Posts

Written-off loans reach Tk 48,053cr

/0 Comments/in /by

Written-off loans reach Tk 48,053cr

AKM Zamir Uddin

The amount of loans written off by banks increased six times year-on-year to Tk 141 crore in the first quarter of 2018 as the lenders used a central bank policy to clean up their books.

This took the total written-off loans figure to Tk 48,053 crore since January 2003 when the policy was introduced.

Tk 24.76 crore was written off in the January-March quarter last year, according to Bangladesh Bank data.

Of the six banks that used the facility to clean up their balance sheets, Premier Bank topped the chart as it removed bad debts worth Tk 64 crore from its book. Eastern Bank wrote off Tk 55.42 crore.

State-owned banks wrote off Tk 22,618 crore and private banks Tk 23,825 crore in the quarter.

Two state-run specialised banks—Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank—wrote off Tk 555 crore and foreign commercial banks Tk 1,055 crore.

Between January 2003 and March 2018, Tk 48,053 crore were written off. Of the amount, 78 percent remained outstanding, meaning banks’ efforts to recover the bad loans haven’t paid off.

Banks prefer to avoid writing off bad loans as it is their primary assets and source of future revenue.

However, toxic loans that cannot be collected or are difficult to recover reflect very poorly on a bank’s balance sheets and can divert resources from more productive activity. This leads banks to remove bad loans from their balance sheets and thus reduce tax liability.

A central banker, however, said banks usually do not write off bad loans in the first quarter as there is no rush to clean the balance sheets at the beginning of a year.

The banking sector wrote off Tk 1,875 crore in the October-December quarter last year.

As per BB rules, loans are written off after making adequate provisions to take advantage of tax benefits. But banks are obligated to continue their recovery efforts.

In order to write off, banks have to file lawsuits with the money loan court against defaulters and keep 100 percent provisioning.

The process to write off was not transparent as it was an attempt to prevent people from knowing the actual figure of default loans, Khondkar Ibrahim Khaled, a former deputy governor of the central bank, told The Daily Star yesterday. Banks write off loans to conceal corruption, he said.

“The central bank introduced the policy to show a decreased amount of default loans on banks’ balance sheets with a view to presenting a positive picture of the country’s financial sector to the international community,” he said.

Khaled said write-off loans are like uncollectible loans and the recovery process is highly difficult.

“So, banks should prevent corruption so that the vested quarter can’t take loans through unethical process.”

Default loans rose by Tk 14,286 crore to Tk 88,589 crore in March this year compared to a quarter ago, showed BB data.

Default and write-off loans together totalled more than Tk 1.26 lakh crore at the end of March.

NBR lifts 15pc VAT on solar panel import

/0 Comments/in /by

NBR lifts 15pc VAT on solar panel import

Star Business Report

The National Board of Revenue has lifted value added tax (VAT) on import of solar panels in the face of demand from stakeholders.

The move comes two months after the revenue authority slapped a 5 percent advance income tax (AIT), 5 percent advance trade VAT and 15 percent VAT on the import of solar modules.

Under the latest initiative, the NBR lifted the 15 percent VAT to facilitate fast expansion of the green energy.

“We have exempted the VAT on import to cut cost of solar home systems and encourage its expansion,” said a senior NBR official.

The revenue collector has been offering duty benefit for solar panel import to encourage expansion of solar-based electricity generation.

Until fiscal 2015-16, no tax was applied on solar panels.

The 5 percent AIT was imposed in fiscal 2016-17, said Infrastructure Development Company Ltd, a major financier of renewable energy, in a letter to the NBR at the end of June seeking withdrawal of all taxes on solar module import.

Industry operators feared that new and ongoing green energy initiatives would face spiralling costs if solar panels are to be imported upon payment of high tax.

A number of solar-based initiatives such as solar irrigation, mini-grids, rooftop-based solar home systems and solar power plants are being established in various parts of the country.

Already, 999 solar irrigation schemes, 15 mini-grid and solar rooftops with a combined power generation capacity of 25MW have been established, according to a Sustainable and Renewable Energy Development Authority letter to the NBR.

About 52 lakh solar home systems have already been installed, benefitting 12 percent of the total population in off-grid areas.

The government aims to generate 2,000MW of electricity, or 10 percent of the total production, through renewable energy by 2020.

Exports to China drop 27pc

/0 Comments/in /by

Exports to China drop 27pc

Refayet Ullah Mirdha

Bangladesh’s exports to China—one of the most promising Asian markets—fell 26.79 percent year-on-year to $694.97 million in 2017-18.

The China Food and Drug Administration last year toughened certification regulations and it no longer accepts certification of the Bangladesh Standards and Testing Institution, said ATM Azizul Akil, senior vice-president of Bangladesh China Chamber of Commerce and Industry.

Now, Bangladeshi processed food exporters have to wait for days to receive testing certification from China, which is the main reason for the fall in exports, he said.

Even in fiscal 2016-17, the exports had recorded a 17.48 percent year-on-year increase to $949.41 million, according to data from the Export Promotion Bureau (EPB).

Moreover, the number of exportable items that Bangladesh has is very low, although China has allowed duty-free access to 5,074 products from Bangladesh, said Akil.

Bangladesh is one of the global leaders in garment items, but China did not allow duty-free export of all kinds of garment items.

As a result, the export of garment items to China is also not increasing, although Bangladeshi basic garment items have huge demand in the East Asian nation, he said.

China seeks high-end value-added items, something Bangladesh does not have a strong grasp on, he said.

Export of jute, jute goods, leather and leather goods are doing well in the Chinese markets, he said.

However, Bangladeshi exporters are lagging behind due to their poor negotiation skills, he said. “Other countries are performing well here.”

China in recent months tightened visa regulations for which, in most cases, small and medium company owners are being denied the scope to travel there.

“We sat with the government policymakers several times to resolve the trade barriers but those discussions hardly produced any positive result,” said Akil.

Mohammed Hatem, former vice-president of the Bangladesh Knitwear Manufacturers and Exporters Association, said the value of garment exports to China has remained stagnant over the last two years mainly because of the rising influence of Myanmar in fashion business.

Bangladesh exports basic garment items to China for the lower- and middle-income group people, Hatem said, adding that Myanmar and Vietnam were doing the same trying to take advantage of their geographical proximity to China.

China exported clothing items worth $158 billion last year, according to World Trade Organisation (WTO). The value of China’s domestic clothing market is almost the same.

China’s demand for basic garment items is high, as its manufacturers mainly concentrate on high-end products for upscale western markets.

This resulted in a rise of Bangladesh’s garment export to China over the last few years. But last year the export figure reached the same level as of the previous year.

In fiscal 2017-18, Bangladesh exported garment items worth $391.64 million to China and $391.60 million in fiscal 2016-17, according to EPB data.

Besides, it exported knitwear worth $157.75 million and woven items worth $233.89 million to China last fiscal year.

Currently, China is Bangladesh’s second largest export destination among the Asian nations after Japan.

Japan emerged as a potential export market as Bangladesh’s export earnings from the country saw an 11.73 percent year-on-year rise to $1.13 billion last fiscal year.

Given the situation of bilateral trade, the Bangladesh government initiated the process for signing a free trade agreement (FTA) with China.

Last week, Commerce Minister Tofail Ahmed said a memorandum of understanding has already been signed between the two countries for the FTA.

The first joint working group meeting between Bangladesh and China for signing the FTA was held in Beijing in July.

Bangladesh demanded that before the FTA was signed, China should provide duty benefit on export of 97 percent of Bangladeshi goods, as per a decision of WTO’s ministerial conference of 2006 held in Hong Kong.

Protect every data to fight cyber crime

/0 Comments/in /by

Protect every data to fight cyber crime

Star Business Report

Bangladeshi companies should establish proper security shields to protect their official data from cyber attacks, cyber security and audit experts said yesterday.

Every organisation should think about security of their data before awarding the audit work to a chartered accountancy firm, said Luna Shamsuddoha, chairman of Janata Bank.

“Official data should be protected and archived to avoid cyber threats and loss of data,” said Luna, also president of the Bangladesh Women in Technology.

She spoke in a workshop titled “Cyber security for personal and professional safety” organised by the Institute of Chartered Accountants of Bangladesh (ICAB) and Bangladesh Open Source Network (BdOSN) at the CA Bhaban in Dhaka.

The auditors should secure computer networks in their offices so as to prevent intrusions and hacking attempts, Luna said. Companies in Bangladesh will suffer because of the lack of their capacity to handle such threats, she said.

She also urged women to keep their national identity cards in a safe place and not to share passwords with anyone, not even their better halves. In today’s digital world, technology influences day-to-day activities of every person, said Dewan Nurul Islam, president of the ICAB.

So people should be more careful while using technology, otherwise they could fall victim to cybercrimes at any time, he said.

“Currently 80 million people are using internet in Bangladesh, so cyber threats may become pervasive just because of a lack of capacity in handling such threats.”

Munir Hasan, general secretary at the BdOSN, and Mohammad Tohidur Rahman Bhuiyan, managing director and CEO of Right Time Limited, jointly presented keynote papers at the workshop. Every minute, about 18 million people are sending text messages, 187 million sending emails and 1 million using Facebook, they said.

Some 78 percent of social media users share and press “like” on news posts without knowledge of its authenticity, they opined.

Organisations should have safer email identities to ensure security to their data, said Hasan of the BdOSN.

The internet network and the digital devices of any workplace should be locked using security codes, he said.

Parents should be more careful about the use of internet by their children because excessive dependency hampers brain development, Lafifa Jamal, chairperson of the Department of Robotics and Mechatronics Engineering at the University of Dhaka, said mentioning a study.

People should very carefully select passwords for email or Facebook accounts, she said.

It is a must to create mass awareness on cyber crimes, said Sayed Nasirullah, assistant commissioner of the cyber security and crime division of Dhaka Metropolitan Police.

More programme should be organised to create awareness on cyber crimes among people, especially women, said Parveen Mahmud, former president of the ICAB.

Govt widens reach of jute packaging law

/0 Comments/in /by

Govt widens reach of jute packaging law

Sohel Parvez

The government has made packaging of two more products—poultry and fish feed— in jute bags compulsory, a move that has been objected by the feed millers due to risks of quality deterioration.

The Feed Industries Association of Bangladesh had earlier urged the government not to include feeds under mandatory packaging by jute sacks as it would expose the products to moisture, which depreciates the quality.

“It will affect farmers,” said Moshiur Rahman, president of the Feed Industries Association of Bangladesh.

The country’s feed mills, which cater to the needs of tens of thousands of poultry farms that meet the domestic demand for chicken meat and eggs, produced 56 lakh tonnes of feed in 2017, according to the data from the Bangladesh Poultry Industries Central Council.

The sector also caters to the 1.50 crore fish farmers in the country.

If feed is to be packed in jute sacks, an additional layer of polyethylene would be required to protect them from moisture, Rahman said.

“This will not be good for the environment. At the same time, our costs will increase,” he said, adding that feed mills are using jute bags to package maize, one of the main ingredients for feed.

The feed millers will once again appeal to the government to reconsider the decision, he added.

The inclusion of poultry and fish feeds to the mandatory jute packaging umbrella comes 1.5 years after 11 agricultural items — including flour, potato, pulse, onion.

The government started enforcing the mandatory packaging law for commodities from the last quarter of 2015 to protect the interests of the jute growers and mills that remain vulnerable to fluctuations of demand in the global market for the absence of a vibrant domestic market.

Limiting the use of environmentally harmful plastic bags was another motive. The law was framed in 2010 and six commodities including the staple rice, wheat, fertilisers and sugar were brought under it.

The demand for jute bags has increased after the government started enforcing the law, said Md Mahmudul Hassan, chairman of Bangladesh Jute Mills Corporation.

Asked about the issue of moisture raised by feed millers, he said the use of inner liner will keep feeds free from moisture.

“We have examined in case of sugar and fertilisers and found no problem,” he said, adding that mills would try to use biodegradable liners.

Bangladesh Jute Mills Association (BJMA) estimates that public and private mills can make 140 crore pieces of jute sacks annually but they are manufacturing 50-55 crore pieces now, said its Secretary Abdul Barik Khan.

“Full compliance is yet to take place,” he said, adding that a section of the traders have started using plastic bags again.

In Bangladesh, about 2 lakh people work in 176 public and private mills, which process two-thirds of the country’s annual jute production of 14 lakh tonnes, according to data by the Bangladesh Jute Spinners Association.

Of it, 8.36 lakh tonnes are exported and the rest are consumed locally, according to the association.

Govt widens reach of jute packaging law

/0 Comments/in /by

Govt widens reach of jute packaging law

Sohel Parvez

 

The government has made packaging of two more products—poultry and fish feed— in jute bags compulsory, a move that has been objected by the feed millers due to risks of quality deterioration.

The Feed Industries Association of Bangladesh had earlier urged the government not to include feeds under mandatory packaging by jute sacks as it would expose the products to moisture, which depreciates the quality.

“It will affect farmers,” said Moshiur Rahman, president of the Feed Industries Association of Bangladesh.

The country’s feed mills, which cater to the needs of tens of thousands of poultry farms that meet the domestic demand for chicken meat and eggs, produced 56 lakh tonnes of feed in 2017, according to the data from the Bangladesh Poultry Industries Central Council.

The sector also caters to the 1.50 crore fish farmers in the country.

If feed is to be packed in jute sacks, an additional layer of polyethylene would be required to protect them from moisture, Rahman said.

“This will not be good for the environment. At the same time, our costs will increase,” he said, adding that feed mills are using jute bags to package maize, one of the main ingredients for feed.

The feed millers will once again appeal to the government to reconsider the decision, he added.

The inclusion of poultry and fish feeds to the mandatory jute packaging umbrella comes 1.5 years after 11 agricultural items — including flour, potato, pulse, onion.

The government started enforcing the mandatory packaging law for commodities from the last quarter of 2015 to protect the interests of the jute growers and mills that remain vulnerable to fluctuations of demand in the global market for the absence of a vibrant domestic market.

Limiting the use of environmentally harmful plastic bags was another motive. The law was framed in 2010 and six commodities including the staple rice, wheat, fertilisers and sugar were brought under it.

The demand for jute bags has increased after the government started enforcing the law, said Md Mahmudul Hassan, chairman of Bangladesh Jute Mills Corporation.

Asked about the issue of moisture raised by feed millers, he said the use of inner liner will keep feeds free from moisture.

“We have examined in case of sugar and fertilisers and found no problem,” he said, adding that mills would try to use biodegradable liners.

Bangladesh Jute Mills Association (BJMA) estimates that public and private mills can make 140 crore pieces of jute sacks annually but they are manufacturing 50-55 crore pieces now, said its Secretary Abdul Barik Khan.

“Full compliance is yet to take place,” he said, adding that a section of the traders have started using plastic bags again.

In Bangladesh, about 2 lakh people work in 176 public and private mills, which process two-thirds of the country’s annual jute production of 14 lakh tonnes, according to data by the Bangladesh Jute Spinners Association.

Of it, 8.36 lakh tonnes are exported and the rest are consumed locally, according to the association.

Shipment delay weighs on RMG

/0 Comments/in /by

Shipment delay weighs on RMG

Star Business Report

Shipment delays and late presentation of documents to Bangladesh’s authorities are among the most critical challenges faced by the country’s garment sector, according to a survey.

Some 66 percent of the exports could not be delivered on time while late presentation of documents, which poses a money laundering risk, occurred 53 percent of the time, said the survey of the Bangladesh Institute of Bank Management (BIBM).

Inadequate knowledge of domestic and international regulations was also to blame, it said. The BIBM revealed the findings of the “Trade Facilitations in RMG by Banks: Risks and Mitigation Techniques” survey at a workshop at its auditorium in Dhaka yesterday.

The institute organised the programme in association with the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).

Garment exports account for more than four-fifths of the country’s total exports, earning about $30 billion in 2017, of which woven and knitwear garments constituting around 52 and 48 percent respectively, according to the survey.

The survey spoke of another risk: the increasing amount of overdue export bills: 48 percent against letters of credit (LCs) and 53 percent against contracts.

The bills increased sevenfold to $119.63 million last year from $16.23 million the year before, said the survey, adding that some 42 percent of the export proceeds were found to have been non-repatriated against contracts.

The overdue bills raised concerns about money laundering and whether the exports actually did occur. The LCs cater to transactions between locals and foreign banks while contracts to direct deals between buyers and suppliers.

During the survey, members of the BGMEA and the BKMEA pointed out some key operational challenges to trade facilitation and financing by banks.

These include low packing credit usage, inefficiency in assessing working capital, absence of credit limit tolerance and of a customised collateral system, and inconsistent trade charges among banks.

Other obstacles are lack of awareness and inefficiency of traders and bankers in handling operations, they said, adding that problems were sometimes faced in trade facilitation with countries including Russia, Iran, North Korea and Cuba.

Some 46 percent of bankers suggested increasing skilled workforce in the RMG sector to address the risks, the survey said.

Though foreign trade facilitation service improved, non-compliance still remains a major concern in banks, said Prof Shah Md Ahsan Habib, director of the BIBM, while presenting the research paper at the workshop.

Incidents of trade-based money laundering are a growing concern for policymakers and central banks throughout the globe and it is affecting the RMG trade and service-providing bankers, he said.

Though available anti-money laundering rules are in line with globally accepted standards, there is still a lot of scope for improving their enforcement and identifying applicable red flags in the country’s context, he said in his recommendations.

Shipment delays result from a lack of efficient workforce in the industry, said Fazlee Shamim Ehsan, second vice president of the BKMEA. Subcontract in the RMG sector is a great risk factor for banks and the government should give policy support to banks to minimise risks of foreign trade, said Helal Ahmed Chowdhury, supernumerary professor of the BIBM.

Banks should intensify monitoring in the entire import and export process to avert risks, said Syed Mahbubur Rahman, managing director of Dhaka Bank.  There is no alternative to training for reducing risks in foreign trade, said Mehmood Hussain, managing director of NRB Bank.

Banks, NBFIs sign up to refinance power, infrastructure projects

/0 Comments/in /by

Banks, NBFIs sign up to refinance power, infrastructure projects

Star Business Report

Eight banks and four non-bank financial institutions yesterday signed a participation agreement with Bangladesh Bank to enjoy funds from an Investment Promotion and Financing Facility (IPFF) II project.

The central bank, as the project’s administrator, has formed a $403.70 million fund to lend to financial institutions, authorising them to refinance customers in power and infrastructure projects at a lower cost.

Governor Fazle Kabir was present at the signing ceremony as chief guest at the central bank headquarters in the capital.

Ahmed Jamal, deputy governor of the central bank; Hassan O Rashid, project director of IPFF II; AKM Abdullah, senior financial sector specialist of World Bank, and senior executives of the signatories were present at the event.

The signatories are Dhaka Bank, Prime Bank, Eastern Bank, Mutual Trust Bank, Dutch-Bangla Bank, United Commercial Bank, One Bank, City Bank, IDLC Finance, Infrastructure Development Company, Bangladesh Infrastructure Finance Fund, and Industrial and Infrastructure Development Finance Company.

The government received loans amounting to $356.70 million from World Bank to implement the IPFF II project.

The government provided $60 million as a counterpart fund to the project. The total project cost stands at $416.70 million, out of which the amount being lent is $403.70 million. The rest of the fund will be used as technical assistance.

India doubles import tax on textile products, may hit China

/0 Comments/in /by

India doubles import tax on textile products, may hit China

Reuters, New Delhi/Mumbai

 

India doubled the import tax on more than 300 textile products to 20 percent on Tuesday as the world’s biggest producer of cotton tries to curb rising imports from China.

It was the second tax hike on textiles in as many months after an increase on other products including fibre and apparels last month.

The moves are expected to provide relief to the domestic textile industry, which has been hit by cheaper imports.

India’s total textile imports jumped by 16 percent to a record $7 billion in the fiscal year to March 2018. Of this, about $3 billion were from China.

The government did not disclose details of the 328 textile products that will be subject to the duty increase announced on Tuesday.

Rising imports sent India’s trade deficit with China in textile products to a record high $1.54 billion in 2017/18, alarming industry officials as India had been until recently a net exporter of textile products to China.

Sanjay Jain, president of the Confederation of Indian Textile Industry, told Reuters he did not expect China to retaliate to the Indian duty increases as it still has a trade surplus with India.

He said India’s textile product imports could fall to $6 billion in 2018/19 as a result of the tax hike to 20 percent.

India’s imports of textile products from Bangladesh, Vietnam and Cambodia also jumped in the last few years as they are not subject to any duty under free trade agreements (FTA) signed by India with these countries.

The 20 percent duty will not be applicable to products sourced from those countries due to the FTA, Jain said.

Industry officials say in the last few months Chinese fibre has been shipped to Bangladesh and processed and exported to India with zero duty.

“Rules of origin need to be implemented for textile products. Otherwise Chinese products will land from other countries,” said a Mumbai-based garment exporter, who declined to be named.

Jain said India’s textile and garment exports could rise 8 percent to $40 billion in 2018/19 due to a weak rupee and as the government is expected to introduce incentives to boost overseas sales.

India’s trade differences with the United States have also been rising since President Donald Trump took office.

Govt brings fresh funds for entrepreneurs

/0 Comments/in /by

Govt brings fresh funds for entrepreneurs

Star Business Report

The government has introduced an Entrepreneurship Support Fund (ESF) for agro-based industrial, food processing and ICT sectors by abolishing the Equity and Entrepreneurship Fund (EEF), as clients did not pay back loans on time despite enjoying equity at zero interest.

The ESF fund would provide eight-year term loans at 2 percent simple interest, the central bank said in a circular yesterday.

It has a four-year grace period, after which clients will have to pay 25 percent principle and interest every year, according to the statement.

Clients themselves have to provide 51 percent as equity of the project cost and invest it within one year after securing the approval from the Investment Corporation of Bangladesh (ICB). They must also submit mortgage against the loans.

The loans will be disbursed in three installments, the first through the ICB. Clients will have to invest the whole of the first installment within one and a half years. They would otherwise have to pay back the fund including interest.

No other bank loan will be allowed as equity of the projects and no defaulter can get the loan, according to the guideline.

The central bank will continue to frame policy-related rules of the fund as needed and the ICB will work as the operator.