India’s Jet Airways to buy 75 Boeing planes worth $8.8b

India’s Jet Airways Ltd has entered into an agreement to buy 75 Boeing Co 737 MAX narrow-body jets, worth $8.8 billion, to meet passenger demand which has shown no sign of abating after years of growth. Jet Airways, in a filing to the stock exchange late on Tuesday, did not say whether the agreement was a formal order or a non-binding memorandum of understanding. Boeing did not respond to a request for comment. The jets would be worth $8.8 billion at list prices, though airlines typically receive significant discounts from manufacturers.

Shares of Jet Airways rose as much as 3.2 percent in Wednesday morning trade, and were trading up 1.4 percent at 0610 GMT. The wider Mumbai market .BSESN was up 0.25 percent. The latest agreement comes as Indian airlines rush to expand fleets to meet ever-increasing demand for domestic as well as international flights, making it one of the most targeted sales markets for Boeing and European rival Airbus SE (AIR.PA).

Boeing said in July it expected Indian airlines to order up to 2,100 aircraft worth $290 billion over the next 20 years, calling it the highest-ever forecast for Asia’s third-largest economy.

Bring Facebook, Youtube under local tax net

Newspapers owners yesterday urged the government to bring global social media platforms such as Facebook and Youtube under the tax net as they eat up half of online advertisement. The government does not have any control over global digital platforms as they do not have any office in Bangladesh, said Matiur Rahman, president of the Newspaper Owners’ Association of Bangladesh (NOAB). The global platforms are eating up 50-60 percent of the online advertisement incomes of the newspapers of Bangladesh, he said.

Many countries in Europe have been successful in realising their share of online incomes through battles with Facebook and Youtube, Rahman said. “It is also done in India.” “It means that Facebook and Youtube should be brought under the tax net of Bangladesh. They should share a portion of their incomes with the state and with us. For this, the government should take an initiative.”

The editor of the Prothom Alo said if the global platforms are brought under the tax net, it will be beneficial for the government, the local newspaper industry and the television channels.

A panel should be formed to solve the issue, he said. His comments came at a discussion of the National Board of Revenue (NBR) with the print and electronic media owners.

The NBR organised the event to hear the views and recommendations of various professionals and trade bodies before framing the fiscal measures for 2018-19.

Chaired by NBR Chairman Md Mosharraf Hossain Bhuiyan, Prime Minister’s Media Adviser Iqbal Sobhan Chowdhury and NOAB’s Executive Committee Member Mahfuz Anam were present.

Representatives of the Association of Television Channel Owners (ATCO) also spoke. In November last year, the NOAB sent a letter to the finance ministry, the Bangladesh Bank and the NBR about the issue.

In the letter, the association said Facebook and Google have no office in Bangladesh which allows them to remain out of the purview of Bangladesh’s laws.

Facebook and Google are earning a huge amount of money from digital advertisements, but they are not paying any taxes, the association said.

To do business in any country, it is a pre-condition for every company to comply with local laws, reads the letter signed by Rahman. At the meeting, the NBR chairman asked his colleagues to take the issue into consideration.

The NOAB said the newspaper industry faces competition worldwide from electronic and online media as well as social media platforms. “The newspaper industry is the only old industry that is losing readers worldwide because of television and other digital platforms. As a result, its advertisement income is falling,” Rahman said.

The similar trend is also seen in Bangladesh, he added. “We have estimated that the readers are falling by 5-10 percent here and advertisements are also declining. On the other hand, our costs are rising,” he said.

He said the price of newsprint has risen by $100-$150 per tonne in the last three months.

The newspaper industry has become a sick industry because of falling income from advertisements and circulation, Rahman said. “It is now a question whether the newspaper industry will sustain in the next 10 years,” he said, urging the government to give incentive to the sector. He also demanded withdrawal of the import tariff and value added tax for the sake of the industry.

The recent formation of the wage board for journalists will increase the cost for newspapers, said Rahman. “The media should not be seen as a factory; it should be given incentive from the perspective that it provides a social service,” Iqbal Sobhan Chowdhury said.

ATCO Senior Vice President Mozammel Babu expressed dissatisfaction over the lack of reflection of views and recommendations given at pre-budget discussions in the past. “The rate of implementation of the recommendations is so low that we do not find incentive to come here,” he said. He called for bringing cable operators under digitisation and imposition of fees for broadcasting foreign channels in Bangladesh.

Promote innovation for further growth

Bangladesh needs to promote innovation to take its economy and companies to the next level of growth, said experts yesterday.  Last year, Bangladesh came in at 114th spot in the Global Innovation Index. Innovation is not an option; it is imperative, said Anir Chowdhury, policy adviser of the a2i Programme at the Prime Minister’s Office, at the fifth Leadership Summit held at the Le Méridien hotel in Dhaka.

An initiative of Bangladesh Brand Forum, this year’s summit was organised in association with Beximco, American International University Bangladesh, Dhaka Bank and The Daily Star. The capacity for innovation in Bangladesh is high at the individual level but low at the government and academia level and medium at the industry level, he told a session titled ‘Bangladesh Dialogue for the Next 10 Years’.

“Innovation has to be coordinated across the government, industry and society at large. An innovation culture must be nurtured everywhere.”

Bangladesh is in a poor shape in education, creative goods and services, human capital, research and environmental performance, he said. Subsequently, under the Bangladesh Mission Innovation 2041, the government plans to transform education for problem solving, facilitate research and development collaboration, enhance trust in government and simplify processes, mobilise financing and support commercialisation of innovations, and catalyse innovation by youth, women and persons with disability.

The country’s education system has to make an improvement sooner so that it can drive innovation, said Arif Dowla, managing director of ACI. “The existing curricula promote memorisation rather than critical thinking.”

He went on to call for promotion of a culture of innovation within companies as the current system is largely hierarchical.

“We need to give a little bit of freedom to employees so that they can express their ideas freely,” he added.

Creating trust is crucial for innovations, said Robert C Wolcott, a clinical professor at the Kellogg School of Management of Northwestern University.

The Bangladesh government is committed to innovation, so the firms and start-ups already have a head start.

One of the most powerful forces reshaping markets for the coming generation would be production of products and services ever closer to the point of demand.

“True breakthroughs won’t happen due to doing what we do today more efficiently. They will happen due to doing what was hitherto impossible,” said Wolcott, also a co-founder and executive director of Kellogg Innovation Network.

Bangladesh is ready to do a lot as it has untapped potential, said Yasir Azman, deputy chief executive officer at Grameenphone.

In the same session, one participant raised the issue of red tape and taxation, saying they are preventing ideas from coming to fruition.

The country has come a long way as a nation and as an economy and its performance in attaining the Millennium Development Goals is also a benchmark for others, said Shariful Islam, managing director of Bangladesh Brand Forum.

“Yet, the journey ahead needs innovations and proper planning and strategy to be executed by leaders for sustainable development.”

In order to flourish in the changing times, businesses should re-strategise, embrace and exploit the power of digital, strategically collaborate and partner, rethink modes of employment, and promote a ‘start-up’ mindset, said Mir Salim, principal of Boston Consulting Group, an American management consultancy firm.

Bangladesh needs multiple growth engines and focus, said Namrata Dubashi, partner of McKinsey & Company, another American management consultancy firm.

Successful development journeys concentrate on six to 10 sectors. “Prioritisation should follow a framework that will match national objectives with market opportunity.”

Bangladesh is poised to benefit from China’s rebalancing, provided it leverages technology and upgrade skills, said Faisal Ahmed, chief economist of the central bank, in a session on the economy. There is no magic bullet in managing equity and social cohesion.

“A quantum leap is needed in our education, health and fiscal performance, both revenue and the equality of public expenditure. Finance, infrastructure, investment have to play their roles too,” he said in a presentation.

Policymakers should get to the bottom of low FDI

Policymakers should find the reasons behind the low inflow of foreign investment to Bangladesh despite a number of agencies’ efforts to boost receipts, said a top official of an investment agency yesterday.

“We have a number of organisations and yet foreign investment inflows are no more than $2.5 billion,” said Paban Chowdhury, executive chairman of the Bangladesh Economic Zones Authority, at a discussion at the headquarters of the National Board of Revenue. Besides, there are a number of authorities and laws to promote investment. In contrast, Vietnam has simply a decree, which has paved the way for the country to receive huge amounts of foreign investment, he said. In 2016, Vietnam received $12.60 billion in foreign direct investment, whereas Bangladesh got $2.33 billion, according to United Nations Conference on Trade and Development.

The NBR organised the event to hear views and recommendations from investment related agencies to frame the measures for the incoming fiscal year.

Myanmar receives $9 billion of foreign investment and countries like Hong Kong and Singapore get $75 billion, according to Chowdhury.

“Bangladesh sits on a strategically ideal location with two economic giants, China and India, and has a long coastal belt. A number of organisations are also working to attract investors. Yet, we could not make that much stride for various reasons.”

Asked for reasons, the BEZA chief said the investment climate and regulatory framework are easier in Vietnam than in Bangladesh.

The Southeast Asian nation has one organisation for special economic zones and other agencies support it in attracting investment.

“Investments do not get stuck anywhere there,” Chowdhury said.

He, however, said investment will rise to $5 billion next year because of increasing inflows.

BEZA has received $8 billion of confirmed investment proposals, he said, adding that the ‘One Stop Service’ law would be instrumental in facilitating investment.

“But without the help of the NBR, it is not possible to have a diversified manufacturing regime,” he said.

Bangladesh Investment Development Authority Executive Chairman Kazi M Aminul Islam said budgetary measures should focus on promoting investments.

“I do not see the NBR as a revenue collection agency. It is a very important institution and it has important role for the development of Bangladesh.” Vietnam fares better than Bangladesh in terms of business climate, infrastructure and skills, he said. “We want a tax system where processes are simple, transparent, fair and affordable.” Citing the high corporate income tax rate, Islam said it is necessary to know whether the high rate helps the country to attract FDI. “Corporate tax rate should be attractive in comparison with our competing countries in terms of foreign investment,” he said. In response, NBR Chairman Md Mosharraf Hossain Bhuiyan said the revenue authority will try to frame fiscal measures by providing sufficient incentives to attract investments. An investment promotion team will be formed with representations from BIDA, BEZA, NBR and other related agencies and suggestions from the panel would be incorporated in next year’s fiscal measures.

Representatives from Bangladesh Hi-Tech Park Authority, Bangladesh Export Processing Zones Authority and Business Initiative Leading Development also shared their views at the event.

WB gives $515m for power, insurance projects

The World Bank has committed to providing $515 million through two projects, one helping to expand electricity transmission networks and another to improve insurance coverage.

The two deals were signed at Economic Relations Division (ERD) in the capital’s Sher-e-Bangla Nagar yesterday. Mahmuda Begum, additional secretary to the ERD, and Qimiao Fan, WB country director for Bangladesh, Bhutan and Nepal, represented the two sides. The $450 million worth of Enhancement and Strengthening of Power Transmission Network in Eastern Region Project would improve supply and reduce load shedding in the eastern region, covering greater Comilla and Noakhali and a part of greater Chittagong, said a WB statement.

About 275,000 households and 16,000 agricultural consumers will get new electricity connections while 13 new substations will be built and an existing one rehabilitated, it said.

One 230 kV transmission line through greater Comilla and four short distance 132 kV lines in Comilla and Noakhali will also be built, it added.

The statement said the Insurance Sector Development Project of $65 million would help strengthen the Insurance Development and Regulatory Authority’s regulatory and supervisory capacity.

This will also happen for state-owned insurance bodies Shadharan Bima Corporation and Jiban Bima Corporation through modernisation of their systems and business practices, it said.

It will also help enhance Bangladesh Insurance Academy’s capacity into becoming a reliable resource for training and research, addressing a severe lack of insurance professionals, it said.

The power project will receive a scale-up facility credit from International Development Association (IDA), a WB wing. It has a maturity period of 35 years, including a four-year grace period.

The insurance project will receive interest-free IDA credit, repayable in 38 years, including a six-year grace period and a service charge of 0.75 percent. “Only investing in power generation is not sufficient, unless that is supported by improvement in transmission and distribution,” said Fan. “By supplying uninterrupted power to Mirsharai Economic Zone, port, airport or other key economic facilities, the project will help unlock private sector growth,” he said. In Bangladesh, insurance penetration is particularly low: less than 1 percent of the population has insurance coverage, he added.

Mahmuda said the 7th Five-Year Plan includes a vision for providing electricity to all and improving insurance coverage. “Both projects will contribute to creating more and better jobs, and boosting growth,” she said.