Business Supplement Issue-20

DT
VOL1, ISSUE 20 | Sunday, July 9, 2017
Business Tribune
The unstoppable
growth of capital
flight
Stocks continue to rally
5 amid higher turnover
6
Loosen the
regulatory system
7
Information
is all we need

2
Sunday, July 9, 2017
DT
Special
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
flight.
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
Tribune.
“However, the existing laws
are insufficient and failing to stop
money being siphoned off from the
country.
10
8
6
4
2
0
ILLEGAL CAPITAL FLIGHT FROM BANGLADESH
4.26
3.38
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).
4.1
6.44
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
6.13
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
5.41
5.92
Given the current situation and the next
general elections looming, more money is
likely to flow out of the country
7.23
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
laundering.”
BB fails to get info about
Bangladeshi depositors in Swiss
Banks
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
9.66
9.1
Amount in $ billion
Source: GFI
DhakaTribune
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. •

Interview
3
Sunday, July 9, 2017
DT
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
system.
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
issue.
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
procedure.
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
flight.
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
people.
Bangladesh Bank is seeking information
from the Swiss National Bank management
about the Bangladeshi deposits there. •

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Sunday, July 9, 2017
DT
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
industry.
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

Stocks
5
Sunday, July 9, 2017
DT
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
DSEX
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 news@dhakatribune.com.
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
points.
5,800
5,780
5,760
5,740
5,720
5,700
5,680
5,660
5,640
5,620
5,600
5,580
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%
MOVEMENT OF DSEX INDEX LAST WEEK
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
points.
Among the traded issues 281
gained, 41 declined and 11 remained
unchanged during the
week.
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. •
DAY 0 DAY 1 DAY 2 DAY 3 DAY 4 DAY 5
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
February.
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. •
DSE NEWS
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. •

6
Sunday, July 9, 2017
DT
OPINION
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
cumbersome.
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
manifold.
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.

OPINION 7
Information is all we need
No need to reinvent the wheel
DT
Sunday, July 9, 2017
GROSS NATIONAL INCOME (GNI) PER CAPITA, ATLAS METHOD (CURRENT USD)
1,400.0
1,200.0
1,000.0
800.0
600.0
400.0
200.0
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
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
out
THE lAST
WORD
• 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
wealth.
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
now.
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.