Golden days beckon for jute

Refayet Ullah Mirdha

Jute and jute goods put in a solid shift in the overseas market in fiscal 2017-18, crossing the $1 billion mark in receipts after five years, much to the cheer of the government as it endeavours to lower dependency on garment.

Last fiscal year, the sector brought home $1.02 billion, up 6.56 percent year-on-year, according to data from the Export Promotion Bureau.

Jute and Jute goods is the third sector to crossed the $1 billion-mark in export receipts after apparel and leather and leather goods.

“The international market trend is so far good,” said HM Rezaul Karim, vice-president of the Bangladesh Jute Goods Exporters’ Association.

The sector’s turn of fortune comes as the use of the natural fibre is on the rise worldwide for a growing shift towards an eco-friendly lifestyle.

Besides, the demand for jute sacks is on the rise from African countries like Sudan, Kenya, Ivory Coast, Kenya, Nigeria, Egypt, Cameroon, Tanzania and Uganda, where they are used for food grain packaging.

Karim, whose firm Bico Jute Fibres exports jute and jute goods worth $20 million a year, lamented that exporters do not enjoy any financial incentive from the government, although the local manufacturers are enjoying 7.5 percent cash incentive from the government.

Another important reason for the rise in the sector’s exports is the use of the natural fibre by global car giants like BMW, Mercedes-Benz, Toyota, Renault, Mitsubishi, Volvo, Audi, Daimler Chrysler and Ford, said Azazur Rahman, owner of Supreme Fashion and Fibre, which ships 600 tonnes of raw jute a year.

The global car industry needs about 100,000 tonnes of jute a year, of which 12,000 tonnes come from Bangladesh, the exporters said.

Bangladesh has the potential to become the main supplier of jute to the global automobile industry, which uses the natural fibre to manufacture the car interiors.

Previously, the car industry used glass fibre to manufacture the interiors. But glass fibre is not recyclable or biodegradable, so in 1994 the search for a green alternative began. Jute emerged as the frontrunner.

As a result, Bangladesh has the potential to export jute and jute goods worth $5 billion to $7 billion annually in the next seven years.

“We have a big potential also in the European markets as the demand for natural fibre is increasing in the western world,” Rahman said.

Punish loan defaulters: FBCCI

Star Business Report

The FBCCI yesterday reiterated its demand that the government punish wilful loan defaulters who were putting a great strain on the banking sector.

“The real defaulters should be punished. The justice should be done in a transparent manner,” said Shafiul Islam Mohiuddin, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI).

He was speaking at a press conference in the FBCCI’s office in Dhaka on the recent cut in bank interest rates.

Reitering his views at a June 9 press meet, he said trials of some bad bank borrowers were ongoing while some were facing Anti-Corruption Commission (ACC) but the FBCCI would not lobby to save any defaulter.

The FBCCI also suggested that banks continue to fund good borrowers, who defaulted on valid reasons such as sudden huge losses for political instability and a cut in production because of inadequate gas and electricity supply.

“Unfortunately, these good borrowers are also becoming victims along with the wilful defaulters,” the president of the apex trade body said.

Every bank should treat their borrowers according to their previous records, he said. “They should keep in mind that no injustice is done to the good clients.”

In the June 9 press meet, the FBCCI chief also called for exemplary punishment for bank defaulters. “It was no less than a robbery.”

Sometimes some small borrowers—owners of small and medium enterprises—have to go through tough legal processes after failing to repay loans of small amounts, although they are not wilful defaulters, Mohiuddin said.

“Now, every bank defaulter in the country has to face the trial where the political or any other kind of identity of the person does not add any value. It’s a very good culture.”

The banking sector has been going through a tough time in recent months. Banks’ non-performing loans (NPLs) hit Tk 88,589 crore as of March this year, which is 10.78 percent of the total outstanding loans.

The chronic inefficiency and mismanagement in state banks can now been seen in private banks too. Even some first-generation banks are in serious trouble now, including liquidity crisis.

The probes into some of the scams that have plagued BASIC and Farmers banks have not gone well to say the least. Even the High Court called in the ACC investigators of BASIC Bank scams last month and reprimanded them. “We have to cover our faces with black cloth in shame …,” an HC judge said. According to a Bangladesh Bank enquiry, around Tk 4,500 crore was siphoned out of BASIC Bank between 2009 and 2013 when Sheikh Abdul Hye Bacchu chaired the board of the bank.

“The current amount of NPL is a matter of concern for our economy. It helps to increase the interest rate. Whether it is a vicious cycle or not, BB knows it better,” Mohiuddin said in yesterday’s press meet.

“We want that our banking management not fall in any risk. We demanded an independent banking commission so that the actions are taken transparently.”

Banks are supposed to implement the cut in bank interest rates from July 1, he said.  “However, we do not have any record on how many banks have reduced the interest rate to single digit until now although the order to cut the rate came from the prime minister.”

He also suggested that the government form a high-powered taskforce to realise the NPLs for which the bank interest rate rose abnormally. The bank interest rate in Bangladesh is higher compared to some other Asian countries, he said.

For instance, the interest rate in China is 4.3 percent, Singapore 5.3 percent, Vietnam 6.25 percent, Pakistan 8.2 percent, Thailand 7 percent, Nepal 7 percent, Indonesia 4.5 percent and Malaysia 4.8 percent, Mohiuddin said.

The reduced interest rate will encourage businesses to come up with more investment, create more jobs and boost economic development, he said.

China factory growth slows

Reuters, Beijing

Growth in China’s manufacturing sector slowed in June after a better-than-expected performance in May, official data showed, as escalating trade tensions with the United States fuel concerns about a slowdown in the world’s second-biggest economy.

China’s economy has already felt the pinch from a multi-year crackdown on riskier lending that has driven up corporate borrowing costs, promoting the central bank to pump out more cash by cutting reserve requirements for lenders.

The official Purchasing Managers’ Index (PMI) released on Saturday fell to 51.5 in June, below analysts’ forecast of 51.6 and down from 51.9 in May, but it remained well above the 50-point mark that separates growth from contraction for a 23rd straight month.

The findings are in line with recent data including credit growth, investment and retail sales pointing to slowing growth in China’s economy, as policymakers navigate debt risks and a heated trade row with the United States.

Significantly, the June new export orders index contracted for the first time since February, dropping to 49.8 from 51.2 in May.

A production sub-index fell to 53.6 in June from 54.1 in May, while a new orders sub-index declined to 53.2 from 53.8.

The PMI for large-sized firms fell to 52.9 in June from 53.1 in May, the index for medium-sized firms dipped to 49.9 from 51.0 while that for small firms rose to 49.8 from 49.6.

“Domestic demand is weakening and external demand faces pressure from escalating trade frictions between China and the United States,” said Wen Bin, senior economist at Minsheng Bank in Beijing.

Wen said he expected the central bank to continue to lower banks’ reserve requirement ratios (RRR) in the coming months to help ward off a sharper economic slowdown.

The central bank said on June 24 it would cut the RRR by 50 basis points for some banks to accelerate the pace of debt-for-equity swaps and spur lending to smaller firms.

After May’s official factory PMI touched an eight-month high, there have been increasing signs that China’s economy is finally slowing.

Credit growth has slowed this year as the government cracks down on many types of lending, and the tighter liquidity environment appears to be impacting growth.

On July 16, the government is due to release data on second-quarter growth in gross domestic product (GDP) and other key indicators.

Analysts at ANZ forecast second-quarter growth of 6.7 percent, from 6.8 percent in the first quarter.

In May, industrial output, retail sales and fixed asset investment all missed expectations as auto sales dropped, and local governments scaled back building projects amid scrutiny from Beijing over their borrowings.

While the economy could likely handle these domestic challenges without growth slowing dramatically, the trade dispute with the US is adding to uncertainty about how China’s economy will react.

As US President Donald Trump has ratcheted up the pressure on China with threats of new tariffs and investment restrictions, China’s stock markets and currency suffered one of their worst months in years in June.