Metropolitan Chamber of Commerce and Industry (MCCI) sees a better economic outlook for the first quarter of the current fiscal 2016-16 benefiting from relatively calm political situation.
In its quarterly review of the country’s economic situation the MCCI, prime chamber body of the leading businessmen and industrialists, made published last week put the opinion with statistical analysis of the export, imports and remittances.
Meanwhile, Bangladesh has been elevated to the status of lower middle income nation by World Bank last month and acting on it the Organisation for Economic Co-operation and Development (OECD) has also upgraded the overall country rating by one notch for its economic resilience.
What is needed now is to keep the peace stable and work towards achieving higher growth, experts said with positive forecast on development issues.
The MCCI said those vital economic indicators shows improving tendency in the first quarter of the current fiscal year banking on the peaceful political situation.
The chamber body identified growing private sector investment as a crucial factor in accelerating economic growth. “It is assumed that the political situation will continue to remain calm in the first quarter,” the chamber body said with flash bank to non- violent situation from April to June
The trade body predicted that export earnings in September will be $3.5 billion, while imports will be $4.5 billion and remittances $1.66 billion. About private sector investment, it said rising investment is a precondition for economic growth but there are many impediments that have kept the domestic investment at a low.
Entrepreneurs — both local and foreign still appear not encouraged to make any new investment in the present murky political environment.
Foreign investors have adopted a ‘go-slow’ strategy in making fresh investments since 2013, MCCI said. Public investment has increased, but it cannot be an alternative to private investment which is crucial to accelerating economic growth.
The damages inflicted by political unrest last year and early this year to the national economy also dented the confidence of the investors, causing a slow down in investment in the private sector.
“Maintaining macroeconomic stability, restoring momentum in economic activities, enhancing revenue collection, raising investment, achieving the export target, containing inflation, and above all, improving law and order conditions will be the major challenges for the government.”
Adequate infrastructure and energy, skilled manpower, political stability and investment-friendly climate are also key to achieving higher economic growth. The MCCI said the country’s overall economic situation is positive, which is indicated by the steady improvements in the major economic variables at the end of the outgoing fiscal year.
“The economy experienced stable growth, inflation was under control, exchange rate was stable, and foreign exchange reserves rose and remained at a comfortable level.”
However, the chamber body said the foreign exchange reserves may fall in July-September period when the payments to the Asian Clearing Union against imports is scheduled to me made
Inflation may go up in September because of increased demand ahead of Eid-ul-Azha.
The trade body said the agriculture sector performed well in the first quarter of the new fiscal years now under review, but continuous government support will be needed to sustain the sector’s growth.
Performance of the manufacturing sector needs to be improved by removing bottlenecks in physical infrastructure and the crisis in power and energy supplies. The services sector is doing well but will need government support to be able to recover the losses they suffered during the political unrest.
However, the chamber body said, in order to achieve the government’s growth and inflation targets, political stability is a must. “Violence caused by political unrest hurts economic activities thus hindering growth and disrupts the supply chain of goods which pushes up inflation.”
On the fact that the World Bank has recognised Bangladesh as a lower middle income country, the chamber body said the Organisation for Economic Co-operation and Development (OECD) has also upgraded the overall country rating by one notch for its economic resilience.
“The enhancement in OECD classification should lead to significant lowering of costs for Bangladesh’s entrepreneurs and banks in securing guarantees and letters of credit confirmations,” the chamber said.
“The country’s sovereign credit risk would also be lower and it will get more respect from international creditors and investors.”
A slow down in investments in the weaving sector is emerging as a catastrophic development for the apparel textile sector where the demand for fabrics is rapidly expanding with expansion of manufacturing but not locally produced to met the demand.
Chairman and Managing Director of Little Star Group Mohd Khorshed Alam made the comment last week while talking to the Holiday on the overall situation in the textile sector.
He said the industry has full capacity of producing cotton yarns by the spinning mills to meet the demand for domestic and export market but as the weaving capacity remains far below in absence of required investment, much of the spinning capacity is remaining idle.
He said new investments took place in spinning mills to produce yarns over the last few years but investments in weaving did not happen accordingly.
The Little Star Group chief said as the weaving mills buy cotton yarns from the spinners to produce fabrics and enough investments in weaving sector did not happen so many yarn producers are not getting customers though there is a growing need for quality fabrics for export market.
Pointing to industry statistics, he said local textile mills can meet the demand for only 40 per cent of the total woven fabrics for export while the remaining 60 per cent is being imported. He said the country is missing enough opportunity to make expansion of weaving facilities for producing quality fabrics.
At present the gap is being met by import from China, Indi, South Korea and other countries under back to back L/Cs using the bonded warehouse facilities. He said there is room to increase investment for producing fabrics with enough scope to dominate the market.
Mr Alam who is also a director of Bangladesh Textile Mills Association (BTMA) said many problems are slowing down investments in the weaving sector. Among them non availability of gas, absence of central effluent treatment plant (ETP) and the existing rules and regulations relating to environmental compliance are hindering progress.
The BTMA director laid emphasis on installation of a central effluent treatment plant on urgent basis in the industrial zones where the weaving industries would get facilities for their products’ effluent treatment facilities.
It is not possible to install ETP by all the mill owners, the government must come up to meet the requirement, he said.
Mr Alam said apart from ETP, power disruption is another problem. He said when production in a mill is going on and a load shedding come into effect, it hampers production quality and a lot of products also become waste and defective.
Such disruption not only causes production loss, it is also harmful for high tech- machineries. At the end they become malfunctioning earlier than their expected duration of services.
Currently the environment department terms and conditions are so exaggerative along with some unnecessary rules which are not friendly for investing money in the weaving sector, he said.
Along with bureaucratic hindrance by many government bodies;, the environment officials also create problems when someone go for investing money in the weaving sector.
He suggested for relaxing unnecessary environmental rules for encouraging more investment in textile industry that will add more to local value in ready made items for export.
Currently RMG exports fetches around $ 34 billion but in reality the major part of the value addition comes from imported fabrics. He said the misuse of duty free import facility by using the bonded warehouse facility is causing problems to the industry.
The Little Star Group chief said due to availability of duty free imported fabrics in the market, demand for locally made fabrics is falling to force many weaving mills to face troubles as they cannot compete with the illegally imported fabrics.
He suggested for strict supervision of the bonded warehouse fabrics and sought the government’s support in uninterrupted power supply for textile mills. He also urged the government to take move to set up the central effluent treatment plant for the industry.
Along with six monthly monetary policy, the Bangladesh Bank has introduced specialized sectoral credit target for agriculture and rural sector to remove shortcomings overshadowing credit availability in those sectors.
Bangladesh Bank governor Atiur Rahman announced the credit target for those sectors while unveiling the agriculture and rural credit policy for 2016 at a meeting at his office at the central bank last week in presence of senior bankers.
He raised the farm loan disbursement target by 5.5 percent to Tk 16,400 crore for the current fiscal year compared to the target last year. Under policy guidelines the central bank has however asked nine new banks that
started operations in 2013 to disburse at least 5 percent of their total loans to the farm sector during this fiscal year, which is 2.5 percent for private and foreign banks.
The disbursement target has been set at Tk 9,290 crore for state-owned and specialised banks and at Tk 7,110 crore for private and foreign banks. He told bankers that they have to increase farm and rural credit and bring farmers into the banking system. The governor asked the bankers to encourage cultivation of import-substitute crops.
He also reminded the bankers that the 10-taka bank accounts for farmers were not introduced to disburse subsidies only. He said these accounts must be run like any other bank accounts.
If any bank fails to attain the disbursement target at the end of the fiscal year, it has to deposit an amount equivalent to the unattained portion compulsorily to the BB without any interest.
The central bank set a Tk 15,550-crore agriculture loan target for fiscal 2014-15, but disbursement surpassed the target and stood at Tk 15,978.46 crore. But the target of Tk 95.5 crore meant for import-substitute crops could not be reached as only Tk 82 crore was disbursed.
A total of 31.94 lakh farmers received agriculture and rural credit in the immediate
past fiscal year. Of them, 25.43 lakh were small and marginal farmers who got Tk 11,203 crore or 70 percent of the total loans, while 2.56 lakh sharecroppers got Tk 914 crore and 2.66 lakh women received Tk 901 crore. The recovery rate has been stagnant at around 70 percent for the last few years, according to BB data. The banking regulator last year cut the interest rate for farm loans by 2 percentage points to 11 percent to encourage farmers to take bank loans.
Overall farm production increased to 4.5 crore tonnes now from 1.1 crore tonnes 40 years ago.
Reliance Group of India has appointed Ashok Kumar Balyan as chief executive officer (CEO) for its oil and gas business.
Balyan has been serving as Petronet LNG managing director before joining Reliance Group, said a company statement.
He brings over four decades of experience in strategic planning, operations management, business development and human resources in oil and gas sector.
Balyan, who will be based outside Delhi, will lead Reliance Power’s project to establish a 3,000MW LNG-based power plant and an LNG terminal at a cost of $3 billion.
Reliance Group is owned by the Indian business magnate Anil Ambani.
Working on a business expansion programme RAK Ceramics has decided to invest about Tk 24 crore to entirely acquire two of its subsidiary and associate companies. The company wants to take equity investments in its subsidiary RAK Power to 100 per cent from the previous 57 per cent. The firm plans to spend an additional Tk 22.47 crore to buy 8.81 lakh ordinary shares with face value of Tk 100 each from other shareholders of RAK Power at Tk 255 a share.
Its equity investment in RAK Security and Services, an associate of RAK Ceramics, will be raised from existing 35 per cent to 100 per cent. The investment will be Tk 1.87 crore to acquire 6,500 ordinary shares with face value of Tk 100 each from other shareholders at Tk 2,875 per share.
The equity investments are however subject to approval of the shareholders and concerned authorities for the interest of the business of the company. In another development RAK Ceramics said that its entire holding in RAK Paints will be sold to SAK Ekramuzzaman, managing director of RAK Ceramics, and other existing shareholders of RAK Paints.
RAK Ceramics has 24.67 lakh ordinary share of Tk 100 that will be sold at Tk 90 per share, totalling Tk 22.21 crore. On the premier bourse on Tuesday, each share of RAK Ceramics, which was listed in 2010, traded between Tk 76.2 and Tk 80, before closing at Tk 78.1.