely to set a 15 percent higher export target for this fiscal year as it looks to hit $60 billion in receipts by 2021, said Commerce Minister Tipu Munshi yesterday.   

If the target is achieved Bangladesh’s export will be $46.60 billion, up from $40.53 billion in the immediate past fiscal year that ended on June 30, according to data from the Export Promotion Bureau (EPB).

To boost receipts, the government will allow rice export of two lakh tonnes by eligible businesses, Munshi said in a press conference at his secretariat office.

“Around 30 lakh tonnes of potatoes have been surplus this year in Bangladesh. We are also in talks with Malaysia and the Philippines to export potatoes,” he added.

He is expecting good receipts from shipment of jute and jute goods as the demand for products made from natural fibres are on the rise around the world for growing environmental consciousness.

Bangladesh wants to export garment items to Brazil and to some Eurasian countries.  “We will be greatly benefited from these two markets. Our bargaining capacity with the existing buyers will also improve if we can grab those markets.”

The minister also expects a massive export growth of leather and leather goods this year.

“We want more export earnings. We have been diversifying both the export destinations and products for more export,” said Md Mofizul Islam, secretary to the commerce ministry.

Regarding the EU markets, the biggest export destination for Bangladesh, Islam said the local exporters have been facing some problems in quality issues in the EU.

The government has been trying to improve the quality of exportable goods, especially of leather and leather goods and footwear. “We hope the EU market will grow a lot in the near future,” he said.

About the signing of free trade agreements, he said, “We will have to think a lot before signing anything. We need to improve our capacity so that we can also benefit from the signing of the FTA.”

The government is evaluating signing FTAs with some countries like China, Malaysia and India, he added.

Bangladesh’s export to the main markets like Germany, the US and some Asian countries registered a significant growth in the immediate past fiscal year, said Tapan Kanti Ghosh, additional secretary to the commerce ministry.

The signing of FTA between Vietnam and the EU might not be a big threat for Bangladesh as the country has been enjoying the zero duty benefit to the EU till now. Bangladesh will contisnue to enjoy such benefit to the EU until 2027, he said.

Bar on mutual funds to give stock dividend
17 Jul 2019
Source: The Daily Star

The stockmarket regulator yesterday came up with the decision of barring the open-end and closed-end mutual funds from providing any return on unit (a form of stock dividend) to the unitholders. Mutual funds are investment funds that gather a fixed pool of money from a number of investors and re-invest them into stocks, bonds and other assets. 

The asset managers provide a dividend after the yearend and it could provide cash dividend or return on unit (like stock dividend) earlier.  Bangladesh Securities and Exchange Commission took the decision in a meeting held in the commission building in Dhaka.

The commission has also said the sponsors of the closed end mutual funds, which shall liquidate within a certain period, will have to hold their unit for at least one year from the fund formation date.

The sponsors will have to have at least 10 percent of their primary holding until its liquidation.

BSEC puts only 2-year lock-in on placement shares
17 Jul 2019
Source: The New Age

The Bangladesh Securities and Exchange Commission on Tuesday finalised public issue rules, putting a two-year lock-in on placement shares despite a demand for 3-year lock-in from most of the stakeholders.

The commission also cancelled the option of declaring bonus dividend by mutual funds. The closed-end and open-end mutual funds can declare cash dividend only from now on.

The stock market regulator made the decision at a commission meeting presided over by BSEC chairman M Khairul Hossain, a BSEC press release said.

The BSEC brought a number of other changes to the public issue rules 2015.

According to the new public issue rules, the shares held by a company’s sponsor-directors and shareholders having 10 per cent and above of the company’s shares will face a three-year lock-in period.

But the shares held by placement shareholders and alternative investment funds will face a two-year lock-in period.

The period would be counted from the first trading day of the issue on the stock exchanges.

The BSEC backtracked on its previous position of putting a three-year lock-in on all the shares issued by a company before its initial public offering.

It seems that the commission entertained the suggestion put forward by the merchant bankers as only the merchant bankers urged the commission to set the placement share lock-in period at two years.

The BSEC also backtracked on its previous position over requirement of utilising entire fund raised before the IPO for seeking public issue.

The BSEC now directed that a company must utilise 80 per cent of its pre-IPO paid-up capital for seeking public issue.

Most of the capital market stakeholders proposed a three-year lock-in for placement shares considering the recent volatility at the market as the market could not absorb huge selling pressure from the placement-share holders.

According to the new rules, the eligible investors including financial institutions must have to invest a certain amount of fund at the secondary market to get the IPO quota facility reserved for them.

The commission will set the amount in the consent letter of every IPO.

If an EI does not invest the BSEC-set amount at the secondary market, the EI will lose the IPO quota facility.

The size of the public issue under the fixed price method must be minimum Tk 30 crore or 10 per cent of the company’s paid-up capital, whichever is higher.

The size of the public issue under the book building method must be at least Tk 75 crore.

The commission also abolished the condition of one-year positive net operating cash flow for issuing IPO by a company.

According to the new rules, the bidder must buy the amount of shares he/she bids for and at the prices he/she quotes for.

The name and price quotation of any bidder in book building would not be displayed.

The IPO quota facility for the general investors has been raised to 50 per cent from 40 per cent under the fixed price method of IPO and it has been increased to 40 per cent from 30 per cent under the book building method.

The quota facility for the eligible investors has been cut to 50 per cent from 60 per cent under the book building method while it has been reduced to 30 per cent from 40 per cent under the fixed price method.

The BSEC at the meeting also allowed Bank Asia to float non-convertible floating rate subordinated bond worth Tk 500 crore.

The face value of each unit of the bond will be Tk 1 crore and the bond will be fully redeemable in seven years.

Only corporate bodies, financial institutions, corporate institutions and other eligible investors will be allowed to subscribe the bonds through private placement.

The purpose of the issue is to strengthen the bank’s capital base and meet its capital requirement under Tier-II.

Green Delta Insurance Company Limited acts as the trustee for the bond while Standard Chartered Bank is the mandated lead arranger for the bond.a

Stocks break 7-day losing streak on bargain hunting
17 Jul 2019
Source: The New Age

Dhaka stocks snapped a seven-day fall on Tuesday as some investors especially the institutional ones went for bargain hunting while the others maintained cautious approach amid financial sector volatility.

DSEX, the key index of Dhaka Stock Exchange, advanced by 0.64 per cent, or 32.96 points, to close at 5,124.44 points on Tuesday after losing 289 points in the previous seven consecutive sessions.

Market operators said the DSEX started rising on Tuesday as some institutional investors went for bargain hunting after the recent fall in share prices.

The market lost 330 points in the previous 10 sessions due to People’s Leasing and Financial Services (PLFS) liquidation move, penalty tax on listed companies, gas price hike and Grameenphone woes, dipping the DSEX to a 30-month low on Monday.

Sea Pearl Beach Resort & Spa Limited made its debut on the DSE on Tuesday and received huge response from investors. The share prices of the company shot up by 267 per cent to end the session at Tk 36.40 each. The hotel issued its shares at Tk 10 each in the initial public offering. On Tuesday, the company’s price earnings (PE) ratio became 51.51, which put the company in the danger zone in terms of PE ratio.

PE ratio at 40 or above signifies the danger zone, according to DSE sources.

EBL Securities in its daily market commentary said, ‘The index kept its upward movement till the end of the session with some volatility. Most of the investors were active from both sides of the trading fence. Meanwhile, Sea Pearl Beach Resort & Spa Limited had a flying debut.’

The average share prices of telecommunication sector advanced by 1.2 per cent, bank by 0.7 per cent, non-bank financial institution by 0.69 per cent and textile by 0.4 per cent.

Turnover on the bourse dropped to Tk 271.76 crore on Tuesday from Tk 306.06 crore in the previous session.

Many investors preferred to be on the sidelines on Tuesday to observe the next move of the market, stockbrokers said.

They said investors remained worried over the volatile financial market that further exposed by the government’s move to wind up PLFS.

The media reported that the High Court on Sunday accepted the prayer of Bangladesh Bank for PLFS’ liquidation for hearing and the court also appointed BB deputy general manager Md Asaduzzaman Khan as provisional liquidator of PLFS.

Out of the 353 scrips traded on the day, 222 advanced, 94 declined and 36 remained unchanged.

DS30, the blue-chip index of DSE, added 0.60 per cent, or 10.96 points, to close at 1,829.48 points.

DSE’s Shariah index DSES advanced by 0.76 per cent, or 8.92 points, to close at 1,175.29 points.

Sea Pearl Beach Resort led the turnover chart with its shares worth Tk 15.41 crore changing hands.

Fortune Shoes, BRAC Bank, Bangladesh Shipping Corporation, Sinobangla Industries, United Power Generation Company, Grameenphone, Dhaka Insurance, Square Pharmaceuticals and Federal Insurance Company were the other turnover leaders.

SEML FBLSL Growth Fund gained the most on the day with a 9.95-per cent increase in its share while First Finance was the worst loser, shedding 10 per cent.

BB devising strategy to check probable misuse
17 Jul 2019
Source: The New Age

Bangladesh Bank is working to devise a strategy for prevention of possible misuse of the government-announced 2 per cent incentives against inward remittance of the wage earners.

Announcement by the finance minister AHM Mustafa Kamal in the budget for the fiscal year of 2019-20 to provide incentives against the wage earners’ remittance has prompted the central bank to address the scope for possible misuse.

To this end, the central bank has already held a meeting with the senior executives of the country’s banks, BB officials said.

Asked about the progress in implementing the budgetary announcement and possible bottlenecks, BB executive director Md Serajul Islam told New Age that they were working in this regard before making a final proposal to the finance ministry.

As per the latest data, remittance inflow hit record $16.4 billion in the immediate past fiscal year (2018-2019).

Considering the total remittance receipt in FY19, the government will have to spend around Tk 2,755.2 crore in each year for giving incentives against remittance.

Although there is no doubt that the government as well as the central bank has no objection in awarding remittance senders with cash incentives considering their contribution to the country’s economy, the possible misuse has become a major concern, senior executives of the central bank told New Age.

There is only single instance in the world, Pakistan, of giving incentives against wage earners’ remittance, but it has witnessed misuse of the scope, the BB officials said.

The exporters, who do not enjoy any government incentives against exports, might misuse the scope.

Besides the exporters, the exchange houses could also take advantage of the facility as money including illegal money might come in circulation if the incentives are introduced without adequate monitoring.

But tight monitoring or scrutiny over the inward remittance might put adverse impact on the earnings as many of the expatriates do not have sufficient knowledge to comply with the requirements.

Besides anticipation of misuse, bankers at a recent meeting with the central bank demanded that the government pay the incentive money to them in advance; otherwise it would create additional cost of fund for them.

Implementation of the goal number 10.c of the sustainable development goals has prompted the government to give the incentives.

Under the goal number 10.c of SDG, the government has mandate to bring down the cost of remittance sending to below 3 per cent on average and to ensure less than 5 per cent cost of sending money from any destination within 2030.

At present, Bangladeshi expatriates have to spend 4.23 per cent on average of total fund from sending money to Bangladesh.

BB executive director Mohammad Humayun Kabir told New Age that they were working to implement the government decision.

BD gets $6.21b foreign aid, $9.78b pledged in FY ‘19
17 Jul 2019
Source: The Financial Express

Bangladesh received foreign assistance amounting to US$ 6.21 billion in the last fiscal year (FY), 2018-19, which was nearly $150 million lower than that of the previous fiscal, official data showed on Monday.

In FY 18, the overseas development partners disbursed $6.37 billion as concessional medium- and long-term (MLT) assistance.

According to the Economic Relations Division's (ERD) provisional data, the government received $5.94 billion as concessional loan and $256 million as grant from July 2018 to June 2019.

Meanwhile, commitment worth $9.78 billion foreign assistance from different development partners, including the World Bank (WB), the Asian Development Bank (ADB) and the Japan International Cooperation Agency (JICA), was received in last FY, the ERD data showed.

Out of the total commitment, the donors confirmed $6.85 billion as loan and $1.255 billion as grant in FY 19.

The significant amount of commitment was recorded, as the government signed a big Overseas Development Assistance (ODA) package deal of $2.5 billion with Japan in June, said an official.

In FY 18, the commitment was $12.27 billion, as the government signed some big loan deals with China and India.

The ERD official told the FE that the $6.21 billion foreign aid inflow to the country in FY 19 was the second highest after the previous fiscal's record inflow of $6.37 billion.

Since the amount of foreign aid commitment to Bangladesh is maintaining a higher trend over the last few years, the amount of foreign aid disbursement is also continuing in a vigorous way, which is playing a vital role in the country's development.

The amount of foreign aid inflow in FY 19 is almost close to its target of $6.35 billion, he added.

Meanwhile, the government repaid $1.56 billion worth of interest and principal against its total outstanding MLT loans to the overseas lenders in last fiscal, the ERD statistics showed.

Out of the payments, it repaid $1.18 billion worth of principal and $387 million worth of interest from July 2018 to June 2019.

In the previous FY, the government repaid debt worth $1.41 billion against its outstanding loans.

Of the payment, it gave $1.11 billion as principal of loans along with $299 million as interest.

Another high official of the ERD told the FE that the volume of external assistance disbursement can be increased, if the government's project implementing agencies can execute their foreign-funded projects in time.

Bangladesh's development partners, including the WB, the ADB, the JICA, the UK's Department for International Development (DFID), and the Islamic Development Bank (IDB), disbursed concessional aid every year for the country's development.

Bangladesh mainly utilises the foreign aid to build its infrastructure and cut poverty across the country through the annual development programme (ADP).

Order issued to freeze accounts of 11 former directors, officials
16 Jul 2019
Source: The Daily Star

Bangladesh Financial Intelligence Unit (BFIU) yesterday issued an order to freeze the accounts of nine former directors and two officials of troubled Peoples Leasing and Financial Services (PLFS) over their alleged involvement in driving the non-bank financial institution into the ground.

The BFIU instructed all banks, non-bank financial institutions, insurers and cooperative societies to follow the order.

The intelligence unit also embargoed a transfer of their moveable and immovable assets.

The intelligence unit has taken the move in line with an order given by the High Court on Sunday to start the liquidation process of the scam-hit PLFS.

As part of the liquidation process, the central bank, on behalf of the government, will take over ownership of the PLFS within a day or two.

The central bank is now forming a team led by Deputy General Manager MD Asaduzzaman Khan, who was appointed as liquidator by the High Court on Sunday, to take over the PLFS, said a Bangladesh Bank official involved with the process.

Banks, NBFIs, insurance companies, brokerage houses, merchant banks, Central Depository Bangladesh and co-operative societies will have to take required measures against the 11 persons within seven working days, according to the BFIU letter served to them.

The nine former PLFS directors are: Moazzem Hossain, Nargis Alamin, Humayra Alamin, Arefin Shamsul Alamin, Mohammad Yousuf Ismail, Md Motiur Rahman, Bishwajit Kumar Roy, Md Shahidul Haque and Khabiruddin Miah.

The alleged officials are Kabir Mostaque Ahmed and Nipendra Chandra Pandit.

All 11 individuals were with the PLFS until 2015.

The financial organisations concerned will have to submit detailed information of the liquid and illiquid assets of the 11 persons to the BFIU.

Punitive measures against the individuals and the liquidation process are running in tandem, the central bank official said.

“The central bank team has already completed all preliminary works to take over the PLFSL in the interest of its depositors. It is just a matter of time.”

The management of the NBFI will have to submit detailed information of its assets and liabilities to the liquidator within 21 days from the date of his appointment by the High Court.

The liquidator will have to submit a report on the PLFS’s assets and liabilities to the High Court within four months after verifying the financial condition of the NBFI.

The High Court will then give instruction on how to pay back the depositors’ money.

“But, we do not know how much time will be needed to complete the liquidation process as this is the first incident in the country’s financial sector,” he said. 

As of December last year, the NBFI disbursed Tk 1,131 crore in loans and mobilised deposits worth Tk 2,036 crore.

More than 60 percent of the disbursed loans has become defaulted.

The NBFI’s problems came to the surface in 2013-14, when some of its directors made off with Tk 570 crore by way of submitting fake documents, according to a central bank inspection report.  In 2015, the central bank had removed four of the nine directors for their involvement in the scandal.

Stocks sink to 2.5-year low
16 Jul 2019
Source: The Daily Star

Dhaka bourse’s index hit a two-and-a-half-year low yesterday after sinking for seven days straight as investors continue to stay away from the market for lack of confidence.

DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), shed 88.01 points to close at 5,091.48, the lowest since January 1, 2017.

Since the budget was passed in the parliament on June 30 with harsh provisions for the stock market, DSEX lost 330.14 points and Tk 21,075 crore.

This has compelled aggrieved retail investors to demonstrate in front of the DSE office yesterday.

They said the government has taken many steps recently that ultimately went against the listed companies and when listed companies are hurt the investors would also be hurt.

Furthermore, banks and non-bank financial institutions are suffering from liquidity pressure, so their participation has remained subdued.

Market insiders said foreign investors are selling off their shares due to the lack of confidence and depreciation of local currency against the US dollar.

These, along with the announcement of liquidation of People’s Leasing and Financial Services, have drained general stock investors’ confidence.

The liquidity crisis in financial institutions is the main reason behind the erosion of investors’ confidence, said Mizanur Rahman, a professor of the Accounting and Information Systems of the Dhaka University.

“It is necessary to take initiatives to address the liquidity crisis,” he said, adding that the confidence crisis was compounded by PLFS’s liquidation as investors will lose almost all their money.

A top official of a leading stock broker said a harsh decision on Grameenphone, the largest listed company of the DSE, by the telecom regulator ultimately affected the whole stock market.

The telecom regulator’s move to declare Grameenphone a significant market power (SMP) in February has played a huge role in dampening the confidence of stock investors, he added.

As an SMP, higher charges will be applied on Grameenphone, which will squeeze the business growth of the country’s leading mobile phone operator.

Already, the telecommunication company’s earnings per share (EPS) in the last quarter dropped and so did its interim dividend.

The EPS dropped to Tk 7.07 from 7.70 in the second quarter of this year. Its half yearly interim dividend dropped to 90 percent from 125 percent a year earlier.

In the last five months, Grameenphone’s stocks plunged 22 percent to Tk 324.

“A large company’s impact is also very large on the market,” the official said.

UCB Capital in its daily market commentary said Grameenphone’s regulatory tussles along with lower dividend pay-out have left investors jittery.

“So, Grameenphone topped the turnover chart as concerned investors continued to sell their stakes,” it added.

The decision to impose tax on stock dividend and reserves would ultimately hit the listed companies, so the stock investors are reacting negatively, said a top official of a leading merchant bank requesting not to be named.

“Imposing a tax can never be an incentive for cash dividend but providing tax rebates would have been,” he added.

In the budget for fiscal 2019-20, a 10 percent tax has been prescribed for companies that give out stock dividend more than the cash dividend and holds on to more than 70 percent of their earnings in a year in order to promote cash dividend.

The following decisions impacted the investors’ confidence, he added.

Rahman said they urged the government to relax the corporate tax rate for listed companies but it was not honoured.

Moreover, the budget has no stock market friendly policy, he added.

Yesterday, turnover of the DSE fell by a staggering 13.6 percent from previous session to stand at Tk 306.06 crore.

Of the traded issues, 37 advanced and 303 declined with 12 securities closing unchanged.

Grameenphone dominated the turnover chart with its transaction of 3.74 lakh shares worth Tk 12.32 crore, followed by Monno Ceramics, Fortune Shoes, Square Pharmaceuticals and United Power Generation.

Meghna Pet Industries was the day’s best performer with its 9.90 percent gain, while Bangladesh Industrial Finance Company was the worst loser, shedding by 10 percent.

Chattogram stocks also fell with the bourse’s benchmark index, CSCX, declining 157.23 points, or 1.63 percent, to finish the day at 9,487.98.

Losers beat gainers as 220 declined and 40 advanced, while 18 finished unchanged on the Chittagong Stock Exchange.

The port city bourse traded 62.27 lakh shares and mutual fund units worth Tk 14.40 crore.

GP’s profit falls despite record revenue
16 Jul 2019
Source: The Daily Star

Grameenphone raked in Tk 3,603.82 crore in revenue in the April-June period this year, the highest in a single quarter, driven by growth in voice and data usage due to improved network.

The receipts in the second quarter of the year were up 10.63 percent year-on-year.

However, the mobile phone operator’s profit declined 8.12 percent to Tk 955.28 crore in the quarter, according to its financial statement published yesterday. Earnings per share stood at Tk 7.07.

A board meeting of the operator on Sunday decided to declare 90 percent interim cash dividend.   

“GP is very happy about the business growth amid huge regulatory challenges,” said Michael Patrick Foley, chief executive officer of the company.

He said the operator delivered strong business performance in the first half of the year.

In the last quarter, GP focused on improving the network resilience and modernising it as well as expanding 4G services, covering 62 percent of the population of Bangladesh, he said. GP witnessed growth in voice and data revenue as well as in usage and subscriber base.

Foley said despite the additional supplementary duty on mobile phone use, the company would continue to protect the interest of the shareholders and provide value to customers. GP acquired 13 lakh new subscribers and 16 lakh internet subscribers in the quarter.

Data revenue grew more than 18 percent to Tk 720 crore. Each internet user now uses 1.5 GB data on an average every month, up from 986MB a year ago. At the end of June, 52.8 percent of its total subscribers were using internet services. The market leader has 84 lakh active 4G users.

Mustafa Alim Aolad, deputy chief financial officer of GP, said the company continues to acquire quality subscribers. With investment in network rollout, he is optimistic about delivering profitable growth going forward. 

In the last three months, GP invested Tk 380 crore for network coverage and installed 1,560 new 4G sites.

On Dhaka Stock Exchange yesterday, the share of GP, the lone listed mobile phone operator in the market, traded between Tk 241 and Tk 253.4, before closing at Tk 252.2. 

Sharp rise in public bank bad loans
16 Jul 2019
Source: The New Age

Bad loan in half a dozen state-owned banks including scam hit Sonali, Janata and BASIC increased by 5,182 crore in January-March period as the recovery efforts were slowed down due to an impending new loan restructuring policy adopted in May, experts said.

Five state-owned commercial banks Sonali, Janata, Agrani, Rupali, BASIC and the specialised Bangladesh Development Bank Ltd, however, showed unwillingness by the borrowers to clear debts and stay order from the High Court as the reasons for the recent sharp rise in bad loans in their portfolios.

They highlighted the reasons last week while responding to queries by the financial institutions division, said the division officials.

On June 23, the FID directed the banks to reason out why the bad loans increased in January-March 2019 in their portfolios from its previous quarter of October-December 2018.

The FID queries came against their repeated previous directives to the banks to bring down the amount of bad loans by bolstering the recovery efforts.

Former Bangladesh Bank governor Khondkar Ibrahim Khaled said the sharp rise in defaulted loan in the state-owned banks was not surprising as the overall loan recovery was slowed down against the impending new loan rescheduling policy.

The new loan rescheduling policy allowing errant borrowers to pay only 2 per cent down payment of outstanding loan against the previous 11 to 12 per cent has been made effective by the Bangladesh Bank last week.

But much before the new policy, which was adopted by Bangladesh Bank in May, borrowers stopped making payment on debts, he said.

Financial institutions division secretary Ashadul Islam did not want to make any comment on whether they were satisfied with the replies by the state-owned banks against the queries.          

He told New Age on Sunday that the division was working to reduce the defaulted loans of the state-owned banks.

The division insiders said loan recovery was interrupted greatly against the backdrop of the announcement by finance minister AHM Mustafa Kamal to allow rescheduling of non-performing loans on easy conditions since the beginning of his incumbency as the finance minister in January.

Available data of the financial institutions division showed that bad loans in Janata Bank alone increased by a whopping Tk 4,185 crore in the January-March quarter due to failure by the bank’s clients Crescent Group and AnonTex to clear the loan repayment.

The total amount of bad loans of the Janata stood at Tk 17,304 as of December 2018, a threefold increase on Tk 5,818 as of December 2017.

Agrani Bank’s defaulted loan climbed to Tk 396.57 crore in the January-March quarter while Rupali’s bad loans increased by 239.57 crore during the same quarter.

Smarting under the loan scam involving Tk 3,500 crore to the little-known Hallmark Group in 2013, Sonali saw an increase in bad loans which stood at Tk 176.20 crore in the January-March quarter.

BASIC bank, which was on the verge of bankruptcy due to shady loan of around Tk 6,000 crore distributed by the previous board of directors led by controversial chairman Sheikh Abdul Hye Bacchu from 2009 to 2014, added Tk 172.27 crore as bad loans to its portfolio. 

Sonali is yet to recover a single penny out of the Hallmark loan scam while Sheikh Abdul Hye Bacchu remains scot-free as the Anti-Corruption Commission failed to include his name in the cases filed in connection with the loan scam in once profitable BASIC bank.

Ibrahim Khaled noted that the new loan rescheduling policy might bring down the amount of defaulted loan for the time being but the entire banking sector as well as the economy would suffer in the long run.

The previous policy on loan restructuring policy issued by Bangladesh Bank in 2015 was made easier than its first policy adopted in 2003.

But it did not help in reducing the bad loans.

On June 22, AHM Mustafa Kamal said in the parliament that the overall amount of default loan in the banks and financial institutions increased by Tk 43,210 crore to at Tk 1,02,315.19 lakh crore in December 2018 from Tk 59,105 crore at the end of September 2015.

The finance minister also said that the number of loan defaulters also increased by 58,436 during the same period.

Policy Research Institute chairman Zaidi Sattar said that repeated loan restructuring policies proved that the state-owned banks were at ‘the mercy of the loan defaulters’.

The loan defaulters got a new lease of life at the cost of state-owned banks, he said.

PPPA seeks tax holiday for projects under 9 more categories
16 Jul 2019
Source: The New Age

The Public Private Partnership Authority has requested the National Board of Revenue to give tax holiday to PPP projects under eight more categories, including utilities and logistics.

The new categories include urban development like planned housing, utilities like electricity transmission, water supply and drainage, multimodal transport hub, logistics like container and cargo depot, health sector, light rapid transit or light rail transit or metro rail, education infrastructure and manufacturing sector.

Earlier in June 2017, NBR offered tax holiday for 10 years to companies for implementation of infrastructure projects in 14 categories under PPP scheme.

The projects include national highways or expressways and related service roads, flyovers, elevated and at-grade expressways, river bridges, tunnels, river ports, sea ports, airports, subways, monorails, railways, bus terminals, bus depots and elderly care homes.

The revenue board also offered to the PPP projects a set of tax benefits including tax exemption for capital gain, royalty, technical know-how, technical assistance fee and foreign technician.

PPPA under the Prime Minister’s Office on Monday sought the tax holiday facility for the new sectors and some other tax benefits to other PPP projects at the first meeting of a committee headed by secretary to the PMO Sajjadul Hassan.

High officials of the NBR attended the meeting held at the PMO.

Earlier in March, PPPA executive board formed the committee to review the possible withdrawal of various types of taxes for PPP projects.

Officials who attended the meeting said that the PPPA sought the benefits arguing that the number of PPP projects was increasing after tax benefits had been offered to 14 sectors.

The proposed sectors should also be included in the list of tax holiday considering the importance of the projects, they said.

The meeting discussed in details about the possible impact and benefits of tax holiday for the sectors, particularly for the projects having commercial investment.

Officials said that the revenue board agreed to scrutinise the proposals.

They said that there was a decision of the executive board of PPPA to implement 30 per cent of the government’s annual development programme under PPP scheme.

PPPA also requested NBR for offering VAT and duty waiver on import of reexportable plants, machine, equipment and spare parts for PPP projects.

It also demanded withdrawal of stump duty on share and property transfer, and calculation of depreciation based on tenure of PPP projects instead of existing 2 per cent to 9 per cent depreciation.

At the meeting, PPPA also sought decision on demands of private sector partners of PPP projects seeking tax incentives for various projects such as construction of high-rise residential apartment building for low and middle income group of people at Jhilmil Residential Project and Payra Port Dredging.  

BB finds irregularities in sanctioning Tk 400cr in loans by IBBL
16 Jul 2019
Source: The New Age

A Bangladesh Bank investigation has found irregularities in sanctioning loans worth Tk 400 crore by Islami Bank Bangladesh Limited (IBBL) to an entity and one individual for purchasing commercial floor space worth around Tk 400 crore at the Jamuna Future Park in capital Dhaka.

The central bank (BB) has found that the investment decision made by IBBL was a complete deviation from banking rules and due diligence, BB sources said.

The irregularities came to the BB’s knowledge when Islami Bank sanctioned Tk 400 crore in loans for Rongdhanu Builders Private Limited, which is owned by Md Rafiqul Islam, also a former director of scam-hit Farmers Bank (renamed as Padma Bank), and for his brother Md Mizanur Rahman this year.

IBBL issued the investment facility (hire purchase under Shirkatul Melk) worth Tk 200 crore to Rongdhanu Builders for purchasing 50,979.54 square feet of commercial space at the Jamuna Future Park. The space can house 37 shops at the mall.

The bank gave Mizanur Tk 200 crore in investment facility for purchasing 49,020.46 square feet of commercial space at the mall. The space can house 32 shops.

Despite being a beneficiary of IBBL’s credit facility in purchasing floor space, Rafiqul gave guarantee to the Tk 200-crore investment facility issued to his brother, Mizanur.

The central bank also found that the probable income from the floor space would not be sufficient for repayment of monthly instalments against the loans.

The BB investigation found that the bank’s decision to award the investment facility to Mizanur was also irrational considering his business and income.

As per the information available at Registrar of Joint Stock Companies and Firms, the initial paid-up capital of Rongdhanu Builders Private Limited was Tk 1 lakh till December last year since its formation in 2008.

The paid-up capital of the entity was raised by Tk 4.99 crore to Tk 5 crore in December, 2018, few months before the issuance of credit facility by IBBL.

Apart from the credit facility worth Tk 200 crore from IBBL, Rongdhanu Builders with just Tk 5-crore paid-up capital has been enjoying another Tk 285 crore in credit facility from Social Islami Bank Limited.

Asked about the central bank’s observation that the returns from the shops might not be sufficient for the instalment payment, Rafiqul disagreed with the BB finding stating that he ‘does not think that the instalment payment would be a problem with the earnings from the shops’.

He mentioned that he would be able to earn around Tk 4 crore a month from the shop rents. He, however, denied making any further comment on the issue.

Before the issuance of loans to Rongdhanu Builders and Mizanur, IBBL in October last year issued credit facility worth Tk 1,025 crore to Adil Corporation, an entity owned by Mostan Billah Adil, and to Sadia Traders, an entity owned by Mostan’s wife Sadia Jamil, against mortgage of the same Jamuna Future Park floor space Rongdhanu Builders and Mizanur were given loans to purchase. The entities mortgaged others assets also to receive the loans.

IBBL sanctioned the credit facility in favour of the entities in just six days of opening accounts with the bank by the firms.

Registration of the two companies could not be found in the RJSCF records.

Based on the findings, BB in April this year issued a letter to IBBL managing director Md Mahbub-ul-Alam asking the bank how any property mortgaged to a bank could be allowed to be sold to another with the credit facility of the same bank given that the entire loan amount remained unpaid.

Although the central bank asked IBBL to reply to its notice in three days, the private commercial bank took more than two months to respond to it.

Sources said that Adil Corporation and Sadia Traders gave another asset as mortgage to IBBL, replacing the floor space at the Jamuna Future Park following the objection raised by the central bank.

Although IBBL top officials were visited and contacted over e-mails through its public relation wing for comment on the issue several times since June 24, the entity is yet to make any official statement in this regard.

SIBL managing director and chief executive officer Quazi Osman Ali also could not be reached for his comment.

In late 2016 and early 2017, S Alam Group bought a significant amount of shares of IBBL through a number of companies and virtually took control of the bank.

The bank has been mired in crisis and controversies since the takeover by the Group.

Apart from IBBL, S Alam Group has control over Social Islami Bank, First Security Islami Bank, Al-Arafah Islami Bank, Union Bank, Bangladesh Commerce Bank and NRB Global Bank.

Asian shares mixed; China share rises
16 Jul 2019
Source: The Financial Express

Asian shares were mixed on Monday, led by gains in Chinese markets after the government reported that the economy grew at the slowest pace in a decade in the last quarter.

The Shanghai Composite index gained 0.8 per cent to 2,952.85 while Hong Kong’s Hang Seng index gained 0.2 per cent to 28,532.85. Australia’s S&P ASX 200 fell 0.3 per cent to 6,673.60.

In South Korea, the Kospi edged 0.1 per cent lower to 2,084.40. India’s Sensex climbed 0.5 per cent to 38,912.85, while shares fell in Taiwan and Singapore.

Japan’s markets were closed for a national holiday, reports AP.

The mixed day in Asia followed a rally Friday in New York that pushed major US stock indexes to record highs, with the S&P 500 ending above 3,000 for the first time.

The Dow Jones Industrial Average gained 0.9 per cent to 27,332.03. The S&P 500 rose 0.5 per cent to 3,013.77 and the Nasdaq composite index advanced 0.6 per cent to 8,244.14. All were record highs.

The yield on the benchmark US 10-year Treasury note was 2.12 per cent compared to the multi-year low of 1.95 per cent the bond hit only 10 days ago.

Benchmark crude oil fell 17 cents to $60.04 per barrel in electronic trading on the New York Mercantile Exchange. It rose 1 cent to settle at $60.21 a barrel Friday in New York.

Brent crude oil, the international standard, lost 8 cents to $66.64 a barrel.

The dollar rose to 108.05 Japanese yen from 107.91 yen on Friday. The euro was flat at $1.1271.

China-BD joint venture company to invest $1.46m in Ishwardi EPZ
16 Jul 2019
Source: The Financial Express

A China-Bangladesh joint venture company, M/S Golden Ocean Limited, will invest $1.46 million to establish a garment accessories industry in Ishwardi Export Processing Zone.

In this regard, Bangladesh Export Processing Zones Authority (BEPZA) and M/s Golden Ocean Limited signed an agreement at BEPZA complex in the city, reports BSS on Monday quoting a press release.

Member (Investment Promotion) of BEPZA Zillur Rahman and Director of M/s Golden Ocean Limited Amin Nargis signed the agreement on behalf of their respective organisations.

The company will produce annually 65 million yards of elastic, ribbon, shoelaces, folder elastic and jacquard elastic, said a press release.

M/s Golden Ocean will create employment opportunity for 92 Bangladeshi nationals.

BEPZA Executive Chairman Major General S M Salahuddin Islam, Member (Engineering) Mohammad Faruque Alam and General Manager (Public Relations) Nazma Binte Alamgir, among others, were present at the signing ceremony.

Korea pledges investment boost
15 Jul 2019
Source: The Daily Star

South Korean Prime Minister Lee Nak-yon yesterday expressed interest in investing in Bangladesh’s infrastructure, power, ICT, deep sea fishing, construction, shipbuilding and energy sectors to deepen ties between the two countries.

The trade between Bangladesh and Korea needs to be increased beyond the textile and garment sectors, Nak-yon said in the Korea-Bangladesh Business Forum, organised by the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) and the Korea International Trade Association (KITA) at the Hotel InterContinental in Dhaka.

Ministers, diplomats, exporters, importers, businesspersons and trade body leaders attended the forum to explore trade opportunities.

“Some big Korean companies have already invested in Bangladesh, but there is a scope for further business expansion here,” Nak-yon said.

He particularly expressed interest in helping construct 10,000 ICT centres across Bangladesh.

Korea’s Daewoo helped train up manpower for the garment sector in Bangladesh in 1979. Later, Korean multinational company Youngone invested in Bangladesh’s garment sector and employed thousands of workers.

Currently, the size of total investment by Korean companies in Bangladesh is $1.12 billion and most of them are in the textile and leather sectors.

The trade prospects to Korea are promising given the duty-free market access to 90.4 percent of Bangladesh’s products, said Sheikh Fazle Fahim, FBCCI president.

Fahim proposed Korean investment through mergers and acquisition in electronics, automobiles, telecommunications, shipbuilding, chemicals and steel.

“We have one of the most liberal and flexible investment regimes in South Asia and the ease of doing business is being addressed at the highest policy levels.”

Recently, South Korean Super Petrochemical has proposed investments worth $2.38 billion in petrochemicals, which will positively contribute towards the bilateral investment relations, he said.

Commerce Minister Tipu Munshi sought Korean investment in jute and jute goods and leather and leather goods sectors. He called for preferential market access for all Bangladeshi goods to the Korean market as the country is ready to sell the goods at competitive prices. A preliminary agreement between the FBCCI and the KITA was signed to boost the bilateral trade between the two countries. Fahim and Yung Zu Kim on behalf of their respective organisation signed the memorandum.

Nurul Majid Mahmud Humayun, industries minister; Nabhash Chandra Mandal, executive member of the Bangladesh Investment Development Authority; Jahangir Saadat, president of the Korean Export Processing Zone; RyuChul Ho, regional director of Hyundai Engineering and Construction; and Mohammad Enamul Kabir, director of the Bangladesh Computer Council, also spoke. 

Liquidator appointed for People’s Leasing
15 Jul 2019
Source: The Daily Star

The High Court yesterday gave the go-ahead to the central bank to appoint a liquidator for People’s Leasing and Financial Services (PLFS), a non-bank financial institution (NBFI).

The bench of Justice Muhammad Khurshid Alam Sarkar also ordered the Bangladesh Bank to freeze the accounts of those who were in PLFS’s board until 2015, Tanjib-ul Alam, a lawyer of the central bank, told The Daily Star.

Md Asaduzzaman Khan, deputy general manager of the BB’s financial institutions department, has been appointed as the liquidator.

“The High Court has ordered the liquidator to submit his report to the court,” Alam said.

Asked whether a deadline has been given for submission of the report, the lawyer said: “Liquidation is a complex process and this is the first ever case in the country. So, the court did not set any specific timeframe for the liquidator.”

Sami Huda, managing director of PLFS, told The Daily Star that he has heard about the court’s order to appoint a liquidator.

Earlier on June 27, the finance ministry instructed the central bank to shutter the NBFI for its failure to improve its conditions, in a first for Bangladesh’s financial sector.

Previously, two banks -- Bank of Credit and Commerce International and Oriental -- that were on their last legs were restructured but not liquidated.

Liquidation of PLFS means closing its operations permanently and the BB with court’s permission will take actions to settle liabilities by selling off its assets.

The NBFI has failed to repay the depositors’ money despite maturity of the funds, found a BB investigating. Default loans and net losses have recently escalated as well.

The problems of PLFS began in earnest in 2013-14, when some of its directors made off with more than Tk 1,000 crore by way of submitting fake documents, according to a central bank inspection report then.

In 2015, the central bank had removed five directors for their involvement in the financial scandal.

But it was not enough. Since then the NBFI has been on a downward spiral. For instance, in the first nine months of last year PLFS’s operating expenses stood at Tk 22.48 crore against the operating income of Tk 2.05 crore. PLFS sometimes failed to pay the wages to its employees because of the severe liquidity crunch, some officials informed The Daily Star upon condition of anonymity.

Meanwhile, the Dhaka Stock Exchange yesterday suspended trading of PLFS in line with the BB’s liquidation decision. As of May 31, retail investors held 68 percent of the NBFI’s stock and they stand to lose about Tk 193.52 crore -- and institutional investors Tk 25.75 crore -- if the liquidation goes through.

Some 15 banks and NBFIs have Tk 850 crore stuck in PLFS. In the event of liquidation external creditors are paid off first and then the depositors, debenture holders and preferential shareholders in that sequence, according to Mohammad Mohiuddin Ahmed, executive director of Financial Reports Monitoring Division at Financial Reporting Council. But given the dire position of PLFS, there is unlikely to be much to salvage from liquidation.

The general shareholders’ turn comes in the end, once all parties have been paid off. They get a sum if the net asset value per share is positive.

But in PLFS’s case its net asset value or NAV is Tk 67.66 in the negative as of March 31. “There is no possibility of the shareholders getting anything as PLFS’s NAV per share is so negative,” Ahmed said. 

Trump administration freezing fuel efficiency penalties
15 Jul 2019
Source: The Daily Star

The Trump administration said late on Friday it was issuing final rules to suspend a 2016 Obama administration regulation that more than doubled penalties for automakers failing to meet fuel efficiency requirements.

Congress in 2015 ordered federal agencies to adjust a wide range of civil penalties to account for inflation and, in response, the National Highway Traffic Safety Administration (NHTSA) under President Barack Obama issued rules to eventually raise fines to $14 from $5.50 for every 0.1 mile per gallon of fuel that new cars and trucks consume in excess of the required standards.

Automakers protested the hike, saying it could increase industry compliance costs by $1 billion annually.

After a group of states and environmental groups filed suit, the Trump administration began the process of formally undoing the Obama regulation and first proposed the freeze in 2018.

In a statement late on Friday, NHTSA said it was faithfully following the intent of Congress to ensure the penalty rate was set at the level required by statute.

It expected this final rule to significantly cut the future burden on industry and consumers by up to $1 billion a year, it added.

The Alliance of Automobile Manufac-turers, a trade group representing General Motors Co, Volkswagen AG, Toyota Motor Corp, Fiat Chrysler Automobiles NV and others, had said it could increase industry compliance costs by $1 billion annually.

Late on Friday, Gloria Bergquist, a spokeswoman for the group, praised the decision, saying NHTSA’s “own model clearly shows the significant economic harm that such a dramatic and unjustified increase in penalties would have on auto manufacturers, workers, and ultimately consumers.”

The prior administration had “failed to take into account the significant economic harm that would result,” she added.

Automakers argued the increases would dramatically raise costs, since they would also boost the value of fuel economy credits that are used to meet requirements.

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