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Internet growth hits 3-year low

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Internet growth hits 3-year low

Star Business Report.

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The growth of new internet connections fell 21.58 percent year-on-year to 1.09 crore in 2018, a three-year low.

Industry insiders blamed the fall on the restriction imposed on digital services ahead of the national polls, as the sector lost 11.18 lakh active mobile connections in the last two months of 2018.

This was the first time the internet industry in Bangladesh has observed a negative growth for two consecutive months.

If the restriction had not been there, internet use would have continued growing keeping pace with the economy, industry people said.

The number of active mobile connections also fell by 0.03 percent to 15.69 crore in December from the previous month.

Only Grameenphone posted positive growth in the last month of 2018, while the market share of the three other operators shrunk.

As of December, there were 9.13 crore active internet connections, of which 8.55 crore was mobile internet, 57.35 lakh broadband and the rest WiMax, according to data from the Bangladesh Telecommunication Regulatory Commission.

Since its launch in February 2018, the country now has 1.17 crore fourth generation (4G) mobile internet users.

Real estate betting big on 2019

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Real estate betting big on 2019

Sohel Parvez.

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Home sales are likely to pick up this year after a underwhelming 2018, spurred by hopes of political stability and positive economic growth outlook, said realtors and lenders.

“As the election is over there is political stability. So, we expect the market to be better this year than the last one,” said Alamgir Shamsul Alamin, president of the Real Estate & Housing Association of Bangladesh (REHAB).

This year, the market may expand by up to 9 percent in terms of sales of the number of units, he said, adding that the loan opportunity extended by the government for public sector employees would have a positive impact on the demand for homes.

Toufiq M Seraj, managing director of Sheltech, one of the leading developers in Bangladesh, echoed the same.

“People feel encouraged to invest if there is stability. And it can be assumed there will be political and social stability and investment this year.”

He went on to predict that the real estate sector this year will be far better than the last couple of years.

Growth slowed down in the last three months of 2018, according to Seraj.

Many prospective buyers kept their investment on hold in 2018, said AKM Shafiuddin Shahin, sales in-charge of Structural Engineers.

“As a result, overall sales slipped a bit. But fortunately, we registered growth in sales last year,” he said.

The market was static in 2018 mainly because of interest rate increase, said QM Shariful Ala, managing director and chief executive of Delta Brac Housing Finance Corporation.

The interest rate rose in the first half of the year in the face of liquidity crisis in the banking sector.

The average interest rose to 11 percent in 2018 from 8.5 percent a year earlier because of liquidity crunch, said Ala of DBH, the largest and specialist housing finance institution in the private sector.

“Some developers might have done exceptionally well but the total market did not grow in 2018,” he added.

The home loan market shrank to about Tk 5,000 crore in 2018 from about Tk 7,000 crore the previous year.

DBH’s outstanding home loans rose 8.15 percent year-on-year to Tk 4,326 crore at the end of December 2018, according to Ala.

“The market is supposed to be better this year,” he added.

Arif Khan, chief executive and managing director of IDLC Finance, said the market had been picking up gradually since 2014.

The housing market went on a downturn in 2012 for intermittent political instability, a bearish stock market and the government’s apathy towards providing gas connections to new buildings.

The property price corrections in the past few years have lured in many prospective home buyers and the market is invigorated again. “Now, developers are coming and trying to build new projects. And the prices are moving towards the positive territory,” Khan said, adding that IDLC posted about 20 percent growth in its portfolio.

The industry delivers roughly 10,000-12,000 units a year.

No data is available yet on the total sales of apartments and commercial spaces in 2018.

LNG boosts Ctg factories

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LNG boosts Ctg factories

Mohammad Suman

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Factories in Chattogram, which have long been operating at below capacity because of inadequate gas supplies, are now breathing a sigh of relief thanks to the availability of liquefied natural gas (LNG).

Some 450-480 million cubic feet (MMCF) of LNG is being added to the national grid every day since the middle of August last year as per the supplier, Karnaphuli Gas Distribution Company (KGDCL).

Of the amount, the Chattogram region has been getting 250-300 MMCF and the rest of the country 200-230 MMCF, said Anupam Dutta, KGDCL’s manager (customer and maintenance).

Previously, Chattogram would get 200-220 MMCF of gas.

“I hope the gas shortages would become a thing of the past for Chattogram,” said Mizanur Rahman, director of Ratanpur Steel Re-Rolling Mills, whose plant has been a beneficiary of the development.

The factory had to stay shut at least four times on an average every year for two to seven days for gas shortage.

“The LNG supplies have jumpstarted our production,” he added.

Like Ratanpur Steel Re-Rolling Mills, Raozan Thermal Power Station, Chattogram Urea Fertiliser, newly installed Abul Khair Power Plant, Karnaphuly Fertiliser, United Power Plant, Regent Power Plant and various steel factories have generously benefitted from the government move to import LNG from Qatar.

The LNG imports began in September last year. To date, 15 shipments have arrived.

The liquid is being converted to gas by a floating storage and regasification unit (FSRU) in Moheshkhali operated by American company Excelerate and pumped ashore.

KGDCL provides supplies to about 598,000 residential consumers alongside 75 compressed natural gas refuelling stations and about 3,000 industrial and commercial entities.

The cost per cubic feet is Tk 9.10 for households and Tk 17.04 for commercial units. The gas crisis has been mitigated by the LNG to some extent as some plants are yet to get the supplies, said Mahabubul Alam, president of the Chittagong Chamber of Commerce and Industry.

Chattogram needs 450 MMCF per day to run productions and the crisis would end within three months given the plan taken by the government, he added.

A second FSRU, operated by Summit Corp with Japan’s Mitsubishi Corp as a partner, is expected to start operations by the end of March. Rupantarita Prakritik Gas, which supervises LNG distribution, already hopes to take supplies to 500 MMCF by February’s end with the existing FSRU.

The supplies are expected to reach 1,000 MMCF once the second FSRU starts functioning, according to Rafiqul Islam, general manager of Rupantarita Prakritik Gas.

Some five land-based LNG terminals are also under construction and once executed it will be able to fulfil all the demand for gas, including that from Chattogram, he said.

India plans to cash in on US-China trade war

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India plans to cash in on US-China trade war

Pallab Bhattacharya.

India is encouraging its exporters to take advantage of the trade friction between Beijing and Washington, commerce ministry officials said yesterday.

While India has signed protocols with China to export several items, the actual exports need to be scaled up substantially and Indian exporters are being encouraged to take advantage of the recent developments in the US-China trade conflict, they said.

While some of India’s concerns over the balance of trade have been addressed, more efforts are required for greater market penetration in China, they said.

India is hopeful of signing protocols for export of Indian soybean meals, cakes and pomegranates to China in the near future as these are in advanced stages of discussion.

India is also in negotiations with China for early announcement of Chinese import quotas for sugar and rice for 2019, so that Indian exporters are able to plan their shipment well in time, the officials said.

India’s exports to China have grown after several years and the country is poised to achieve its highest-ever exports to China in the current fiscal year.

Between April and December last year, Indian exports were to the tune of $12.7 billion, closer to last year’s $13.33 billion. The growth in exports has been driven by marine products, organic chemicals, plastics, petroleum products, grapes and rice.

The Indian commerce ministry has taken an initiative to identify and share with Indian exporters and other stakeholders the specific lines where the US would lose competitiveness in China and where India has an export potential.

Several back-to-back meetings with Chinese buyers were facilitated through the Indian embassy in Beijing. Chinese grape buyers were invited to visit Indian grape farms and related units under the Agricultural and Processed Food Products Export Development Authority.

Recognising that the regulatory environment in China remains a challenge for Indian exporters, the ministry signed three protocols in the last financial year.

In light of the US duties on Chinese products, similar steps have been taken with regard to Indian exports to the US, the officials said.

Textile sector needs Tk 10,000cr investment

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Textile sector needs Tk 10,000cr investment

Refayet Ullah Mirdha

Bangladesh needs Tk 10,000 crore additional investments in the primary textile sector to reduce its import dependence for fabrics for the export-oriented garment sector.

For instance, in 2018 Bangladeshi garment exporters imported 5.52 lakh tonnes of fabrics worth Tk 33,156 crore, according to data from the National Board of Revenue and Bangladesh Textile Mills Association (BTMA).

“As we cannot meet the full demand, China and India fill in the gap,” said BTMA President Mohammad Ali Khokon.

The local textile millers can supply 4 billion metres of fabrics, so Bangladesh imports 6 billion metres of fabrics from China and 3 billion metres from India.

Currently, the local textile millers can meet 85 percent of the demand from the knitwear sector and 35 percent from the woven sector, according to data from the BTMA.

“We need to build another 20 big textile mills which will be able to supply quality fabrics to the local garment exporters,” Khokon said, adding that it will take Tk 500 crore to set up each new textile mill.

The primary textile sector will be able to add more value in the garment sector, which typically rakes in more than 82 percent of the export receipts in a year.

“We want a textile palli (village) as the government has been establishing 100 special economic zones across the country.”

Khokon went on to outline some of the difficulties in attracting fresh investment to the sector: the high bank interest rate, scarcity of industrial land, no fresh gas connections and setting of effluent treatment plants (ETPs). If the investment is done in a textile palli under an economic zone there will not be a need to set up separate ETPs. “Only a central ETP is enough to serve the whole cluster of mills, thus reducing the cost of production.” The BTMA chief said the majority of investment in the textile sector has been taking place in the form of capacity expansion.

Although the local textile millers can supply quality fabrics the quantity is still low, said Siddiqur Rahman, president of the Bangladesh Garment Manufacturers and Exporters Association. “Every year Bangladesh needs to improve the capacity of its primary textile sector as the export of apparel items is also growing.”

If Bangladesh wants to hit $50 billion in garment export receipts by 2021, the local textile millers will have to supply more. “The increased supply of local raw materials also decreases the lead time, which is very important in this competitive apparel business worldwide,” Rahman added.

 

BSEC looks to curb overbidding for small-cap stocks

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BSEC looks to curb overbidding for small-cap stocks

Ahsan Habib

Small-cap companies that are after a premium will have to offload shares to institutional investors at the prices at which they place their bids as the stock market regulator looks to rein in collusion amongst companies and investors to set a higher premium.

At present, institutional investors buy shares of such companies at the cut-off price, which is a weighted average of all the bids received by the underwriter during the book-building method for an initial public offering.

The premium is the additional price that a company seeks apart from its face value when it offloads shares through an IPO.

It has been alleged that companies and institutional investors collude during the book-building process by bidding a higher price so that the cut-off price can be set higher.

“Now, institutional investors will be cautious because they will be losers if they overbid,” said a top official of the Bangladesh Securities and Exchange Commission requesting anonymity.

Since a higher premium ultimately affects all investors, the BSEC does not want small-cap companies to be burdened with over-valuation. The stock market regulator had earlier directed institutional investors to justify their bidding price to control over-estimation but the outcome was not satisfactory.

“If this turns into a success, the same method can be introduced on the main board too,” he added.

The small-cap board is set to be introduced next month, said KAM Majedur Rahman, managing director of the Dhaka stock Exchange.

The new board would open up a new avenue for small-cap companies, the paid-up capital of which would be between Tk 5 crore and Tk 30 crore after listing, according to the gazette notification made last month.

If a company seeks premium, it has had to log in profits for the last two financial years at least and have a minimum paid-up capital of Tk 10 crore. However, if the paid-up capital goes past Tk 30 crore, the firm will have to apply for listing on the main board of the exchanges.

Trade gap narrows to $7.66bn in Jul-Dec

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Trade gap narrows to $7.66bn in Jul-Dec

Analysts say declining import of capital machinery is a matter of concern.

AKM Zamir Uddin

Trade deficit narrowed 12 percent in the first half of the fiscal year thanks to a rise in exports and a slowdown in imports.

At the end of December last year, trade deficit stood at $7.66 billion, down from $8.62 billion a year earlier, according to data from the central bank.

Economists, however, was not impressed with the development as the gap had gone down because of negative import growth of capital machinery in recent months, which play a major role in job creation.

Import payment for capital machinery stood at $2.40 billion in the first half of the fiscal year, down 5 percent year-on-year.

“It is a matter of concern,” said AB Mirza Azizul Islam, a former finance advisor to a caretaker government.

The country has been facing a jobless GDP growth over the years, so the government should lay emphasis on creating employment by way of offering stimulus packages to the private sector, he said.

Between the months of July and December last year, overall import rose 5.73 percent to $27.82 billion. At the same time exports fetched $20.16 billion, up 16.75 percent year-on-year.

There should be a balanced growth between imports and exports to make the economy more vibrant in all aspects, Islam said.

The country’s current account deficit also decreased 39 percent year-on-year to $3.08 billion in the first six months.

The country will have to face a major stumbling block in maintaining a favourable current account in the years ahead as imports will increase substantially centring on the mega infrastructural projects, said Ahsan H Mansur, executive director of the Policy Research Institute.

Against the backdrop, deficit in the current account will widen heavily, which will have a bad impact on the economy.

“Foreign exchange reserves have been in a stagnant situation in the last three to four years, which is not good at all,” said Mansur, also a former official of the International Monetary Fund.

At the end of December last year, foreign exchange reserves stood at $32.01 billion, down from $33.06 billion a year earlier.

The amount is sufficient to cover import payments for 5.2 months, which was 6.1 months a year earlier.

“So, the government should take an initiative to give a boost to both remittance and export to ease the pressure on the reserve,” he said.

Trade deficit hit an all-time high of $18.25 billion last fiscal year.

BSRM to set up wire plant for Tk 459cr

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BSRM to set up wire plant for Tk 459cr

The steelmaker will manufacture 4 types of wires that are currently imported.

Jebun Nesa Alo

BSRM Group is set to establish a wire manufacturing plant at Mirsarai in Chattogram at a cost of Tk 459 crore as the country’s leading steel manufacturer looks to capitalise on the impending construction boom in Bangladesh.

To be christened BSRM Wires, the new concern of the port city-based business group will manufacture four types of wires that are currently imported, said Alihussain Akberali, chairman of BSRM Group.

“The steel industry is booming thanks to the mega projects that the government has set in motion.”

The prices of raw materials of wires are very low in the international market but the prices of the finished goods end up being high for Bangladesh due to imports, he said.

“Local manufacturing will reduce their prices,” he said, adding that the plant is expected to roll from next year.

The plant is being implemented with 70 percent bank financing and 30 percent equity investment.

“To make the plant viable we decided not to take bank financing of more than 70 percent,” Akberali added.

BSRM has already raised Tk 321 crore from different banks, with the rest being equity investment.

Dhaka Bank arranged the fund through syndication with six other banks — Bank Asia, City, NCC, Modhumoti and Mercantile — and one financial institution, the Saudi-Bangladesh Industrial and Agricultural Investment Company.

The banks have invested in the project as it would have a direct impact on the economy, said Syed Mahbubur Rahman, managing director of Dhaka Bank.

“The project has good prospects,” he added.

The plant will create job opportunities for 400 people, bringing the group’s number of total employees to 4,700.

The plant will have the capacity to manufacture 77,000 tonnes of wires a year, which would be a combination of galvanised wire, LRPC wire, welding electrode and CO2 wire, according to project proposal.

Galvanised wire is used in cable manufacturing in the form of chain link fence. LRPC wire is used in pre-stressed concrete girders for construction sectors. Welding electrode is used for gas metal arc welding or shielded metal and CO2 wire is used to weld shipbuilding steel. BSRM currently has a plant at Nasirabad in Chattogram that manufactures wire rod.

The production capacity of the plant, which is the first and only company to manufacture high-strength reinforcement wires in Bangladesh, is 24,000 tonnes of wire rod. Considering the demand for the products, the group has decided to set up a new factory with some diversified product lines, said the project proposal.

BSRM Group logged in profit of Tk 602 crore in the financial year 2017-18. Its turnover was Tk 12,841 crore.

The business group has total liabilities of Tk 9,589 crore in the market against which its total asset value is Tk 13,466 crore. Currently, two companies of BSRM — Bangladesh Steel Re-Rolling Mills and BSRM Steels — are listed on the Dhaka Stock Exchange.

Bangladesh Steel Re-Rolling Mills traded above Tk 70 in the last one month and BSRM Steels at more than Tk 60, according to data from the DSE.

BB eases loan write-off policy

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BB eases loan write-off policy

Star Business Report.

In a divisive move the central bank has relaxed its write-off policy, at a time when the default loans in the banking sector hit an all-time high.

Banks are now allowed to write off the default loans that have been hovering in the bad category for three years from their balance sheet, down from five years previously, according to a notice from the Bangladesh Bank on Wednesday.

Furthermore, lenders do not have to file any case with the Artha Rin Adalat (Money Loan Court) to write off a delinquent loan worth Tk 2 lakh, up from Tk 50,000 previously.

Experts said the new policy would allow banks to show lower default loans on their books — artificially.

The central bank should have taken a strict stance against the banks seeing the default loans are crawling up, said Salehuddin Ahmed, a former BB governor.

“But it went the opposite direction,” he said, adding that the latest BB move would tempt banks to disburse loans without following the rules.

As of September last year, default loans in the banking sector accounted for 11.45 percent of all outstanding loans at Tk 99,370 crore — the largest yet in Bangladesh’s 48-year history.

The central bank introduced the write-off policy in January 2003 with the view to putting the brakes on the rising default loans then.

But the move turned out to be a disappointment as banks failed to recover the majority of the written-off loans.

Between January 2003 and September 2018, banks wrote off Tk 49,745 crore. As of September last year, Tk 37,866 crore remained outstanding, which is 76 percent of the sum.

Finance Minister AHM Mustafa Kamal yesterday told reporters after a meeting with business leaders at the NEC Auditorium in the capital that the central bank had revised the policy by informing him.

He went on to reiterate his earlier comment on January 10 that the total non-performing loans would not be allowed to go up under his watch.

“This sends a bad signal to the global community about Bangladesh’s banking sector,” said Ahsan H Mansur, executive director of the Policy Research Institute.

The Association of Bankers, Bangladesh, a platform of private banks’ managing directors, however, did not seem too enthusiastic about the revised write-off policy.

Banks will have to keep 100 percent provisioning in cash to write-off the bad debts, said Syed Mahbubur Rahman, chairman of ABB.

“So, it is not so easy for lenders to write-off their default loans.”

But the policy will help banks to write-off the small loans, which will help in bringing down the overall default loans, said Rahman, also the managing director of Dhaka Bank.

Banks with solid financial health and strong net profit stand to benefit from the revised policy, said Faruq Mainuddin, managing director of Trust Bank

“It is because they have enough provisioning capacity.”

Festivals boost online sales in February

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Festivals boost online sales in February

Muhammad Zahidul Islam

Online sales will see a 30 percent rise in February on the occasion of four successive festivals, namely Saraswati Puja, Pahela Falgun, Valentine’s Day and International Mother Language Day, industry insiders said.

On an average, around Tk 3 crore to Tk 4 crore worth of products are sold online every day, said Ashish Chakraborty, chief operating officer of SSL Wireless, a digital commerce market research firm.

“The sales may go up by another Tk 1 crore, thanks to the festivals.”

He said e-commerce slows down in January but it picks up from the beginning of February. “We are observing the same trend this year as well,” he told The Daily Star.

Nearly 25,000 online orders a day were placed in the last few months and 3,000 of the orders were carried out online or through digital financial services, Chakraborty added. “The number will rise in the first two to three weeks of February.”

The average amount per order is Tk 700, according to an analysis of SSL.

On the backdrop of the festivals, the demand for mostly fashionable products and gift items increases, prompting e-commerce platforms to offer discounts and cashback along with free delivery.

AKM Fahim Mashroor, founder of ajkerdeal.com, one of the leading local e-commerce ventures, said his company has come up with a “combo” offer for couples.

Under the offer, the couples can use matching designed products like t-shirts, wrist watches, saris and panjabis along with different kinds of gift items, he said.

“These products accelerate the growth of our business. The orders for black and white clothes and products will spiral from the second week onwards,” said Mashroor, also a former president of Bangladesh Association of Software and Information Services.

Ajkerdeal is offering 20 percent cashback on payments made through mobile financial service provider bKash and is expecting 30 percent sales growth in February.

“We are offering discounts on a wide range of products on the eve of Pahela Falgun and Valentine’s Day,” said Mirajul Huq, CEO of bagdoom.com, another e-commerce venture. “Not only on saris, panjabis and gift items, we are offering price cuts on mobile phones, home appliances and bikes also.”

“I believe an occasion provides an opportunity to go on a shopping spree, whether someone buys something for their loved ones or for themselves,” said Huq.

As the cashback partner of bagdoom.com for Valentine’s Day, Eastern Bank is offering 10 percent discount for its cardholders on every online purchase.  Similarly, cardholders of LankaBangla will get 14 percent off, accountholders of bKash will get 20 percent off and Grameenphone Star customers will get 12 percent off.

Daraz Bangladesh has organised a Valentine’s Day campaign for the fourth time. One of its events began on the first day of February, which will end on February 14. The company is offering discounts as high as 70 percent.

Daraz is offering 20 percent additional cashback for payments made through bKash, 14 percent on transaction through LankaBangla Visa credit card, up to 10 percent discount for credit cards of City Bank and Southeast Bank, the e-commerce firm said.

It will organise a raffle draw and offer candle light dinner at the Westin Dhaka hotel and give out various gifts.

According to SSL, there are now about 29,000 Facebook pages in Bangladesh that market products online.

Of them, 1,500 are actively participating in commercial activities. There are 2,500 more dedicated web portals, 400 to 500 of which are active.

The research firm is expecting the online market size to be about Tk 1,700 crore in 2019 from about Tk 1,000 crore last year. Various festivals will play a bigger role to expand the market size, according to SSL.