Modernise companies act for ease of doing business

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Modernise companies act for ease of doing business

The government should update the companies act to ensure a business-friendly atmosphere in Bangladesh, speakers told a seminar yesterday.“A comprehensive companies act should be formulated to ensure transparency and accountability,” said one of the speakers, Ajit Kumar Paul, additional secretary (financial institution division) to the finance ministry.

He said the government was working hard to bring changes to the act to develop the economy further.

“We should plan for a company law keeping an eye on the changing business scenario of the country. It should also reduce the cost of doing business,” he said. The Institute of Chartered Accountants of Bangladesh (ICAB) organised the seminar titled “Modernisation of the Companies Act for Ease of doing Business” on its premises in Dhaka.Under the Companies Act, 1994, companies are not allowed to buy its own shares or provide financial assistance to make such purchases.

The government is going to amend the act considering the changes in the global economic system and to attract more foreign direct investment, said Commerce Secretary Shubhashish Bose. He said the Office of the Registrar of Joint Stock Companies & Firms (RJSC) would be strengthened and the problems in the share transferring process will be addressed in the new act.

The ICAB said modernisation of the companies act was required to ensure a business-friendly atmosphere in the country. ICAB President Dewan Nurul Islam urged the government to put more importance in accounting and auditing standards and in ensuring that publicly listed companies appoint a company secretary.

The institute called for full automation of the RJSC and easing of share transferring process and the taxation policy. It recommended better coordination among the RJSC, Bangladesh Bank, the Bangladesh Securities and Exchange Commission, the National Board of Revenue, Bangladesh Investment Development Authority, city corporations and other regulators concerned.

Speakers said facilitating electronic communications and modern technology in the companies act would be supportive for the rise of small and medium enterprises (SME).The keynote paper presented at the seminar said there should be a mandatory requirement for publicly listed companies to appoint a company secretary so that investors can see how companies maintain corporate documents.

It recommended recognition and accommodation of international standards already in place for accounting, financial reporting and auditing. Other recommendations include introduction of corporate governance to establish orderly and efficient management of companies and provision for enforcement of contracts and taking punitive measures against wrongdoings or manipulations.Provision for enforcement of contracts and taking punitive measures against manipulations will boost the confidence of investors, enable the right to get recovery and increase local and foreign investment, according to the paper.

Humayun Kabir, a former president of the ICAB, and Mahamud Hosain, vice-president, also spoke.

Current account deficit records steep rise on higher imports

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Current account deficit records steep rise on higher imports

Crosses $7.0b in nine months of FY ’18

The country’s current account deficit widened, reaching a record high in the first nine months of the current fiscal year (FY) as imports grew faster than exports. Central bank statistics, released on Tuesday, showed that the current account deficit hit $7.08 billion in July-March period of the fiscal 2018. The amount of deficit is the highest in the country’s history, which was only $1.37 billion in the same period of the past fiscal year.

The increasing gap in both the merchandise and service trades of the country is pushing the current account deficit higher.

The Bangladesh Bank data showed that the country’s merchandise trade gap with the rest of the world exceeded $13 billion in the first nine months of the current fiscal year.

The deficit in merchandise trade stood at $13.20 billion in July-March period of FY18, which was $7.04 billion in the same period of the past fiscal year.

Trade deficit registered an 87.5 per cent growth in the nine months to March.

The Bangladesh Bank said that exports have recorded around 7.0 per cent growth in the first nine months of the current fiscal year, while imports surged by 24.50 per cent in the same period.

The considerable jump in imports over the moderate increase in exports has driven up the trade gap.

“Import growth is unsustainably high against the lacklustre growth in exports and so the trade gap is rising fast,” said Dr Ahsan H. Mansur, executive director at the Policy Research Institute of Bangladesh, a Dhaka-based think-tank. He also said that while remittances are growing, the inflow remains the same level as was in 2016.

The soaring gap in trade as well as the current account reflects the growing imbalance of the country’s external account, thus creating mounting pressure on the overall balance of payments. The central bank data showed that the overall balance of payments has posted a negative balance of $1.40 billion in the first nine months of the current fiscal year against a positive balance of $2.60 billion in the same period of the last fiscal. To make the connection, Dr Mansur argued that the country is accumulating foreign debt both in the public and private sectors and a portion of debt is likely to be used for financing the current account deficit. Dr Mansur was of the view that the government is heavily relying on debt financing to construct the mega infrastructure projects.

“This is unsustainable and going to put the economy under serious strain in the near future,” he warned.

He suggested that the government opt for equity financing for different big infrastructure projects, meaning attracting Foreign Direct Investment (FDI) in these projects.

But the country does not fare well in attracting FDI.

The central bank statistics showed that the net inflow of FDI fell by 2.89 per cent to $ 1.36 billion in the first nine months of the current fiscal year, down from $ 1.41 billion in the same period of the last fiscal. Dr Mansur, a former senior executive of the International Monetary Fund, also underlined the need for right pricing and timely implementation of the projects so that costs could not rise abnormally.

BONDED WAREHOUSE PRIVILEGE

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BONDED WAREHOUSE PRIVILEGE

Licences getting hard to come by

About 200 applicants, who have set up factories to make wares for export, are kicking their heels in frustration because of the Customs Bond Commissio-nerate’s (CBC) apathy in giving out bonded warehouse licence, a duty-free privilege extended to exporters. In some cases, some applicants are waiting for up to a year or longer. “Not only me, many investors like me have been waiting for several months for licences,” said an entrepreneur who applied for the permit in February. The businessman has invested about Tk 150 crore for setting up a fully export-oriented denim factory, but in the absence of any production he now has to foot the costly bank instalments. Previously, licences were issued within a month of applying.

“On one hand, the government encourages us to invest to boost exports. On the other, we face delays in getting licences. This is contradictory,” he said seeking to remain unnamed. The Customs Bond Commissionerate Dhaka, which looks after nearly 6,000 fully export-oriented factories that avail bonded warehouse benefits, has issued 77 bonded warehouse licences in the last one and a half years, which is less than half the number of licences issued in 2016 (162). And as of April 25 this year, it has issued 25 bonded warehouse licences. Since January 2013, 757 licences were issued, 68 percent of which were to garment makers. So the current delays have left garment exporters jittery as they gun for $50 billion in receipts by 2021. Despite repeated attempts, CBC Dhaka Commissioner Md Al Amin Pramanik could not be reached for comments on the issue.

However, a senior official of the CBC Dhaka on condition of anonymity acknowledged that there had been slowness in issuing licences over the last one and a half years. One of the reasons was thorough scrutiny of all the documents accompanied with physical verification to ensure that only genuine exporters get the duty-free import privilege and the benefit is not abused, he said. “But this does not mean that we are not issuing licences. We are issuing licences after checking the compliance status and documents. We are not extending the benefit to naughty and noncompliant firms.” The official said the field office under the National Board of Revenue became tough on granting bonded warehouse privilege amid allegations that a section of licence holders sold out the duty-free items to the domestic market, causing the state to miss out on large sums of revenue.

Officials said the state loses several thousand crores of taka for leakage of items from bonded warehouses.

At a meeting in August 2015, former NBR chairman Md Nojibur Rahman said the government could build two Padma bridges with the customs duty that the state was losing every year for the misuse of zero-duty import benefits under bonded warehouses. Subsequently, some officials refrained from issuing licences without checking documents properly to avoid probe by anti-corruption watchdog. Besides, many firms apply for licences with incomplete documents, he added.

“That’s why, applications got piled up,” he said, adding that steps are being taken to clear the backlog.

Out of nearly 170 applications for licences, the CBC Dhaka has sought documents from about 100 firms and 40 applications are under process of issuance, the official added.

Golden Harvest to set up cold storage chain

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Golden Harvest to set up cold storage chain

Golden Harvest Ice Cream Limited, a fully owned subsidiary of Golden Harvest Agro Industries, signed an agreement with IFC lnfraVentures on Tuesday to set up cold chain warehouses across the country. The company says the temperature controlled logistics infrastructure would be used in keeping and distributing goods in the freshest possible manner and in reducing wastage which results from non-temperature controlled movement. The project aims to ensure consumer safety, reduce post-harvest losses, remove middlemen, and reduce variations in quality. It would also ensure hygiene, freshness and quality, including reduction in formalin use on food products.

Initially the warehouses would be set up in Dhaka, Chittagong, Gazipur, Jessore and Khulna. “Anyone can keep their products in these warehouses,” said Mohius Samad Choudhury, a director of Golden Harvest. The services will cater to sub-sectors such as agribusiness, supermarkets, dairy, meats, restaurants (quick service and fine dining), seafood and fish, pharmaceuticals, e-grocers and e-commerce. IFC InfraVentures is a $150 million global infrastructure project development fund that has been created as part of World Bank Group’s efforts to increase the pipeline of bankable projects in developing countries.

Each share of Golden Harvest, listed on Dhaka Stock Exchange in 2013, closed at Tk 40.5 yesterday.

Malaysia tries crowdfunding to plug ballooning debts

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Malaysia tries crowdfunding to plug ballooning debts

KUALA LUMPUR (Reuters) – Malaysia has set up a fund for members of the public to donate cash to help the new government repay its hefty national debt, the finance ministry said on Wednesday, providing a bank account number for deposits.

Prime Minister Mahathir Mohamad has made it a priority to cut Malaysia’s debts and liabilities – estimated at 1 trillion ringgit ($250.8 billion) or 80 percent of GDP – since he mounted a surprise win over scandal-plagued Najib Razak in a May 9 general election.

The move comes after a private fundraising initiative ‘Please Help Malaysia!’ received more than $3,500 of donations on website GoGetFunding in a campaign to help the Southeast Asian country reduce debt.

“Due to the recent economic development and the growing concern among the rakyat (people) on the country’s current debt position, there are signs of awareness from the rakyat to lend their support to the government,” the finance ministry said in a statement.

“The rakyat voluntarily want to share their earnings with the government to help ease the burden.”

The ministry said the fund would be called Malaysia Hope Fund and provided the name of a local bank and an account number for contributions which it said must be made in cash denominated in the local currency.

While Mahathir’s government has made it a priority to get a handle on debts – pledging to review mega projects, axe some government agencies and cut ministers’ salaries – it is also withdrawing a goods and services tax this week which will hurt government revenues.

Training boosts garment workers’ productivity: study

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Training boosts garment workers’ productivity: study

The garment factories that have trained workers have seen a productivity rise by 5 percent, according to a survey of the International Finance Corporation released yesterday. The trained female operators of the factories were also promoted to the posts of supervisors for their efficiency gained from the trainings, it showed. The study report — Cutting through the Cloth Ceiling — prepared by the IFC in collaboration with the Japanese government was released at a discussion at Radisson Blu Dhaka Water Garden. The IFC trained 144 female sewing operators and their mid-level managers in 28 factories in collaboration with Better Work Bangladesh and the Innovations for Poverty Action in 2016-17. Out of the 144 trainees who completed the programme, 92 were offered a promotion with an increase in salary within weeks of completing the training and 60 percent of them have accepted the offer, said the study.

Everybody received two months’ training. The IFC provided the Work-Progression and Productivity Toolkit (WPT) to female sewing operators with five days of classroom training in the technical skills required to supervise a production line. They were also given four days’ of soft skills training on leadership, communications, and how to be an effective supervisor. The trainees had to put the lessons to use during an eight-week on-the-job training. “The trainees were promoted to line supervisors and line assistant supervisors,”said Anaise Williams of the University of Oxford who along with her colleague Prof Christopher Woodruff led the study. About 2,000 people, including mid to top-level managers of the factories were interviewed during the survey between December 2016 and January 2018.

The number of female supervisors in the participating factories increased from an average of 5.22 percent before the training to 11.86 percent after the training, said the study. “The training taught me how to speak to people at different levels, how to behave as a professional, and how to keep track of my work and calculate production and efficiency in an organised way,” said Popy Aktar, who is now a sewing line supervisor at Sparrow Apparels Ltd.

Wendy Werner, country manager of the IFC Bangladesh, said research showed that training increases line efficiency and benefits both the female supervisors and the factories that promote them. “If scaled-up in more factories, it has the potential to overturn the industry’s blind spot when it comes to career progression opportunities for women.” Faruque Hassan, vice-president of the Bangladesh Garment Manufacturers and Exporters Association, said in the early days of the garment sector in 1980s, the participation of females in the national workforce was only 8 percent and now it stands at more than 34 percent.

Utilising time when stuck in traffic jam

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Utilising time when stuck in traffic jam

The population of Dhaka city is at a staggering number of over 18 million. This data in and of itself can raise the eyebrows of many Westerners when they hear about the size of Dhaka. Our country’s capital is now officially the most densely populated city in the entire planet. One of the ‘perks’ of claiming this title is an unbearable traffic jam. ‘Congestion in Dhaka eats up 3.2 million working hours per day,’ as stated by World Bank. Therefore, it is evident that we, the residents of Dhaka, have to spend a considerable chunk of our day stuck in traffic. And this time may become time wasted unless we do something about it. This is because many things can be done while being in a vehicle especially a private car. So here are some ways to make traffic jams more productive.

When stuck in traffic, students can study. Since a considerable portion of one’s day is spent on the road, getting some essential study material covered during this time can help utilise the idle time. Studying while stuck in traffic jams is not an untested practice. Amit Ahsan, the boy who stood first in Dhaka University C unit admission test in 2016, used to do this during the admission season. As stated by Ahsan, “My coaching centre was a bit far from my home, but due to the unbearable traffic I had to spend two hours on a bus to get to my coaching and another two hours to get back. Time is precious to any student during the admission season, so I decided to get some studying done on the bus. I must say that the four hours of distraction-free studying did wonder for me, even though it was done in a crowded public bus.’

Besides studying, the time being stuck in traffic can be used to read the newspaper. Getting updated on whatever is going on around is something mandatory. But if one starts to read any newspaper while stuck in traffic, one will be able to focus more on the paper since there is nothing else to do inside an immobile vehicle. This is also a method that is used by a first-year BBA student in IBA- DU, Iftekarul Sharod. According to him, “I have a couple of students in Kafrul which is one-hour bus ride from the hostel. So that’s two hours on the road, whenever I go to teach them. So I get on the bus with a copy of the daily news, and within the two hours, I can read the entire paper. It makes a tedious task of reading the news fun since there is nothing else to do.”

Besides these methods, one can spend their hours stuck in a traffic jam to read a book or listen to an audiobook. These are not coherent with studying, the books mentioned here are out of the curriculum. Almost all of the financially successful people in the world have a habit of spending an hour or more every day for reading. So if the two to three hours stuck in traffic are used for that purpose, one can quickly focus on self-development in a shorter period of time.

Another important thing that can be done to spend traffic time is to call  parents, grandparents, uncles, aunts or friends who will most likely brighten the day with their inspiring words.

Just one need to be cautious that when the vehicle moves– it is better not to read anything, since that creates pressure on eyes.

By following some of these guidelines, an insufferable traffic jam can turn into a delightful experience. Thereby traffic jams can now be treated as distraction-free time slots to get many things done. Since people do not have many alternatives regarding activities in a car, a traffic jam can prove to be the most productive part of someone’s day. Thus people can do all the activities mentioned above and more if they want to utilise up to four hours of their day, which would have otherwise been wasted in frustration and anguish.

Govt set to establish new support fund for entrepreneurs

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Govt set to establish new support fund for entrepreneurs

The government is going to introduce an alternative loan support model soon replacing the existing equity fund, in an attempt to bring entrepreneurs under a legal framework, officials said. The move comes as the government could neither properly monitor the Equity and Entrepreneurship Fund (EEF) activities nor make the fund receivers accountable to it due to legal loopholes, they added. So, the Bangladesh Bank (BB) has made an alternative proposal to set up the ‘Entrepreneurship Support Fund (ESF)’.

The central bank is expected to launch the loan model soon to help recover government funds in case of project failure. The government created the EEF in the fiscal year 2000-2001 to extend support to the two promising sectors — agro-based food processing and software for which Tk 1.0 billion was allocated. Contacted, General Manger of the EEF Unit of the central bank Parimal Chandra Chakraborty said, “The final draft of the proposed ESF policy model has been sent to the finance ministry, seeking its opinion before getting approval from the law ministry.” “We have proposed bringing all entrepreneurs under legal framework. Currently, the EEF policy is share-based,” he mentioned.

The initiative has been taken considering it necessary to recover disbursed funds properly and make a time-befitting policy and law for recovering the funds disbursed to EEF programmes, said a BB source. According to the proposed structure of the loan model, a minimum of Tk 0.8 million and a maximum of Tk 50 million in loan support will be provided for agro-based industries. And a maximum of Tk 120 million support fund will be given to machinery-dependent agro-based project, the proposal said. IT-based projects will be entitled to get a minimum of Tk 0.5 million and a maximum of Tk 50 million in loan assistance.

The ESF funds will support up to 49 per cent of a project’s cost while the entrepreneurs will invest the remaining 51 per cent. The central bank has suggested that the loan tenure should be eight years and the interest rate 2.0 per cent. After receiving the first instalment of the fund, entrepreneurs will have to implement the project fully within one and a half years, otherwise they will have to refund the loan with interest. It is mandatory for the entrepreneurs to invest its equity within one year of receiving the ESF sanction letter. Two sanction boards and two evaluation committees will be formed and the board and committee members will receive honorarium.

In the new policy, the BB also proposed making registered mortgage of company properties mandatory against loans so that the money could be recovered by selling them off. The grace period for the loan will be four years instead of existing three years and the remaining loans will have to be repaid in eight six-monthly instalments, the proposed model mentioned. Under the EEF, a major weakness in the project operation is proper selection of entrepreneurs, a high official of the BB said. Many entrepreneurs have defaulted on loan repayment and failed to buy back government shares as per terms and conditions, he added. According to an investment agreement of EEF, an entrepreneur needs to complete buyback within eight years. In case of failure, the entrepreneur concerned should face action. But the process is complex and legally ineffective. No funds could be recovered as yet by filing cases.

Currently, a significant number of entrepreneurs have stopped making payments taking advantage of legal and policy limitations, a senior official of the central bank said. The latest move has been taken to bring such entrepreneurs under the legal framework aiming to make the recovery of funds easier, an official of the Financial Institutions Division said. The central bank was the implementing agency of the EEF project until May 2009. Later, the operational function of the fund was transferred to the ICB. Since then, the central bank has been formulating fund management policies and monitoring the investment activities of the EEF. According to officials, since its inception, the government has allocated Tk 20 billion in favour of the fund, of which Tk 15.13 billion went to the agriculture sector and Tk 5.12 billion went to information and communication technology (ICT) sector as of March last year.

 

Satellite company to get licence

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Satellite company to get licence

Bangladesh Communication Satellite Company Ltd—which is operating Bangabandhu Satellite-1—will get a licence from the telecom regulator to provide satellite services to local and foreign companies for 15 years. “We have decided to award a licence to the satellite company. We will send our recommendation to the government within one week,” Md Jahurul Haque, acting chairman of the commission, told The Daily Star yesterday. In a meeting on Monday, the officials of Bangladesh Telecommunication Regulatory Commission took the decision after the new state-owned company applied to the regulator last month.

Bangladesh’s first commercial satellite Bangabandhu Satellite-1 was launched from Florida in the US on May 11 and it has successfully reached its orbit. However, it will take three months for the satellite to complete some technical procedures and start offering services. The Telecommunication Act makes it mandatory for any entity to avail licence if it wants to provide telecom services in Bangladesh.

BTRC officials said they are yet to finalise the conditions of the licence, fees and charges. As the commission does not have any experience in this regard, it needs to consult with the government about it, Haque said. After the licence is handed, the BTRC will move to formulate a guideline on satellite services as there is no such licence in the country at the moment, officials said. The move will be taken to create scopes for prospective satellite companies to deliver satellite services, they said.

Private pension shaping up

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Private pension shaping up

Finance Minister AMA Muhith will present a detailed outline of a private sector pension scheme in the upcoming budget with a plan to reach one lakh beneficiaries on a test case basis. A finance ministry official said the minister wants to come up with a framework about the scheme that the government has promised earlier. The ministry has started working in full swing on the issue, he said. The finance ministry official said the piloting will focus on three population groups: lower-income savers, voluntary savers, and private sector employees. In the beginning, the private sector employees such as garments workers may be included in the pilot scheme. The pension scheme for the private sector employees got a boost in 2015 when the cabinet approved the National Social Security Strategy, which contained a thorough plan with a focus on initiating a universal pension scheme.

In his budget speech in June 2016, Muhith had said the existing pension system would be reformed and an initiative would be taken to introduce a pension system in the private sector. Two months later, the minister held a high-level meeting where a concept paper from the finance division was presented and discussed. The meeting decided that the paper will be placed with the cabinet to come up with a framework, but it has not progressed. In January the issue was revived again when Muhith said he would give an outline in the budget but it will be implemented by the next government. According to the finance ministry concept paper, the government plans to introduce a universal pension system for both public and private sector employees. Finance ministry sources said the government plan will only include private sector employees. Private sector employees will make a voluntary contribution to the pension fund. If a person resigns from an organisation and joins another, his contribution will be transferred. To materialise the idea, several subsidiary institutions will be established, including pension enrolment office, pension trust, custodian, central record keeping agency, trustee bank, pension fund managers and annuity service providers.

A new pension office will be set up along with a pension cell in the finance division to prepare a revised draft law for the pension scheme. A pension authority will be formed to bring all the citizens under the scheme. The finance ministry official said the ministry has already examined the pension systems in other countries, discussed the matter with stakeholders and made a draft proposal. Preparatory works, including framing laws, will be done in the next fiscal year, he said.   The World Bank has informed the government about its willingness to provide financial and technical assistance for the private sector pension scheme. The lender has committed $100 million for introducing the private sector pension scheme. As the introduction of the scheme got delayed, $80 million has been given to the insurance sector. The remaining $20 million will be provided when the pension scheme starts functioning.

According to a WB document, low-income savers will voluntarily save and the government may provide a matching fund of 25 to 50 percent. In case of salaried workers, the staff and their employers will contribute on their own, not the government. The WB proposal builds on the best practices from countries such as India, Malaysia, Sweden and Australia.

In particular, it uses India’s experience in developing the national pension scheme.