Business Supplement Issue-20



VOL1, ISSUE 20 | Sunday, July 9, 2017

Business Tribune

The unstoppable

growth of capital


Stocks continue to rally

5 amid higher turnover


Loosen the

regulatory system



is all we need


Sunday, July 9, 2017



The unstoppable growth of capital flight

• Shariful Islam

Large amounts of money continues

to be siphoned off as the country’s

anti-money laundering act appears

inadequate in deterring capital


The biggest chunk of laundered

money ends up in Malaysia, Singapore,

Thailand, USA, Canada,

Switzerland, UK, and other places

where the laws protect the capital

inflows into their countries.

The Swiss National Bank (SNB)

published a series of annual reports

on June 29 which revealed that deposits

by Bangladeshi citizens had

gone up remarkably.

Last year’s report revealed that

there had been a 19% increase

in deposits since 2015. The total

deposit by Bangladeshi citizens

to various Swiss banks totalled

Tk5,566 crore in 2016, which was

Tk4,417 crore in 2015.

Overall, the United Kingdom has

the biggest deposit in Swiss banks.

In South Asia, Pakistan leads with

the largest deposit, followed by

India whose deposits are down by

more than a half, with Bangladesh

in third position.

The unrecorded capital flow from

Bangladesh stood at $61.63 billion

between 2005 and 2014, riding mostly

on mis-invoicing, according to a

report of Global Financial Integrity.

The GFI report also revealed that

illicit capital outflow from Bangladesh

has been on a growing curve

from 2007, in the wake of political

turmoil during the period, and it

continued till 2013 when the highest

$9.66 billion was siphoned off.

Of the total $61.63 billion illicit

capital flight, $56.83 billion went

off through trade mis-invoicing

while the rest $4.8 billion could

not be traced in the balance of payments

data, added the report.

The Washington-based research

and advisory organisation unveiled

the report titled “Illicit Financial

Flows (IFFs) to and from Developing

Countries: 2005-2014” on May 2.

Experts say the racket of money

launderers are a tight knit group,

building a community with any incumbent

government high-ups.

Former Finance Adviser to the

caretaker government AB Miza Azizul

Islam claimed that wealthy people

who launder money out of the

country enjoyed political backing.

Most of the money was laundered

by unscrupulous businessmen

through under- and over-invoicing

in international trade, he said.

“The government should take

stern action against dishonest individuals

involved in money laundering,”

Mirza Aziz told the Dhaka


“However, the existing laws

are insufficient and failing to stop

money being siphoned off from the











Admitting the fact, Finance

Minister AMA Muhith said the current

laws are not adequate to stop

money from being laundered.

“Money laundering has recently

risen due to existing laws and

regulations. We are going to reform

them,” he said at the signing

ceremony of Annual Performance

Agreement between the ministry

and 16 state-run banks and financial

institutions at the ministry auditorium

on June 18.

Laundering likely to go up ahead of

next national polls

Given the current situation and the

next general elections looming,

more money is likely to flow out of

the country. According to reports

from a host of foreign agencies, it is

evident that a big chunk of wealth

goes off from the country ahead

of every national election. Economists

apprehend that such a situation

could emerge again.

PRI Executive Director Ahsan H

Mansur said: “If Tk4 or Tk5 billion

had been laundered before, this

year might witness 20% more capital

flight than the previous year.

In the next year, such asset flight

could go up 30%-40% than the year

gone by. ”

Mansur termed the capital flight

“internal bleeding” of the country.

Four ways money is laundered

Every year a vast amount of money

goes off primarily in four forms -

through over and under-invoicing,

tampering with shipment figures,

multiple invoices and false declaration

on goods and services, according

to a study report of Bangladesh

Institution of Bank Management




BIBM Research Director Shah

Md Ahsan Habib launched the report

“Review of the Trade Services

Operations of Banks-2016”.

Habib said: “Among various

forms of trade-related frauds,

trade-based money laundering is

perhaps the most concerning issue

to policymakers all over the world,

and the four basic techniques are

followed by fraudsters in Bangladesh

to launder money.”

“The new online reporting system

of Bangladesh Bank has turned

out to be a great achievement in

the banking sector, which greatly

helps in monitoring and supervising

day-to-day trade transactions.

Also, this is a vital tool for data validation.”

In spite of these improvements

and achievements, cases of under-reporting

and misreporting are

still concerning, added Habib.

Collective efforts necessary to

curb money laundering

A series of concerted efforts need

to be taken to stem money laundering.

According to think tanks and

economists, if Bangladesh Bank,

Anti-corruption Commission, NBR

and the office of the attorney general

work together, capital flight

can be stopped while money siphoned

off can be brought back to

the country.

Transparency International

Total $61.63bn


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014



Given the current situation and the next

general elections looming, more money is

likely to flow out of the country


Executive Director Dr Iftekharuzzaman

said: “If the financial unit

of the central bank, Anti-Corruption

Commission, National Board

of Revenue and office of the attorney

general team up, the move

can prove effective to stop money


BB fails to get info about

Bangladeshi depositors in Swiss


Over the last three years, the central

bank has sought information about

Bangladeshi depositors in Swiss

banks but are yet to get any reply,

said Finance Division officials.

BB also sent two letters to SNB

seeking wealth information about

controversial Bangladeshi businessman

Moosa Bin Shamsher and

his family, but SNB didn’t respond.

Unlike Bangladesh, India receives

information about its depositors

in Swiss Banks under the “Automatic

Exchange of Information”

agreement with Switzerland.

However, Bangladesh has no

such agreement with Switzerland.

Last May, Switzerland succumbed

to pressure from the United

States and the European Union

and relaxed its law of secrecy,

which for generations has been the

principal cause of attraction for deposits.

It is alleged that a large amount

of cash is laundered from different



Amount in $ billion

Source: GFI


branches of multinational banks in

Bangladesh to SNB.

Subhankar Saha, executive director

of Bangladesh Bank, said

different government agencies including

Bangladesh Bank are trying

to take strict measures against

money laundering by Bangladeshi

businessmen through over and under-invoicing.

However, all of the deposits by

Bangladeshis in Swiss banks were

not directly from Bangladesh; a

large portion of the money came

from across the globe, he added.

Subhankar Saha, executive director

of Bangladesh Bank, told

reporters that Bangladesh Bank is

unaware of what the Swiss central

bank based the report on.

He said Bangladesh Bank works

diligently to prevent money laundering.

Seeking anonymity, a Bangladesh

Bank official said they are not

clear about the manner in which

money goes out, but a lot of the

money is actually siphoned off

from Bangladesh.

BB to seek info about Bangladeshi

clients of Swiss Banks again

Though the Swiss National Bank

has not responded to the previous

BB requests for information about

Bangladeshi account holders in SNB,

Bangladesh is going to make further

requests as a new report suggests a

rise in Bangladeshi deposits.

“A letter has already been drafted

in consultation with the government

high-ups and it will be sent to

Swiss authorities shortly,” according

to an official of Bangladesh Bank.

He said they hope SNB will

respond with a list of Bangladeshi

account holders in Swiss banks. •



Sunday, July 9, 2017


We need transparency, political will, good

investment climate to curb capital flight

Experts say that transparency in source of earning money, political will to stop corruption

and ensuring investment-friendly environment and bringing money launderers into justice

must be ensured to prevent illegal capital flights out of the country. Dhaka Tribune’s

Ibrahim Hoosain Ovi talked to the experts about a recent report on illegal capital flights

and Bangladeshi deposits to Swiss banks

Md Shafiul Islam Mohiuddin

President, FBCCI

It is an allegation that capital flight is being

taken place illegally through under-invoicing

in export and over-invoicing in import. The

government has separate wings to monitor

export and import, and they are responsible

for this.

If the authorities concerned find any irregularities

or corruption in export or import,

they should take stern actions. In this regard,

the government has to ensure proper investigation

and scrutiny.

On the other hand, it’s not true that all the

money deposited in foreign banks are kept

by the Bangladeshis. There are a good number

of Bangladeshi people who live abroad

and are doing business there. They also keep

their money in the banks assuming it safe.

I do not agree with the swipe comment

that the business people are making all the

illegal capital flights or deposits in Swiss National

Bank. It is quite impossible to deposit

a huge amount of money to foreign banks by

a businessman as they do not have enough

money to siphon off.

Without having proper documents, we

should not make any swipe comment about

the business people, bureaucrats or any

group about the capital flights.

While taking findings of a report into the

consideration, we should think about methodology

and process of making of that report

and its credibility. The report is not a sermon

from the bible.

To stop the capital flight, the government

should ensure investment-friendly environment

and the tax system and structure should

be eased and the rate should be lowered.

Above all, the National Board of Revenue

and Bangladesh Bank need to strengthen

their monitoring systems to curb the illegal

capital flights.

Honestly speaking, as a businessman and

business leader, I can tell that no one wants

to send his/her hardly-earned money to another

country. It may only happen when any

one feels insecure in home country. But the

businesspeople always try to expand his/

her business and make investments instead

of depositing to another country’s banking


Khondaker Golam Moazzem

Research Director, Centre for Policy Dialogue

Illegal capital flight and deposits to Swiss

banks continue to rise. In the Panama Papers

leak, names of some political and corporate

leaders were revealed although we saw no

steps were taken later to stop the illegal flight

of capital out of the country. As a result, the

money launderers feel easy about the matter.

If we look into recent trend of illegal capital

flights in India and Pakistan, it shows

downward trend. This is because of their

governments’ internal initiatives taken to

curb money laundering. But in Bangladesh

there is no visible improvement due to lack

of the long-term government policy on the


Firstly, the government will have to find

out the sources of big and dubious transactions.

Secondly, transparency should be

ensured in the pricing of imported and exported

goods to stop misinvoicing in trade.

Thirdly, monitoring on foreign exchange

dealers should be strengthened to be learned

how much currencies they trade everyday.

In attaining theses goals, all the authority

concerned have to be included with the

Bangladesh Bank Money laundering cell.

By establishing relationship with international

organisations, Bangladesh government

has to collect information about

the laundered money. And then all the people

connected with the misdeed should be

brought under the book.

Besides, the government can consider allowing

business people to invest in foreign

countries on the condition that the profits

must be repatriated to Bangladesh in a transparent


M Hafizuddin Khan

Trustee Member, TIB

The lion share of money deposited to Swiss

National Bank and illegal capital flights are

considered as black and earned in illicit way.

But the government is not much aware of

that and is not active about the siphoned-off

money and its sources. Political parties do

not pay heed to the issues of corruption.

If we look into our neighboring countries

like India and Pakistan, they have been able

to reduce illegal capital flights by strengthening

policy and monitoring.

If Bangladesh government wants to stop

illegal capital flight, at first, it will have to

establish the rule of law in the country. The

process of the government procurement and

awarding contracts of job in development

projects should be transparent.

To stop black money, Bangladesh needs to

prevent corruption and all the sectors have to

be freed from illegal transactions.

However, it is very important to ask about

the source of funds when it is being invested

or transferred to any bank. As the regulator

of all financial institutions, Bangladesh Bank

should take the lead in this matter.

On the other hand, the regulatory frame

is not enough to curb amassing of wealth

through illegal means while the existing

rules are weaker and not implemented effectively.

Political stability and peaceful transition

of power through neutral elections is very

important. If political volatility exists in the

country, the people may resort to capital


Subhankar Saha

Executive Director, Bangladesh Bank

Not only the Bangladeshis living at home but

also those who live, run business and work

in foreign countries are participating in illegal

capital flights or having deposits to Swiss

banks. The non-resident Bangladeshis are

leading the Bangladeshi depositors in terms

of share of deposits in Swiss banks. The money

comes as profits of their business.

However, illegal capital flight from Bangladesh

is done through misinvoicing in export

and import of goods.

According to the Global Financial Integrity

(GFI) report, an average of 87% of global

illicit financial outflows over the 2005-14 period

were due to the fraudulent misinvoicing

of trade.

As a regulatory body of financial institutions,

Bangladesh Bank is working very hard

with other authorities concerned to stop illegal

capital flight. The process of collecting

information about the illegal capital flight

and their senders. Bangladesh government is

trying hard to sign a MoU to get information

about the money laundering by the Bangladeshi


Bangladesh Bank is seeking information

from the Swiss National Bank management

about the Bangladeshi deposits there. •


Sunday, July 9, 2017


Week in Review

RMG export earnings growth lowest in 15 years

Bangladesh’s export earnings from the

apparel industry, the lifeline of foreign

currency earners, have seen only a

0.20% rise to $28.15 billion, which is the

lowest on record in the last one and a half

decades, in the just-concluded fiscal year.

However, Bangladesh’s overall

export earnings stood at $34.83 billion

in FY’17, which is 1.68% higher than the

$34.25 billion a year ago.

Since the inception of RMG export,

Bangladesh has registered negative

growth only once in 2001-02 fiscal

year, by 5.68%, to $4.58 billion.

Trade analysts and businessmen

have blamed average price fall of

products, ongoing structural reforms

in the apparel industry, economic slowdown

and sluggish demand in export

destinations, devaluation of Euro and

appreciation of BDT against US dollar,

for the lackluster export growth.

According to provisional data of

Export Promotion Bureau (EPB),

Bangladesh’s export earnings from

the RMG sector stood at $28.14 billion,

posting 0.20% growth in the past fiscal

year. The figure is 7.34% less than the

target of $30.38 million.

In the last fiscal year, Bangladesh

earned $28.09 billion from the clothing


Of the total amount, Knitwear

products earned $13.76 billion, which is

3% higher than the $13.35 billion in the

same period a year ago. Woven products

earned $14.39 billion, down by 2.35%,

compared to $14.73 billion a year ago.

As per the provisional data, in FY’17,

Bangladesh’s overall export earnings

stood at $34.83 billion with 1.68%

growth. The figure is over $2 billion less

than that of the government target of

$37 billion set for the previous fiscal. In

June, export earnings saw a 15.27% fall

to $3 billion, which was $3.59 billion in

the same period last year.

“The meager growth is a reality in

the Bangladesh RMG sector. It comes

as no surprise as the apparel industry

is going through many challenges,

including remediation, devaluation

of Euro and labour unrest,” Exporters

Association president Abdus Salam

Murshedy told the Dhaka Tribune.

RMG manufacturers are working

hard to face the challenges by

introducing production engineering,

technological upgrade etc, but it is not

enough, said Salam.

Dhaka Tribune

In continuation with the existing policy

support, the government should offer

special incentives, including 5% cash

incentives on the value of Freight on

Board (FoB) for at least next two years,

the former BGMEA president said.

On the other hand, to bring about

sound export growth, the government

has to come up with long-term policy

support, including tax holiday for 10

years, for new investors to attract

investment. •

World Bank, IMF

unhappy with VAT

law suspension

The World Bank (WB) and the International

Monetary Fund (IMF) has

sent a letter to the Finance Ministry

saying they were disappointed

about the VAT Law 2012 not being

implemented this fiscal year.

In the letter, the World Bank

asked the government to implement

the law immediately saying

without the new law, the government’s

revenue will slow down

along with negatively impact GDP

growth and create difficulties in

getting foreign financial assistance.

The WB and IMF said the government

has stalled the implantation

of the new VAT law the very

last minute even though the law

was complete. They collectively

said that it was illogical to fear an

increase in the inflation rate.

They warned that keeping the old

VAT law would be bad for Bangladesh’s

relationship with the country’s

development partners, adding:

“The government has failed execute

the 2012 VAT law for five years.”

The two development partner

suggested that without the

implementation of the new VAT

law, Bangladesh’s aid and credit

standard might be impacted. The

development partners said the government

will find it hard to finance

and implement the new budget in

the beginning of the fiscal year. •

Corporate News

Prime Minister’s Office (PMO) and Bangladesh Export Processing Zones Authority (BEPZA) have

recently signed an annual performance agreement for the fiscal year 2017-18, said a press release.

Senior secretary at Prime Minister’s Office, Suraiya Begum and executive chairperson of BEPZA, Major

General Mohd Habibur Rahman Khan have signed the agreement

University Grants Commission (UGC) of Bangladesh and Council of Higher Education (CoHE) of Turkey

have recently signed an agreement on providing seven Bangladeshi students with PhD scholarship

facilities in textile education at Turkish universities every year, said a press release. Chairperson of UGC,

Professor Abdul Mannan and Professor Dr MA Yekta Sarac, president at Council of Higher Education of

Turkey have signed the agreement

Social Islami Bank Limited has recently held its half-yearly business conference for the year 2017, said a

press release. The bank’s chairperson, Major Dr Md Rezaul Haque (retired) inaugurated the conference

as chief guest

PBL Exchange (UK) Ltd London, a wholly owned company of Prime Bank has recently held a gettogether

programme with its agents and clients at its Birmingham and Oldham branches for boosting

inward remittance, said a press release. The bank’s DMD, Habibur Rahman was present at the

programme along others



Sunday, July 9, 2017


W E E K L Y M a r k e t O v e r v i e w

SUMMARY Points Change (%) Turnover (BDTmn) Volume (mn) Advanced issues Declined issues Unchanged Issues


5,749.7 DSEX 5,749.7 2.69% 52,956 1,659 281 41 11

(+) 2.69%

CSE ASI 17,819.4 1.73% 3,335 122 216 58 12

Stocks continue to rally amid higher turnover

• Tribune Business Desk

Stocks have recorded yet another

week of massive gains on increase

investors participation last week.

High level of investor participation

has been one of the key drivers

to the recent rally, said traders

at several stock brokerages. They

added, the market is anticipating

overall positive earnings results

this July and satisfactory dividend

announcements of the June-ending

companies as well.

Participation in the Dhaka Stock

Exchange increased substantially

by 48.2% to amount an average

daily turnover of Tk1059cr, crossing

the Tk1,000cr mark.

Fresh funds are being injected

into the market based on recent

turnover, suggested a technical analyst

of a leading stock brokerage.

The benchmark index, DSEX

Most Traded Price Weekly change

LankaBangla 57.0 2.52%

Regent Textile 31.1 0.32%

Baraka Power 46.4 6.42%

Fu Wang Food 21.0 32.91%

Keya Cosmetics 16.4 13.89%

Doreen Power 156.1 1.42%

BEXIMCO 34.4 4.24%

Prime Bank 23.9 6.70%

SAIF Powertec 46.1 5.98%

ICB 195.2 10.59%

Dhaka Tribune has accumulated the stock market related data primarily from Dhaka Stock Exchange website. The basis of information collected was primarily from daily stock quotations and audited/unaudited

reports of publicly listed companies. High level of caution has been taken to collect and present the above information and data. The publisher will not take any responsibility if any body uses this information and

data for his/her investment decision. For any query please email to

Asian stocks hit by Wall Street stumble

• Reuters, Tokyo

Asian shares lost ground on Friday

after a weak session on Wall Street,

while global sovereign debt yields

were elevated across the board on

bets the European Central Bank

is moving closer to unwinding its

massive monetary stimulus.

Spreadbetters expected Britain’s

FTSE to open 0.25% lower,

Germany’s DAX to open 0.3%

lower and France’s CAC to open

down 0.2%.

MSCI’s broadest index of

Asia-Pacific shares outside Japan

slipped 0.4%, after the Dow lost

0.7% and the tech-heavy Nasdaq

fell 1% on Thursday, partly as

higher Treasury yields dimmed

the appeal of equities.

Japan’s Nikkei was down 0.5%,

closed at 5,749.7 points on last

Thursday after gaining 150.58

points or 2.69% over the week

while CSE ASI advanced 302.7

points or 1.73% to end at 17,819.4














Dhaka Tribune

Textile equities contributed

17.7% of the week’s total turnover,

said the weekly market report of

UCB Capital Management Ltd.

Fu Wang Food Limited secured

the highest weekly gain of 32.9%


South Korea’s KOSPI dropped

0.3% and Australian stocks declined

0.9%. Hong Kong’s Hang

Seng slipped 0.4%.

The prospect of the ECB turning

off the flow of easy money

has been a dominant global market

theme since President Mario

Draghi’s hawkish comments last

week, pushing bond yields higher

and hurting equities.

The pan-European STOXX 600

fell to an 11-week low the previous

day and the German 10-year

bund yield rose above 0.5% to

an 18-month high after the ECB’s

June meeting minutes showed

the central bank opening the door

to dropping a long-standing bond

buying pledge.

“It is natural for risk assets in

developed markets to adjust lower

on prospects of curbed liquidity,

as easy money has allowed

them to rise far out of proportion

with their underlying real economies,”

said Yoshinori Shigemi,

global market strategist at JPMorgan

Asset Management.

“For the ECB, tapering of easy

policy and hiking rates are two totally

different things, and it is likely

to make this clear. But right now

the markets are having a hard time

believing the ECB’s intentions.”

The 10-year Treasury note

yield stood near a two-month

high of 2.39%. With more focus

on the euro zone bond market’s

rise in yields, Treasuries brushed

off Thursday’s weaker-than-expected

US ADP employment data.

“Expectations that the European

Central Bank and other central

while Shinepukur Ceramics Limited

turned out the worst loser

with its price declining by 10.1%.

LankaBangla Finance Ltd secured

leadership position on the

top turnover chart with a turnover

of Tk157cr over the week with

its share price advancing 2.5% by

the end of week.

DS30, the blue-chip index

gained 32.2 points or 1.55% to end

at 2,103.6 points, while DSE Shariah

based index advanced 21.1

points or 1.64% to close at 1,307


Among the traded issues 281

gained, 41 declined and 11 remained

unchanged during the


The Dhaka Stock Exchange currently

has a market capitalisation

of BDT 385,426cr with the benchmark

index, DSEX up by 14.2%

since beginning of this year. •


banks joining the Federal Reserve

in moving towards tighter policies

are causing a diversification

of funds away from Treasuries,”

said Junichi Ishikawa, senior forex

strategist at IG Securities in Tokyo.

“The key point is that higher

US yields also tend to weigh on

high-tech sectors by increasing

their funding costs.”

The 10-year Japanese government

bond (JGB) yield initially

reached 0.105%, its highest since


But the rise prompted the Bank

of Japan to act, pushing the 10-year

JGB yield back to 0.09%. The central

bank, which has tasked itself

to control the yield curve as a part

of its easy policy, offered to buy an

unlimited amount of 10-year JGBs

on Friday in order to cap yields. •


PRAGATILIF: The Board of Directors

has recommended 8% cash dividend

and 17 % stock dividend for the year

ended on December 31, 2016. Date of

AGM: 28.09.2017, Time: 10:30 AM, Venue:

To be notified later. Record Date:

27.07.2017. Q1 Un-audited: Increase in

life revenue account for Jan-Mar, 2017

was Tk. 108.58 million with total life

insurance fund of Tk. 4,869.71 million as

against increase in life revenue account

of Tk. 92.98 million and Tk. 4,353.12

million respectively for the same period

of the previous year.

DOREENPWR: The Company has

informed that Dhaka Southern Power

Generations Limited (DSPGL), a subsidiary

of Doreen Power Generations and

Systems Limited (DPGSL) has allotted

50,66,700 Ordinary shares of Tk.

100.00 each to DPGSL (against share

money deposit) after getting consent

from the BSEC vide letter No. BSEC/CI/

CPLC (Pvt.)-653/2015/318 dated July

02, 2017. After this allotment of the

shares, holding of DPGSL in the books

of DSPGL has been increased to 99.14%

from 96.78%.

IFADAUTOS: The Company has

informed that the Board of Directors

has decided to sell 402.34 decimal

land (Book Value Tk. 63,891,592.00)

at Khalia, Dhamrai, Dhaka and

767.25 decimal land (Book Value Tk.

121,839,300.00) at Khulla, Dhamrai,

Dhaka and subsequently purchase land

adjacent to IFAD Autos Limited’s assembly

unit. The detailed proceed of sale

will be notified after its execution.

PTL: With reference to their earlier

news (disseminated by DSE on

31.05.2017), the Company has further

informed that the Board of Directors of

the Company has decided to participate

to develop HSD Based 2X100 MW IPP/

Rental Power Plant in the First Track

Project of the Ministry of Power and

Energy under Paramount-Aggretech

Energy Consortium at the same ratio

i.e. 55% of equity capital in the project

on Build, Own and Operate (BOO)

basis upon getting permission from

the concern authority at Bheramara,

Kushtia/Santahar/Thakurgaon or

any other place in Bangladesh under

Bangladesh Power Development Board

(BPDB). The Board of Directors has also

decided to act as the Lead Member and

contribute 55% on total equity of the

project amongst the members of the

consortium. Contributions of the other

parties will be as follows: Aggretech AG

(as Operating Member): 20% of total

equity, Paramount Holdings Ltd. (as

Other Member-1): 10% of total equity,

Paramount Spinning Ltd. (as Other

Member-2): 15% of total equity. •


Sunday, July 9, 2017



Loosen the regulatory system

We have to make moves to build a forward-looking and fast-growing trading nation

• Mamun Rashid

Despite a lot of constraints and

somewhat love for the “Approval

Raj,” the Bangladesh Bank

has offered a lot of support and

“hand-holding” to the growing

private sector in Bangladesh.

Starting from allowing backto-back

import L/Cs for apparel

exports, it continued with export

retention quotas, holding foreign

exchange for overseas business

development, loans from foreign

bilateral and multilateral agencies,

parent company loans, issuance of

repatriation guarantee, increase of

the travel quotas, special quotas

for treatment abroad, remittance

of tuition fees for studying abroad,

remittance of foreign consultants

fees and technical fees, repatriation

of profit or dividend against foreign

direct investment, and investment

in traded securities in the bourses.

In fact, most Bangladesh Bank

officials are busy processing

approval requests for various

private sector entities on a day-today

basis. Even after 45 years of

independence, almost every third

inward or outward remittance

requires central bank clarification,

or consent, or mostly approval.

While individual remittance has

gone through reasonable reforms

or liberalisation, enterprise-level

inward and outward inflow still

remains an issue which warrants

a lot of filtering, making the outward

flows still quite complex and


After independence, we inherited

a war-torn economy with a

very low foreign exchange reserve.

Therefore, we appreciated the

slow pace of reforms in the foreign

exchange regime. In 2001, our net

foreign exchange reserve dropped

to lower than $1 billion. The then

Governor of central bank contacted

his many counterparts in the

Middle East to provide some foreign

currency liquidity support to

take care of increasing commodity

imports and imports for exports.

Known to be the foreign exchange

man, Allah Malik Kazemi

requested all global banks operating

locally to put in some foreign

currency deposits with the central

bank. The good thing was, despite

all the challenges, our trade was

happening, and L/Cs were opened,

routed, and confirmed through

the global banks. Where L/Cs were

being opened and settlement monitoring

was heightened, Bangladesh

Bank didn’t follow the route of RBI,

such as putting up a 300% cash

margin for opening L/Cs or “no export,

no import” commandments.

Bangladesh Bank is still trying

to hand-hold private enterprises

Foreign currency being counted at a money exchange

Nothing can happen if our regulatory regime does not become

more friendly and helpful. Even if the regulators are helpful, they

can’t do much without the right tools and guidelines

through quick disposal of their

FCY inflow-outflow requests.

This is taking a lot of their time in

the absence of clear guidelines.

Emerging realities also don’t allow

them to take shelter under existing

guidelines for foreign exchange

transactions or relevant core risk

management guidelines.

Development partners, especially

the IMF, have been talking of the

further liberalisation of the current

account transactions and updating

the outdated Foreign Exchange

Regulation Act (FERA) 1947.

Although it looks very odd

for an independent country like

Bangladesh to chalk out its growth

path to a middle income country

with this 1947 cross border

transaction rule, the reality tells

us that we don’t know when our

distinguished members of the

parliament could approve a new

foreign exchange regulation act,

suited more to the dreams of a

forward-looking and fast-growing

trading nation.

The archaic 1947 act is not

allowing Bangladesh Bank’s “very

helpful officials” to do much in

attending to emerging issues in

international trade and remittance

flows. They have been issuing

prudential guidelines to: Increase

travel quota (though still miniscule

against the increasing travel needs

of the individual business person or

professionals), creating space within

the student quota, remittance of

withdrawal proceeds by a foreign

investor, expansion of the EDF

program, and extension of the deferred

payment for USANCE L/Cs or

increasing the space for e-wallets.

They have issued almost 50 circulars

in this regard in recent times.

Our foreign exchange reserve is

on its way to $35bn, yet a traveler

can’t deposit more than $5,000 on

his/her return to his/her account if

not declared at the airport, or easily

buy tickets for overseas travels.

Remitting a single dollar

outside the country for investment

abroad still raises a lot of

eyebrows. Establishing the local

representative office or agency by

the global corporations is still a

tough exercise.

The consular section at the local

US or European country embassies

or Indian high commission reportedly

increased the issuance of

non-immigrant or business visas


When I asked the US consular

head the reasons behind the move,

she promptly replied: “Bangladesh’s

economy is growing at a

steady pace; its entrepreneurship

is growing fast, they need to

connect with their US counterparts

for their exports and raw materials

or capital equipment sourcing

Syed Zakir Hossain

or know-how purchases; there

are more and more Bangladeshi

students qualifying for good US

colleges and universities; more

Bangladeshi graduates are making

their presence felt in the US professional

world, and these realities are

convincing us to facilitate their entry

to the US for our own interest.”

The whole world has started

to accept Bangladesh as a global

player in its chosen field.

The buyers want our capacity

to increase, see our performance

improve, our workers’ productivity

to go up, and entrepreneurs to

reduce their business’ costs.

Nothing can happen if our regulatory

regime does not become

more friendly and helpful. Even

if the regulators are helpful, they

can’t do much without the right

tools and guidelines. We need to

change, revise, and upgrade our

foreign exchange rules.

It also has to happen fast.

Bangladesh not only requires

continuous liberalisation in current

account transactions, time

is possibly ripe to start thinking

about capital account convertibility

in order for us to be ahead

of our peers or competitors in the

identified opportunity spaces. •

Mamun Rashid is a leading banker and

economic analyst in Bangladesh.


Information is all we need

No need to reinvent the wheel


Sunday, July 9, 2017






















































Source: World Bank

But what will

really drive

that growth

is the people

in Bangladesh

applying the

methods of

adding value

that others have

already worked




• Tim Worstall

Sheikh Hasina has announced that

income per capita in Bangladesh

will be $12,000 by 2041. That’s up

from the current $1,600 or so but

we should point out that the PM

hasn’t quite announced that it will

be so, rather that we are aiming to

reach that amount.

We should also point out that

while it is not unlikely to be easy,

nor will it be a straight path, there

is no fundamental reason why it

should not or cannot happen.

Compound economic growth

just works that way; if growth is

just a little higher than it is currently

and continues on for those

decades then it will happen.

There is also no particular reason

to think that it won’t happen

that way.

Of course, there is always the

possibility of disaster, a rather

higher possibility of bad economic

policy being implemented, but

it is a general assumption in the

economic world that the currently

developing countries will continue

to develop.

It’s such a basic assumption

that it is even built into all our

calculations about climate change,

for example.

This process is called convergence

and there’s a very good

reason we think it should happen.

The difficulty with economic

growth is that we’ve got to

work out what to do next. Gross

domestic product, or GDP, is the

value that is added in an economy

each year and we generally define

economic growth as being a rise

in GDP.

The head scratcher, the puzzler,

is always, well, what is it that we

do to add more value? At which

point a developing country has an

advantage over a developed one.

By definition, a developed

country is at the technological

frontier. They’ve already implemented

all the ways to add value

that they know of and thus to

advance any more they’ve got to

invent some more.

This is not an easy task and

that’s why it takes time. Thus the

currently advanced countries grow

at 1, 2 and if they’re lucky 3% a

year, simply because there aren’t

all that many bright people to

work out how to add more value.

A developing country, again by

definition, is not at that frontier.

If it were it would be rich already.

But they have plenty of examples

to follow – as in, developed

countries – in terms of what to do

to add more value.

As we all remember from school

– OK, there will be a clever clogs

who never did this but for the rest

of us – homework is a lot easier if

you can copy it rather than having

to work it all out yourself.

A developing country can and

should grow faster than an already

rich one – thus that convergence

– so that in the end we should all

end up in roughly the same place,

the same level of income and


One such idea is using VAT as a

major part of the tax system. VAT

is a tax upon consumption and

this causes less economic distortion

or dislocation than taxes upon

incomes or capital.

So, the general move to a

simple VAT system is a good idea

for Bangladesh, despite it having

just been postponed for a couple

of years.

The rise in taxation upon SIM

cards probably isn’t such a good

idea. Of course, I’m not trying to

tell the government what they

should do but a general observation

is that mobile telephony is the

one single technology we know of

that promotes economic growth

more than any other.

The actual finding is that 10% of

the population with a phone, in a

country previously without a general

landline network, adds 0.5%

each year. That’s not 0.5% of extra

growth, that’s 0.5% of GDP growth

just from that 10% having a phone.

Sadly, it doesn’t scale all the way,

we don’t then assume we’ll get

5% GDP growth each year just by

everyone having a phone.

But information is the lifeblood

of economic growth – as above,

we’re trying to apply, in most

circumstances, things that others

have already worked out. Thus

we must know, of course, what it

is that those others have already

worked out.

We should therefore treat mobile

telephony, and the next stage

mobile internet, not as a consumption

good but rather an intermediate.

What that means is that

communication is something that

then feeds into the production of

other things. And we tend to think

that we shouldn’t tax intermediate

goods, only final consumption,

and or income.

In general Sheikh Hasina’s goal

is entirely achievable, even if I’d

prefer to agree that it will be a bit

of a stretch.

I’m not the world’s greatest

mathematician but I see that as

being 8% compound GDP growth

over the next couple of decades.

China has recently achieved

that, South Korea and Japan before

that, India looks on the way to it

and Bangladesh has been managing

just under that for two decades


Yes, it’s possible. Others have

done it and Bangladesh is close to

it already.

As to how, well, generally a

market and capitalist economy is

going to help, for no one has done

it without that.

Other than that, the various

policy decisions like VAT, or SIM

card taxation, are going to make a

difference at the edges.

But what will really drive that

growth is the people in Bangladesh

applying the methods of adding

value that others have already

worked out. •

Tim Worstall is a Senior Fellow at the

Adam Smith Institute in London.

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