Idlc monthly business review june 2017

Volume 13 l Issue 6 l June 2017

IDLC MONTHLY

BUSINESS

REVIEW

WHAT’S UP 

MOBILE PHONE

AIR TICKET

CONSTRUCTION MATERIALS

TOILETRIES

COSTLY CARS

BD

WHAT’S DOWN 

15% VAT

ENDITUR XP BDT 4.00

E

E

FAST FOOD

IT FICTrillion E D .12 T1

Trillion

BDT 2.88

RE LPG CYLINDER

LOCAL AC

HYBRID CAR

MEDICINE

LOCALLY-MADE SOFTWARE

COMPUTER PRODUCTS

BLUEPRINT OF A THRIVING ECONOMY REVIEW OF NATIONAL BUDGET FY’17-18

Trillion

VEN UE

2 of 40

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If you have any comments and/or suggestions, please write to us at mbr@idlc.com

FROM THE

EDITOR IT FICTrillion E D .12 1 DT

B

ENDITUR XP

ENUE REV

E BDT BDT

2.88 4.00 Trillion Trillion

E

Talks over Budget

C

Cities from Sweden to India are pushing for a totally cash-free society. The Government of India has undertaken a number of initiatives as it heads out to be a more digitally empowered countryintroduction of Aadhar- the digital identity, opening of 11 payment banks which can hold money but can’t lend, launch of Unified Payment Interface (UPI) for direct transfer of money based on Aadhar, roll-out of “India Stack” which stores and shares personal data to determine the financial behavior of people which ultimately will facilitate small business lending and many more.

On June 01, 2017, the Finance Minister proposed a mega budget of BDT 4.00 trillion. A salient feature of the budget was the hike of excise duty

on bank deposits. Many talks have been taking place regarding the heavy impact of this hike on the commoners. Another eminent feature is the implementation of VAT and SD Act 2012 on effect from July 01, 2017 for 3 years. While it is a tremendous move towards revenue mobilization, on the flipside; the small traders may have to bear the brunt of the high percentage. Lastly, as the saying goes- “The taste of pudding lies in its eating”, the budget will be fruitful in true sense when implemented as designed.

Adnan Rashid Assistant General Manager IDLC Finance Limited

INDUSTRY & EQUITY ANALYSIS TEAM ASIF SAAD BIN SHAMS

ADNAN RASHID

SUSHMITA SAHA

Email: shams@idlc.com

Email: adnan@idlc.com

Email: sushmita@idlc.com

contents 04

18

Bangladesh Development Update

Everest Wood-Working Machine

Research In Focus

06

Cover Story Review of national budget FY 2017-18 Blueprint of a Thriving Economy

Design & Printing: nymphea l www.nymphea-bd.com

The 46th national budget for FY 2017-18 has been declared, in the backdrop of sound economic parameters, on June 01, 2017 with a view of furthering economic development. The initiative to execute excise duty on bank deposits, on top of charging VAT at a uniform rate of 15%, are the two new additions in this budget. Amidst constructive criticism and accolades, the national budget looks set to have a kick-start of FY 2017-18.

16

Expert Opinion A different budget than yesteryears Dr. Ahsan H. Mansur Executive Director, Policy Research Institute

Entrepreneurs’ Corner

19

28

Trailblazers

In Conversation with Dr. Mohammed Farashuddin Founder, East West University Former Governor, Bangladesh Bank

IDLC News

32

IDLC Launches Its First Open End Mutual Fund – IDLC Balanced Fund

Frontier Markets

20

Spotlight on Startup Bagdoom

24 26

Economy At a Glance

Buzzword

34

The Month In Brief

38

Capital Market Review

Youth Leadership BRAC University Business Club (BIZ Bee)

All rights reserved. No part of this journal may be reproduced in any form, by print, photoprint, microfilm or any other means without written permission from the publisher.

RESEARCH IN FOCUS

BANGLADESH DEVELOPMENT UPDATE

BANGLADESH DEVELOPMENT UPDATE This article has been adapted from the research report “Bangladesh Development Update 2017”, published by the World Bank Group. The objective of the report is to provide an update on the state of the economy, outlook, risks, and key challenges that the Bangladeshi economy is facing at present. It also discusses the country’s prospects of long-term growth and the policy changes that need to be implemented in order to unravel Bangladesh’s growth potentials.

Year

Recent Economic Developments

Overall GDP Agriculture Industry Services Growth

FY10

5.57

6.2

7.0

5.5

FY11

6.46

4.5

9.0

6.2

FY12

6.52

3.0

9.4

6.6

FY13

6.01

2.5

9.6

5.5

FY14

6.06

4.4

8.2

5.6

FY15

6.55

3.3

9.7

5.8

FY16

7.11

2.8

11.1

6.2

Source: Bangladesh Bureau of Statistics (BBS)

Continued Poverty Reduction

reserves increased to almost USD 33 billion in early April, 2017. However, slowing export growth and declining remittances contributed to a USD 1.1 billion current account deficit for the first two quarters of FY17. Although the Bangladesh Bank was able to keep the nominal exchange rate against the US Dollar in the interbank market almost fixed, the appreciation of the cross-rates against the Pound Sterling, and the Euro, led to an appreciation of the Real Effective Exchange Rate.

The interbank BDT-USD rate depreciated by about 2.3% between the period July 2016 to April 2017, with the growing deficit in the external current account.

Although the accommodative monetary policy has been beneficial, it has offered little protection against the competitiveness in the exchange rate market.

According to the official quarterly poverty statistics (April-June, 2016) published by the government in October 2016, the headcount poverty rate, decreased to 23.2% in April-June, 2016. Possible factors which could have contributed to continued poverty reduction include increased wages, rise in labor-intensive exports, and the decreasing food inflation. However, the recent slowing exports, declining remittance flows, increasing food inflation, and early floods, may slow down the rate at which poverty is being reduced.

Steady Growth GDP (Gross Domestic Product) Growth, reported to be around 7.1%, can be contributed to investments, exports, and industrial growth. Manufacturing and construction, which encouraged industrial growth in FY16, continue to grow strongly. The recovering exports, and increasing private investments helped grow aggregate demand in FY16. However, the effect of the increased salaries in the public sector were weakened by declining remittance flows, which contributed to slowing private consumption growth. On the other hand, private investment, as a share of GDP, rose from 22.1% in FY15, to around 23% in FY16, the highest, in 20 years.

Weak Financial Sector Governance Although excess liquidity has been rising, financial sector distress has brought about a falling trend in lending rates. Bank lending rates continued the declining trend, falling to 9.9% in January, 2017. Private sector growth remained low at 15.9% in February, 2017, while banks had excess liquidity, and were burdened by non-performing loans. Stock prices rose on a temporary basis. However, overall capital market development was hindered by the quick increase in sales of the National Savings Certificates (NSCs).

Macroeconomic Stability

Continued Fiscal Prudence

Headline inflation decreased to 5.3% in February 2017 due to sluggish non-food inflation. Foreign exchange

The fiscal deficit has fallen due to increased revenue mobilization, and reduced expenditure on subsidies.

4 of 40

GDP is forecasted to grow by 6.8% in FY17, with agricultural growth increasing to 4.1%. Industrial growth may be hampered due to slowing exports, and declining remittance flows, and fall to 8.9%. Services are estimated to grow steadily at 6%. The increase in private investment is expected to continue, bolstered by political stability.

High frequency indicators till date show improved performance, and boast confidence that the economy is on the way to maintaining robust growth.

However, the composition of the fiscal deficit has hampered how effectively the financial intermediaries can operate. Increased reliance on NSCs helped increase the interest burden on the budget. Ad-hoc administered adjustments of price for gas, and electricity, helped reduce the quasi-fiscal deficit.

Potential Growth Bangladesh needs to increase its potential growth rate to help hasten its journey on the middle income path.

An investment-led strategy, along with more efficient public capital will help boost economic growth over 5% for the next 10 years. Increased productivity growth, and higher engagement of the female labor force can help the country achieve higher than 7% annual growth on a sustained basis. Real GDP per capita would double if distortions hindering resource mobility between sectors are reduced.

Continued Macroeconomic Stability The overall macroeconomic outlook is stable, despite modest increases in inflation, contributable to rising import prices. The overall balance of payment surplus is forecasted to reduce considerably. However, this will not negatively impact the stability in the foreign exchange market, due to the cushion in the level of reserves.

The FY17 aims to increase revenues through amended revenue administration. The current spending, and capital spending are also projected to rise. The deficit is forecasted to be around 4% of GDP, with 60% financed by domestic borrowing.

The prevailing gender gap in the market is an enormous waste of potential. If Bangladesh can increase the involvement of the female labor force participation rate to 45% by 2020, then it can achieve economic growth 1% point above the trend throughout 2020. This could be achievable if the female labor force engagement continues to rise, until it matches the male labor force engagement. This would cause a productivity growth of 1.5% annually which would help the economy achieve its envisaged growth targets.

Downside risks due to domestic factors Domestic risks include additional weakening of the financial sector stability, problems in fiscal reforms, and possible amplified political tensions arising due to the 2019 elections. Rising levels of non-performing loans make banks vulnerable to the rising risks of financial stress.

The business environment is still weak, with Bangladesh ranking 176th out of 190 countries in Doing Business, and 107th out of 140, in the Global Competitiveness Index 2016, one of the lowest in South Asia.

The gender gap is caused by several of the following factors:  Uneven burden of household responsibilities, which are disproportionately borne by women

 Human capital deficiency, which does not allow women to acquire the skills and knowledge required by the job market

 Human capital mismatch, which causes wasting of female aptitudes, and attained skills

Highlights:  Private investment, rose from 22.1% in FY15, to around 23% in FY16, the highest, in 20 years.  GDP is forecasted to grow by 6.8% in FY17, with agricultural growth increasing to 4.1%.

 Gender discrimination, in job searching, hiring, and promotion processes

 The business environment is still weak, as Bangladesh ranks 176th out of 190 countries in Doing Business, and 107th out of 140, in the Global Competitiveness Index 2016, one of the lowest in South Asia.

Outlooks and Risks Projected medium-term robust growth Growth in Bangladesh’s biggest export markets, the United States, and Europe, are forecasted to improve.

5 of 40

REVIEW OF

NATIONAL BUDGET FY 2017-18

6 of 40

COVER STORY

REVIEW OF NATIONAL BUDGET FY 2017-18 BLUEPRINT OF A THRIVING ECONOMY

The 46th national budget for FY 2017-18 has been declared, in the backdrop of sound economic parameters, on June 01, 2017 with a view of furthering economic development. The initiative to execute excise duty on bank deposits, on top of charging VAT at a uniform rate of 15%, has been met with criticism from all concerned entities. Amidst constructive criticism and accolades, the national budget looks set to have a kick-start of FY 2017-18.

The national budget of a developing economy carries paramount importance in ameliorating the whole economic outlook. People ranging from all the bracketscommoners to business community, look forward to this event as it is going to create marked impact in their respective arenas. On June 01, 2017, the presentation of the proposed 46th national budget for FY 2017-18 was made by the Finance Minister A.M.A Muhith. With a robust size of BDT 400,266 Crore, the newly proposed budget witnessed a 17.51% increase over that of the previous fiscal.

registered half (3.9%) growth of its target (8%), in which, Non-RMG export growth (11.7%) overpowered the RMG export growth (2.2%).

FY’16 ended with an upsurge in private investmentGDP ratio. During July-February of FY2017, capital machinery import, which has cardinal investment implications, registered an impressive growth of nearly 24%. However, as discerned, this investment was concentrated in one particular area- the power sector.

This uptake is reflected in the private sector credit which increased by 15.9% by the end of February 2017 compared to the corresponding period of FY2016. On the flipside, industrial term loan disbursement recorded only 6.9% growth during July-December of FY2017, which was -3% over the matched period of FY2016.

The announcement of the budget has been made in a backdrop of sound economic parameters. The outline of the budget was sketched out based on the assumptions of a 7.4% GDP growth and a 5.5% inflation target.

While the GDP growth is quite attainable, inflation target may prone to ambiguity fueled by two factors: the of-late hike in gas and electricity price and the skyrocketing coarse rice price (one of the highest in the global market). Other assumptions include: decline in interest rates, stable nominal exchange rates, increased consumption and investment expenditure, positive Balance of Payment (BoP), supportive monetary and credit policy, increase in Tax Revenue by 1.7% of GDP and increased foreign aid disbursement.

How was FY 2016-17?

In response to the ambitious NBR (National Board of Revenue) revenue growth target of 38.9%, the attained growth has been 20.6% up to October of FY2017 when compared with the corresponding period of the previous fiscal year. Although, 45.8% is yet to be achieved by the NBR, their performance in revenue mobilization picked up signifiacntly as the comparable periods for FY2015 and FY2016 registered a much lower growth of 8% and 10.9% respectively. ADP implementation was 44.8% during July-March of FY2017. This is an improvement over similar timeline of FY2016 (41.1%).

It is the third time that the GDP growth of Bangladesh exceeded 7% bracket, FY’16 ended up on a 7.11% level and for FY’17, the provisional growth rate is 7.24%, as estimated by Bangladesh Bureau of Statistics (BBS).

Per Capita Income is on upward trend, currently at USD 1,602 (Provisional). Over the years, Bangladesh economy has taken a turn from being agricultural-based to industrial-sensitive. Manufacturing sector has been the cornerstone of industrial sector notwithstanding a lower growth in export earnings. Export earnings

Remittance showed a constraining picture in FY 2016-17. At the end of Jul-Apr FY17, remittance was 16% lower than that of Jul-Apr FY16. Majority of the remittance earning (58.1%) came from the Gulf countries- with 17.5% coming from United Arab Emirates (UAE) and 16.8% from Saudi Arabia. Among the non-Gulf countries, the US (12.8%), the United Kingdom (9.6%) and Malaysia (7.3%) were the largest sources of remittances. The lower remittance is mainly ascribed to sending money through informal channels.

7 of 40

Budget at a glance, FY 2017-18

THE STATISTICS

Public Finance Framework The Public Finance Framework in a national budget is the cardinal section, which constitutes the mapping of resources and allocation of resources. Following the trend of national budget for the last fiscal years, this one shows no exception in setting a skyrocketing revenue target to accomplish the expenditure.

GDP Growth 6.46% 6.52%

6.01% 6.12%

6.51%

7.40% 7.11% 7.24%

Revenue Mobilization

FY 11 FY 12

FY 13

FY 14 FY 15

The FY’18 budget targets an additional BDT 69,464 Crore revenue target with a 31.8% growth from the revised budget for FY 16-17. An amount of BDT 287,990 Crore is set for the total revenue mobilization target, in which, NBR will be accountable for almost 90% of it (BDT 248,190 Crore) with 34.2% growth than that of previous timeline. Heavy reliance on tax imposed on domestic level is discerned.

FY 16 FY 17 FY 18 ( E) (P)

Revenue Mobilization Non-NBR Tax, 2%

Non-Tax, 7%

Other Duties and Taxes, 1%

Deficit Financing The revised budget deficit of FY 16 amounts to 3.78% of GDP whereas the target was 5%. The proposed budget for FY’18 also targets the same for budget deficit i.e. 5% of GDP to the tune of BDT 112,276 Crore. High reliance on bank borrowing was discerned in the previous classification of deficit financing, whereas, foreign source (foreign borrowing and foreign grants) leads the pack this time. Gross foreign aid flow is anticipated at a level of USD 7.6 billion which is highest in history (USD 2.7 billion in FY16).

Taxes on Income and Profit, 32%

Supplementary Duty, 13%

Import Duty, 12% Value Added Tax (VAT), 33%

Annual Development Program (ADP) Deficit Financing FY 17-18 (P)

Non-bank Borrowing

Foreign Source

Bank Borrowing

An allocation to the tune of BDT 153,331 Crore has been made on the national budget for FY 17-18. The figure is a sharp increase of 38.51% from that of original figure of previous fiscal. The revised figure for ADP has remained unchanged. A number of 1,195 projects has been considered in the newly proposed budget, which was 1123 in FY 16-17. Transport sector again received the highest allocation (26.8% of total allocation) along with the highest number of projects. For FY18, ICT Sector has received a substantial amount in ADP allocation (almost 2.6 times compared to RADP FY17) and Rooppur Nuclear Power Project receives 75.5% of the incremental allocation.

FY 16-17 28.63% 37.10%

46.25% 23.10%

25.12% 39.80%

Source: Ministry of Finance

8 of 40

The total number of carryover projects to FY 17-18 stands at 221, in which Physical Planning, Water Supply & Housing sector has 46, Transportation comprises of 40 projects, Education constitutes 28 projects, 15 for Rural Development and so forth.

will be continued for the existing raw materials and components of agricultural machineries along with some more equipment in the agricultural sector.

Expenditure

The Small and Medium Enterprise (SME) has been serving as a steering wheel to gear up the economy.

The proposed budget for FY 16-17 is a mixture of headwinds of tailwinds for the SME related business.

In the previous budget for FY 17, the tax-exempted turnover limit was increased from BDT 0.3 million to BDT 0.36 million which acted as a boon to the small enterprises and will encourage entrepreneurship.

Threshold for turnover tax has been raised to between BDT 3.6 million and 15 million from existing BDT 3 million-8 million with imposition of 4% turnover tax.

Raising the ceiling will keep higher number of SMEs out of VAT net. However, they have to pay turnover tax at a higher rate of 4% which was 3%in FY17. VAT will remain exempted on 404 agriculture, livestock and fisheries products.

Small and Medium Enterprise (SME)

BDT 400,206 Crore has been set as the total expenditure of the proposed budget for FY 17-18 with a growth target of 7.40%. The highest allocation goes to the Education & Technology (16.4%) followed by Public Service (13.6%) and Transport & Communication (12.5%). The emphasis on allocation for the education sector earned much accolades. On the other hand, implementation of the new pay scale for government employees has accelerated non-development expenditure.

Agriculture Despite being a sector extremely vulnerable to climate shock, the pro-poor and catalytic nature of agricultural growth has been a leading contributor to poverty alleviation since 2000. However, the sector has been witnessing a downward trend in share of allocation in the national budget since FY 2013-14. In FY 2017-18, BDT 244.3 billion is allocated for agriculture sector which accounts for 6.1 % of the total budget. Agriculture remains a major targeted sector for subsidy (from 35% in FY13 to 25% in FY17). A number of measures have been announced to promote mechanization of agriculture. The current duty tax concessional facility

Information and Communications Technology (ICT) Like the previous FY, the national budget of FY 201718 proposes an outstanding allocation for Ministry of Science and Technology and ICT Division is BDT 3,974 Crore. For FY 18, ICT Sector has received a substantial amount in ADP allocation (almost 2.6 times compared to RADP FY17). Coverage of tax exemption has been Growth (%) Share (%) ADP ADP FY18 over FY17 RADP FY17

No of Projects ADP FY18

Share (%) ADP FY18

Share (%) RADP FY17

Total Five Sectors

601

69.1

66.4

71.0

44.2

Transport

171

26.8

24.7

25.8

50.0

Education & Religious Affairs

82

12.3

12.1

13.1

40.2

Physical Planning, Water Supply & Housing

112

10.9

11.6

12.1

29.8

Power

205

9.7

13.0

11.8

3.9

Rural Development & Institutions

31

9,4

4.9

8.2

164.1

Other 12 Sectors

594

28.7

29.9

29.0

33.0

Development Assistance

NA

2.2

2.7

2.7

-18.2

1,195

100.0

100.0

100.0

40.7

Sector

Total

9 of 40

extended for the income derived from the business of information and communication technology (ICT) sectors this will promote development of ICT sector which has significant potentials.

from July 01, 2017. The salient feature of the new VAT policy that created much agitation and uncertainty among the concerned entities is the imposition of VAT across the board at a uniform rate of 15% for the next 3 years. The new VAT law is anticipated to cover 35% of the revenue earnings. Some other features are encapsulated below:

Budget for the Business Community The entire business community remains on tenterhooks at the announcement of the national budget as it determines their move in the respective years. The budget, as it is labeled, a mixed bag for the business community containing few welcome moves and discontents.

 VAT-free annual turnover threshold has been raised to BDT 3.6 million from BDT 3 million.

Earlier, businesses had to pay package VAT for annual turnover of BDT 3 million. The measure will benefit small businesses.

Corporate Tax Unchanged

 Threshold for turnover tax has been raised to between BDT 3.6 million and BDT 15 million from existing BDT 3 million – BDT 8 million with imposition of 4% turnover tax. Raising the ceiling will keep higher number of SMEs out of VAT net.

However, they have to pay turnover tax at a higher rate of 4%, which was 3% in FY17.

The FY’18 budget has also made no significant changes in the corporate tax structure as similar to the previous period. Corporate Tax rate remains same for both publicly traded companies (25%) and non-publiclytraded companies (35%). However, Budget FY’18

What’s up!

FAST FOOD

MOBILE PHONE

AIR TICKET

CONSTRUCTION MATERIALS

proposed to bring down the corporate rates for nonlisted banks (42.5%), non-listed mobile operators (45%) and cigarette manufacturing companies (45%) gradually.

TOILETRIES

COSTLY CARS

 Businesses have to take new 9-digit VAT registration; according to VAT administration promotion. The existing BIN will become obsolete from July 01, 2017.

Reduction in Corporate Tax for RMG

 0.85 million entities are reported to be VAT registered while only 0.032 million pay taxes. NBR intends to increase the number to 0.06 million.

Tax rate is to be reduced to 15% from 20% for knitwear and woven garments’ export earnings. It will be brought down to 14% for RMG companies, which have factories with internationally recognized green building certification. This initiative is encouraging and time befitting, catering to environmental welfare. Also, Supplementary Duty has been increased from 45% to 50% for RMG sector to protect locally made garments.

Protecting Domestic Industry The FY’18 budget contains the following measures in a bid to protect the local industry:  Import of 1,666 products is to come under Supplementary Duty (SD) to protect the local industry. Previously, the number was 1,250.

In addition, the existing 10% SD slab has been scraped during this budget session. The duty

VAT and SD Act 2012 Finally, the announcement roll-out of the VAT Policy has been made at the budget session and it will be effective

10 of 40

slabs have also been proposed to restructure. SD has been increased to 25% from 20% for major industries such as shrimp and live fish, plastic and plastic products, jute yarn.SD has been increased to 50% from 45% for RMG and glass and glass ware industry.

Threshold of Taxable Income

Status

 Local manufacturing of air conditioner and import of its machinery parts will remain VAT exempted till 30 June 2019 –move will help growth of the industry.

Tax Exempted Income Threshold

250,000

Women and the Elderly (65 years & Above)

300,000

Physically Challenged

400,000

Excise Duty on Deposits on banks In the proposed budget for FY’18, the excise duty on account balance between BDT 0.1 million to BDT 1 million has been increased by 60%, to BDT 800 from a level of BDT 500. The initiative has been undertaken as a part of revenue mobilization to a greater extent. This has come as a surprise to the commoners as well as to the high officials of Financial Institutions. Depositors are charged with three types of expenditures for savings with banks- income tax, excise duty and account maintenance fee. After the imposition of this heavy

 Domestic industry protection through increase of CD (articles of copper; dry mixed ingredients of bulk food items etc.)

Unchanged Duty-Rice Import Coarse rice price is at highest level at present, trading at BDT 42-43/kg. According to Ministry of Food, the current price of rice is one of the highest in the globe.

What’s down?

LPG CYLINDER

LOCAL AC

HYBRID CAR

MEDICINE

LOCALLY-MADE SOFTWARE

COMPUTER PRODUCTS

duty, the real return of depositors would be negative.

The additional levy on bank deposits will not only make the depositors shy away from the banks, but also will take its toll on the national savings.

In this context, the CD on rice import has kept steady which will encourage import of rice and fuel domestic rice price.

Budget for the Commoners

Other Incentives

The FY’18 budget is a mixed bag for the commoners.

Several products have become more expensive or more affordable as announced in the budget. Besides the ups and downs in the prices, the commoners also look for other decisions pertaining to their investments and savings.

Customs Duty on several products has been decreased in order to protect consumers’ interest e.g. pepper, cinnamon, cardamoms. Supply of refined palm oil and soybean oil will remain VAT exempted until 30 June 2019. Supply of LPG cylinder also enjoys the same benefit –welcome news for consumers.

Personal Income Tax

Capital Market Implications

Tax exemption threshold for personal income remains at the same level at BDT 250 thousand. Threshold income tax of persons with disability has been increased from BDT 375 thousand to BDT 400 thousand.

 Proposal of granting tax exemption to alternative investment fund.  Tax exemption for the Bangladesh Securities and Exchange Commission in order to make a positive impact on capital market.

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ALLOCATIONS BY SECTORS DEFICIT BDT 1.12 Trillion 32,149

Non-bank borrowing

24,430

28,203

Agriculture

20,679

F

4 ou ,92 n S 51 reig o

Bank Borrowing

ENUE REV

21,119

50, Tra 099 nsp ort

2.88 4.00 Trillion Trillion

Energy

65,450

on & Educati y og Technol 27,708

64

Pu ,58 Ad blic 5 mi nis tra tio n

LGRD

24,489

Social Security & Welfare

25,771

Defense Service

22,881

Public Order & Safety

91,333 VAT

41,431 Interest

29 1 , 85 ome Inc x Ta

BDT BDT

E

Import Duty and Others

E ENDITUR XP

71,726

rce

39

No ,80 ear n-NB 0 nin R gs

Health

3,734 Housing

4,281

Industrial & Economic Services

3,609

Recreation, Culture & Religious Affairs

Source: Ministry of Finance

Excise Duty on Deposits on banks Balance of the bank account

Existing Excise Duty Amounts (in BDT)

BDT 0 – BDT 20,000

Changes proposed in Budget Speech FY2018 (in BDT)

Changes mentioned in Finance Bill 2017 (in BDT)

0

0

BDT 20,000 to BDT 1 lakh

150

0

BDT 1 lakh to BDT 10 lakh

500

800

BDT 10 lakh to BDT 1 crore

1500

2500

BDT 1 crore to BDT 5 crore

7500

12000

Nothing Mentioned about the slabs

Balance above BDT 5 crore

15000

25000

30000

Nothing Mentioned about the slabs

Sectorwise Impact Bank

 Government Borrowing from Bank hiked 18% from RB FY’16-17  Excise Duty on Deposits (Above BDT 20,000)

Tobacco

 Corporate income tax for cigarette, bidi, zarda, chewing tobacco, gul or any other tobacco

products manufacturers has been kept unchanged to 45%. Tax rate 40% hinted in future.  A surcharge of 2.5% is imposed on the income from cigarette, bidi, gul, zarda and other

tobacco items.  Export duty of 25% has been imposed on export of tobacco and tobacco products.  Lower segment cigarette consumption is still discouraged. Price has been raised to BDT 27

from BDT 23 for 10 sticks of lower segment cigarettes of local brands. To offer protection to domestic brands in lower segments, price for international brands in this segment is fixed at BDT 35 for 10 sticks. Supplementary duty (SD) for lower segment local brands and international brands have been increased to 52% & 55% respectively from the earlier SD level of 50%.  Government did not increase any price or Supplementary Duty for the medium and high

segment cigarette brands which are currently being sold at Tk. 45 and above.  Prices for non-filtered Bidi (25 sticks) has been raised to BDT 15 from BDT 10.61. Prices for

filtered bidi (20 sticks) has been raised to BDT 15 from BDT 12.03. Supplementary duty of non-filter and filter bidi have remained unchanged at 30% & 35% respectively. Increased price for bidi will gradually convert bidi smokers into low-end cigarette smokers but the conversion process can be slower due to increase in prices for low segment cigarettes.  Customs duty on e-cigarette and its refill pack have been increased form existing 10% to

25%. At the same time, 100% Supplementary Duty has been imposed on these two items.

Textiles

 Corporate tax has been reduced to 15.0% from 20.0% (listed) for RMG manufacturers.

Expected to benefit composite and RMG producers  Turnover tax remained unchanged at 0.7%.

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Leather & Footwear

 Reduced rate of duties is proposed for busbar trunking system and electrical panel

import by leather manufacturing companies. This will help reducing CapEx for leather manufacturing companies.  Decrease in SD of glues and acetates to 5% from 15% and 10% respectively. This will help

reducing production cost slightly.  SD on Polishes, Creams and Similar Preparations for Footwear or Leather has been raised

to 25% from 20%. SD of footwear with outer soles and uppers of rubber or plastics has been raised to 50% from 45%. Increased SD will increase production cost for footwear manufacturing companies.

Pharmaceuticals

 Duty exemption of various raw materials in pharmaceuticals industry is likely to reduce

manufacturing costs of the pharmaceuticals companies.  10% on bio-hygiene equipment (to manufacture pharma-grade water) is proposed to be

exempted.  Raw materials of cancer drugs are also enlisted for duty exemption

Consumer Goods

 5% CD has been imposed on copra, the major raw material for coconut oil production.  SD of several beauty and hygiene products, toiletries, soaps and detergents is proposed

to be increased.

Consumer Electronics

 VAT exemption facilities for local refrigerator manufacturers is extended up to June

2019.  VAT exemption facilities for local air conditioner (AC) manufacturers is extended up to

June 2019.  Increased duty of wires (from 5% to 10%) is likely to increase manufacturing costs of

bulbs.

Fuel & Power

 Duty exemption facility, for machinery and equipment required to set up LPG,

continues. Under this facility, any duty above 1% is exempted.  VAT exemption facility for local manufacturers of LPG Cylinder at the production stage

is extended up to June 2019.  CD of imported LPG cylinders is proposed to be reduced to 5% from existing 10%.

If meticulously analyzed, the pattern of the national budget has been quite static over the years. The extent of NBR’s revenue generation has always been a matter of concern to the big guns of the economy and no exception is discerned this year. The Finance Minister put an end to all the hue and cry about the implementation of VAT and SD Act 2012, which will be on effect from July 01, 2017. The additional levy on customers’ bank deposit came out of the blue. When the government is putting effort to expand the financial inclusion net, this sort of announcement is likely to hold the commoners back from getting into the financial net. On the sunny side, the Finance Minister deserves accolades for substantial allocation in Education sector. How the aggregate economic ecosystem reaps the benefit out of the proposed budget is to be perceived.

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EXPERT OPINION

DR. AHSAN H. MANSUR EXECUTIVE DIRECTOR, POLICY RESEARCH INSTITUTE

A DIFFERENT BUDGET THAN YESTERYEARS

In the wake of the newly proposed national budget for FY 2017-18, MBR had the privilege to have a one-to-one conversation with Dr. Ahsan H. Mansur, Executive Director at the Policy Research Institute, and a former Economist of International Monetary Fund (IMF), regarding the recently proposed budget before making an impression on the aggregate business community.

Dr. Ahsan H. Mansur

Executive Director, Policy Research Institute A Different Budget

updated about the current situation. However, the trend observed over the last three months, indicates that rice prices will rise, and continue to contribute to increasing inflation rates. If the import duty on rice is lifted, then merchants will be able to import rice from India at lower prices. This market based solution should have a dampening effect on food inflation rates. Food inflation is the major contributor to rising inflation rates. Nonfood inflation is relatively stable. However, rising food prices will cause other businesses to raise prices, thereby increasing overall inflation.

The proposed budget of FY 17-18 is slightly qualitatively different from the budgets of the previous years. The imposition of VAT (Value Added Tax) across the board at a uniform rate of 15% for the next three years is the first, and one of the most important reforms to be implemented during the present government’s tenure. This is a progressive initiative, and the positive impacts of this initiative on the country, provided that it is correctly implemented, can be discerned in the upcoming years.

Sector allocations have mostly been pro-growth, and pro-development. In the Annual Development Program (ADP), the main emphasis has been put on Transportation (26.80%) and Power & Energy (13.70%) sectors, both pro-development measures. The highest expenditure allocation for Education & Technology (16.4%) is merited, but needs to be higher in the upcoming budgets. Government implementation of set policies needs to improve in order to truly achieve growth and development for the nation.

Parameters of Budget Slow exports have ensured that the export growth rates are unacceptably low. This has potential negative implications, since it affects the manufacturing sector directly. If manufacturing sector growth rates are to increase to double digits, exports have to increase.

The manufacturing sector is the main engine of growth; if that is stopped, overall GDP is bound to be affected adversely. Remittance has fallen to -16 and will negatively affect domestic demand. If remittance flows, and exports are not increased immediately, it will have an undesirable impact on the country’s external balance and macroeconomic factors, put pressure on the exchange rate and increase inflation.

Implementation is the key In line with the budgets of the previous years, this time around as well, the size of the budget is far greater than the country’s current capabilities of managing and implementing the expenditure. Furthermore, the financial capabilities of the government are quite constrained, particularly due to weakness in the

The abolition of the practice of publishing the monthly Inflation Index has deprived people the chance of being

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management of the tax administration. In the previous FY 16-17, the revenue growth target was set around 3536% in the revised budget, which was not possible to achieve. In comparison with the performances of the last 2-3 years, the current performance is better (attained growth has been around 20%), but it is still not as good as it be in the yester years. There is optimism that the performance will be slightly better in the coming year.

If the new VAT initiative can be implemented properly, then the positive results should be visible within one year. However, it would probably take around 2-3 years to truly obtain large scale revenue gains from the implementation of this new law. The tax net has to be widened and more people should be brought under the tax net and induced to pay taxes, which will bring about positive results. The process is being conducted in quite an advanced manner. With time, the general people will learn of the benefits that will result due to the implementation of this new VAT policy.

3% reduction in the rate of VAT, i.e. the new rate would be 12%, there would be a BDT 240,000 million (BDT 24,000 crore) loss in revenues. This would result in a huge loss in revenues, which would have been incredibly difficult for the government to bear. Additionally, the reduction of this rate would benefit neither the government nor the people. This money would go to the pockets of a few: certain affluent members of the society, and big corporations. Hence, the reduction in the rate of VAT imposed would not benefit the general population.

Excise Duty Hike: A new addition A new dimension added to the budget of this year has been “Excise Duty on Deposits in Banks.” This initiative might have been undertaken to increase revenue mobilization, but it has come as a surprise to both the general population and financial institution officials.

The government is already privy to the 15% VAT charged from every service rendered. In addition to that, the government also charges 10-15% on the nominal interest income available from deposits. Furthermore, the government is getting an additional 30-39% on interest incomes of people with larger deposits. There does not seem to be an obvious requirement for the imposition of this excise duty. Rather, the imposition of an arbitrary tax like this may damage the financial pillar of this country. If the general population’s reaction to the imposition of this unsystematic tax is left unattended, many people may stop taking services from the banking sector.

The new VAT law and the business community There has been a general misconception amongst the business community, that the imposition of VAT of 15% will have adverse impact on trade. However, the business community has been paying VAT of 15% for almost 26 years, since 1991, and during that period, there have been no debates regarding this rate. As for the present concerned, there is no basis for this debate now, since both consumers and businesses alike, have been paying this rate of tax for quite some time. The declaration of this new VAT policy cannot suddenly be perceived as burdensome, since it has been in practice for almost over two decades.

We are talking about a time when the government is putting efforts to bring the chunk of the population under the financial inclusion net. If we take neighboring India for instance, they are running campaigns on “Cashless Society” where the financial transactions take place through electronic payment. As a burgeoning economy, we also have to venture on this area to survive competition and this sort of announcement may hinder out growth progress.

The implications of what might have happened if the VAT rate had been reduced may be interesting to note.

If the rate of VAT was reduced, assuredly, there would be ensuing problems. According to the calculations conducted at the Policy Research Institute, if VAT had been reduced by even 1% (to 14%), it would result in a revenue loss of BDT 80,000 million (BDT 8,000 crore).

If there had been an implementation of the proposed

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ENTREPRENEURS’ CORNER

EVEREST WOOD-WORKING MACHINE

EVEREST WOOD-WORKING MACHINE of furniture and doors. His regular clientele include timber firms, saw mills, and furniture manufacturing firms across the nation.

Expansion He started humbly, with one factory, situated at Shahjadpur, Dhaka. Then he opened a showroom, adjacent to his factory, in Shahjadpur. In an astute business move, Yusuf expanded his business operations by setting up another factory at Badda, where all the leading furniture stores like Hatil, and Akhter and Brothers, are situated. Most recently, he opened a sales center in Gazipur, where products are sold directly.

From woodworking machines, he has now diversified into making tall vases, and small furniture related products.

Entrepreneur in the making

Challenges

Mr. Mohammad Yusuf, began his career, earlier than most, in 1995, as a manager-cum-worker in his father’s engineering workshop in Sholoshohor, Chittagong named ‘Ibrahim Engineering Workshop.’ From a young age, he was determined to operate his own business, instead of working at his father’s, and after working throughout his student life, his dreams found fruition in 2003.

Yusuf ’s biggest challenge has been sourcing financing for his ventures. Since 2005, he has been obtaining financing from IDLC Finance Ltd., and according to him, “It’s only because I have been able to expand my business and create faith in my business and myself, that IDLC is still helping me flourish my business.” Another challenge he faced was in terms of worker management. As a skilled individual with engineering skills, he was successful in training his workers, but he was unable to retain them, since they usually left after getting better offers.

The furniture industry in Bangladesh was almost booming. Yusuf, an insightful entrepreneur, decided to enter a complementary industry; instead of manufacturing furniture directly, he began to produce the wood working machines which manufactured furniture. And hence, in 2003, he established his own manufacturing workshop, ‘Everest Wood Working Machines.’

Plans down the line Yusuf is intending on growing his business, but he does not have any plans of going for any more infrastructural expansion i.e. he does not wish to grow the number of factories or showrooms that he possesses. Instead, he wishes to grow his customer product offerings and his customer base. He reckons that by diversifying his product offerings, he can expand his customer base. He also wishes to capitalize on the trend of furniture manufacturing shifting from manual labor to automation, since he already possesses the requisite skills.

Product offerings He started by producing wood manufacturing machines, like saw machines, woodworking planers, thickness planer, spindle molder, wood jointer machines, etc.

His products are mainly used in making different types

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IDLC NEWS

IDLC LAUNCHES ITS FIRST OPEN END MUTUAL FUND – IDLC BALANCED FUND

IDLC Launches Its First Open End Mutual Fund – IDLC Balanced Fund

IDLC Asset Management Limited has announced the launch of its first open end mutual fund - IDLC Balanced Fund - on May 22, 2017 through a grand event held at Pan Pacific Sonargaon Dhaka. IDLC Asset Management Limited is a wholly-owned subsidiary of IDLC Finance Limited – the largest financial institution in the country. The fund is sponsored by IDLC Finance Limited, and its Asset Manager is IDLC Asset Management Limited. Investment Corporation of Bangladesh is the Trustee and Custodian of the fund.

IDLC is launching its first mutual fund for the common people of Bangladesh. As a result of mass participation presumably with a long-term orientation, our capital market will receive a good, stable flow of fund. Most importantly, since individual investors will participate in the capital market through institutionalized products like mutual funds, volatility of the market will be lower.

IDLC Balanced Fund offers fund management through skilled fund managers mitigating investment risk.

Investors can invest any amount, anytime starting from BDT 5,000 (for individuals) and BDT 50,000 (for institutions) with the facility of anytime fund withdrawal at Net Asset Value with the lowest exit load. Investors can also check the present value of their investment every week on the company’s website.

The objective of IDLC Balanced Fund is to deliver the investors regular annual income as well as capital gain in the long-term. IDLC Balanced Fund is an ideal fit for people looking for a long-term investment vehicle to better achieve their life goals.

Dr. A. B. Mirza Azizul Islam, former advisor to the Government of Bangladesh, Ministry of Finance has graced the event as the Chief Guest, while Prof. Dr. Mohammad Musa, Dean, School of Business and Economics, United International University was present as the Special Guest.

Arif Khan CEO & Managing Director IDLC Finance Limited.

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SPOTLIGHT ON STARTUP

BAGDOOM

BAGDOOM Bagdoom is a pioneer business-to-consumer (B2C) e-commerce platform, based on Dhaka, which offers a wide array of products from all the exclusive local and international brands, and delivers them to customers throughout the nation.

Bagdoom puts special emphasis on getting the best quality products to its customers within the shortest time possible.

The Start

aforementioned products, it also provides beauty, health, and jewelry items. For children, it offers clothing, toys, and grooming products. Electronics is one of Bagdoom’s key performing product ranges, and under that, the company sells mobile phones, tablets, laptops, cameras, games, computers, and all associated accessories. It also sells home appliances like televisions and refrigerators under its electronics range. Under its home and living range, it offers everything from household products like home and kitchen appliances and tools, to home décor items like furniture, mirrors, lamps, clocks, cushions, curtains, bedding, etc. In addition to all these, Bagdoom also offers an impressive array of gift items for every occasion.

In their words, “Everything you need, for yourself, and your home, is available at Bagdoom.com.”

The company was initially called “Akhoni.com” and it was launched almost 6 years ago, in 2011. Akhoni. com was the first local business-to-consumer (B2C) e-commerce in Bangladesh. The company was founded

by Shameem Ahsan, and his wife, Syeda Kamrun Ahmed, who is the present CEO of the company.

The name of the company had to be changed due to the launch of Ekhanei.com. The companies had a direct collusion in terms of name, and had customers mistake one for the other.

Due to the name dilution, “Akhoni. com” was revamped to “Bagdoom.com” in November, 2015.

“Bagdoom” – the name and its significance

Target Group and Market Reach

The name “Bagdoom” is quite unconventional, and gives off a ‘whimsical’ vibe. It is a colloquial word, and is intended to remind people of the popular nursery rhyme “Agdum, bagdum, ghoradum, saje.” This name was chosen so that the brand would resonate with its initial target audience: the millennials, who are known for being carefree, and have a tendency to gravitate towards random and unusual things. Moreover, the name is quite tough to replicate, which would ensure that there was no repeat of the name dilution incident that happened with Akhoni.

Bagdoom’s core target audience are ‘Millennials’ i.e. people aged between 18 and 35. However, the company is recently seeing a shift in their target group, since people aged 35 and above, are also availing their services.

By utilizing google analytics, Bagdoom discovered that initially their customer base was mostly comprised of 23-24 year olds. Recent analytics have revealed that the mean age has now increased to 28. This implies that the brand is creating loyalty amongst its customers; the person who used to purchase from Akhoni.com when s/he was 22 years old, is now 28 years old, and has continued to purchase from Bagdoom.com. This loyal customer base is becoming older, and more able to spend higher amounts purchasing products from the company. For example, when the 22 year old was earning around BDT 25,000, his/her demands were mostly for gadgets and inexpensive accessories. Now

Current Product Offerings Bagdoom is a lifestyle brand which has a wide variety of products available for its various target customers. For men, it offers apparel, accessories, sports and fitness, and various grooming products. For women, in addition to the

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the 28 year old may be earning around BDT 70,000, and his/her demands may be for household appliances and expensive lifestyle products.

Bagdoom’s market reach is wide as it is the only e-commerce business which delivers products to each and every corner of the country. Hence, in terms of demographics, Bagdoom’s core base is actually not the capital city, but the suburbs. There is a common misconception that wealth is accumulated in the capital, and hence most consumers would probably be from there. However, Bagdoom has found that most of its customers are from the suburbs, or the rural areas.

People of Dhaka have easy access to the physical outlets of stores like Ecstasy. However, for people who are not living in the capital, online shopping is the only option.

It is generally the people living on the outskirts of the capital, who comprise Bagdoom’s biggest customer base.

check after arriving at the company’s warehouse from the merchants, and only after receiving a quality control seal, that it meets the quality specifications, is the product allowed to be shipped to consumers. Bagdoom is working hard to clear consumers’ fears about product quality by maintaining strict quality control inspections.

Logistics Bagdoom has a delivery team within Dhaka, but for nationwide delivery, the company has different partners.

Due to partnerships with other companies, Bagdoom is often, unable to deliver products to consumers living outside the capital in the standard 2 days. Often, the product will reach the consumer in 4 or sometimes even, 5 days. Bagdoom is working hard to speed up this process because it wants to ensure that all its products reach all its consumers in the shortest time possible.

Challenges of the e-commerce industry

Automation

Credibility

Bagdoom has implemented a lot of automations and integrations with its merchants. But some merchants are SMEs (Small and Medium Sized Enterprises) or SOHOs (Small Office/Home Office), who are often technologically challenged. It is very hard to integrate with such merchants’ backend or inventory systems. Bagdoom wishes to implement ‘real-time’ integration so that once a product is sold from its inventory, its suppliers’ inventory is also updated. However, most of these merchants are not familiar with laptops, much less CRM (Customer

Credibility is still a huge challenge to overcome for Bagdoom, especially since the general public’s impression about e-commerce has not changed much over the last few years. Most people still mistrust online shopping, mostly because they believe that the products delivered would not live up to the quality expectations, or that they would not receive the products in a timely manner. However, at Bagdoom, they firmly focus on quality control. Every product undergoes an inspection

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Relationship Management) systems. Hence, Bagdoom holds training sessions twice a month with its merchants to make them more technologically savvy.

approach Bagdoom, the company intends to promote them as much as possible. Bagdoom currently has a partnership with BRAC TARA to release debit cards, solely for women entrepreneurs.

Growth over the last one year Bagdoom has achieved steady growth over the last one year. At the beginning, the company was mostly apparel based, but has since moved to different styles like fashion accessories, electronic gadgets, heavy appliances, etc. It has covered other verticals and gotten positive responses for all of them. The target audience is changing, and the propositions are different, so Bagdoom is making a pool of different audiences for its different product lines. There is an audience pool for electronics, an audience pool for fashion, an audience pool for home and living, etc. The heavy appliances may be for families, and the gadgets for university goers.

There are different pools for different audiences.

What’s next?

Overcome the challenges: Bagdoom’s immediate plan for the future is to overcome the current challenges that it is facing. The company wishes to advocate its clients and merchants to get onboard using technology, since it makes the entire transaction process easier, faster, and more convenient. It also wishes to reduce the times taken to deliver products to consumers, particularly those who live outside the capital city.

Increase access to finance: Bagdoom is currently providing loans to its merchants against minimum collaterals, and charging, the minimum interest rates. It wishes to extend this role further. One of the company’s success stories is Aesthetics, a small company which grew with the help of Bagdoom’s loans, and now provides branded jackets to stores like Ecstasy.

Shift consumer base from web to app: Bagdoom recently launched its own app called ‘Bagdoom Online Shopping’ a few months back. So far, the response for the app has been positive. Deals expire on the website, depending on the time-frame or occasion, but the company ensures that these deals are always available on the app. This is to ensure that more customers switch from using the website to using the app.

Bagdoom believes that it has built a brand equity that is unparalleled in its industry of operation, and it wishes to capitalize on this to expand in the future. At present, the company has lucrative partnership deals with Standard Chartered, and PepsiCo Global, and is planning on increasing its current product offerings to reach the greatest number of customers possible.

Increase women empowerment: Bagdoom already focuses quite heavily on women empowerment, and they plan on taking this further in the future. The company actively sponsors Women Entrepreneurship based programs, most recently having sponsored a Women Leadership competition in BUET. Currently, almost 40% of its merchants are women, and it expects this number to grow in the future. Whenever women merchants

Everything you need, for yourself, and your home, is available at Bagdoom.com.

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www.idlc.com

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/IDLC.FinancingHappiness 23 of 40

ECONOMY AT A GLANCE IMPORT

MONETARY AND CREDIT DEVELOPMENTS

11%

15%

Industrial raw materials 39% 8%

6%

1892.288

Intermediate goods 9%

Net Foreign Assets of banking system

Consumer goods 11% 12%

5983.853

Others 15%

Net Domestic Assets of banking system

Petroleum & petro.prodts. 5% 10%

879.408

Machinery for misc. inds. 10%

39%

Currency outside banks

Capital machinery 11%

6996.733 Deposits

Monetary and credit developments as of June 2016 (in Billions of BDT)

REMITTANCE 3.5

2015-16

EXPORT

2016-17

3 2.5 2 1.5 1 0.5

1.33831 1.3126 1.34906 1.1974 1.15064 1.13426 1.09846 1.14248

1.34906 1.3126 1.15064 1.13426 1.33831 1.1974 1.09846 1.14248

1.46 1.21

2%

32%

JUTE

WOVEN GARMENTS

1

1.21

19%

1%

45%

KNITWEAR

FROZEN FOOD

OTHERS

1.46 1

0 Sep Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun Jul

Remittance decreased by USD 0.04 billion in October'16 compared to September'16

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SPREAD OF LENDING & DEPOSIT RATE

LIQUIDITY POSITION OF THE SCHEDULED BANKS 0.59%

7.62% Specialised Banks 11.09%

4.90

State owned Banks

4.85 4.87 4.8 4.84

41.20%

4.76

Private Banks (Islamic) 4.7

4.69

4.71 4.72

Foreign Banks

4.69

4.65

39.50%

Total liquidity assets for December 2015 was BDT 2577.94 billion

Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

INFLATION

KEY INFO

Non-Food Inflation (point to point)

8.34%

7.92%

7.50%

6.98%

5.10% 4.23%

4.35%

4.30%

Apr-16 May-16 Jun-16

Jul-16

Aug-16

3.81%

Non-Food Inflation (point to point)

7.00% 6.19%

3.84%

Private Banks (Other than Islamic)

Sep-16

5.58% 5.56%

5.33%

4.49%

5.41%

6.53%

6.84%

6.89%

3.10%

3.07%

3.18%

Jan-17

Feb-17 Mar-17

5.38%

Oct-16 Nov-16 Dec-16

Inflation rate in March 2017 declines as non-food inflation falls

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USD Highest in the 1.26 Million past 11 Remittance months Inflow

YOUTH LEADERSHIP

BRAC UNIVERSITY BUSINESS CLUB (BIZ BEE)

BRAC UNIVERSITY BUSINESS CLUB (BIZ BEE) BRAC University Business Club (BIZ BEE) is the first business club of BRAC University, founded in 2003, which currently has 290 members. The objective of the club is to offer the students of BRAC University, the opportunities to exercise leadership, and teamwork, while developing the requisite skills required to excel in the corporate world to enable them to achieve their vision of building a nationwide network and community of professional minded students.

MBR: Tell us about the start of this club.

comparison to any other club in BRAC University) and a plethora of Seminars, E-Carnivals, Workshops, and Competitions. We have held seminars on topics such as e-Commerce, Digital Marketing, Branding, Marketing, the Stock Market, Human Resourcing, and Advertising, where eminent figures from those fields shared their thoughts and ideas to help educate interested students.

Moreover, we have arranged workshops on Leadership skill development, Presentation skills, Resume writing skills, Business Plan construction and Presentations.

We have also conducted job fairs on a regular basis.

BRAC U Business Club: For as long as 2003, all the students of BRAC University were just limited to book knowledge, or whatever they were taught in the classroom; practical knowledge about the inner mechanics of both the corporate and professional worlds remained obscure to most. This necessitated the birth of BRAC University Business Club (BIZ BEE) in 2003: a club that prepares its members for the uncertain future, developing leadership and teamwork skills, aiding in building a network that would help advance their professional careers, and achieving excellence.

And thus, the first business club of BRAC University was born on January 21, 2003.

Additionally, we hope to make the world a better place to live in, so we also arranged events that help society as a whole. These events include blood donation campaigns, and providing relief (such as food and warm clothes) to areas affected by natural disasters.

Between the years, 2003 to 2008, BRAC University Business Club was directly operated by the BRAC Business School. In 2008, the first governing body was selected from existing students, and Mr. Atiq Bin Raheem became the first president of BRAC University Business Club.

MBR: How is your recruitment process? What qualities do you look for in potential members?

BRAC U Business Club: Our recruitment process has two different stages. The first stage is a written exam where we test the analytical prowess of potential members and where, they have to select which department of the club they want to join. We have six departments overall: Organizing and Management, Marketing and Public Relations, Media and Communication, Publication, Information and Technology, and Department of Adroit Development. All these departments are experts in their respective lines of work, so as to assist the club to work efficiently. The second stage is an oral exam where the potential members have their stress limits tested by senior members or alumni members. The candidate is then sorted into a particular department based on the viva given, provided that they meet the interviewers’ criteria.

At present, Mezba Uddin Ornob is serving as the President, Imam Jafar Sadik as the Vice President, Fuad Hasan Khan as the General Secretary, and Raisa Rashmi Tabassum as the Additional Vice President of BRAC University Business club (BIZ BEE).

MBR: Briefly share the activities (competitions, workshops, seminars) of this club.

BRAC U Business Club: Since we are a business club, we are always thinking of new things to do and how to arrange as many events as possible per semester. Till date, we have arranged five club fairs (the highest, in

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BRAC U Business Club look for members who are not afraid to think unconventionally and work hard. The club prefers people who possess qualities like creativity, honesty, commitment, and have a positive outlook on life, because these people are to represent the club and the university to the rest of the world.

Furthermore, the seniors are always available to help and usher everyone to achieving academic excellence.

MBR: How do you want to see your members down the line once they get in the professional world?

BRAC U Business Club: We wish that all our members live to fulfill their expectations and potential. We hope to see all our members on the pinnacle of the corporate and business ladders. We provide our members with all the prior knowledge needed to excel in the ruthless corporate world; being in BRAC U Business Club has helped a lot of our alumni to land amazing job opportunities and executive positions. There are also members who have opened their own business and shown great entrepreneurship initiatives. We expect to see excellence from our current members in whatever path they choose to follow. All of our members are ready to take this world head on and succeed.

MBR: What challenges do you face? How do you overcome them?

BRAC U Business Club: Our main challenge is finding sponsors for any event, whether it be a competition, workshop, or seminar that we want to organize. Most companies in Bangladesh are not willing to spend on university clubs for arranging events or seminars.

However the diligence and determination shown by all the members, eventually pay off and we end up succeeding in getting sponsors. Additionally, we must ensure that the event goes well and is a success; otherwise it would scar the club’s good name and reputation, and make it even more difficult to get sponsors for the next event.

MBR: What are the club’s plans for the future?

BRAC U Business Club: In the near future, we plan on organizing more events like an Ad-making competition, a Business Summit, a Case Study competition, and launch our Corporate Magazine “Vision.” It looks like it will be a busy future ahead, which is just the way we want it to be. In the long run, we hope to maintain our consistently high quality seminars, workshops and competitions, and learn from whatever minor mistakes we have made down the line. We hope to be one of the biggest business clubs in the country one day, and have an internationally revered business competition in our name.

A challenge which all members face is balancing academic duties with club duties. The members constantly struggle with maintaining good grades, as launching an event requires a hefty amount of brainstorming prior to the event, and takes a lot of physical toll until the event has ended successfully.

Telling all the members their particular jobs and responsibilities beforehand so they can manage their classes, alongside all the club activities, usually helps overcome most of the aforementioned problems.

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TRAILBLAZERS

DR. MOHAMMED FARASHUDDIN

Dr. Mohammed Farashuddin Founder, East West University Former Governor, Bangladesh Bank

Dr. Mohammed Farashuddin was the seventh Governor of Bangladesh Bank. He is the founder of East West University where he was the Founding Vice Chancellor (1995-1998). He is currently the Chairperson of the Board of Trustees of East West University. In his eventful professional career, he has been exposed to multiple cardinal positions- his stint of Private Secretary to the Father of the Nation is mention worthy. Besides being an accomplished professional, who is high on integrity and on intellect, his biggest identity is his sense of true patriotism.

Recently, MBR had a one-to-one conversation with Dr. Farashuddin to get an idea about his early life, professional career, the transition points, and his life lessons.

Farashuddin’s childhood was quite an exuberant one.

Besides regular studies, he developed many interests and passion to satiate the mind appetite. Having learned swimming at a young age, he swam across the river Surma, all by himself at the age of ten. Enjoying close relationships with his neighbours, irrespective of their religious backgrounds, showing affinity for social welfare by cleaning up debris used to be his area of interests.

C

Reality Check

Childhood and Dreams Mohammed Farashuddin was born at Ratanpur village in Madhabpur Thana in the Habiganj district in a middleclass family. His father used to be an education lover and his mother was a homemaker. Farashuddin was the fourth child, among nine siblings. Since primary school, he has been a meritorious student. Hence, the village people remained curious to know of his future plans.

When a village elder, Abdul Helim Munshi asked him“What do you want to be going ahead?”; Farashuddin had one spontaneous answer- “I want to be Governor General like Muhammad Ali Jinnah.” The time was 1948.

In 1952, Farashuddin lost his father and his family went through a setback. His mother and elder brother assumed the responsibilities of the family. As a meritorious student self financing his education from scholarship money, Farashuddin was asked to continue his education. In 1954, Professor M. A. Hashem, the friend, philosopher and guide of Farashuddin, decided that he should go the district town Sylhet and he passed the Matriculation Exam (now S.S.C) from Sylhet Government School in 1958. He secured high merit position under the single education board- the East Pakistan Secondary Education Board.

As a kid, he had a vivid imagination and fascinating dreams. He and his close friend Shamsul Islam Chowdhury, had a vision of touching the sky in literal terms. In order to materialize this, they spent many a day researching how to balance bamboos on top of one another to make a tall structure that would reach the sky.

However, disappointed one day, the duo figured out that it was not going to work out this way.

He sat for Intermediate Science (ISC) exam in 1960 and passed with flying colors. However, Professor Hashem advised him to pursue Economics in undergraduation program. He took an admission in University of Dhaka to study Economics as Honours, Mathematics and Statistics as subsidiary subjects and had some of the best times of his life then. He got both his BA (Bachelor of

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Arts) and MA (Master of Arts) in Economics in 1963 and 1964, respectively, securing first positions both times.

war ravaged women, foreign policy ‘friendship to all enmity to none’, land boundary delimitation with India, water sharing treaty with India, claims on the rights on the maritime boundaries etc.

Professional Career Farashuddin left the teaching career in the University of Dhaka and joined the elite erstwhile Civil Service of Pakistan (CSP) in 1966. He worked in the field administration as a Sub Divisional Officer (SDO), Additional Deputy Commissioner (ADC), Additional Commissioner, as well as Deputy Secretary, and Joint Secretary, over the period 1966 – 1975. He got married on the 6th of February, 1966 to Suraiya (Asma).

During Farashuddin’s stint as an SDO, he had to deal with many atrocities that would later help shape his life. He was then transferred to Karachi, in October of 1969, where he was promoted to Additional Commissioner. There, he was reunited with his favourite Professor Nurul Islam, the Director of the Pakistan Institute of Development Economics (PIDE), a very knowledgeable man who also worked for the independence of Bangladesh. Professor Nurul Islam refused the offer to become a Deputy Chairman of Pakistan Planning Commission, in Yahya Khan’s time. Farashuddin solidly stood by his Professor and assisted in the daunting task of shifting PIDE to Dhaka in 1970.

In 1973, Farashuddin was appointed as a Director of Planning in Bangladesh Small and Cottage Industry Corporation(BSIC). Whilst there, he got the most exciting news, the father of the nation Bangubandhu Sheikh Mujibur Rahman’ had chosen him as a Private Secretary to the Prime Minister. He worked with diligence, sincerity and loyalty for two years in the best assignment of his career. He enjoyed a close and cherished relationship with the Prime Minister based on mutual trust, and respect, and his family and fondly reminisces about those memories. In 1973-75, he accompanied the Prime Minister to many countries and places including New York. Where the father of the nation delivered the address in Bengali to the United Nations on the 25th of September 1974. During his tenure as private secretary, Farashuddin helped and oversaw the socioeconomic-cultural advancement, formulation, planning and implementation of the pro-people, anti-poverty and disparity fighting welfare state policies.

On the 12th of August 1975, Farashuddin handed over charge of the PS in preparation to go on deputation to pursue higher studies in USA. He spent the days, 13th and 14th of August with Sheikh Mujibur Rahman, at the latter’s orders, recounting to him his experiences in Rajshahi and in Karachi. The founding father was curious to learn about what atrocities Farashuddin had witnessed during those times. At the dawn of the 15th August, he received the terrible news of the most barbarous act of terror on the man who gave an identity to the Bengali people. Farashuddin tried in vain to rush to 32 Dhanmondi to be of assistance to the greatest son of Bengal. While grieving for his beloved mentor, he also had to think of his own future: whether he would be allowed to pursue his PhD or whether he still had a job, or whether he would be put behind the bars.

He worked in Karachi for two years and returned to Bangladesh, in June of 1971, when the blood-shed but glorious war of independence was ongoing. While working as ADC of Mymensingh during the Yahia Khan Martial Law Regime in 1971 Farashuddin incurred the wrath of the local military high up for showing respects to lawyer Mr. Goswami and school teacher Mr Upendra Dhar. Farashuddin had to pay the price and was transferred at midnight on 24 hour notice to Rajshahi despite rules that people should not ordinarily be transferred in the unsettled war conditions. This incident is a key example of how Farashuddin has always been a man who lived by his principles, and who has always been a loyal friend, ready to come to aid whenever the situation required it, unheeding of the troubles that he might bring upon himself, in the process of doing so.

In due course of time, Farashuddin went to Boston University, in the United States to pursue his PhD program. Whilst there, he was urged by one of his American professors, to write an account of all that he had witnessed during the war, and his time with Sheikh Mujibur Rahman. He was unwilling to undertake this task, since he feared how his words might cause offence to some self seeking people. Farashuddin refused as he has never been a man who seeks personal glory. He completed a double MA (Master of Arts) in Economics, in 1978. In 1979 he defended his PhD theses in May 1979. His theses was ‘Shadow Price of Labour, Foreign Exchange and Government Revenue in the context

After the Liberation war, Farashuddin witnessed many historic events including the formulation of the constitution based on four basic principles Democracy, Socialism, Secularism and Nationalism. He saw how the father of the nation Bangubandhu Sheikh Mujibur Rahman laid the foundation of all the policies of the newly born Bangladesh in areas such as the framing of the constitution, formulation of the Qudrat-E-Khuda education policy, preparation of the first five year plan as well as outlining the agriculture policy, fiscal policy, social equity, population planning, rehabilitation of the

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of Bangladesh.’ in 1978, Farashuddin was adjudged to be the most outstanding foreign student at Boston University. He returned home and worked in three different assignments. He worked for a period for the Economic Relations Division (ERD) of the Ministry of Finance, and later for the Planning Commission. He also acted in the boards of several banks, financial institutions and corporate bodies, throughout the 80s and 90s.

the government decision to open the banking and insurance sectors to the private sector. In 1983-84, under the guidance of Mr. Sydezzuman and assisted by Mr. Mozammel Huq, the General Manager of Grameen Bank, Farashuddin formulated the first draft of the Grameen Bank Ordinance, 1984. In 1984, as the Controller of Capital Issues, he accomplished the unloading of a considerable number and amount of shares from Multinational Companies (MNCs) to revitalize the Dhaka Stock Exchange.

Farashuddin was elected as Rapporteur of the UNDP (The United Nations Development Programme) in 1980, He was also a member of the Bangladesh Delegation to the First UN conference on Least Development Countries (LDCs) held in Paris in 1981 where he made a contribution towards the adoption of the Substantial New Programme of Action (SNPA) for the LDCs. He served as the Resident and Deputy Resident Representative of UNDP for 13 years between 1984 and 1996. The job for Farashuddin was selected in 1984 was entirely merit based. As first he was denied permission, from the government to join the assignment. However, thanks to Mr. M. Syeduzzaman, the then Minister for Finance and Planning, Farashuddin got the nod to join in UNDP in 1984. As Resident Representative and UN Resident Coordinator of UNDP Maldives, Farashuddin arranged two donor meetings in Vienna, in the years 1993 and 1995, to help the country graduate out of the LDC category.

While still working in UNDP where he went primarily to get resources for the quality education of Tomal (Asaf) and Shoma (Fehmin), the two children. Suraiya and Farashuddin jointly decided to seek an early retirement from the UN to return home in 1996. In the meantime, Tomal completed his MBA from Stanford University and Shoma completed her MSc in Economics from the London School of Economics, LSE. Farashuddin family sought and got cooperation, commitment and financial resources form 14 distinguished education lovers to be able to set up East West University, EWU. EWU stands for “Excellence in Education” at affordable costs and has as its modality seeking a ‘meaningful synthesis of eastern values, cultrue and requirements and the western rigor’.

East West University is now one of the best in the country in providing quality higher education.

The 7th Governor of Bangladesh Bank

Between 1983-85, he served as the Joint Secretary of Investment, in the Ministry of Finance and Controller of Capital Issues. He played a crucial role in implementing

In 1998, the government appointed Farashuddin as the seventh Governor of Bangladesh Bank. Till date, he has

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a name for reforms he brought about in the banking sector and overall economy. This was his second best time of life, serving as the Governor for three years.

His responsibilities included managing over seven thousand employees, including their compensation, incentive schemes, and personal development measures.

Farashuddin strongly pleaded for a separate pay scale for the central bank. He enforced major restructuring in order to establish a healthy, sound, transparent, and default fighting banking system. 

like drugs and arms. In order to stop this, he set the margin for import LC on rice at 100% and the damage was prevented.

He was deeply saddened when notes bearing the picture of Sheikh Mujibur Rahman were withdrawn.

At the earliest opportunity, Farashuddin got the highest denomination currency notes of Bangladesh with the photograph of the father of the nation, Bangabandhu Sheikh Mujibur Rahman. Farashuddin recalls the 8th April 1975 demonetization of the 100 taka currency note allegedly being faked in huge amounts to disrupt the Bangladesh economy. Bangabandhu the head of the government implemented the demonetization operation in complete security and without hue and cry.

In particular, after observing irregularities, one of his first steps was enforcing The Company Law 1913 provision of rigorously preventing the borrowing of the sponsor directors of banks to never exceed 50% of their equity. People around felt that this was the end of his career as Governor, but he persisted in seeing it through, since this was something he believed in.



The second irregularity he observed was the increase in defaults. There was a higher court stay order on the enforcement of the penalty on the bank on defaulters. Farashuddin had been able to enlist the best legal advise and Bangladesh Bank won all the 57 lawsuits regarding the defaults.



The third key action was enforcing a new provision debarring office bearers of political parties from holding paid position of advisor to a bank.



Furthermore, he depreciated the Bangladeshi Taka (BDT) three times based on REER calculations. The REER based exchange policy received praises from many quarters.



Cashing in on his knowledge of Economics, he sketched out the outlines of Monetary Policy. He implemented it such that the Bangladesh Bank was successfully able to combat the after effects of the devastating flood of 1998, and help the government feed 20 million people, free of cost, for half a year.



The practical policies implemented by Farashuddin during his tenure as Governor of Bangladesh Bank ensured that despite a very low reserve of $2 billion, the economy generated a healthy yearly GDP grwoth of 5.5%, and maintained a low inflation rate below 2%.



Normally, the margin on LC (Letter of Credit) for import is 0%. However, he received news that importers were importing rice via LC, to sell in Bangladesh. But the import of rice was just a cover to bring in other illegal goods into the country,

Dream came true Farashuddin dreamt of touching the sky in childhood.

Right now, he dreams of establishing East West University, which is placed in top-notch position amongst the Private Universities. The university has a resolution that whatever surplus earnings the university has, will be reinvested for the development of the university. EWU pays taxes of BDT 5-6 crore every year. Farashuddin feels the mission of East West University has been successful whenever the hears a guardian complains of hard work by his/her ward or as a news comes of a good job being offered to a graduate of the university.

Advice to young professionals: A person should have three things to succeed: talent, integrity and patriotism. If a person has these three things, then s/he should focus on their education when it is the time to do so. However, this is not just that individual’s duty, his/her family and guardians also have a great role to play in ensuring that their children succeed. Parents may have to ensure that children get enough time, love and attention so that they do not become derailed or spend too much time on electronic gadgets. Schools should have a congenial atmosphere that encourages learning, and the pursuit of knowledge. School teachers should be nurturing, patient, and encouraging, to inspire students to try their best. There is no substitute for patriotism.

This country has been won after numerous trials, and sufferings. If everyone keeps away from activities that are to the detriment of the country, only then will the country and the people prosper.

To Farashuddin, the work that he does at his advanced age now is in repayment of the huge debt he owes to the society that gave him care, affection and opportunity to get the right type of education.

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BUZZWORD

FRONTIER MARKETS

FRONTIER MARKETS What are they?

or frontier market. Experts have differing opinions on which countries can be labelled as frontier markets.

There is a broad divergence in classification systems between indexes and benchmarks. For example, the MSCI Index considers 32 countries in its Frontier Index, while S&P Dow Jones Indices have 34 countries.

MSCI (Morgan Stanley Capital International) examines each country’s economic development, size, liquidity, and market accessibility in order to classify it in a given investment universe. The World Bank focusses on a country’s economy and, more importantly on, its relative level of wealth per capita. Countries with high levels of wealth per capita are categorized as developed.

Meanwhile, the countries with low, middle, and uppermiddle incomes per capita, relative to incomes in other countries around the world, are classified as developing, or emerging.

The phrase “Frontier Markets” is used to refer to the underdeveloped capital markets from the developing world. Frontier markets are countries, which because of demographics, development, politics, and liquidity are considered less mature and stable than emerging nations. These countries have stock markets that are investable, but less developed, compared to emerging markets. These markets are generally characterized by a lack of standard legal, and regulatory institutions, which makes them risky investments for investors.

Frontier markets are also often referred to as “preemerging markets.”

Who invests in Frontier Markets?

These pre-emerging markets are usually pursued by investors who are looking for potentially high returns, but are willing to bear the higher risks that these markets are generally exposed to. Probable risks which these investors might have to bear include, unstable political conditions, low levels of liquidity, weak regulations and governance, frequent, and large, currency fluctuations, and below standard financial reporting practices.

Furthermore, many frontier markets are heavily reliant on volatile commodities. However, frontier markets are generally observed to have a low correlation to developed markets, and hence, can provide surplus diversification to an equity portfolio.

Countries with even lower levels of wealth per capita are termed as frontier markets. These countries usually have more volatile, less diverse stock markets, and the companies have weaker shareholder and corporate governance. For example, a lot of the stock markets in the Middle East are dominated by oil-based stocks, whereas the stock markets in Argentina are heavily dominated by commodity-based stocks.

Indexer MSCI currently has 32 countries in its Frontier Index:

Most investors are aware of emerging markets like Mexico, and Brazil. They are less familiar with frontier markets like Argentina, Botswana, Pakistan, Ukraine, or Vietnam. In terms of economic development, frontier markets are at the bottom of the list. As frontier markets grow, they may change into emerging markets like the BRIC countries – Brazil, Russia, India and China, and later graduate into becoming developed markets like the United Kingdom or France.



Three countries from the Americas: Argentina, Jamaica, Trinidad & Tobago.



Four countries from Asia: Bangladesh, Pakistan, Sri Lanka, and Vietnam.



Seven countries from the Middle East: Bahrain, Jordan, Kuwait, Lebanon, Oman, Palestine, and Saudi Arabia.



Eight countries from Africa: Botswana, Ghana, Kenya, Mauritius, Morocco, Nigeria, Tunisia, and Zimbabwe.



Ten countries from Europe: Bosnia Herzegovina, Bulgaria, Croatia, Estonia, Lithuania, Kazakhstan, Romania, Serbia, Slovenia, and the Ukraine.

Which countries are classified as Frontier Markets?

For interested parties trying to understand exactly what a frontier market is, there is no universally embraced definition of what constitutes a developed, emerging,

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Benefits of Frontier Markets: 

Sector Weights

Natural Advantages

Frontier markets are naturally diverse. These include the flourishing capital markets of the Middle East, whose development can be attributable to the region’s high availability of natural resources. Countries of SubSaharan Africa are also rich in resources, particularly Nigeria, Africa’s biggest oil producer. Meanwhile, the frontier markets of Asia are likely to benefit from China’s rising wage levels, since this will force manufacturers to shift production to lower-cost countries like Bangladesh and Vietnam. 

Financials, 43.35%

Telecom Services, 12.67%

Argentina, 18.48%

Other, 39.66%

Kuwait, 16.56%

Pakistan, 8.92% Morocco, 7.54%

Vietnam, 8.85%

Source: MSCI Frontier Markets Index

Low Correlations the United Arab Emirates, and Qatar, recently advanced from frontier, to emerging market status.

Frontier markets do not just have low correlations with developed markets, they have low correlations with each other as well. For example, the issues impacting Nigeria, due to low oil prices, have little to no impact on countries like Argentina or Pakistan. Additionally, investing in a wide variety of frontier markets helps decrease the volatility and risks of investing in any one frontier market.

The lack of transparency and information available to investors in frontier markets may indicate that there is a large discrepancy between a company’s value and potential for growth and its current market price. This can ensure that investors are able to achieve substantial returns against their investments. Similarly, since foreign investors may face difficulties in achieving access to these regions, they are also at higher risks of making significant losses. Frontier markets can allow investors access to high growth potentials and portfolio diversification benefits, provided that they are able to bear the associated risks of volatility and liquidity.

Furthermore, individual frontier markets are quite distinguishable from each other. For example, Kuwait, one of the larger countries in the Frontier Market Index, is termed as a ‘high-income country’ by the World Bank. On the other hand, Nigeria, another large index country is classified as a ‘lower middle income country.’ 

Consumer Staples, 9.65%

Country Weights

Home Comforts

Frontier markets have lower levels of debt, and faster economic growth rates, in comparison to many nations of the emerging world. Additionally, frontier markets are more concerned with local issues as opposed to global issues, since they are not yet fully integrated into the world economic system. This ensures that frontier markets are not worried about chasing ‘risk on/risk off ’ trades which emerged as dominant behavior in recent years for emerging and developed markets. 

Information Technology, 0.87% Consumer Discretionary, 1.22% Health Care, 2.45% Industrials, 3.84% Utilities, 4.70% Real Estate, 5.62% Materials, 6.24% Energy, 9.39%

The macroeconomic conditions in frontier markets are also sometimes more uncertain than those of developed markets, since many regions suffer from political unrest or are at war with other countries. These factors are volatile and can cause even the best quality stocks to underperform. Although, the potential rewards for investing in frontier markets are significantly higher than those in developed markets, it might often be offset by the higher risks which investors have to bear.

Because of this, frontier markets should only make up a small part of a well-diversified investment portfolio.

Frontier today, emerging tomorrow

Although frontier markets are generally risky, many are now enjoying relative stability, due to political reforms, and better democracy, which is paving the path for further infrastructural development and providing a better business environment for investors. Frontier markets usually trade at cheaper valuations and provide higher dividend returns. The ultimate aim of a frontier market is to become an emerging market. For example,

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THE MONTH IN BRIEF

ECONOMY OF BANGLADESH

Jobless rate shrinks in 2016, marginally Survey reveals that unemployment rates fell by 0.1% points, but, hopeful job seekers remained vulnerable while entering the labor market. The jobless rate decreased to 4.2% in 2015-16, according to the Bangladesh Bureau of Statistics (BBS) data. The labor force participation rate rose from 57.1% in 2013 to 58.5% in 2015-16. The number of male workforce increased to 43.1 million in 2016 from 42.5 million in 2013, whereas female workforce increased 19 million, from 18.1 million in 2013.

The unemployment ratio of male and female is 50:50. The rates of both male and female unemployment decreased, by 3% and 6.8%, respectively. Unemployment is higher in urban areas (4.4%), compared with rural areas (4.1%) in 2015-16.

Unemployment is also higher among youths, 10.4% for both genders. Employment in service sector increased by 11.1%, from 19.8 million to 22 million, in 2015-16.

Import falls 15% in February Imports dropped by more than 15% or USD 640.05 million due to the lower purchases of consumer goods, industrial raw materials and capital machinery. The opening of ‘Letter of Credits’ (LCs), fell by more than 13% to USD 3.96 billion from USD 4.59 billion.

Actual imports decreased to USD 3.46 billion in February from USD 4.10 billion in January 2017. It was USD 3.70 billion in December 2016. Consumer goods imports decreased to USD 439.47 million from USD 516.66 million while industrial raw materials imports fell to USD 1.24 billion from USD 1.49 billion. Capital machinery imports dropped to USD 284.92 million from USD 355.16 million.

Petroleum products imports also dropped to USD 202.83 million from USD 232.77 million. Capital machinery imports increased by nearly 65% to USD 3.22 billion in FY17 from USD 1.95 billion in FY16. Bangladesh’s overall imports grew by 4.22% to USD 40.08 billion in the FY16 from USD 38.45 billion.

Disbursement of farm loans grows by 22% Agriculture loan disbursements grew by more than 22% or BDT 25.53 billion in the first eight months of FY17, compared to FY16, due to higher demands for credit during the ongoing Boro season. The disbursements rose to BDT 139.29 billion in the July-February period of the FY17 from BDT 113.76 billion in FY16. Eight State-Owned Banks (SOBs) disbursed BDT 65.04 billion while Private Commercial Banks (PCBs) and Foreign Commercial Banks (FCBs) disbursed BDT 74.25 billion.

All the scheduled banks already achieved 79.37% of their collective farm loan targets of BDT 175.50 billion for the current FY. The recovery of farm loans, however, rose to BDT 123.16 billion during the period from BDT 107.55 billion in the same period of the last FY. The central bank will review the performances of both agriculture credit disbursements and recovery of all PCBs and FCBs in April to know the overall situation.

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THE MONTH IN BRIEF

ECONOMY OF BANGLADESH

Private investment flatters to deceive In FY17, private investment to gross domestic product ratio is expected to be 23.01%, only 0.02% points higher than last year, according to the Bangladesh Bureau of Statistics. The ratio has been stagnant for the past several fiscal years except the last, when it edged up about 1% point to 22.99%. The banks’ lending rates decreased significantly over the past few years; the weighted average lending rate stood at 9.70% in March, down from 11.93% two years earlier.

Private Investment, in % of GDP 23.01

22.99 22.5 22.03

22.07

21.75

FY12

The financial markets have not developed to keep up with the dynamism of the private sector. Investors are struggling to access medium and long-term credit at affordable interest rates. Imports have also been increasing due to the government’s implementation of

FY13

FY14

FY15

FY16

FY17

large infrastructure projects. In the first nine months of FY17, letters of credit opening and settlement for capital machinery soared by 52.82%.

Telcos cannot hold shares in mobile banking cost According to the latest draft guidelines on the MFS, Bangladesh Bank (BB) will not allow Mobile Network Operators (MNO) to hold any shares in the companies which run mobile financial services. The MNOs have been demanding to keep investment in the MFS operation, but the BB high-ups are openly opposing these demands at different seminars since the central bank has decided to follow a bank-led model in this regard.

Banks and other institutions, which will form subsidiary companies for operating MFS, will have to keep paid-up capital amounting BDT 100 crore with BB. Currently, 18 banks are operating MFS, but only BRAC Bank runs the business through a subsidiary company. The banks, which earlier took no-objection certificates from BB to operate MFS, will have to form subsidiary companies to run the business within one year after issuing the finalized guidelines.

Exports rise 3.9% in July-April Annually, exports grew by 3.92% to USD 28.72 billion in July-April, riding on shipments of knitwear, home textiles, leather products and jute. Monthly, it also rose nearly 3.49% to USD 2.78 billion in April 2017, compared to April 2016, according to the Export Promotion Bureau. However, the earnings fell 4.25% short of the target set at almost USD 30 billion for the 10-month period. April’s earnings were also 3.82% shy of hitting the monthly USD 2.89 billion target.

Monthly Export (in billions of USD) 3.3 2.71

2.53

Jul'16

Shipments of knitwear, jute, leather products, and leather footwear helped the country maintain the positive export growth amid protracted slowdown in the European Union and uncertainty in the US following the presidential elections. At the current

2.89

3.1

3.1 2.72

2.78

2.24

Sep'16

Oct'16 Nov'16 Dec'16 Jan'17

Feb'17 Mar'17 Apr'17

pace of growth, Bangladesh could beat last fiscal year’s total exports, but may struggle to hit the fullyear target for 2016-17, which is 8% higher than the receipts in 2015-16.

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THE MONTH IN BRIEF

TRADE AND BUSINESS

Bangladesh 9th largest market of US cotton Bangladesh is the ninth largest market of US cotton.

Textile executives from 12 companies in Bangladesh are visiting US to boost its import from US, reports fox34. com. They are now getting a closer look at cotton in the US to learn more about why it is the world’s preferred fiber.

Bangladesh don’t grow any cotton. So there is no domestic growth cotton use for the textile industry. The country imports all the cotton it needs. The companies participating in this trade mission are expected to consume about 11% of Bangladesh’s total cotton consumption. The delegation began its tour in New York.

2nd phase gas price hike comes into effect from June 01, 2017 The Supreme Court cleared the way for the government to raise the prices of gas for households and motor vehicles in the second phase. Chamber Judge of the Appellate Division Justice Syed Mahmud Hossain passed the order after hearing a petition filed by the Bangladesh Energy Regulatory Commission (BERC).

Talking to reporters, Attorney General Mahbubey Alam said there is no legal bar to raise gas price from 1st June.

The court also issued a rule asking the authorities to explain why the government’s move to raise gas prices will not be declared illegal. Households have been paying BDT 750 and BDT 800 for single, and double burners respectively, since the first phase gas price hike

in 1st March. These same consumers will now have to pay BDT 900 and BDT 950 for single and double burners, respectively from 1st June.

World Bank supports Bangladesh in diversifying exports beyond garment sector The World Bank has recently approved USD 100 million financing to support Bangladesh in diversifying exports in labor and skill intensive industries beyond the garment sector. ‘The Export Competitiveness for Jobs Project’ will enhance the competitiveness of current and budding export-oriented industries where Bangladesh has a competitive edge. This project will help increase the number of firms directly exporting in targeted sectors by about 29%.

The project will increase local firms’ access to international markets and enhance their ability to conform to global standards by building awareness and matching grants. Furthermore, it will also address the shortage of skills development, especially in industrial training for women, as well as in infrastructure and technology. Recently, employment growth in the RMG sector has slowed down. The project will help create more than 90,000 jobs in Non-Ready Made Garment (RMG) export sectors.

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THE MONTH IN BRIEF

TRADE AND BUSINESS

Bangladesh leads major SAARC nations in internet access According to data from Bangladesh Telecommunication Regulatory Commission (BTRC), the total number of internet users has reached 67.245 million at the end of February, 2017. This is around 41.52% of the total population of Bangladesh, higher than many other Asian powerhouses. 34.83% of India’s total population use internet. In Sri Lanka, and Pakistan, only 29.30% and 17.81% of its total population, respectively, use internet.

The government has proposed an allocation of BDT 3,974 crore for the Information and Communication Technology (ICT) in the revised budget of 2016-17.

The existing capacity of the submarine cable has been increased to 200 gbps (gigabits per second) from 44

gbps. There are also plans to take the rate of internet penetration in the country to 100%, ensuring high speed broadband internet at cheap rates to all, expanding 3G network across the country and launching 4G by 2020.

Bangladesh’s increased commitment to China helps it land deals beyond OBOR Bangladesh is now officially part of the One Belt, One Road (OBOR) initiative of China. The country recently signed two deals with China which will enable the latter to invest in Bangladesh’s power grids, coal mines, and tire-factory projects. The deals were signed with the Export-Import Bank of China within the OBOR umbrella. For Bangladesh, the OBOR is proposed to be a catalyst for economic stability and growth.

Foreign Direct Investment Inflows to Bangladesh 2000 1800

1750 1490

1250

1400

750

Bangladesh’s increased commitment to China, helped it land deals beyond OBOR. China agreed to fund the ninth Bangladesh-China Friendship Bridge, amongst other infrastructural developments. In April, the China Building Materials Federation provided a plan to Bangladesh Investment Development Board to provide USD 2 billion for investment in the country’s materials

2010-11

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

sector. Foreign direct investment has been rising in Bangladesh, and China’s investment will act as a signal to other foreign investors about Bangladesh’s rising investment possibilities.

Bangladesh earns USD 31.79 billion from exports in 11 months of FY 2016-17 Bangladesh’s total goods export income in the first 11 months of FY 2016-17, ending this month increased by 3.67% year on year to USD 31.79 billion, in comparison with USD 30.66 billion over the same period of last year. Bangladesh dispatched goods worth USD 3.06 billion in May, the 11th month of the fiscal year 2016-17 (July 2016-June 2017), which was about 1.39% higher than the same month, last year.

The export income, however, did not meet the target of USD 33.35 billion for the July-May period by 4.68%. Bangladesh set its export target in FY 2016-17 fiscal year at USD 37 billion, including USD 30.37 billion from ready-made garment (RMG) products. In the July-May period, Bangladesh earned USD 25.62 billion from garment exports with knitted items such as T-shirts and woven items like jeans rising about 2%.

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CAPITAL MARKET REVIEW

MONTHLY MARKET STATISTICS

Monthly Commentary l The market entered into a prolonged downtrend in the month of May. After peaking at 5,545.1 points in the second session of the month, DSEX fell almost continuously to a month low of 5,373.3 points. In this ordeal, DSEX lost 171.8 points in 18 sessions. Market appeared to bottom out at that point and started reversal in the last two sessions of the month and recovered 46.5 points. Overall, the broad index lost 72.4 points during this month.

Activities were lower in this month compared to the month before. Average daily turnover was BDT 5.8 bn compared to BDT 7.3 bn. Food & Allied (+6.4%) performed the best among the major sectors, followed in lag by Fuel & Power (+2.7%). On the other hand, Life Insurance (-5.3%) and NBFI (-5.1%) had a bad month.

Meanwhile, MSCI frontier market index underwent a good time, increasing by 3.8% over the month. Close regional peer, Pakistan, Sri Lanka and Vietnam all outperformed DSEX in the month of May. Pakistan posted 2.6% return in the last month of being categorized as a Frontier market as defined by MSCI, before being upgraded to Emerging market.

Monthly Market Statistics l Index Movement Indices

Index Point, May 2017

1M Return

3M Return

YTD Return

3Y Return

Bangladesh DSEX

5,403.1

-1.3%

-3.7%

7.3%

DS30

2,005.2

-0.5%

-1.0%

10.7%

22.0% 24.6%

DSES

1,251.4

-1.0%

-4.2%

5.0%

26.0%

50,591.6

2.6%

4.2%

5.8%

71.2%

6,674.3

1.0%

8.8%

7.2%

5.9%

Vietnam (VNI)

737.8

2.8%

3.8%

11.0%

32.1%

MSCI Frontier Markets Index

561.5

3.8%

5.9%

12.4%

-18.8%

Peer Countries Pakistan (KSE 100) Sri Lanka (CSE - All Share)

All returns provided are Holding Period Return

Market Statistics (May, 2017) Market Statistics

Graph: DSE Turnover and DSEX

31-May-17

30-Apr-17

% change

Mcap All (USD mn)

45,712.0

46,058.4

-0.8%

Mcap Equity (USD mn)

38,311.5

38,662.9

-0.9%

72.4

90.5

-20.0%

Daily Avg. Turnover (USD mn) *Equity+Mutual Funds+Debt

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Top Twenty Market Cap (May, 2017) DSE Code GP SQURPHARMA BATBC

Sector

Mcap1 (USD Mn)

Telecommunication

5,508.8

Pharmaceuticals & Chemicals Food & Allied NBFI

ICB LAFSURCEML RENATA

Daily Avg. Turnover

1M Return

3M Return

YTD Return

3Y Return

0.7

-2.6%

6.4%

19.0%

44.2%

2,400.9

1.3

-0.6%

5.1%

13.2%

54.1%

2,078.2

0.1

9.5%

14.2%

15.1%

25.5%

1,409.8

0.3

-6.5%

7.3%

71.8%

52.2%

at DSE (USD Mn)

Cement

931.2

0.4

-1.1%

-20.7%

-20.8%

-14.8%

Pharmaceuticals & Chemicals

830.4

0.1

-0.5%

-0.9%

1.6%

75.9%

BRACBANK

Bank

822.4

1.3

6.6%

40.5%

46.9%

339.6%

UPGDCL2

Fuel & Power

814.0

2.3

14.5%

22.0%

27.6%

N/A

OLYMPIC

Food & Allied

665.1

0.3

-3.3%

-12.8%

-13.0%

104.8%

Bank

623.5

0.5

-0.2%

-27.3%

8.3%

43.2%

Fuel & Power

613.9

0.2

0.2%

-7.1%

1.2%

-27.6%

BERGERPBL

Miscellaneous

604.4

0.0

-2.2%

-6.7%

-8.7%

87.9%

BXPHARMA

Pharmaceuticals & Chemicals

544.6

0.8

-2.5%

17.2%

33.9%

216.4%

Fuel & Power

511.6

0.2

-4.0%

-10.2%

4.3%

50.6%

ISLAMIBANK TITASGAS

SUMITPOWER MJLBD MARICO

Fuel & Power

443.7

1.1

9.3%

-2.0%

-0.9%

107.9%

Pharmaceuticals & Chemicals

395.7

0.0

0.6%

0.5%

9.6%

-0.5%

Bank

385.4

0.7

-5.1%

-7.1%

28.4%

52.0%

NBL BSRMSTEEL

Engineering

382.6

0.2

-0.2%

-7.0%

-0.8%

30.8%

CITYBANK

Bank

359.8

0.8

3.1%

7.3%

30.6%

162.4%

IDLC

NBFI

330.4

1.0

-1.5%

6.1%

29.5%

184.5%

All returns are holding period return Mcap as on last trading session of the month

1

3Y return of UPGDCL is unavailable as it was listed in 2015

2

Top Ten Gainers’ List (May, 2017) DSE Code

Top Ten Losers’ List (May, 2017)

31-May-17

30-Apr-17

% Change

31-May-17

30-Apr-17

% Change

KAY&QUE

55.4

39.0

42.1%

EXIMBANK*

10.2

13.9

-26.6%

ZEALBANGLA

46.4

34.0

36.5%

FAREASTFIN*

9.7

12.5

-22.4%

NORTHERN

495.4

370.1

33.9%

JANATAINS

10.6

13.0

-18.5%

BEACHHATCH

15.8

12.0

31.7%

PREMIERBAN*

10.3

12.5

-17.6%

SHURWID

10.7

8.2

30.5%

ISLAMICFIN

22.2

26.9

-17.5%

FASFIN

17.3

13.4

29.1%

NCCBANK

12.3

14.8

-16.9%

DOREENPWR

143.3

115.9

23.6%

REPUBLIC*

26.8

31.9

-16.0%

ASIAINS

22.9

18.6

23.1%

GSPFINANCE

27.0

31.5

-14.3%

INTECH

17.3

14.1

22.7%

MIDASFIN

27.0

31.5

-14.3%

MERCINS

19.9

16.6

19.9%

AGRANINS*

17.4

20.3

-14.3%

DSE Code

*Represents post record date adjustment

39 of 40

Top Ten Closed End Funds based on 5 years’ (NAV CAGR) performance DSE Code

Fund Manager

"Price1

"NAV1

"Price/

"Dividend 2

(BDT)"

(BDT)"

NAV"

Yield (%)"

NAV Return3 2017 YTD

2016

"Redemption

2014-16

2012-16

Year" 2022

NLI1STMF

VIPB

14.2

15.57

91.2%

9.9%

9.2%

20.0%

17.7%

15.7%

SEBL1STMF

VIPB

13.2

14.55

90.7%

9.8%

8.9%

19.3%

16.5%

14.2%

2021

GRAMEENS2

AIMS

14.6

19.12

76.4%

6.8%

10.4%

15.1%

13.6%

12.1%

2023

RELIANCE1

AIMS

10.5

13.73

76.5%

9.5%

8.2%

17.1%

10.7%

11.8%

2021

IFILISLMF1

ICB AMCL

8.4

9.92

84.7%

11.9%

3.3%

14.0%

12.9%

11.0%

2020

1JANATAMF

RACE

7.6

11.75

64.7%

0.0%

7.1%

6.5%

12.2%

9.8%

2020

ABB1STMF

RACE

7.0

12.37

56.6%

0.0%

7.9%

8.9%

9.9%

9.8%

2022

FBFIF

RACE

6.6

11.90

55.5%

0.0%

6.3%

9.1%

9.3%

8.8%

2022

POPULAR1MF

RACE

7.0

11.84

59.1%

0.0%

8.3%

8.2%

11.1%

8.7%

2020

PHPMF1

RACE

8.1

11.57

70.0%

0.0%

8.9%

7.4%

10.9%

8.0%

2020

Price and Index as on May 29, 2017; NAV as latest published

1

On latest cash dividend declared

2

CAGR computed for respected periods, except for 2017, adjusted for dividend. YTD returns of funds debuting within the year represent return generated since debut, hence is not

3

directly comparable with return of funds that operated throughout the year.

Fund Managers’ Performance Fund Manager

AUM (BDT mn)

P/NAV

Dividend Yield (%)

"Fund Managers'

NAV Return

Ranking by Return6"

2017 YTD

2016

2014-16

2012-16

2016

2014-16

2012-16

RACE

29,959

60.9%

0.0%

7.4%

8.5%

9.9%

8.1%

5

4

3

LR Global

9,900

71.4%

6.9%

5.2%

4.2%

5.6%

5.3%

6

5

5

ICB AMCL

7,160

89.1%

8.5%

8.3%

13.8%

10.1%

5.6%

4

3

4

AIMS

4,251

76.4%

7.1%

10.0%

15.5%

12.7%

11.7%

2

2

2

VAML

3,088

75.3%

3.4%

7.6%

-

-

-

-

-

-

VIPB

2,236

90.9%

9.9%

9.0%

19.5%

16.9%

14.7%

1

1

1

SEML

1,559

90.5%

0.9%

3.2%

-

-

-

-

-

-

ATCP AMCL

841

79.4%

12.0%

9.6%

14.4%

-

-

3

-

-

CAPM

502

85.9%

0.0%

-0.3%

-

-

-

-

-

-

RACE

29,959

60.9%

0.0%

7.4%

8.5%

9.9%

8.1%

5

4

3

AMC Industry

59,494

70.3%

3.8%

7.2%

9.6%

9.7%

7.9%

-

-

-

1Position of the respective fund manager in the ranking of 6 managers by return in respective horizon

40 of 40

BRANCH ADDRESS

BRANCH ADDRESS

CORPORATE HEAD OFFICE IDLC ASSET MANAGEMENT LTD. D.R Tower, (4th Floor) 65/2/2 Bir Protik Gazi Golam Dostogir Road, Purana Paltan, Dhaka-1000

D.R Tower, (4th Floor) 65/2/2 Bir Protik Gazi Golam Dostogir Road, Purana Paltan, Dhaka-1000

DILKUSHA BRANCH

Bay’s Galleria (4th Floor) 57 Gulshan Avenue Gulshan 1, Dhaka 1212

D.R Tower, (5th Floor) 65/2/2 Bir Protik Gazi Golam Dostogir Road, Purana Paltan Dhaka-1000 Tel: +880 (2) 9560111

Tel: +88 02 7763805-6

South Avenue Tower (5th Floor), Unit No. 502, House # 50, Road # 03, 7 Gulshan Avenue, Dhaka 1212

Tel: +88 (2) 734 8213-6

Tel: +88 02 7343766-7

Tel: +88 02 9817647-9

(3rd Floor)

World Trade Center (5th Floor) 102-103 Agrabad Commercial Area, Chittagong 4100 Tel: +880 (31) 711034

Tel: +88 09609994352

MYMENSINGH BRANCH

HABIGANJ BRANCH

Shankar City (1st Floor), Ram Krishna Mission Road, Ghatia Bazar, Habiganj 3300

Swapnaneer Tower (1st Floor), 27 C.K Ghosh Road, Mymensingh 2200

HOME LOAN

AUTO LOAN

CORPORATE LOAN

KUSHTIA BRANCH

Momotaj Tower (2nd Floor), 5/1, Jaliram Agarwal Lane Rokshi Goli, N.S. Road Kushtia

SME LOAN

RANGPUR BRANCH

Paper palace tower House no # 306, Road # 01 Pairachattor Central Road Rangpur.

WOMEN ENTREPRENEUR LOAN

IDLC Helpline# 16409 41 of 40