monthly business review - january 2016

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Monetary Policy Statement Jan-Jun 2016 Review: Embracing expansionary policy to stimulate investment

Monetary Policy Statement (MPS) H2 FY ’16 has made a shift from the monetary stance of last couple of years, with a larger focus on growth by rate cut and increase in money supply. In our observation, inflation may drop further and growth target is attainable due to improved political calm. Overall, the policy stance can be outlined as “Step towards Expansionary”. 02

CONTENTS

Volume 12 l Issue 01 l January 2016

this issue

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

If you have any comments and/or suggestions, please write to us at [email protected]

ECONOMY

Bangladesh to be second best performer in 2016 24Bangladesh economy shows flexibility 24

TRADE

Export earning booms in 2015 26Capital machinery import records substantial rise 26

BUSINESS

Mobile cash transfer inclines 54% in November 2015 28SMEs drive economy to advanced growth 28

REGULATORY NEWS

USD 200 million project to automate state banks 30BTRC to monitor internet service costs 30

INTERNATIONAL

Oil prices extend rise above USD 32 32China economic growth slowest in 25 years 32

MARKET ROUNDUP

Commodity Market Roundup 34Currency Market Roundup 35

CAPITAL MARKET REVIEW

Market Commentary 40

IDLC NEWSIDLC Spreading Warmth in winter

SPOTLIGHT ON STARTUPSOLshare: Let’s Share the Sun

COVER STORY

20

38

IDLC MONTHLY BUSINESS REVIEW

2

Monetary policy rests on the relationship between the rates of interest in an economy, that is the price at which money can be borrowed, and the total supply of money. Monetary policy uses a variety of tools to control one or both of these, to influence outcomes like economic growth, inflation, exchange rates with other currencies and unemployment. Where currency is under a

monopoly of issuance, or where there is a regulated system of issuing currency through banks which are tied to a central bank, the monetary authority has the ability to alter the money supply and thus influence the interest rate (in order to achieve policy goals). The beginning of monetary policy as such comes from the late 19th century, where it was used to maintain the gold standard.

New monetary policy 2016 (January to June) of Bangladesh has been designed to boost the investment of the country as well as boost the economy. To ensure the objective, Bangladesh Bank has declined the repo and reverse repo rate by 50 basis point at 6.75% and 4.75% respectively. The repo and reverse repo rate were 7.25% and 5.25% respectively since 2013. As the repo rate has been declined, it enables banks and FIs getting fund from Bangladesh Bank at lower rate which simultaneously enable them to lend at lower rate to the business units which finally helps to accelerate the growth of the economy.

Private sector credit growth has been forecasted 14.8% in current MPS which was 15% in previous MPS and the actual rate was 13.7% till November 2015. Bangladesh Bank has also ensured that if the demand from credit exceeds the expected growth, it has preparation to meet up the excess demand.

It is obvious that the current policy has been made to accelerate the growth though there are some factors which is challenging the monetary policy towards growth. Though the economic indicators are doing well, the investment has not been made in expected level. Banks are liquid (around BDT 120,000 crore) enough to fund the business whereas the businessmen argue that it is difficult to do business with double digit rate of financing. Prominent bankers opined that though policy is favorable, the policy makers must concern about the investment climate to accelerate the credit growth which will multiply the economic activities towards growth. Price mismatch between international fuel market and domestic fuel market is another challenge for

Monetary Policy Statement Jan-Jun 2016 Review Embracing expansionary policy to stimulate investment

Cover Story

New monetary policy 2016

(January to June) of Bangladesh has

been designed to boost the

investment of the country as well as

boost the economy.

3


the real economy which intensifies the operating cost of the industry and create obstacles towards industrial growth though it is a fiscal issue which should also be taken care of by the respective authority.

The primary tool of monetary policy is open market operations. This entails managing the quantity of money in circulation through the buying and selling of various credit instruments, foreign currencies or commodities. All of these purchases or sales result in more or less base currency entering or leaving market circulation.

There are some factors which have been considered by central bank in developing monetary policy:

g short term interest rates

g long term interest rates

g velocity of money through the economy

g exchange rates

g credit quality

g bonds and equities (corporate ownership and debt)

g government versus private sector spending/savings

g international capital flows of money on large scales

g Financial derivatives such as options, swaps, futures contracts, etc.

Role of Monetary PolicyThe central bank is the sole issuer of banknotes and bank reserves. That means it is the monopoly supplier of the monetary base. By virtue of this monopoly, it can set the conditions at which banks borrow from the central bank. Therefore it can also influence the conditions at which banks trade with each other in the money market.

In the short run, a change in money market interest rates induced by the central bank sets in motion a number of mechanisms and actions by economic agents. Ultimately the change will influence developments in economic variables such as output or prices. This process is also known as the monetary transmission mechanism and it is highly complex. While its broad features are understood, there is no consensus on its detailed functioning.

Long-run neutrality of money

It is widely agreed that in the long run, after all adjustments in the economy have worked through a change in the quantity of money in the economy will be reflected in a change in the general level of prices. But it will not induce permanent changes in real variables such as real output or unemployment. This general principle, referred to as “the long-run neutrality of money”, underlies all standard macroeconomic thinking. Real income or the level of employment are, in the long term, essentially determined by real factors, such as technology, population growth or the preferences of economic agents.

Inflation - a monetary phenomenon

Inflation is a monetary phenomenon. Prolonged periods of high inflation are typically associated with high monetary growth. While other factors (such as variations in aggregate demand, technological changes or commodity price shocks) can influence price developments over shorter horizons, over time their effects can be offset by a change in monetary policy.

Monetary Policy FrameworkSince monetary policy goals cannot be influenced directly, like most central banks, BB uses a set of indirect instruments. As noted above, the Bangladesh Bank pursues its monetary policy within a framework of monetary targeting with reserve money as the operating target, and broad money as an intermediate target. The Flow Chart in the following page on the Monetary Policy Framework provides a simple illustration.

The broad money (M) can be influenced indirectly by changes in policy instruments that target and monitor the reserve money (RM) via the money multiplier (m). The primary mechanism employed for this purpose is the direct control of liquidity on a day-to-day basis achieved by the ratio, reverse-ratio and the weekly

Bangladesh GDP Growth Rate

Broad Money (M2) Growth Rate

Source: Bangladesh Bank


6.5%

6.8%

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

E

17.1%

22.4%

12.4%

15.0%

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

E

General Inflation %


Jul-1

4Au

g-14

Sep-

14O

ct-1

4N

ov-1

4D

ec-1

4Ja

n-15

Feb-

15M

ar-1

5Ap

r-15

May

-15

Jun-

15Ju

l-15

Aug-

15Se

p-15

Oct

-15

Nov

-15

Dec

-15

7.28

7.227.10

6.87

6.66

6.46

6.356.24

6.20

7.04

6.84

6.60

6.21

6.04

6.276.19 6.36

6.19 6.10

12 Month Avgerage Point to Point


4

Inflation Trend %

Repo and Reverse Repo Rate %



T-bill auctions. The latter instruments would in turn have an impact on the inter-bank call money rate for overnight transactions. While adjusting the excess liquidity in the banking system by this mechanism, BB simultaneously resets the ratio and reverse ratio rates on a daily basis.

A Glimpse of Monetary Policy Statement Jan-Jun 2016

Bangladesh Bank has shown all intentions of spurring the economy which is aiming a trajectory towards 7% GDP growth. The central bank, after a long period of time, has reduced the policy rates by 50 basis points. Higher growth rate has been targeted for Broad Money, Domestic Credit, Public Sector Credit and Private Sector Credit in June 2016 compared to the actual growth achieved in Dec 2015. Inflation is expected to reduce to 6.07% by June 2016 from 6.2% in Dec 2015 mainly due to low fuel and commodity prices globally, even after pay scale revision in the Government sector. This investment stimulating monetary policy focuses on financial inclusion through selective easing for different productive sectors, strategic move in loan disbursements to green and budding projects in the backdrop of excess liquidity in the banking system.

15-Jun 15-Dec 16-Jun

Particulars Target Actual Target ActualTarget in Jul-Dec

2015 MPS

Revised Target in Jan-Jun 2016 MPS

Inflation- General 6.50% 6.40% - 6.20% 6.20% 6.10%Reserve Money growth 15.90% 15.40% 16.50% - 16.00% 14.30%Broad money growth 16.50% 12.60% 15.00% 14.20% 15.60% 15.00%Domestic credit growth 17.40% 10.40% 13.10% 10.90% 16.50% 15.50%Public sector credit growth 25.30% -2.70% 8.00% -1.70% 23.70% 18.70%Private sector credit growth 15.50% 13.60% 14.30% 13.80% 15.00% 14.80%

GDP Growth rate The GDP growth rate of Bangladesh was 6.1% in 2014 which has been consistently around 6% for the last few years. A recent study of World Bank has shown that for each percentage point increase in growth of India, growth of Bangladesh increases by 0.4 percentage points and growth rate of India recently exceeded its

7.28 7.227.10

6.876.66

6.466.35

6.21 6.19

5.41 5.345.47

5.645.78

5.936.08

6.22

6.3 6.41

Jul-1

4

Sep-

14

Nov

-14

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Nov

-15

General, 12 Month Avgerage

Non-Food, 12 Month Avgerage

5.75

5.255.25

4.75

7.75

7.257.25

6.75

Oct

-12

Feb-

13

Jun-

13

Oct

-13

Feb-

14

Jun-

14

Oct

-14

Feb-

15

Jun-

15

Oct

-15

Information Variables:Foreign ReserveShort Term InterestrateLiquidityDomestic CreditIn�ation & Exchangerate

.

.

.

..

Flow Chart: Monetary PolicyFramework of Bangladesh Bank

Policy InstrumentsRepo & Reserve RepoAuctionVarious T-bill auctionsSetting SLR & CRRBank Rate

*

***

Targets1. Operating Target * Reserve Money2. Intermediate Target * Broad Money

Goals

** Price Stability** Economic Growth

Policy Decision based onmarket information andjudgment of the policy maker

5


previous levels to a projected level of 7.5% in 2016. As per the world economic outlook of IMF, emerging and developing nations will face a growth of 4.7% in 2016. IMF projected growth rate of Bangladesh to be almost double of that of global GDP growth and also more than that of China. In line with this forecast, the targeted growth of 6.8% in FY16 for Bangladesh seems achievable if the economic and political environment remain conducive. BB forecast based on ARMA model and sector wise 10 years average growth reaffirms a possible GDP growth rate of 6.8%-6.9% which is very close to the 7% growth target of the Government.

Broad Money Broad Money (M2) growth has been targeted at 15% for FY16 which was at 12.4% in 2014-15. The target has been set after taking the public and private sector credit growth into consideration. M2 is adequate to support the growth and inflation target of BB.

Targeted Credit Growth Both public and private sectors credit growth undershot the targets for Dec 2015. Public sector credit growth was –1.7% compared to the target of 8% while private sector credit growth was 13.8% compared to the target of 14.3% for Dec 2015. As a result, total domestic credit growth was 14.2% compared to the target of 15%. BB has revised down its June 2016 target mentioned in its MPS of June 2015 to an achievable level. BB targets domestic credit growth rate of 15.5%, public sector credit growth of 18.7% and private sector credit growth target of 14.8% for June 2016.

Foreign ReservesBangladesh’s current FX reserve stands at USD 27.5 billion which is sufficient to meet more than 7 months of import payment. However, BB estimates the export and import to grow by 8.5% in FY16 and remittance to increase by 5% for the next fiscal year. This will put pressure on the foreign exchange reserve. However, lower fuel import cost will benefit countries like ours. On the other hand, the number of people going abroad for jobs is rising and it is expected that the remittance will remain stable amid ongoing crisis in the Middle East. BB projects current account balance to be USD 955 million and BOP to be USD 2.28 billion in 2015-16.

InflationInflation has been well managed in the recent years the general inflation dropped from above 7% of mid-2014 to 6.1% in Dec 2015. The decline can be attributed to depressed global commodity market and falling fuel price. Moreover, the food component occupies about 60% of our consumption basket and the price of food is falling all over the world. However, the nonfood inflation is in an upward trend since Oct 2014 and may cause BB to be a bit cautious. The pay rise in the Government sector is likely to push up prices but expected fuel price adjustment in the country may pull it down again.

Policy RateRepo rate of 7.25% has been reduced to 6.75% and reverse repo rate of 5.25% has been lowered to 4.75%. BB expects to stimulate investment in the economy to achieve the higher GDP growth target in the upcoming fiscal year. Meanwhile, yields on T-bill and T-bond are falling followed by call money rate because of excess liquidity in the economy.

In January 2012, the repo and reverse repo were revised upwards by 50 bps from 7.25% to 7.75% and 5.25% to 5.75% respectively. After that, both the rates were revised downwards by 50 bps in Feb 2013 where they remained same for almost three years. Finally, they have been revised downwards again to support the expansionary monetary policy.

The challenges facing monetary policyMonetary policy faces a number of challenges, linked particularly to the interaction between the development of the real economy and the turbulence in the financial markets. This has forced central banks to operate not only by way of conventional measures, in particular the key interest rate at which liquidity is injected into the system, but also via unconventional measures, designed to bypass the malfunctioning that has arisen in the financial system.

Yield on Treasuries %


6.8 6.9 6.8

7.4 7.5 7.67.3 7.3

6.2

5.4 5.45.2

3.0 2.9

7.47.7 7.7

6.45.9

5.5

3.73.3

8.07.6

8.2 8.2 8.1

7.26.7

6.3

4.1

Jul-1

4A

ug-1

4Se

p-14

Oct

-14

Nov

-14

Dec

-14

Jan-

15Fe

b-15

Mar

-15

Apr

-15

May

-15

Jun-

15Ju

l-15

Aug

-15

Sep-

15O

ct-1

5N

ov-1

5D

ec-1

5

91 Day 182 Day 364 Day

Call Money Rate %

Domestic Credit Growth



6.7 6.9

8.47.9

8.68.2

7.6

6.45.8 5.6 5.6

3.7

Jul-1

4

Sep-

14

Nov

-14

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

No v

-15

10.9%

10.1%

11.6%

11.1%

12.3%

10.7%

11.2%

10.8%10.6%

9.8%

10.3%

9.6%

9.9%

10.9%

Apr-

14

Jun-

14

Aug-

14

Oct

-14

Dec

-14

Feb-

15

Apr-

15

Jun-

15

Aug-

15

Oct

-15

Dec

-15

Public Sector Credit Growth


Apr-

14

Jun-

14

Aug-

14

Oct

-14

Dec

-14

Feb-

15

Apr-

15

Jun-

15

Aug-

15

Oct

-15

Dec

-15

7.5%

5.5%

10.3%

12.7%

5.3% 2.5%1.4%

-3.0%

-2.6%-2.6%

-0.5%-1.4%

-2.5%

-1.7%

Assessing the economic situationA major challenge for central bank concerns the assessment of the current economic situation, in terms of the relative strength of the economy. Making projections is always difficult and the political instability as well as other non-economic factors make it impossible to some extent.

One such indicator is the unemployment rate. In economic models the level and rate of potential growth correspond to an equilibrium unemployment rate. Given the difficulty of measuring the output gap, some economists have proposed replacing it with a measure of the employment or unemployment gap. An expansionary monetary policy would be thus justified as long as unemployment did not begin to decline significantly toward its long-run level.

Note: The unemployment rate measures the number of people actively looking for a job as a percentage of the labor force.

Forecasting inflationary pressuresThe second challenge, related to the first, concerns the difficulty in estimating inflationary pressures and in forecasting them. Another aspect has emerged, linked to the global inflation, tied to the commodity markets and products imported from emerging countries. Managing low-level of inflation while expediting growth is a challenge as we know the inflation and growth are positively correlated.

The recent pay rise in the government sector is likely to raise prices at least through expectations and the fuel price adjustment by the government, if executed as committed, is likely to pull prices downward. No one is sure about its net effect. When Europe, Japan and China weaken and global oil prices foresee a further slide, Bangladesh may remain less comprehensive about inflation right now.

Complex Financial FrameworkThe financial crisis has emerged due to the excessive financial leverage that has fuelled excessive consumption and speculative bubbles on different markets, particularly real estate. The return to a sustainable equilibrium depends on the restructuring of these excesses. This restructuring cannot be immediate, nor should it last too long. It is important how the central bank should deal with asset-market bubbles.

The adjustment cannot be immediate because a too rapid reduction in the leverage risks causing an excessive contraction of the assets and liabilities of financial institutions, with an impact on real activity. In this adjustment process, monetary policy plays a decisive role, via conventional measures and exceptional ones. Other than these three, there are many economic, non-economic factors by which monetary policy has been challenged.

When the BB cuts its policy rates to reduce spread, interest rate is still higher in sanchaypatra rates that supposedly impede banking deposit rates from falling. However, the average lending rate fell from 12.84% in July 2014 to 11.27% in November 2015, while the average deposit rate fell from 7.71% to 6.46%. Again 6%+ inflation rate is a big question of real return to the depositor. But the concern over the excess liquidity will not end soon, so the role of the BB is crucial.

The central bank has sustained its pressure on all banks to reduce its spread by lowering NPLs and enhancing efficiency. But, current NPL in banking industry is still double digit which also partially blocks the opportunity to reduce lending interest rate as well as boost investment. If the results are summed up, lower lending rates will not be the only catalyst for investment stimulation.

Macro FactorsTo increase the investment, components of production and proper distribution of products in the market and to maintain the stability in price level, the economic infrastructure such as roads, railway and naval system, electricity and telecommunication system play a vital role. The government has taken various steps to improve these infrastructures. Constructing Padma Bridge, safe naval system, development of electricity sector and setting up modern telecommunication system through the establishment second submarine cable are some important projects taken by the government. Education, training, research, public health, cultural development, ethical views play an important role in the development of human resources.

6

Foreign Reserve USD Billion

Export and Import Forecast USD Billion

Remittance USD Billion

Private sector credit growth (excluding

overseas loans)





21.4

22.1 21.8 22.3

21.6

22.3 22.0

23.0 23.1

24.1 23.7

25.0 25.5

26.2 26.4

27.1

26.4

27.5

Jul-1

4A

ug-1

4Se

p-14

Oct

-14

Nov

-14

Dec

-14

Jan-

15Fe

b-15

Mar

-15

Apr

-15

May

-15

Jun-

15Ju

l-15

Aug

-15

Sep-

15O

ct-1

5N

ov-1

5D

ec-1

5

31.2

33.9

40.7

44.1

-5.0

10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

E

Export Export ForecastImport Import Forecast

14.5 14.2

15.3

16.1

2012

-13

2013

-14

2014

-15

2015

-16

E18.9%

18.4%

19.9%

14.8%11.4%

11.1%11.1%

11.4%

12.2%13.3%

13.6%

12.9%

13.8%

Janu

ary

May

Sept

embe

r

Janu

ary

May

Sept

embe

r

Janu

ary

May

Sept

embe

r

Janu

ary

May

Sept

embe

r

Dec

embe

r

2012 2013 2014 2015

7


Instead of significant turn down of commodity & fuel price in international market, our local investors didn’t get any favor in their production cost, which ultimately actuate them into unfair competition in global market. Even average inflation rate of our local economy didn’t bring down significantly from last few years, huge low cost foreign investment (loan on very cheap interest rate) was injected in private sectors, but significant result in outcome is yet to be observed. Political stability & sustainable pricing of petroleum products play pivotal role in propelling up investment as well as achieving GDP growth. Interest rate is not the only factor in boosting investment, rather attaining investment friendly environment, fixing up political stability, ensuring utility, policy & physical infrastructure are the obvious factors to boost benefit of interest rate cut.

MPS H2 FY ’16MPS H2 FY ’16 was furnished with the following Policy Instruments, Policy Goals and Intermediate Targets:

Policy Instrumentsg Liquidity support for banks through applicable policy instruments

g Policy interest rates

g Policy interest rates have been revised for the first time in last 3 years. Repo Rate and Reverse Repo Rate both were slashed by 50 basis points to stand at 6.75% and 4.75%, respectively.

Policy GoalsGDP growth estimate of 6.8% - 6.9%

g BB’s estimate is slightly lower than that set in the previous MPS of 7.0%. Timely implementation of ADP along with low fuel cost and infrastructure support to business community will be key to attain the target.

Curbing inflation to 6.07%

g In line with decline in commodity price in the global market, government might adjust local price of oil downward, which will ease the inflation pressure further.

g Pay raise for government service-holders might increase consumption and additional demand might play against the benefit attributed from oil price adjustment.

Intermediate TargetsTarget Adjustments in MPS

g Broad money growth target is set at 15.0%, which was 15.6% in last MPS

g Reserve money growth target is set at 14.3%, which was 16.0% in last MPS

g Domestic credit growth target is set at 15.5%, which was 16.5% in last MPS

g Private sector credit growth target is set at 14.8%, which was 15.0% in last MPS

g Public sector credit is targeted to grow by 18.7%, which was 23.7% in last MPS

Observationsg Monetary policy stance of H2 FY ’16 appears a step towards expansionary stance of BB in contrast

to the previous MPS. While global scenario would largely assist to attain inflation target, growth remains the major focus.

g Relative calm in political front and consequent revival of investment and consumer confidence would be required to attain growth target of 6.8%-6.9%.

g Policy rate cut signals an amicable stand for private sector investment which would drive the growth engine of the country.

g Persistence in foreign exchange reserve would help to maintain stability in exchange rate.

g BB might take stronger stand on loan delinquencies by increasing supervisory vigilance.

(The cover story was prepared by Research Team – IDLC Securities Limited and IDLC Investment Limited)

Bangladeshis Going Abroad for Jobs (Thousand)

Current Account Balance and Balance

of Payment USD Million

Weighted Average Spread %

Unemployment Rate in Bangladesh





37 35

34 38

34

29

37 37 38

32 30

38

31

43 43

28

35

45 45

45 46 47

51

July

Sept

embe

rN

ovem

ber

Janu

ary

Mar

chM

ayJu

lySe

ptem

ber

Nov

embe

rJa

nuar

yM

arch

May

July

Sept

embe

r

2013 2014 2015

42

28 29 33

43

(447)

2,388

1,406 1,995

955 494

5,128 5,483

4,373

2,279

2011-12 2012-13 2013-14 2014-15 2015-16 E

Current account balance Balance of Payment

5.02

5.31

4.81

July

Sept

embe

rN

ovem

ber

Janu

ary

Mar

chM

ayJu

lySe

ptem

ber

Nov

embe

rJa

nuar

yM

arch

May

July

Sept

embe

rN

ovem

ber

2013-14 2014-15 2015-16

2005

4.00 4.25 4.50 4.75 5.00

2006

2007

2008

2009

2010

2011

2012

2013


8

MBR: Policy rate cut is surely a signal for the Banks and FIs (to reduce lending rate), but considering the contrary’s overall investment environment & certainty does it guarantee the same? Can Bangladesh Bank take any direct interventions in this regard?

- Dr. Biru Paksha Paul: Not directly, but indirectly, BB is trying hard & LPL can reduce already. Another thing is spread, actually gives income to the bank. If the bank is efficient, then a person can spend less and earn more, so the main point is efficiency. Efficiency is earned via digitalization. BB is directing or pursuing others to go for digitalization. Widespread use of digitalization help reducing the lending rate .

MBR: Along with political uncertainty and the scarcity of utilities (i.e. gas, electricity and other inputs), do you think it is possible to boost the country’s aggregate investment by implementing the recently published MPS?

- Dr. Biru Paksha Paul: MPS does not fully guarantee the possibility of the investment. It has reduced the policy rate. It has increased public and private credit. MPS actually gives some signals. On the other side utilities like gas, electricity etc. are a responsibility of the government. However, at this moment MPS has some limitations.

MBR: The private sector’s credit growth target was set at 15% in the last announced MPS (In June 2015), in spite of policy rate cut the target is set at 14.8%, whereas the actual growth rate is around 13.72%? Do you think the revised target is achievable?

- Dr. Biru Paksha Paul: I think it is easily achievable . In December, credit growth rate was 13.8%. Within 6 months, we have achieved 14.8%. So I think it will be easily achieved.

MBR: Do you think our country has enough investment opportunity to utilize the excess liquidity to its fullest (which is around BDT 131,000 Crore)?

- Dr. Biru Paksha Paul: Actually the total money is not kept idle. However, this is not the real picture. Idle money is much less than that, but still there is some liquidity and at the same time, we try to boost investment in a particular sector in last quarter, so liquidity will be absorbed.

MBR: Our food inflation decreased to 6.05% whereas the non-food inflation increased to 6.41% in December. As recent pay raise in the government sector is likely to raise the expected price level, do you think that it will be a challenge for Bangladesh Bank to keep inflation at desired rate by June 2016?

- Dr. Biru Paksha Paul: Yes, I think so. It will be challenging because of the raised price. At the same time, we had the downward pressure, like to reduce commodity price. We will be able to control inflation in future because we have the capacity to control inflation.

MBR: Would you please give your opinion regarding non-economic factors i.e. strikes or political instability which restrict to implement monetary policy and to have expected results of policy implementation.

- Dr. Biru Paksha Paul: Well, I think if there is strike, it will affect total supply. Commodities cannot come from the countryside. Sufficient supply will reduce the price. Strike or political instability will be difficult to achieve the monetary policy target. We had some political disturbances during the last 3rd quarter in the fiscal year 2015, but it still cannot block the entire flow of the economy.

In conversation with

Dr. Biru Paksha Paul Chief Economist, Bangladesh Bank

If the bank is efficient, then a person can spend less and earn more, so the main point is efficiency. Efficiency is earned via digitalization. BB is directing or pursuing others to go for digitalization. Widespread use of digitalization help reducing the lending rate .

9


MBR: Can we expect that our interest rate will come to single digit in near future?

- Dr. Biru Paksha Paul: Yes. The interest rate has already come to single digit in some particular spaces. I believe that the lending rate will come to single digit. There are two ways to bring it down. One way is by reducing inflation, and another way is by reducing spread. Actually now average lending rate is 11 point something. If we can reduce the spread, the inflation can also be reduced.

MBR: We know that the final objective of monetary policy or any economic decision is to create more employment which can be hardly quantified. Thus the growth is considered as proxy. Furthermore, growth of Bangladesh is quite admirable but still we have a huge number of unemployed people which includes graduates too. What do you have to say regarding this issue?

- Dr. Biru Paksha Paul: The only way to absorb unemployed people is searching for private sector jobs. Government employment opportunity is limited. So private sector gives the main hope. On the other hand, it is difficult for the government to increase employment opportunity in a short time.

MBR: Please say something about your first time in a banking fair in Bangladesh?

- Dr. Biru Paksha Paul: First of all, I’d like to give thanks to my honorable governor for this fair. It was just the beginning but every bank and non bank financial institution should gather in this fair. From this fair, everybody will be able to know the facilities of the banking activities. I think people should expect banking fair every year.

The only way to absorb

unemployed people is

searching for private sector

jobs. Government employment

opportunity is limited.

MBR: Do you think that the recently published MPS is solely enough to boost the country’s investment or which aspects the government needs to closely focus to achieve the target?

- Dr. Goswami: The main objective of MPS is to deal with price stability. Government’s annual budget mostly deals with growth. But these two documents are interlinked in the sense that either one is not enough to deal with this paradox. The paradox is that high growth comes at the cost of high inflation all the time. The MPS made attempt to encourage investment by lowering the REPO and REVERSE REPO by 50 basis points. The attempt is good but practical aspect is to be understood properly. Our interbank call money rate is already too low and banks are having huge amount of idle money in their hand. In this context, MPS is not enough to boost investment. I think infrastructure, power, gas etc. are the main deterrents to domestic investment at this stage. Political stability is also needed to gain consumer’s confidence. FDI is supposed to be depending more on perception about a country rather than the actual governance structure of the receiving country.

MBR: As we know the food inflation in Bangladesh is strongly correlated with that in India which is rising. Do you think it might affect our government to achieve the goal?

- Dr. Goswami: There is weak link between Bangladesh and India’s inflation through import channel. World Bank has projected less then proportional transmission of Indian growth to Bangladesh in its Global Economic Prospect 2016. However, the inflation transmission will be lessened because we are still going through the regime of global oil price and commodity price decline. The wage hike

In conversation with

Professor Dr. Gour Gobinda GoswamiVice Chancellor, North South University

I expect actual growth rate to be slightly lower than 7%. The global recovery will be slower this time due to Non-India BRICKS growth downturn. However, South Asia led by India and Bangladesh will turn out to be growth champion.


10

in public sector might cause private sector wage adjustment and the cumulative effect would be higher. But MPS forecast that the downward force to be stronger than the upward pressure, which is kind of reasonable assumption at this stage.

MBR: In last few years, several scam were occurred in many of our Banks (Including private and state owned), that was eventually one of the prime reasons of slow credit growth. Do you think preventive measures taken by the government and respective authorities are enough? In which aspect the authorities should give more emphasis to ensure good governance in the FIs?

- Dr. Goswami: I think international agencies have some set criteria to ensure governance of FIs. We have not yet complied with all of them. The reasons are twofold: noncompliance, and lack of accountability. These areas need improvement and the conditions imposed by international regulatory agencies must be maintained properly. We should follow the international best practices.

MBR: All of the three credit growth targets (Domestic, Public and Private) have been reduced in the newly published MPS from the previous MPS. Historically, it is observed that the actual growths are always a little less than that of the target. In this scenario, do you think we can achieve 7% GDP growth with this newly curtailed (Projected) credit growth?

- Dr. Goswami: I think it all depends on whether we are going to face repeated hartals or blockades. MPS will only work as a guideline. I think the public sector credit growth assumption is based on Padma Bridge borrowing which is reasonable. I expect actual growth rate to be slightly lower than 7%. The global recovery will be slower this time due to Non-India BRICKS growth downturn. However, South Asia led by India and Bangladesh will turn out to be growth champion. Planned borrowing through national savings certificate has become dysfunctional already. To maintain a targeted pattern in public borrowing Government has to rely more on market based instruments like bond, which is not developing properly. Its primary market is very defective and secondary market does not exist.

MBR: Along with the decreased lending rate the deposit rate offered by the commercial banks are also decreased. Is there any chance that the savers unit get demotivated and investment in unproductive sectors may be increased?

- Dr. Goswami: I think the interest rate will always move with inflation rate. Commercial banks are bound to adjust it based on market development. Savers and investors are not the same group of people. Savers will be forced to save because they have no other alternative. I think unproductive consumption will be encouraged like developed countries. Investment will be less affected.

MBR: Managing low-level of inflation while expediting growth is a challenge as we know that inflation and growth are positively correlated. Would you please give us your opinion regarding this issue?

- Dr. Goswami: I agree 100%. I expect moderate growth and moderate inflation in year 2016 for Bangladesh. That means that paradox still remains.

MBR: Our economic indicators are improving but what about Gini coefficient which indicates income inequality. We know equality promotes sustainable growth. Would you please give your opinion regarding this issue?

- Dr. Goswami: I have some reservation about Gini coefficient because it is calculated with long interval in HIES. The fact is that income inequality is increasing. This is the ultimate fate of any market-based development. Growth comes at the cost of environment and equality. Government’s social safety net programs will be helpful in mitigating it. But the existing programs are not enough for a huge country like Bangladesh.

MBR: How should the central bank deal with asset-market bubbles?

- Dr. Goswami: This can be ensured through proper compliance to regulatory guidelines. Now market efficiency has improved substantially than it was in the past but still market fundamentals are not the dominant determinants of asset price in Bangladesh. Expectations play major role.

I think international

agencies have some set criteria

to ensure governance of

FIs. We have not yet complied

with all of them. The reasons are twofold:

noncompliance, and lack of

accountability.

11


Dream Touch Beauty ParlourMs. Sadia Tajmin Dola started her business in 2008 under the banner of “Dream Touch Beauty Parlour” in a rented premise. Her business is mainly committed to provide beauty care services like hair treatment, facial, pedicure, manicure, yoga, spa etc.

MBR: Tell us briefly about yourself.

Ms. Sadia: I completed my studies and then I took some courses in beautification from abroad. When I returned from there I grew this idea in my mind of opening a parlor. The first outlet which is in Jhigatala started in early 2008, the second outlet opened from July 2015; however some of the interior works are still in progress.

MBR: What made you want to get involved in this venture, what was your inspiration?

Ms. Sadia: Basically, I have seen most of my family members giving service to different organizations. However, this type of work didn’t seem appealing to me. I wanted to do something on my own, which perhaps led to the initiative of an entrepreneurship. During that time I observed that the women were much cautious about beautifying themselves. As a result, I got myself enrolled in a formal training of beautification and then started my parlor business on a small scale.

MBR: Do you have plans to open more outlets?

Ms. Sadia: Yes, I do have plans to expand to more outlets even outside Dhaka.

MBR: What kind of barriers did you face while starting this business in Dhaka?

Ms. Sadia: I faced some hurdles from my family. When I told them about doing business as our background consists of jobholders so they were quite reluctant at first.

MBR: How much investment does an aspiring entrepreneur require in terms of capital?

Ms. Sadia: I didn’t face many problems financially. I invested my own capital so it all started like this. Initially, an entrepreneur needs

at least BDT 5 lac before starting a parlor; however, they must have knowledge and expertise about the industry.

MBR: What are the initiatives that you are taking to ensure customers’ satisfaction level?

Ms. Sadia: Our biggest attraction is our clients as they are much aware of what they need regarding their skin so we help them know better about skin products and treatments. This is one of attractions, thus the customers rely upon us.

MBR: How are you marketing your venture to the consumers?

Ms. Sadia: Currently, I’m not advertising that much. When I started I used to hold henna festivals in schools, free haircuts etc. that way I came across many clients and I used this as an advantage when those same clients started visiting my parlor and soon word spread, but I haven’t advertised in newspapers yet.

MBR: Being a successful business person, how do you balance the family and business commitment?

Ms. Sadia: We have to balance both our families and business. My family supports me and they are aware of my schedules. Sometimes there might be an imbalance but I can manage it.

MBR: What will you suggest for someone who wants to set up an outlet similar to yours?

Ms. Sadia: My advice would be to fully have the support of your family, without it doing business is a tough job.

MBR: What is your opinion about doing business with the help of social networking sites and do you have any thought of using it?

Ms. Sadia: Yes we are using social networking site like Facebook to promote, and we run a page. The responses and feedbacks we are getting are quite positive.

Managing Director : Ms. Sadia Tajmin Dola

Year of Establishment : 2008

Website : -

Main Product :Hair treatment, facial, pedicure, manicure, yoga, spa etc.

Number of Outlet : 2

Space : 2900 sqf

Number of Employees : 15

Entrepreneurs’ Corner


12

Research in Focus

The Global Risks Report 2016 focuses on the ways that global risks could be minimized in the next ten years. This year marks a forceful departure from past findings, as the risks about which the report has been warning over the past decade are starting to manifest themselves in new, unexpected ways and cause damage to the people, institutions and economies. Global Risk is an insight report published by

the World Bank Group members World Economic Forum.

The StudyGlobal risks still exist because of their combined impact and likelihood, and involve some economic risks, including fiscal crises in key economies and high structural unemployment and underemployment. These are triggered by cyber-attacks as well as profound social instability. Their assessment reflects the potentially profound impact of the Fourth Industrial Revolution on the economy and society and emphasizes the need for safeguarding future benefits.

Three reasons emerged strongly: the potential for climate change to exacerbate water crises, with impacts including conflicts and more forced migration, calling for improved water governance to adapt to climate change and accommodate a growing population and economic development; the need to address the global refugee crisis, adding emphasis to policies that can build resilience in addition to responding to the immediate crisis; and the risks of failing to fully understand the risks around the Fourth Industrial Revolution and how this transition will impact countries, economies and people at a time of persistently sluggish growth.

Risks in focusThe Global Risks Report describes a world filled with rapid advances in technologies, coupled with ever growing cyber fragilities and persistent unemployment and underemployment.

Food security risk

The changing weather patterns could harm food security and agricultural production across geographic boundaries. The most climate vulnerable countries often heavily rely on agricultural productivity to sustain economic growth and development.

Global Risks 2016

Global risks still exist because of their combined

impact and likelihood, and

involve some economic risks, including fiscal

crises in key economies and high structural

unemployment and

underemployment.

Central Asiaincluding RussiaEurope

North America

Latin Americaand the Caribbean

Profoundsocial

instability

Unemployment orunderemployment



Sub-SaharanAfrica

Failuar of criticalinfrastructure

South Asia

East Asiaand the Paci�c

Middle Eastand North Africa

Failure ofnational

govermance

Unemploymentor under-

employment

Profoundsocial

instability

Water crises Naturalcatastrophes

Failure of nationalgovemance

Failure of nationalgovemanceInterstate

con�ictEnergypriceshock

Extremeweatherevents

Water crises

Data fraudor theft

Fiscal crisis

Unemploument orunderemployment

Cyber attacksExtremeweatherevents Extreme

weatherevents

Faiture ofnational

govermance

Large-scaleinvoluntarymigration

Failure ofnational

govermance

Economic

Risk category

Environmental

GeopoliticalSocietal

Technological 1st Ranking positionin each region

2nd

3rd

13


Ebola crisis The outbreak of a global disease named Ebola warns the population growth, rapid urbanization and increasing transnational flows of commodities, people and animals. It intensifies the risk of infectious transmission across geographies while equally diminishing the ability to respond; all at a time of growing resistance of micro organisms to today’s most effective medicines.

Technology RiskTechnology makes it easier for the citizens to find information and socialize with those citizens who feel disenfranchised by distant elites. It attempts to discover the risk of social instability if both governments and business embark on either repressive actions or non-action out of uncertainty about how to deal with a more informed, connected and demanding citizenry, which could lead to an escalating downward spiral of broken trust and harsher response on either side.

Methodology of the Global Risks ReportThe Global Risks Report interprets the difference in risk perceptions over different time frames and the perceived interconnections among risks, as visualized in the Global Risks Landscape 2016. It is all based on the Global Risks Perception Survey, which combines the views of different stakeholders. Three risks interconnection clusters stand out: climate change in relation to water and food crises; the growing challenges of the rising number of displaced people worldwide; and what the Fourth Industrial Revolution means in an era of economic risks.

Transition to the New Normal Pathways to Resilience: EffectiveGlobal risks identify that there are no geographic boundaries. However, the Global Agenda Council (GAC) on Risk and Resilience advocates four key activities for companies, organizations and governments to build resilience at national and global levels.

g Delegate roles and responsibilities. During a crisis, it is difficult to have clearly delineated and understood senior official and c-suite executive roles and responsibilities for risk and incident management.

g Generate Crisis Leadership Characteristics. Organizations that successfully build their base, respond to and recover from major events also consistently have effective leadership the qualities and actions of those with authority and influence can empower their entities to be resilient.

g Relevant leverage expertise. When confronted with an unforeseen emergency, strategic crisis managers must be able to quickly identify and mobilize the most relevant and trustworthy expertise to help understand and respond to the crisis.

g Build an environment of integrated risk management and multi stakeholder partnerships. Another necessary institutional value is the recognition of the scope of global risks and the need for partnerships to address them.

Number of Economies in which a Risk Appears as the Risk of Highest Concern for Doing Business Risk Number

g Unemployment or underemployment

g Energy price shock

g Failure of national governance

g Asset bubble

g Fiscal crises

g Cyber attack

Deep-Dives into Five Global RisksThere are two reasons that account for the global risks of most concern for doing business in half of the 140 economies covered: unemployment or underemployment and energy price shock. Then comes the reason for the failure of national governance, which affects businesses in many ways, including the failure to stamp out illicit trade. The below deep-dives into the implications for business also explore asset bubbles, fourth on the global list, and cyber-attacks, among the top three risks in 18 economies.

Three risks interconnection

clusters stand out: climate change in

relation to water and food crises; the growing challenges

of the rising number of displaced

people worldwide; and what the

Fourth Industrial Revolution means in

an era of economic risks.

14


Unemployment or UnderemploymentUnemployment or underemployment is viewed as the global risk of highest concern for doing business in 41 countries, and is among the top five global risks in 92 countries. Unemployment affects business in multiple ways, from holding back economic growth to threatening social stability. With a growing mismatch between the skills demanded by a fast-changing jobs market and those possessed by unemployed workers, businesses are struggling to recruit workers with the capabilities they need. Expected job growth is concentrated in occupations for which today’s workers are inadequately prepared. Following three main reforms are needed.

g First, the education systems must be redesigned to concentrate on learning and collaboration. As technology will handle all the knowledge based work, we need to educate future generations in skills where humans can still be expected to outperform machines.

g Second, while the organizations must work with experts, educators and governments to help education systems keep up with the needs of the labor market, companies must also fundamentally rethink their role as consumers of ready-made human capital, obtaining pre-trained talent from schools, universities and other companies.

g Third, governments must extend the education system to restructure the broader enabling environment for talent. Human capital development depends on a series of interventions across a person’s lifetime, including hiring and firing practices, women’s integration, retirement policies, visa regulations, social safety nets, and, in particular, regulatory support for entrepreneurship and small and medium-sized enterprises.

Energy Price Shocks to the Global EconomyThe term “Price shocks” can refer to either sudden increases or decreases in the price of energy, whether in the form of electricity, oil, natural gas or liquid fuels derived from these sources. From 2010 until June 2014, world oil prices were fairly stable, at around USD 110 a barrel for Brent crude; since then they have ranged between around USD 45 to USD 60, a plunge that surprised many. Natural gas prices, often indexed to oil, have followed a similar trajectory. This has resulted in significant shifts of wealth from oil and gas producers to consumers, meaning lower input costs for industry, lower inflation and more money available to spend in other sectors.

There is no certainty for oil prices. On the supply side, one key factor is whether or not the Organization of the Petroleum Exporting Countries (OPEC) and in particular Saudi Arabia will continue with its strategy of not curtailing production despite price declines. Another factor is the extent to which investment will fall in response to low prices, leading to a potential rise in unemployment rate of oil-exporting countries. Key oil and gas producers are estimated to have cut over USD 200 billion in capital expenditure on new projects, deferring oil and gas projects with reserves equating to 20 billion barrels of oil equivalent.

Failure of National GovernanceFailure of national governance is viewed as the highest risk to doing business by the executives. This risk captures the inability to efficiently govern a nation, which is caused by or results in factors such as weak rule of law, corruption, illicit trade, organized crime, impunity, and political deadlock. Weak national government is not the result only of poor governance; governance is a multi-faceted phenomenon in which business, civil society and the general public also play roles.

The national governance creates space for organized criminals and terrorists to profit from illegal trading in humans, weapons, counterfeit goods, and so on. The cross-sector and transnational nature of these illegal activities means they pose a risk to all, creating economic, social, and environmental damage at regional and global levels. Businesses face additional risks as well as costs from operating in countries affected by poor governance. Both the risks and the costs arise from the difficulties of working in an unpredictable environment and complying with international standards when fragile governments do not themselves adhere to international regulatory regimes. These costs can be serious enough to become unsustainable in the long run.

Asset BubbleThe outbreak of asset bubbles hits businesses across the whole economy particularly where leverage induces contagion through the banking system. As business confidence falls, so does consumption,

The outbreak of asset bubbles

hits businesses across the

whole economy particularly where

leverage induces contagion through

the banking system.

15


incomes and investment, which can lead to a prolonged recession. The trigger for the global financial crisis, to take one example, was a widespread default on US subprime mortgages and loss of value of related securities.

Apparent global economic developments have increased both the likelihood and potential impact of bubbles. However, as post-recession growth proved elusive, easy monetary policy was maintained or even stepped up. Low interest rates sent investors on a search for yield, creating an environment that is highly conducive to bubbles. The impact of another bubble bursting now in a major economy would be especially damaging because the weakness of the recovery and high levels of government debt mean there would be little remaining policy space for further stimulus. Asset bubbles can never be identified with certainty while they are building up, as there is always a narrative of “this time is different”. Nonetheless, when attempting to evaluate the risk of a bubble bursting, three types of potential bubbles can be distinguished:

-Equity bubbles: They often have an adverse effect of low interest rates, as investors look to stock markets for higher yields than they can get from fixed income assets. Companies can use their highly-valued stock to make cross-border acquisitions. However, when the bubble bursts, they can in turn become takeover targets for companies in other countries.

-Real estate bubbles: They are not usually a major concern for companies while they are inflating, though they make office and factory space more expensive. However, because banks play a major role in real estate finance, the bursting of a real estate bubble can have catastrophic impacts on business finance, as seen recently in Ireland: with banks struggling, credit can dry up completely and companies find it hard to finance their operations.

-Government bond bubbles: Central banks might purchase the government bonds in bulk and new liquidity requirements increasing demand among private sector banks. As the price of the government bonds increases, its yield decreases. This drives investors into higher-yield corporate bonds, raising the risk of a bubble here, too. In the short term, this can be good news for corporate issuers, but the ending of quantitative easing programs could rapidly make it harder for businesses to raise capital. Some observers have raised concerns about whether current market structures can deal with the resulting large swings in demand for bonds, potentially triggering severe volatility in the financial system.

CyberattacksAll the business operations national infrastructure, public and private services and amenities, and personal finances are increasingly managed via some form of computer network and are consequently prone to attack. The Internet of Things is a growing reality, introducing new efficiencies as well as new vulnerabilities and interconnected consequences. Recent technological advances have been beneficial in many respects, but have also opened the door to a growing wave of cyber-attacks including economic espionage, cybercrime, and even state-sponsored exploits, that are increasingly perpetrated against businesses.

Attempts to detect and address attacks are made harder by their constantly evolving nature, as perpetrators quickly find new ways of executing them. Businesses trying to match this speed in their development of prevention and response methods are sometimes constrained by a poor understanding of the risk, a lack of technical talent, and inadequate security capabilities. Defining clear roles and responsibilities for cyber risk is crucial. Outdated laws and regulations inhibit governments’ ability to capture criminals but also to expedite the often lengthy procedure of elaborating and implementing legal and regulatory frameworks to reflect evolving realities. The sophisticated threats of government-sponsored economic espionage also exceed the defensive capabilities of many commercial enterprises, which are more and more frequently looking to other governments to intervene.

As the price of the government bonds

increases, its yield decreases. This

drives investors into higher-yield corporate bonds,

raising the risk of a bubble here, too.

Individual businesses must think beyond their horizon in order to address global risks. Businesses should stand strong to ensure continued operation and survival in the face of risks. At the same time, the clear role for collaboration among public and private sector actors becomes evident, for example, to develop better cybercrime prevention methods, to establish cybersecurity norms for both governments and industry, and to align international approaches to enforcement and establish industry norms. Above all, it is in the key interest of businesses to find new ways to partner with governments to address global risks. Many risks, ranging from energy security to unemployment, can only be addressed through diverse stakeholders recognizing the need for joint action. Such collaboration requires the identification of key risks and related interests and strong alignment and robust agreement among business and other stakeholders on the need to address them.

16


Our journey started about three years ago when we started asking ourselves what we can do to build the startup community. Few of the enthusiastic people from the community gathered and started a conversation about startups. The community came up with an idea to host a 6 day startup event

called Startup Bash in 2013 which was followed by a documentary called Startup Dhaka.

Now few years later, we feel that collectively we should have a roadmap to build for the longer term. General public tend to critique the government, but in last few years we have seen that they actually have gotten heavily involved now in promoting tech entrepreneurship. It has laid down few ambitious goals and took major initiatives to drive digital eco-system in Bangladesh.

Building a thriving ecosystem requires close collaboration between the public and private sectors. As we move along this path, we predict that we will develop a closer working relationship between the public and private sector. While we both have common interest in developing the startup community, perhaps the best way forward would be to establish a common goal. We are proposing a vision statement of “by 2020, we want to produce 200 startups with 10 companies having 20 million U.S dollar valuation.” It is not enough to just announce ambition statement; we must have proper action behind it. We are proposing few suggestions that can help translate this ambition to a meaningful engagement.

Tax Incentives

We propose Tax incentives to encourage investors to risk their money in startups. Since access to startup funding is an issue, tax incentive to encourage people with considerable risk appetite can be a good alternative for the local market.

Matching Government Grant for Fund Raised by Startups

Singapore government has launched initiative like Business Angels Scheme (BAS), which matches any investment up to SGD 2 million (USD 1.32 million) that a startup raises from a business angel investor through its investment arm SPRING SEEDS Capital Pte Ltd. Bangladesh government has similar grant for technology companies called Innovation Fund, which is really not promoted among the community. This

Exclusive Feature

By 2020 Produce 200 Startups with 10 Companies Having 20 Million U.S. Dollar Valuation

Mustafiz R KhanCEO, SD ASIA

17


fund could be easily be used to match with fund raised by local startups to provide financial backing that the startups require so desperately.

Regional Connectivity

India, Singapore, Vietnam, Malaysia, Thailand, Indonesia and Philippines have a growing startup community. Privately a lot of local startups are connecting regionally, but from government level we need to connect as well. These markets have policy frameworks that we can use and best practices that we can implement. We need to bridge the stakeholders from the regional startup community for idea sharing to better support the eco-system. The government can also provide subsidies to participate in the regional tech events to the startups.

Bridge the Academia with Entrepreneurship

The mindset of young founders needs to change when they are learning at schools and universities. Government education policy needs to align with their vision of digital ecosystem so that there is a pipeline for talents in the private sector. It’s a long term process but in the short term there has to be a way to make the education system more relevant for the ICT sector. One way the government can encourage students to get more relevant job experience in early stages is by subsidizing paid internship programs in Tech companies. This way both students and tech companies benefit from developing talent that is more prepared for the future.

Contribution from Most Important Stakeholders

The Telecommunications, Payment providers, logistics, Service companies and Government (ICT Ministry) should support the common goal of helping to build 200 startups in next 5 years with total valuation of 20 million U.S. dollars. The 5 parties are integral parts in the making the machine move in the right direction. The telecommunications, need to make the data service cheaper, payment providers need to make online payment secured and seamless, logistics services need to be reliable and designed to support cash on delivery system, which is a dominant payment solution in South East Asia, service companies need to start solving real problems that is affecting the bottom of the pyramid, and ICT ministry needs to work with all the parties so that real change can happen.

The Telecommunications,

Payment providers, logistics, Service companies and

Government (ICT Ministry) should

support the common goal of helping to build 200 startups

in next 5 years with total valuation of 20

million U.S. dollars.

18


Let’s take a deeper look at eCourier, Bangladesh’s first bicycle-based courier service. It is no lie that the modern world has a preference for greener methods, and eCourier excels at it. The company’s main service is to delivery documents, files or small parcels for e-Commerce sites. E-commerce is their primary

group of customers and the prime targets, but non-e-commerce customers are served as well.

The company’s mission is to provide a convenient delivery service for its customers and clients. The environment-friendly startup, eCourier, also provides a premium specialized postal service with digital tracking system. This premium track and trace software will enable the customers of eCourier to track their parcel’s real-time location from their computers, android application, or via text messaging. The company also provides a same day delivery, and they have invested heavily to make sure of it too. Their employees work in two shifts to make sure that they are true to their promise of same-day delivery. That’s not the end; the company has a door-to-door service as well. eCourier’s door-to-door service might be something customers yearn for in the midst of the intensifying Dhaka traffic.

eCourier’s service is not only green; it is efficient as well as customer satisfying. Apart from their real-time tracking, one-day delivery, environment-friendly delivery, cell-phone notification, free Android application, and reasonable price, they also follow up on customers after the product has been delivered. They also have a 24-hour support system that answers any queries made by the customers via email or their hotline. eCourier has been very active both environmentally and commercially; eCourier was Gold Sponsor of Uddokta Hat 2013, the company provides professional product delivery service to Click BD, BeautyShop BD, eBiponon, and T-Zone.

In a nutshell, eCourier is a growing startup and their vision is to increase their client base by 50% every year and develop into a profitable startup business within the first two years of operation.

eCourier: Bangladesh’s First Bicycle-BasedCourier Service

New Initiatives in Market

(This article was originally published by SD ASIA. SD ASIA is a content and event platform for startups, entrepreneurs and investors.)

The environment-friendly startup,

eCourier, also provides

a premium specialized postal

service with digital tracking system.

19


The jewelry business runs under the Gold (Procurement, Storage and Distribution) Order, 1987.

1. Dealer: “dealer” means a person who, directly or otherwise, carries on the business of procuring, storing, distributing, making, melting, refining, processing, converting, gold or lending against gold and includes-

A company, bank, society registered under the societies Registration Act, 1860 (XXI of 1860), co-operative society incorporated under any law with respect to co-operative societies, firm, money-lender or other association of persons which carries on such business, or-

(a) buys or accepts gold for the purpose of making ornaments, or

(b) makes, manufactures, prepares, repairs or polishes ornaments, or

(c) process, melts or converts gold for the purpose of making ornaments, or

(d) sells, supplies, or distributes ornaments or other gold for the purpose of making ornaments, to its members;

(e) “gold” means gold, including its alloy (whether as ingot, melted or remelted, wrought or unwrought), in any shape or form, of a purity of not less than nine carats and includes article and ornament, whether plain or engraved with pearl, real or imitation stone;

(1) No dealer shall commence, or carry on, business or lend against gold unless a license is obtained from the Director-General under paragraph 5.

(2) A dealer shall not, without the prior permission in writing of the Director-General, carry on business in any premises other than the premises specified in his license.

(3) Every dealer shall stamp every piece of article or ornament made, manufactured or prepared by him indicating the name or mark of the dealer.

2. Grant or renewal of license and license fee-

(1) An application for a license shall be made in Form A to the Director-General who may, after making such enquiry as he deems fit, grant a license in Form C on payment of the fees in the following categories-

(a) Category ‘A’- Dealers having annual transactions exceeding 100 kg. (1,00,000 grams) of gold;

(b) Category ‘B’- Dealers having annual transactions exceeding 50 kg. (50,000 grams) but not exceeding 100 kg. Of gold;

(c) Category ‘C’- Dealers having annual transactions exceeding 20 kg. (20,000 grams) but not exceeding 50 kg. Of gold;

(d) Category ‘D’- Dealers having annual transactions exceeding 20 kg. (20,000 grams) of gold.

SL. No. Category License fee (in taka)

1 A 1,000.002 B 500.003 C 300.004 D 200.00

(2) All applications for renewal of license shall be made in Form B to

the Director-General at least thirty days prior to the expiry of the

validity period;

(3) The renewal fee shall be the same as that of license fee.

(4) The license fee and the renewal fee shall be deposited in the

Bangladesh Bank or Government treasury or sub-treasury

through challan under the Head ’42- Trade and Commerce-

license fee for Distribution of Gold” and one copy of the challan

shall be submitted along with the application form.

(5) All licenses, unless suspended or cancelled, shall remain valid

during the financial year, expiring on the thirtieth day of June

every year.

3. Declaration and returns-(1) every dealer shall make a monthly

declaration in Form D.

4. Display of license - Every dealer shall display his license at

a conspicuous place of the premises in which he carries on

business.

5. Cash Memorandum-

(1) Every dealer shall, at the time of making any transaction like

buying, selling making, repairing, polishing of gold, ornament

or article, issue a cash memorandum in duplicate containing

particulars of the transaction including description, weight and

value of the gold, ornament or article, as the case may be, name,

address and signature of the buyer or seller, as the case may be,

and the duplicate copy of the cash memorandum shall be kept

by the dealer.

(2) The cash memorandum shall also indicate separately the ratio of

pure gold (Tejabi), alloy (Khad) inlays (Meena), fillings (Panmora),

stones, if any, duties and taxes, if any, and making or servicing

charges.

6. Price to be exhibited by the dealer - The dealer shall exhibit in

a conspicuous place of premises the price of gold.

Jewelry Business

Entrepreneurs’ Assistance Tool

20


Dhaka-based ME SOLshare Ltd. provides improved electricity access to low-income people living in rural Bangladesh. Through an e-interview, Sebastian Groh, the current director of SOLshare, told us about this great initiative to help Bangladesh achieve affordable electricity. Here are his responses:

1) Tell us a bit about yourself.

Sebastian is living and working in Bangladesh as the director of two newly founded companies, ME SOLshare Ltd. and ME Fosera BD Ltd. He is further project manager at MicroEnergy International (MEI) since 2009, a Berlin-based consulting company focusing on the linkage between microfinance and sustainable energy supply. Along his professional work, Sebastian is currently pursuing his PhD on the role of energy in development processes, energy poverty, and technical innovations.

Previous to his work at MEI, Sebastian worked on the trading floor at Commerz bank in Frankfurt, at ProCredit in El Salvador and Planet Finance in India. Sebastian holds a Bachelor in Economics from University of Mannheim (Germany) and Universidad Carlos III de Madrid (Spain) as well as a Masters in International Economics from the University of Goettingen (Germany), University of Pune (India) and Universidad José Matías Delgado (El Salvador).

Sebastian received an executive training on strategic leadership for microfinance from Harvard Business School and is a Stanford Ignite Fellow of 2013 from Stanford Graduate School of Business.

2) Tell us a bit about your company.

MESOLshare is a Dhaka-based company founded in 2014. SOLshare is a platform provider for improved electricity access to low-income people in rural Bangladesh. Our box can interconnect new and existing solar systems to form microgrids. It specifically targets Bangladeshi households and small businesses in densely populated off-grid villages. These communities need flexible, stable, and sufficient electricity supply

SOLshare: Let’s Share the Sun

Spotlight on Startup

21


for lighting, phone charging, entertainment and business generating activities at an affordable price point. Nearly, 4 million solar home systems have been installed in Bangladesh. These systems, however, do not reach the poorer segments of the rural areas mostly for reasons of affordability. Also, each of these systems produces surplus power that goes completely unused due to system design and the advent of super efficient direct current appliances. At the same time, people do not have enough energy for productive use engagements.

3) What inspired you to undertake such an initiative?

After having worked for a couple of years in a Berlin-based consultancy, MicroEnergy International, on the inter-linkage of microfinance and decentralized energy supply, in 2013, Sebastian participated in the Stanford Ignite Program- Powering Innovation and Entrepreneurship, where his idea behind SOLshare was selected and developed into a business model. After receiving very positive feedback from a panel of judges at the end of the program, he pursued SOLshare and flew to Bangladesh to set-up the company.

4) Could you tell us a bit about the services of ME SOLshare?

MESOLshare has developed a smart grid concept that is targeted for the Global South and has been tailored to the Bangladeshi market: a smart DC microgrid that manages and meters power flows between rural households and businesses. Solar panels and decentralized storage systems are added incrementally in a step by step manner so that supply is guaranteed while avoiding sunk costs of earlier investment. In addition to technological reasons for leapfrogging, market models that accompanied the mobile phone revolution such as sharing phones may serve as a precedent for these kinds of smart grids. The integration of productive use is just one of many logical steps of the post-installation development of every SOLshare smart nano-grid.

5) What’s the future for your project? What do you hope to achieve with your business? Are you currently looking for funding?

By 2019, 550,000 people can borrow electricity at an affordable cost, 2.2 million people can create additional income sources, 2.75 million people can live with less indoor smoke, and 10,000 tons reduction in CO2 emissions have been achieved.

SOLshare was recognized internationally and awarded as a finalist in the ‘2014 Best Climate Practices Contest on Energy Poverty Alleviation’ by the International Center for Climate Governance.

(This article was originally published by SD ASIA. SD ASIA is a content and event platform for startups, entrepreneurs and investors.)

Nearly, 4 million solar home

systems have been installed in

Bangladesh. These systems, however,

do not reach the poorer segments of the rural areas

mostly for reasons of affordability.

22


In November 2015, the transaction through

mobile banking channels reached BDT

14,915.59 crore a whopping 54.2%

year-on-year

54.2%

Sector-wise import as of July-November 15 (%)

38%

11%

16%

Category-wise breakdown of exports July-December 2015

2% 42% 40% 2% 14%

5.175.21

5.065.04

4.874.84 4.83

4.87

4.794.77

4.824.77

Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 April-15May-15June-15July-15 Aug-15 Sep-15 Oct-15Monetary and credit developments as of November 2015 (in Billions of BDT)

7336

916

6194

2058

37%

42%

12%

9%

0%

State owned Banks

38% 11%

8%

11%

10%

16%

1.17 1.29 1.23 1.22 1.29 1.491.17 1.34

1.02

1.181.34 1.30 1.32

1.441.39

1.201.35

1.10

0.00Feb Mar Apr May Jun Jul Aug Sep Oct

0.10

0.60

1.10

1.60

2.10

2.60

3.10

Remittance increased by USD 0.17 billion in December'15 compared to November'15

6.01%

6.20%

6.12%6.08% 6.14% 6.15%

6.80%6.35%

6.73%

6.67% 6.56%

7.05%

6.07%

6.11%

6.37%6.48%

6.23% 6.32% 6.07%6.06% 5.92%

5.89%5.72%

5.48%

Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15

Inflation rate in December 2015 inclines as non-food inflation increases

23


In November 2015, the transaction through

mobile banking channels reached BDT

14,915.59 crore a whopping 54.2%

year-on-year

54.2%

Sector-wise import as of July-November 15 (%)

38%

11%

16%

Category-wise breakdown of exports July-December 2015

2% 42% 40% 2% 14%

5.175.21

5.065.04

4.874.84 4.83

4.87

4.794.77

4.824.77

Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 April-15May-15June-15July-15 Aug-15 Sep-15 Oct-15Monetary and credit developments as of November 2015 (in Billions of BDT)

7336

916

6194

2058

37%

42%

12%

9%

0%

State owned Banks

38% 11%

8%

11%

10%

16%

1.17 1.29 1.23 1.22 1.29 1.491.17 1.34

1.02

1.181.34 1.30 1.32

1.441.39

1.201.35

1.10

0.00Feb Mar Apr May Jun Jul Aug Sep Oct

0.10

0.60

1.10

1.60

2.10

2.60

3.10

Remittance increased by USD 0.17 billion in December'15 compared to November'15

6.01%

6.20%

6.12%6.08% 6.14% 6.15%

6.80%6.35%

6.73%

6.67% 6.56%

7.05%

6.07%

6.11%

6.37%6.48%

6.23% 6.32% 6.07%6.06% 5.92%

5.89%5.72%

5.48%

Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15

Inflation rate in December 2015 inclines as non-food inflation increases

24


Bangladesh to be second best performer in 2016 lAccording to American news organization Bloomberg, Bangladesh’s economy will grow at 6.6% in 2016, a joint second rank with Vietnam. The rate is the second fastest pace after India, which is expected to clock in 7.4% growth. Bangladesh is on track to log in the second best economic growth figure this year out of 93 countries, forecasted Bloomberg.

The forecasts are the median estimates from each country’s latest survey conducted between October and December 2015. China came in fourth with its 6.5% growth forecast. Deflation-pained Japan is projected to grow 1% this year, lagging behind many of its neighbors. For the world’s worst-performing economies, no good will come from New Year’s resolutions to do better.

For many, 2016 will only bring more disappointment, said the economists surveyed by Bloomberg. The forecast by Bloomberg, which is calendar-year based, is similar to the World Bank’s recent forecast of 6.6% growth for Bangladesh in 2016. The government, however, has set the growth target of 7% for fiscal 2015-16, against the WB and the International Monetary Fund’s forecast of 6.5%. The strong forecast comes at a time when the global economy is going through a recession.

Bangladesh economy shows flexibility lEconomic fundamentals signify impressive growth prospects for Bangladesh claimed by the banking giant Citi in its annual market update. Showing resilience, the Bangladesh economy grew 6.51% in fiscal 2014-15, despite the political front presenting tough challenges at the beginning of 2015. The services sector contributed the most 3% followed by the industrial and agricultural sector with 2.7% and 0.5% respectively.

According to Citi, the country has already achieved growth in excess of 6% over the last five years. However, the focus has now shifted towards moving to the next level and stepping up the growth rate to 8% by 2020 as envisaged under the country’s seventh five-year plan. Annual average inflation decreased to 6.2% at the end of 2015, the lowest level since February 2013; point-to-point inflation hovered between 6 % and 6.4% throughout the year before closing at 6.1% in December.

Food inflation slowed to 5.48% in December 2015 from 5.86% a year ago, whereas non-food inflation rose to 7.05% from 6.48% over the same period. The statistics showing rising import of capital machinery orders provide an indication of growing investments and an expansion of production capacity. However as import growth outstripped export growth by a significant margin in fiscal 2014-15, the country posted a trade deficit of over USD 10 billion.

Citi claimed that most Bangladeshi workers are employed in the Middle Eastern and Asian countries, the currencies of which have depreciated against the US dollar, whereas the taka held strong, which resulted in workers sending home lower amounts in remittance. Foreign exchange reserves climbed to a record USD 27.45 billion at the end of 2015; marking an 18.7% year-on-year increase and 8.8% increase from the beginning of fiscal 2015-16.

Remittance growth slackens in 2015 lThe remittances inflow recorded a slow growth in the just-concluded calendar year despite a significant rise in outbound jobs taken up by Bangladeshi nationals. According to Bangladesh Bank (BB), Bangladeshi expatriate remitted USD 15.31 billion in 2015, marking a 2.47% growth comparing to that of the previous calendar year.

Some 538,667 Bangladeshi workers went abroad with jobs as of December 23, 2015, reflecting a 30% growth, according to the Refugee and Migratory Movements Research Unit (RMMRU) report. The number was 35% higher than that of 2013. Remittances from Bangladeshi nationals working abroad were estimated at USD 1.31 billion in December last, up by USD 165.31 million than that of the previous month. In November 2015, remittance was USD 1.14 billion, according to BB data. Currently, 34 exchange houses are operating across the globe and have set up 1123 drawing arrangements abroad to expedite the remittance inflow, according to the central banker.

Economy

Bangladesh is on track to log in the second best

economic growth figure this year out

of 93 countries, forecasted

Bloomberg.

EXPORT PERFORMANCE (IN BILLION OF USD)

Source: Export Promotion Bureau2.75

2.39

2.41

2.41

2.72

2.81

2.98

2.16

2.55

1.95

2.41

2.84

2.88

2.51

2.59

2.4

2.84

3.06

2.62

2.76

2.37

2.37

2.74

3.2

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2015 2014

25


ADB to provide USD 200 million loans for SMEs in rural area lThe Asian Development Bank (ADB) will provide USD 200 million in loans to small and medium-sized enterprises in rural Bangladesh. The credit facility will particularly target firms run by women, especially those engaged in subsistence trade and retail activities and are typically less educated and have less access to SME finance than men, stated by the Manila-based bank. According to the principal financial sector specialist at the ADB’s South Asia Regional Department, rural firms and firms run by women struggle to get loans from banks. As a result, both they and the Bangladesh economy lose out.

ADB wants to help cottage industries and SMEs to expand and flourish, including those operated by women. The small firms outside the metropolitan areas of Dhaka and Chittagong will be targeted by the initiative; with at least 15% allocated for women entrepreneurs. There are about 7.2 million SMEs in Bangladesh, which account for 90% of all companies and employ 70-80% of the country’s non-agricultural workforce. In 2014, SMEs accounted for 25% of Bangladesh’s gross domestic product and 40% of the manufacturing output.

The project also includes USD 2 million in technical assistance from Japan Fund for Poverty Reduction to help establish incubation facilities at educational institutions to promote entrepreneurship and support entrepreneurs’ development units at Bangladesh Bank. It will also help set up dedicated women’s desks in financial institutions, and strengthen women entrepreneurs’ ability to access available credit through financial and legal literacy, as well as managing their enterprises.

The amount of inward remittance in terms of US dollar showed a downward trend in 2015 mainly due to appreciation of Bangladesh Taka against the US currency. For this reason, workers also got discouraged in sending their hard-earned money through legal channel, the RMMRU stated. Bangladesh’s foreign exchange reserves hit a record USD 27.49 billion at the end of December; the central bank said on Sunday, fuelled by steady exports and remittances, as per the statement by Reuters. The slower pace of import growth, on the back of a fall in global commodities prices, also helped boost reserves about 23% over the corresponding period of last year.

Excess liquidity cuts call money rate in 2015 lThe inter-bank call money rate has fallen sharply in 2015, as liquidity soared in the banks, according to the US-based Citibank NA Bangladesh statement. All through the year, the banks deployed the excess liquidity with the Bangladesh Bank (BB) through reverse repo operations. With low demand for domestic credit as many corporates resorted to foreign borrowing due to lower interest rates, the inter-bank money market volumes remained low, and interest rate dipped, as liquidity soared in banks, as per the foreign bank.

The weighted average call money rate, which was at 8.57% in January 2015, plunged to 3.69% by the end of the last calendar year, according to the update. Meanwhile, the overall excess liquidity with the commercial banks stood at around BDT 1.20 trillion as of December 10; however a major portion of the funds has been invested in the risk-free government securities.

The excess reserve, generally known as excess over daily minimum cash reserve requirement (CRR) with the central bank, stood at around BDT 37 billion. From mid-October, the BB squeezed acceptance of reverse repo bids, and suspended it altogether from November 16, 2015. The central bank changed its mode of absorbing excess liquidity by stepping up 30-day BB bills bid acceptance, which however, yields a lower rate compared to reverse-repo rate of 5.25%, putting more pressure on the call money rate, according to the update.

Selected Economic Indicators lItem Period/As of Value/ bn Period/ As of Value/ bn +/(-)%Foreign Exchange Reserve (USD) Jan'16 27.15 Dec'15 27.35 -0.73%Workers’ Remittances (USD) Dec'15 1.31 Nov'15 1.14 14.97%Revenue Collection (BDT) Oct'15 112.29 Sep'15 127.92 -12.22%Broad Money (M2) (BDT) Nov'15 8251.82 Oct'15 8202.57 0.60%Reserve Money (RM) (BDT) Nov'15 1576.51 Oct'15 1640.00 -3.87%Total Domestic Credit (BDT) Nov'15 7302.76 Oct'15 7234.53 0.94%Credit to Private Sector (BDT) Nov'15 6039.23 Oct'15 5946.77 1.55%

Source: January 2016, Selected Economic Indicators, Bangladesh Bank

The project also includes USD 2

million in technical assistance from Japan Fund for

Poverty Reduction to help establish

incubation facilities at educational

institutions to promote

entrepreneurship and support

entrepreneurs’ development units

at Bangladesh Bank.

26


Trade

Apparel export climbed in 2015 lIn 2015, the readymade garment (RMG) sector of Bangladesh confronted its highest ever export earnings, even though it faced twin industrial disasters of Rana Plaza collapse and Tazreen Fashions fire previously. From January to November, garment exports raked in USD 26.26 billion, which is already the highest figure recorded by the sector at any given time, according to data from the Export Promotion Bureau (EPB). In 2014, the sector had its revenue of USD 24.53 billion in exports. Exports grew phenomenally in the months of October and November this year by 18.40% and 14.74% respectively. In the year ending on July 31, 2016, Bangladesh may import a record 5.75 million bales (each bale weighs 480 pounds or 218 kilograms) of the fiber, up 6.5% from a year earlier, according to the United States Department of Agriculture. The garment makers were also heartened by the demand from new destinations this year, which accounted for about USD 5.5 billion of the export earnings.

The garment manufacturers are now optimistic regarding this year’s export revenue. Their confidence was boosted by three main following factors shifting of garment business from China to Bangladesh, the historically low price of cotton and the gaining back the confidence of the international retailers regarding the structural soundness of Bangladeshi garment factories. Two factory inspection agencies, engineers of Accord and Alliance, found less than 2% of the factories to be risky. Bangladesh Garment Manufacturers and Exporters Association (BGMEA) stated that it can be expected that 2016 will be better than 2015 as all the factories have already been inspected and are safer now.

Of the new export destinations, Australia, Japan, South Korea, Russia, Brazil, Chile, China, India, Turkey, Mexico and South Africa are among the most promising countries for Bangladesh. The slide in major currencies like the euro and the US dollar in 2015 also impacted Bangladesh’s earnings from garment exports. Bangladesh earned nearly USD 3 billion less from exports in 2015 due to a steep fall of the Euro.

Export earning booms in 2015 lThe total export earnings in 2015 stood at USD 32.37 billion which was USD 30.41 billion in 2014, according to the Export Promotion Bureau (EPB). Bangladesh registered a modest 6.4% growth in just concluded calendar year, 2015, over the previous year, 2014. Due to the enhanced performance of apparel sector, exports earnings recorded higher growth during the first half (H1) of the current fiscal year FY 2015-16, according to the regulatory body.

The earnings also surpassed the target for the period by 1.38%. The earnings from knitwear items rose by 6.11% to USD 6.43 billion in H1 of the current fiscal year compared to the corresponding period of FY 15. In December exports of the apparel products, knit and woven, recorded the highest amount worth USD 2.67 billion in single month during the last two years. On the other hand, earnings from exports of home textile in the first six months of this fiscal increased by 16.68% to USD 348.43 million during the same period of last fiscal.

As per EPB statement the regulatory body hoped that the positive growth would continue in the coming months, and the country would be able to achieve the targeted export earnings. Bangladesh Garment Manufacturers and Exporters Association (BGMEA), attributed the ongoing safety initiatives, entrepreneurs’ efforts to look beyond the traditional markets, and manufacturing apparel products with more value addition for such export growth.

Capital machinery import records substantial rise lThe import of capital machinery sustained a hefty growth in the first five months of the current fiscal year (FY), 2015-16, amid a marginal growth in the country’s overall imports. The actual import in terms of settlement of letters of credit (LCs) grew by 2.48% to USD 16.60 billion during the July-November period of FY 16, from USD 16.20 billion in the same period of the FY 15, according to the central bank’s latest statistics.

On the other hand, opening of LCs, generally known as import orders, dropped by 1.46% to USD 17.48 billion

EXPORT EARNINGS (IN BILLION OF USD)

Source: Export Promotion Bureau

30.41

32.37

29

29.5

30

30.5

31

31.5

32

32.5

33

2014 2015

The slide in major currencies like

the euro and the US dollar in 2015

also impacted Bangladesh’s

earnings from garment exports.

27


Australian ban on air cargo detriments Bangladesh business lAustralia’s embargo on air freight from Bangladesh is hurting business activity as Australia banned air cargo from Bangladesh, Syria, Egypt, Yemen and Somalia as a preventive security measure from December 19. The embargo, which bans anything heavier than 500g, will remain in force until further notice.

Bangladesh uses the seaways to send most of the consignments to Australia, stated Bangladesh Garment Manufacturers and Exporters Association (BGMEA). The restrictions apply equally to cargo carried on passenger and freight aircraft, Australia’s Department of Infrastructure and Regional Development stated on December.

BGMEA leaders sat with Australian retailer Kmart, and two other clothing companies Woolworths and Target that have outlets in Australia. The members of the BGMEA have forged good business relations with the Australian retailers and have to send export samples regularly. There is no problem in sending cargo by ship, but sending samples by air has become an issue for exporters.

Last fiscal year, Bangladesh exported products worth USD 606.88 million to Australia, with apparel items accounting for 88% of the total, according to the Export Promotion Bureau (EPB). At present, Bangladeshi garment enjoys zero-duty access to Australia, one of the emerging markets for local exporters.

Apparel exports to US remain flexible lThe US continues to be the single largest export destination for Bangladesh’s garment items, accounting for 21.28% of the shipments in 2015. The shipments to the American market fetched USD 5.66 billion of the sector’s USD 26.6 billion export earnings last year, according to data from the Export Promotion Bureau. Garment exports to the US rose 13% year-on-year in 2015. The European Union, the trade bloc of 28 nations, accounted for 59.73% of the shipments last year, raking in USD 15.9 billion.

Countrywise in the EU, garment exports to Germany brought in USD 4.36 billion, the UK USD 3.32 billion, Spain USD 1.73 billion, France USD 1.63 billion, and Italy USD 1.24 billion, among others. Apparel export growth to non-traditional markets was also noticeable in 2015. The share of non-traditional markets in the garment sector’s export earnings now stands at 15.29%, which was only 7% in 2009. In 2015, garment products worth USD 4.07 billion were sent to the non-traditional markets.

Exports to Australia have also grown significantly, 32.09% year-on-year. According to Bangladesh Garment Manufacturers and Exporters Association, the second half of 2015 was good for the sector. Although 2015 started on a dismal note, an 8.21% export growth was registered in the end, while the devaluation of the euro negatively impacted earnings.

in the first five months of FY 16, from USD 17.74 billion in the same period of FY 15. The existing trend of overall imports may continue in the coming months also, if the downward price of essential commodities, including petroleum products, persists in the international market.

Import of capital machinery or industrial equipment used for productions rose by 20.10% to USD 1.38 billion during the first five months of the current FY, against USD 1.15 billion of the same periods of FY 15. Higher imports for power and energy, food processing, garment, pharmaceuticals, plastic, printing, packing and telecom industries have contributed to raise the overall capital machinery imports during the period under review, according to the central bank.

GARMENT EXPORTTO AUSTRALIA

(IN MILLION OF USD)

GARMENT EXPORTS TO DIFFERENT REGIONS IN

2015 (IN BILLIONS OF USD)



307.54

428.44 430.76

533.63

0

100

200

300

400

500

600

2011-12 2012-13 2013-14 2014-15

15.9

5.664.06

0.970.11

02468

1012141618

EU US 11 newdestinations

Canada Rest ofthe world

28


Business

Mobile cash transfer inclines 54% in November 2015 lIn November 2015, the transaction through mobile banking channels reached BDT 14,915.59 crore a whopping 54.2% year-on-year, meaning the use of mobile financial services is rising fast, as people are becoming increasingly comfortable with the banking platform, according to data from Bangladesh Bank.

As the market size is huge and mostly untapped, the figures would grow much higher if proper rules are implemented in the industry, according to industry experts. The daily average transactions during the month stood at BDT 497.19 crore in contrast to BDT 322.48 crore a year earlier. In November 2015 number of transactions was 11.09 crore from 6.09 crore in November 2014. Since 2009, 28 banks had taken permission from the central bank to roll out this service, of which 20 banks have already launched the service.

At present, there are 3.12 crore registered mobile financial service clients in Bangladesh, with 1.25 crore of them being active users. The highest growth came in the salary disbursement segment. Salaries amounting to BDT 140.91 crore were disbursed through the platform in November 2015, which is more than double from a year earlier. Person-to-person transactions are increasing in popularity too. It increased 43.41% year-on-year to BDT 2,579.55 crore in November 2015. Utility bill payment saw 79.91% year-on-year growth in November.

SMEs drive economy to advanced growth lThe number of economic units has doubled between 2003 and 2013 riding on the fast expanding non-farm activities across Bangladesh, according to the government’s latest census. In 2003, the number of economic units was 37.08 lakh. It swelled to 78.18 lakh in 2013, according to the Economic Census of 2013. The economic units have increased 71% since 1986, when the first economic census in the country took place. The census conducted between March 31 and May 31 of 2013, was released by the Bangladesh Bureau of Statistics in Dhaka.

More women are engaged in economic activities. It has given a clear picture of the employment situation in the non-agricultural sector. Non-agricultural employment rose 6% on an average every year between 2001 and 2013, whereas permanent establishments went up 4%. It has been cleared that the micro, small and medium enterprises are the main forces of the economy.

Unlike in the past, rural families are no longer engaged in farm-based economic activities alone. As a result, the division between the rural and the urban settings is diminishing. Microcredit has played a role to this effect. So, all necessary assistance should be provided to them so they can flourish.

Costlier jute sacks enhances rice price lIn recent times, the government has made it mandatory for millers to use biodegradable jute sacks for packaging rice in a bid to curb invasion by polythene. Hence, the prices of the rice varieties of the Boro season began heating up at mill gates for supply crunch of such paddy and a mandatory packaging switch. A sack costs BDT 60-70 per piece, which means an extra expenditure of BDT 1.2-1.4 a kg, according to Bangladesh Auto Major Husking Mill Owners Association (BAMHMOA).

The prices of rice varieties like Brridhan-28 and 29, Miniket, Ratna, Parijat and Nayanmoni increased by BDT 1.00-3.00 per kilogram at mill gates and the heat started to be felt in the cities also, as per industry experts. Better-quality Miniket is selling at BDT 2200 per 50-kg bag at mill gates from BDT 2050,” he said. Normal Miniket costs BDT 1900-1940 per sack.

Badamtoli O Babu Bazar Chaul Arat Malik Samity, an association of rice wholesalers in the city, stated that the prices at retail level might increase within few days when the older stock would come to an end. Rice production in the country was the highest-ever 34.7 million tonnes in the financial year 2014-15 against a demand for 31.0 million tonnes, according to the Bangladesh Bureau of Statistics and the Directorate General of Food (DGoF).

A sack costs BDT 60-70 per piece, which means an

extra expenditure of BDT 1.2-1.4 a

kg, according to Bangladesh Auto

Major Husking Mill Owners Association

(BAMHMOA).

MFS TRANSACTIONS (IN CRORE OF USD)


9674.46

14915.59

0

2000

4000

6000

8000

10000

12000

14000

16000

2014 2015

29


Mobile banking consumers cross 30 million mark lThe number of clients under Mobile Financial Services (MFS) crossed 30,000,000 in 2015 with a sign of growing popularity among the mass people. The banks are now focusing on expansion of mobile banking services as it costs less than setting up branches to reach mass people, resulting in rapid growth of clients and transaction amount. As the mobile banking business is flourishing rapidly, country’s telecom industry is also expressing its interest to involve with this business. Bangladesh Bank drafted a new guideline offering telecom companies to make a new MFS platform associating with banks to make the business more viable.

The new guideline has now become a much-talked about issue among the bankers and the telecom companies as both parties are not happy with the proposed shareholding structure. Telecom companies are demanding a telecom-led guideline instead of the proposed bank-led while most of the banks are strongly opposing the entrance of mobile operators into the business. Although return from mobile banking business is not so high right now, it has the bright potentiality to become a profitable business, engaging highest number of clients according to a private bank.

NUMBER OF MFS REGISTERED CLIENTS(IN MILLION OF BDT)


0.5

1

1.5

2

2.51

3

3.12

0 0.5 1 1.5 2 2.5 3 3.5

Apr 13

Nov 13

Mar 14

Sep 14

Dec 14

Oct 15

Nov 15

30

IDLC MONTHLY BUSINESS REVIEWRegulatoryNews

Move to make listed treasury bonds transferable lThe premier bourse has taken a move to make the listed treasury bonds transferable removing the existing obstacles. Dhaka Stock Exchange (DSE) along with the Bangladesh Bank (BB) to solve the existing complexities several times, hindering the transactions of treasury bonds. The premier bourse will submit a formal proposal to the BB soon seeking their support for transactions of bonds.

Presently, the listed bonds are not tradable in absence of any depository institute like Central Depository Bangladesh Limited (CDBL). The data of all listed tradable securities, other than bonds, are stored by the CDBL. On the other hand, the BB’s MI Module is the only depository system for all kinds of bonds.

That is why the premier bourse is working to ensure the MI Module’s connectivity for conducting the transactions of listed treasury bonds. The MI Module has live settlement system, whereas the post settlement system is applicable for tradable listed securities. The live or post settlement system for treasury bonds can be accepted. After submitting the formal proposal, the premier bourse would sit with the central bank and DP (Depository Participant) Banks. At present, there are 221 treasury bonds listed with the DSE. The market capitalization of those bonds is above BDT 550 billion, which is around 16% of total market capitalization of the premier bourse.

BTRC to monitor internet service costs lBangladesh Telecommunication Regulatory Commission (BTRC) is going to inspect the cost components in providing internet services to determine a pricing guideline for the providers. There is a huge pricing gap between different operators. To intervene in the market, the regulator must first conduct an analysis of the pricing process, stated BTRC. The regulator wants to get the correct information which will help to offer the best possible prices to the subscribers. The regulatory body recently decided to purchase expertise from InCyte Consulting, a globally recognized company on telecommunication services and regulation, for a contract of BDT 30 lac.

In 2013, BTRC had approached International Telecommunication Union (ITU), the highest body of global telecommunication services, to receive consultation for free. However, ITU recommended InCyte Consulting for this service. BTRC also recommended the government to appoint a consultant for cost modeling of voice services, short and multimedia messaging, video calls and value-added services.

BTRC negotiates to lower the prices based on all the proposals given by the telecom companies, on condition of anonymity. The company claimed that the government reduced the internet bandwidth price to as low as BDT 625 per megabyte last year, which was BDT 72,000 about seven years ago. However, the operators continued to charge higher rates from the subscribers. The internet service providers claimed that bandwidth is not the only pricing component, and they have other costs as well. The BTRC launched the cost modeling study where the real picture can be learnt and packages can be approved based on the report’s findings. Hence, cost modeling study on voice services was run in 2008.

USD 200 million project to automate state banks lThe government is set to take up a massive automation program with financial assistance from the World Bank for nine state-owned banks to facilitate the central bank’s monitoring. The estimated cost for the program is USD 200 million, of which the WB will provide USD 150 million and the banks the remaining amount. The approval for the USD 150 million from the WB board is likely to come by March, according to experts. For modern banking, three-layer software is required. The main component is the core banking solution (CBS), using which all branches will be integrated online.

The state banks are still in a nascent stage with regards to automation, and the International Monetary Fund (IMF) has been putting pressure on the government to accelerate the process. The government has already made a commitment to the IMF that it will complete automation of at least four state-owned commercial banks by December this year. It would not be possible to complete the automation of the state banks before the end of 2017 as per the banking sector.

To intervene in the market, the regulator must

first conduct an analysis of the

pricing process, stated BTRC.


31

BB incorporates USD 200 million green funds for textile and leather makers lBangladesh Bank (BB) is set to form a USD 200 million fund to provide low-cost loans to textile and leather industries for switching to environment-friendly production. The move comes to help the export-oriented industries that take advantage of the current proclivity towards green products in the western world. Textile and leather sectors will initially enjoy low-cost loans from the ‘Green Transformation Fund’, which will be made open to the other sectors later.

Industrialists are likely to get loans for water conservation and management, waste management, resources efficiency and recycling, renewable energy and energy efficiency. These are only small initial steps, with lots more to do in our intended countrywide transition to environmentally sustainable output practices and lifestyles, according to BB.

Earlier in 2009, the BB set up a revolving fund of BDT 200 crore for disbursing low-interest loans by the banks and other financial institutions on using solar energy, biogas and effluent treatment plants. The central bank has so far identified nearly 50 green products that are eligible for the green refinance line available at the BB. The move comes at a time when Bangladesh is making efforts to generate more energy through renewable sources.

Bangladesh has a capacity to generate 230 megawatts of solar electricity, with a big portion coming from solar home systems, of which there are over 40 lakhs of them at present, according to a publication by Bangladesh Solar and Renewable Energy Association (BSREA).

Industrialists are likely to get loans for water

conservation and management,

waste management,

resources efficiency

and recycling, renewable energy

and energy efficiency.

32


Oil prices extend rise above USD 32 lOil prices extended their rally in Asia by hopes of extra stimulus measures in the Eurozone and Japan that could help boost demand in the face of a global supply glut. Prices ended on a buoyant note January 22, 2016, with the US benchmark West Texas Intermediate (WTI) for March delivery soaring 9% to USD 32.19 a barrel, while Brent soared 10% to USD 32.18.

The upward momentum continued in Asia on January 25, 2016, with WTI up 46 cents, or 1.43%, at USD 32.65 and Brent 56 cents, or 1.74%, higher at USD 32.74. According to the chief market strategist at CMC Markets Australia, a report showing that private sector business activity in the Eurozone continued to expand in January boosted hopes for oil demand catching up with the oversupply. Data monitoring company closely watched composite Purchasing Managers Index (PMI) fell to 53.5 points in January from 54.3 in December. While the figure was an 11-month low it was still well above the 50-point level that separates growth and contraction in the 19-nation bloc.

International

China economic growth slowest in 25 years lChina’s economy grew by 6.9% in 2015, compared with 7.3% a year earlier, marking its slowest growth in a quarter of a century. China’s growth, seen as a driver of the global economy, is a major concern for investors around the world. The International Monetary Fund expected China’s economy to grow by 6.3% this year and 6% in 2017. Beijing had set an official growth target of about 7%.

Weaker growth would be acceptable as long as enough new jobs were created. However, some observers predicted its growth is actually much weaker than official data. Experts stated that any growth below 6.8% would likely fuel calls for further economic stimulus. Economic growth in the final quarter of 2015 edged down to 6.8%, according to the country’s national bureau of statistics.

After experiencing rapid growth for more than a decade, China’s economy has experienced a painful slowdown in the last two years. It has come as the central government wants to move towards an economy led by consumption and services, rather than one driven by exports and investment. Some argue that China’s focus on creating an economy driven by consumption is misplaced. They say as the country attempts to rebalance its economy, it should focus on productivity in order to sustain high growth.

China’s headline annual economic growth numbers are important to the rest of the world. However other monthly economic data as they can provide a more in-depth look at the economy and where it is heading. Monthly industrial production (IP) and retail sales numbers for China were also released on Tuesday, with both December numbers coming in just slightly worse than expected. Industrial production or factory output expanded 5.9% in December, down from 6% in November. Retail sales grew 11.1%, down from 11.3% in November.

China’s GDP growth rate

NYMEX Crude Oil Futures Close

(Front Month)

Source: National Bureau of Statistics of China

Source: WTRG Economics

16

1412

1086

4

20

1980 1985

%, in�ation-adjusted

1990 1995 2000 2005 2010 2015

65605550

45

40

32.1935

3025

Jan

2015

January 2, 2015 - January 22, 2016

Mar

201

5

May

201

5

Jul 2

015

Sep

2015

Nov

201

5

Jan

2016

Close

33


34


Global food price resumed its fall in November after a spike in October Global Food Price plunging by nearly 19% for 2015 l

Global oil market - Monthly Overview l

The global food price index averaged 154.1 points in December 2015, down 1.5 points (1%) from its revised November value. Over the full year, the index has averaged 164.1 points, nearly 19% less than in 2014, marking the fourth consecutive annual decline. Abundant supplies in the face of a timid world demand and an appreciating US dollar are the main reasons for the general weakness that has dominated food prices in 2015.

Cereal Price averaged 151.6 points in December, down almost 2 points (1.3%) from November. Compared to 2014, the cereal price index shed 29 points, or 15.4%, in 2015.

Price of oils & fats averaged 141.1 points in December, up 2.9 points (2.1%) from November. For 2015 as a whole, the Index averaged 147 points, down 19% from 2014 and representing a 9-year low.

Dairy products averaged 149.5 points in December, down 1.6 points (1%) from November. The decline stemmed from a fall in prices for milk powders, as those for butter rose and those for cheese were unchanged. The Dairy Index averaged 160.3 points in 2015, down 63.8 points or 28.5% compared to 2014, marking its lowest annual average since 2009.

Meat Price averaged 152.1 points in December, down 3.5 points (2.2%) from its November revised value. For 2015 as a whole, the Meat Index averaged 168.4 points, down 29.9 points or 15.1% compared to 2014 (a record year), and its lowest annual average since 2010.

The price of sugar averaged 207.8 points in December, up 1.3 points (0.6%) from November. Overall, the FAO Sugar Price Index in 2015 averaged 190.7 points, 21% lower than in 2014.

Organization of the Petroleum Exporting Countries (OPEC) published its Monthly Oil Market Report on December 10, 2015. The OPEC Reference Basket (ORB) plunged by almost 17% in December, and its yearly value almost halved, as persistent oversupply in the oil market coupled with increasing signs of slowdown in the Chinese economy to exert pressure on the oil markets. In addition, oil prices were being driven downward by the appreciation of the US dollar and a fall in equity markets.

Less-than-expected seasonal demand due to warmer weather also weighed on prices. M-o-m, the ORB dropped USD 6.86 to USD 33.64/b, while y-o-y, it was down 48.6% at USD 49.49/b. Crude oil futures declined significantly for the month and the year. ICE Brent ended December down USD 7.03 to stand at USD 38.90/b, while Nymex WTI fell by USD 5.60 to settle at USD 37.33/b. On a yearly average basis, both dropped double digits and for a second straight year, with ICE Brent averaging 2015 down at USD 53.64/b compared to USD 99.51/b in 2014. Nymex WTI plunged by USD 44.20 to settle at USD 48.80/b from USD 93/b in 2014.

Commodity Market Roundup

245

220

195

170

145

Market Roundup

54.06 57.3062.16

56.14

45.4645.02

33.99

27.73

010203040506070

Feb

15

Mar

15

Apr

15

May

15

Jun

15

Jul 1

5

Aug

15

Sep

15

Oct

15

Nov

15

Dec

15

Jan

16

OPEC BASKET CRUDE OIL PRICE (USD/

BARREL)

Source: OPEC

Source: Food and Agricultural Organization

International palm oil quotations

dropped, as sluggish global

import demand coincided with

larger than anticipated

production in South East Asia.

35


Exchange and Forward Rates l (As of January, 2016)

Major Currency Exchange Rates

Currency BC SellBDT

TT BuyBDT

USD 79.00 78.00EUR 87.25 83.25GBP 114.55 110.55AUD 56.70 53.95JPY 0.68 0.65CHF 79.41 75.63SEK 9.38 8.92

Major Currency Exchange Rates

Currency BC SellBDT

TT BuyBDT

CAD 57.18 54.40HKD 10.36 9.86SGD 56.21 53.46AED 21.85 20.78SAR 21.50 20.45DKK 11.66 11.09KWD 264.23 251.31

Exchange Rate of Some Currencies

Currency Currency Per USD

BDT per Currency

INR 67.98 1.15PKR 104.93 0.75LKR 144.05 0.54THB 35.84 2.19MYR 4.26 18.45

Source: Standard Chartered Bank.

(November, 2015)

Money Market lThe Bangladesh interbank call money rate was around 2.0% – 3.0% on January 27, 2016.

Foreign Market lLocal: The USD/BDT market was steady and was range bound as on January 27, 2016.

International: The dollar struggled to gain traction on Wednesday as investors awaited the outcome of a Federal Reserve meeting for clues on whether bets on a single U.S. interest rate rise in 2016 are justified. With investors largely in wait-and-see mode before the Fed, Australia’s dollar was the biggest mover, hitting a three-week high after a measure of domestic inflation came in slightly higher than expected. Most markets were choppy, with Asian bourses closing up on the day but European stock markets falling alongside oil prices. Though the Aussie was up around 0.6% against its U.S. counterpart, other currencies seen as risky struggled.

The Swiss franc fell to its lowest level since the Swiss National Bank removed the cap on its currency just over a year ago, trading at 1.1063 francs per euro. Analysts said 1.10 francs had been an important level for the currency to break through. The dollar index inched down 0.1% to 98.976, nursing a 0.3% loss recorded on Tuesday and staying well below a seven-week high of 99.799 set last Thursday. The euro was flat at USD 1.0874, while the yen crawled up 0.1% to 118.31 against the greenback.

Currency Market Roundup

Financial Sector Prices l The spread of weighted average lending and deposit rate increased slightly and stood at 4.81% in

November 2015 from 4.77% in October, 2015 The weighted average call money rate in the interbank market rose to 3.97% in January 2016 from

3.69% in December 2015 due to adequate liquidity in the money market Bangladesh Bank has changed repo and reverse repo rate at 6.75% and 4.75% respectively, following

a declining revision by 50 basis points effective from January 14, 2016.

Treasury Bill/Bond Auction Information lAuction Date Tenure & Name of the Securities Sale Value (in BDT mn) Weighted Average Yield (%)

24-Dec-15 30-day BB Bill 8577.404 3.2528-Dec-15 91 days T.Bill 5955.288 3.1028-Dec-15 182 days T.Bill 3576.917 4.2021-Dec-15 364 days T.Bill 6709.258 4.502-Dec-15 2 yrT.Bond 4200 6.009-Dec-15 5yr T.Bond 3709.4 6.44

17-Dec-15 10yr T.Bond 2000 7.3923-Dec-15 15yr T.Bond 675 7.8723-Dec-15 20yr T.Bond 3000 8.99

* Sale value not applicable, Face Value used. Source: Bangladesh Bank

36


Management Change lBanks, NBFIs and Other OrganizationsName Position OrganizationMd Rezaul Haque Chairman Social Islami Bank Mushtaque Ahmed Directors Bangladesh Development Bank LtdMd Abu Hanif Khan Directors Bangladesh Development Bank Ltd

SM Nurul Hoque President Bangladesh Myanmar Chamber of

Commerce and Industry

Sheikh Md Abdus Sohhan Senior Vice-PresidentBangladesh Myanmar Chamber of

Commerce and Industry Kazi Masihur Rahman Managing Director Mercantile Bank Abhijit Chakravorty Country Head State Bank of India's Khawja Manzer Nadeem Chief Executive Officer Paramount Insurance Md Shafiqur Rahman Managing Director Social Islami BankMahmudul Alam Managing Director Union Capital (UCL).

Growth in the global car market was solid, if not spectacular, during 2015. There was strong demand in both Britain and America, in part because of low interest rates and improving consumer confidence. Although volumes are still below their pre-crisis levels, the EU had its best year for new car registrations since 2009, spurred on by good results in Italy and Spain. China, however, is experiencing a slowdown: the world’s biggest car market grew at its slowest pace in three years with luxury cars hit particularly hard due to a corruption crackdown and worries about growth. The falling number of new registrations in Brazil and Russia is no surprise given the abysmal state of their economies.

Insight Analysis lNew passenger-car registrations

20

10

0

-10

-20

-30

-40

1.0 1.6

Spai

n

Italy

Indi

a

Euro

pean

Uni

on

Chin

a

Fran

ce

Uni

ted

Stat

es

Brita

in

Ger

man

y

Japa

n

Braz

il

Russ

ia

2.0 2.6 17.5 3.2 4.2 2.1 1.6

2015, % change in registrations* on a year earlier

Total, m* Sales for China, India, Russia & United States, Includes light vehicles Includes light commercial vehicles

Source: ACEA; AEB; ANFAVEA; Autodara; Haver Analytics; JAMA; SIAM

21.1 1.913.7

International Commodity Prices lCommodity Unit Price January 22, 2016

(USD/unit)Price December 24, 2015

(USD/unit) Change +/(-)

Crude Oil Barrel 32.19 38.10 -15.51%Gold Ounce 1096.25 1071.90 2.27%Silver Ounce 14.17 14.20 -0.21%Nickel Tonne 8505.00 8590.00 -0.99%Tin Tonne 13400.00 14650.00 -8.53%Lead Tonne 1615.50 1747.00 -7.53%Aluminium Tonne 1470.00 1610.00 -8.70%Zinc Tonne 1473.00 1535.50 -4.07%Copper Tonne 4376.00 4665.50 -6.21%

Source: LBMA; Worldal; WTRG

37


International Economic Forecast Year on year percentage change

GDP CPI2015 2016 2017 2015 2016 2017

Global (PPP Weight) 2.9% 3.0% 3.4% 3.3% 3.1% 3.6%Advanced Economies 2.0% 2.0% 2.3% 20.0% 1.1% 1.9%Euro Zone 1.5% 1.9% 2.2% 0.0% 80.0% 1.4%Developing Economies 3.8% 3.9% 4.4% 6.1% 5.1% 5.3%

Forecast as of January, 2016.Source: Wells Fargo Securities, LLC

Selected Economic & Financial Indicators l% change on year-on-year

Country

Global domestic product Consumer pricesUnemployment

rate, %

Current account balanceInterest rates,

% 10-year gov’t bonds, latestLatest qtr 2016 latest 2015

Latest 12 months, USD

in billion

% of GDP 2015

United States 2.1 2 2.4 0.7 0.2 5.0 -456.6 -2.5 2.04China 6.8 6.6 6.4 1.6 1.5 4.1 275.9 3.0 2.68Japan 1.6 1 1.1 0.3 0.7 3.3 131.5 3.3 0.22Britain 2.1 1.8 2.2 0.2 0.1 5.1 -134.2 -4.4 1.80Canada 1.2 2.3 1.9 1.4 1.2 7.1 -54.1 -3.3 1.16France 1.1 1 1.4 0.2 0.1 10.1 3.5 -0.3 0.87Germany 1.7 1.3 1.7 0.3 0.2 6.3 279.0 8.1 0.49Russia -4.1 0.0 -0.3 12.9 15.3 5.8 65.8 5.2 10.80Hong Kong 2.3 3.5 2.1 2.4 3.1 3.3 9.3 2.8 1.74India 7.4 11.9 7.5 5.6 5.0 4.9 -22.7 -1.1 7.76Singapore 2.0 5.7 3.0 -0.8 0.2 2.0 68.6 21.2 2.38Brazil -4.5 -6.7 -2.6 10.7 9.6 7.5 -68.0 -3.7 16.6Mexico 2.6 3.0 2.8 2.1 2.7 4.1 -29.9 -2.6 6.26

*% change on previous quarter, annual rate. Source: The Economist.** The Economist poll or Economist Intelligent Unit estimate/forecast.

Markets Index Jan 20th% Change on

One WeekDec 31st, 2014

In Local currency In USDUnited States (DJIA) 15766.7 -2.4 -11.5 -11.5

United States (S&P 500) 1859.3 -1.6 -9.7 -9.7

United States (NAScomp) 4471.7 -1.2 -5.6 -5.6

China (SSEA) 3115.3 0.9 -8.1 -13.3

Japan (Nikkei 225) 16416.0 -7.3 -5.9 -3.0

Britain (FTSE 100) 5673.6 -4.8 -13.6 -21.4

Canada (S&P TSX) 11843.1 -2.7 -19.1 -36.0

Germany (DAX) 9391.6 -5.7 -4.2 -13.7

Hong Kong (Hang Seng) 18886.3 -5.3 -20.0 -20.7

India ( BSE) 24062.0 -3.2 -12.5 -18.8

Pakistan (KSE) 30766.0 -4.3 -4.2 -8.2

Singapore (STI) 2559.8 -5.1 -23.9 -30.0Source: The Economist

International Market Movement l

38


IDLC News

IDLC Investments Acts as an Issue Manager for Energypac Power Generation Limited’s Initial Public Offering (IPO) l

IDLC Spreading Warmth in winter l

Bangladesh Securities and Exchange Commission (BSEC) has approved the Initial Public Offer (IPO) of Energypac Power Generation Limited in its 563rd Commission Meeting held on January 05, 2016. The company will raise BDT 418,255,000 through issuance of 16,730,200 ordinary shares at an issue price of BDT 25 each including a premium of BDT 15 per share from the capital market of Bangladesh. IDLC Investments Limited is acting as manager to the issue of the IPO of Energypac Power Generation Limited.

Energypac Power Generation Limited (EPGL) was incorporated as a private limited company on July 15, 1995. The company is engaged in several diversified businesses including supply of standby and base load generators, low voltage electrical accessories, busbar trucking systems and luminaries; and JAC brand automobiles and construction machinery. The company is also engaged in installing power plants under engineering, procurement and construction (EPC) contracts, operation and installation of CNG refueling station and conversion kits and providing installation and maintenance services to power plants.

During 2015 and 2014 the revenue of the company was BDT 3,132 million and BDT 4,271 million respectively and net profit was BDT 235 million and BDT 430 million respectively. EPS of the company is BDT 1.57 for the year ended June 30, 2015 and Net Asset Value per share is BDT 31.13 as on June 30, 2015.

Energypac Power Generation Limited plans to repay its term loan and to invest in inventory of trading business with the IPO Proceeds.

IDLC as part of its extended responsibilities distributed blankets to selected regions in North Bengal with the help of the Bogra IDLC team.

The blankets were distributed among underprivileged villagers of Bogra, Nilfamari, Gaibandha including Sherpur, Noskuripar, Shazapur, Darail Bazar, Gabtoli, Nizgram, Maloyinagar, which included children and elderly and different orphanages of these locations. The distribution was initiated during the first week of January 2016.

Another set of blankets were distributed to by Dishari Foundation to school children of Mokhshedpur, Gopalganj.

39


IDLC Participated at BARVIDA Car Expo 2016 l

As a part of our marketing strategy, IDLC Finance Limited successfully partaken in “BARVIDA Car Expo 2016”, which was a three day event organized by Bangladesh Reconditioned Vehicles Importers and Dealers Association (BARVIDA). The expo was held at the International Convention City Bashundhara (ICCB), Dhaka during 22nd to 24th January 2016.

Mr. Shajahan Khan, MP, Honorable Shipping Minister of Bangladesh Government, was present as the Chief Guest in the Inaugural Session. Renowned reconditioned vehicle Importers & Dealers, Financial Institutions, Insurance companies, CNG conversion service providers, car accessories & parts sellers, car security service providers and other relevant stakeholders participated in the fair. Md Abdul Hamid Sharif, President, BARVIDA along with state bodies like the National Board of Revenue (NBR) and Bangladesh Road Transport Authority (BRTA) were also present at the event, interacted with the visitors & provided them with necessary information.

Consumer Division successfully promoted its Car Loan products throughout the fair period and received almost 200 prospective client database, who paid a visit to our stall and placed queries regarding car loan. A good number of loan applications have already been submitted & some are in process of submission, which were sourced through the fair.

We firmly believe that our participation in the fair has facilitated us with a distinct branding regarding our product features. We hope it would take us one step ahead towards maintaining our position as one of the major market leaders in Car Loan industry of the country.

A developed nation is a prosperous nation.

At IDLC, we help you contribute to this process.

We are in the business of financing happiness.


Advance/Decline (January, 2016) Advanced Declined Unchanged

All Category 178 140 13

Top Ten Gainers’ List (January, 2016)Top Ten Gainers 31-Jan-16 31-Dec-15 % Change

ITC 71.2 10.0* 612.0%EASTRNLUB 723.6 305.6 136.8%ALLTEX 30.6 17.3 76.9%TALLUSPIN 24.2 17.7 36.7%DACCADYE 15.2 11.2 35.7%SUNLIFEINS 35.5 27.1 31.0%MIRACLEIND 33.1 25.5 29.8%BDTHAI 43.0 34.1 26.1%DAFODILCOM 24.2 19.3 25.4%CMCKAMAL 15.2 12.2 24.6%

*offer price

Index Movement (January, 2016) Index Point Change % Change YTD changeDSEX 4,540.9 -88.8 -1.9% -1.9%DS30 1,719.2 -31.4 -1.8% -1.8%DSES 1,095.3 -11.9 -1.1% -1.1%

Monthly Market Statistics l

Top Ten Losers’ List (January, 2016)Top Ten Losers 31-Jan-16 31-Dec-15 % ChangeSHURWID 12.3 17.1 -28.1%ATLASBANG 122.8 161.4 -23.9%GQBALLPEN 67.3 85.4 -21.2%SAPORTL 48.5 60.3 -19.6%KDSALTD 69.7 85.0 -18.0%NATLIFEINS 205.3 248.9 -17.5%APEXSPINN 94.1 113.3 -16.9%APEXTANRY 108.6 128.9 -15.7%SPCL 104.3 122.6 -14.9%ECABLES 113.3 131.9 -14.1%

The first month of 2016 started with fresh enthusiasm as DSEX accumulated a total of 46.4 points during the first week. But, the zeal could not spread any further, as only seven sessions out of twenty-one closed in positive territory, exhibiting the cautious investment mindset of the investors. During the month, market participants opted for booking profit that they accumulated during the last two months. In the meantime, optimistic macro updates flowed in the market like export beating its target in HY 2016, rising by 7.8% YoY and capital machinery import soaring by over 20% YoY in first 5 months of this FY and 2.5% YoY growth in remittance during last December. Though these optimistic cues spurred positivity among investors for the time being, the effect could not sustain throughout the month. Volatility remained prevalent during the month as DSEX crossed 4,700.0 points psychological level during intra-session, while investors were trying to earn some spreads from short-term positioning and repositioning. During mid-January, Bangladesh Bank published the Monetary Policy Statement for H2 FY 15-16 with an expansionary tone equipped with lower credit growth target, which was still considerably higher than the actual credit growth figure and a rate cut. However, the MPS could not pull out the investors from meticulous investment sentiment and market lost 154.1 points after the publication till the month end. During the latter part of the month, some earnings driven movements were observed in some scrips, as the quarterly disclosures of companies began to flow in the market. In January, ITC, SEMLLECMF and VAMLBDMF1 made their debut in the market at an offer price of BDT 10.0. While ITC and SEMLLECMF postedgain of 612.0% and 5.0% respectively over their offer price since their debut till month end, VAMLBDMF1 closed flat.

By the end of the month, DSEX lost a total of 88.8 points, while the blue chip index DS30 lost 31.4 points. During December, market enthusiasm was higher than that of the last month, with an average turnover of BDT 5.4 bn which was BDT 4.2 bn during November, a 29.8% increase. Throughout the month, Engineering led the turnover chart followed by Textiles, capturing 17.5% and 13.9%, respectively of the month’s average turnover.

This month, Ceramics (+8.8%) and Textile (+4.3%) yielded significant return, while Life Insurance (-7.9%) and Engineering (-4.0%) faced severe erosion. Throughout the month, Micro Caps (+3.9%) satisfied the market participants most, while Mid Caps (-2.5%) yielded disappointment.

During the month BSEC approved the IPO issue of Energypac Power Generation Limited and IPO subscription of Bangladesh National Insurance Company Limited. It also gave consent to the right share (1R:5) issuance of Summit Alliance Port Limited and the draft prospectus of VIPB Accelerated Income Unit Fund.

Capital Market Review

40


Market Statistics (January, 2016)Market Stat Unit 31-Jan-16 31-Dec-15 % Change

Mcap (All)BDT Bn 3,153.1 3,159.8 -0.2%

USD Bn 40.2 40.3 -0.2%

Mcap (Equity)BDT Bn 2,565.4 2,574.2 -0.3%

USD Bn 32.7 32.8 -0.3%

*TurnoverBDT Mn 5,404.6 4,164.2 29.8%

USD Mn 68.8 53.0 29.8%* Turnover indicates avg. daily trade value of respective month

Top Ten by Value (January, 2016)Top Ten (Value) 31-Jan-16 31-Dec-15 % Change Value

UPGDCL 152.1 140.2 8.5% 4,191.8 EMERALDOIL 60.9 65.0 -6.3% 3,638.0

BXPHARMA 86.4 84.1 2.7% 2,697.6

SQURPHARMA 258.9 253.7 2.0% 2,510.3

BEXIMCO 28.9 29.0 -0.3% 2,421.6

BDTHAI 43.0 34.1 26.1% 2,307.1

ITC 71.2 10.0* 612.0% 2,178.9 ALLTEX 30.6 17.3 76.9% 2,040.7 IFADAUTOS 93.6 92.2 1.5% 1,920.5

KDSALTD 69.7 85.0 -18.0% 1,713.1 *offer price

Lowest P/E and Lowest P/NAV ratio

Lowest P/E Lowest Price/NAVSOUTHEASTB 5.0x POPULAR1MF 39.9%PRIMEBANK 5.4x PHPMF1 40.6%TRUSTBANK 5.5x EBL1STMF 41.4%MTB 5.6x 1JANATAMF 41.4%ONEBANKLTD 5.6x EBLNRBMF 41.8%UTTARABANK 5.8x ABB1STMF 42.0%UCB 5.9x TRUSTB1MF 42.5%APOLOISPAT 5.9x IFIC1STMF 43.5%STANDARINS 5.9x GREENDELMF 43.7%FARCHEM 6.1x DBH1STMF 48.7%

Top Ten Market Capitalization (January, 2016)

Top Ten Mkt Cap BDT (Billion) % Change GP 346.6 1.5%BATBC 185.0 4.5%SQURPHARMA 161.4 2.0%LAFSURCEML 82.9 -4.3%ICB 63.7 0.4%RENATA 65.6 -5.8%UPGDCL 55.2 8.5%TITASGAS 44.7 0.9%OLYMPIC 49.8 2.2%BERGERPBL 45.1 -4.6%

Market Capitalization

DSE Turnover and DSEX

Market Cap Class wise Stock Movement

USD in mn

BDT in mn

Recent Corporate Declaration lCompany name AGM Date Record

date SD* CD**

H.R. Textile Mills Limited 28.03.16 10.02.16 N/A 10.0%

Marico Bangladesh Limited N/A 15.02.16 N/A 100% Interim)

Prime Finance First Mutual Fund N/A 17.02.16 N/A 5.0%

*SD = Stock Dividend, **CD =Cash Dividend

-

10,000

20,000

30,000

40,000

50,000

Jan-

13M

ar-1

3Ap

r-13

Jun-

13Ju

l-13

Sep-

13O

ct-1

3De

c-13

Jan-

14M

ar-1

4Ap

r-14

Jun-

14Ju

l-14

Sep-

14O

ct-1

4De

c-14

Jan-

15M

ar-1

5Ap

r-15

Jun-

15Ju

l-15

Aug-

15O

ct-1

5No

v-15

Jan-

16

USD

in M

n

Jan-

13

Jan-

16

Feb-

13M

ar-1

3Ap

r-13

May

-13

Jun-

13Ju

l-13

Aug-

13Se

p-13

Oct

-13

Nov-

13De

c-13

Jan-

14Fe

b-14

Mar

-14

Apr-

14M

ay-1

4Ju

n-14

Jul-1

4Au

g-14

Sep-

14O

ct-1

4No

v-14

Dec-

14Ja

n-15

Feb-

15M

ar-1

5Ap

r-15

May

-15

Jun-

15Ju

l-15

Aug-

15Se

p-15

Oct

-15

Nov-

15De

c-15

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1,000

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3,000

4,000

5,000

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Turnover IndexDSE Turnover (BDT Mn) DSEX

3.94%

2.12%

-1.49%

-2.51%

0.49%

Micro Mini Small Mid Large

41


Sector Indicators (January, 2016) l

Following table exhibits the Open-End Mutual Funds (10) in order of YTD change in NAV. Sl

No Name of Mutual Funds Initial Fund Size (BDT mn)

Re-Purchase Price

Selling Price

Effective Date* NAV % Change in NAV

from last weekYTD Change

in NAV Fund

Manager1 MTB Unit Fund 1000 10.0 10.1 31-Jan-16 10.1 -1.7% 4.8% ACAML2 Rupali Life Insurance First Mutual Fund 500 9.7 10.0 3-Feb-16 10.3 0.2% 1.1% PAMC3 Shandhani Life Unit Fund 500 9.8 10.1 27-Jan-16 10.3 0.0% 0.4% Alif AMCL4 Bangladesh Fund 50000 100.0 103.0 31-Jan-16 100.0 0.0% 0.0% ICB AMCL5 ICB AMCL Islamic Unit Fund N/A 10.0 10.3 31-Jan-16 10.3 0.0% 0.0% ICB AMCL6 ICB AMCL Converted First Unit Fund 500 10.0 10.3 31-Jan-16 10.0 0.0% 0.0% ICB AMCL7 ICB AMCL Unit Fund 100 230.0 235.0 31-Jan-16 230.0 0.0% 0.0% ICB AMCL8 ICB AMCL Pension Holders' Unit Fund 100 180.0 185.0 31-Jan-16 180.0 0.0% 0.0% ICB AMCL9 CAPM Unit Fund 100 100.0 103.0 28-Jan-16 102.9 0.2% -0.1% CAPM

10 Prime Financial First Unit Fund** 200 97.0 100.0 3-Feb-16 100.8 0.2% -4.2% PAMC* For ICB AMCL, ACAML amd CAPM, effective date is the date from which repurchase price, selling price and NAV are applicable. For PAMC and Alif AMCL, effective date is the date until which repurchase price, selling price and NAV are applicable.** YTD Change in NAV is calculated on NAV effective till December 30, 2015

Weekly (Jan. 24 - Jan. 28, 2016) Mutual Funds Update l

Following table exhibits the Closed-end Mutual Funds (41) in order of YTD change in NAV based on latest NAV/unit as on January 28, 2016. On the basis of Price/NAV, 37 Mutual Funds out of 41 were traded below their respective NAV. POPULAR1MF and PHPMF1 had the lowest Price/NAV and were traded at 60% and 59% discount, respectively. 6THICB and 8THICB were traded at higher multiple than others, 29% and 24% premium, respectively. Last week, NAV of 38 Mutual Funds decreased and 3 Mutual Funds increased. On the other hand, price of 21 Mutual Funds decreased, 10 increased while 10 remained unchanged. On an average, price of Mutual Funds decreased by 1.15% while NAV decreased by 0.9% from previous week, against a -1.81% change in DSEX over the week. In terms of price changes, 23 Mutual Funds outperformed DSEX over last week. Among all the asset managers, VIPB outperformed most in terms of change in NAV of its funds, adding an additional 0.08% on an average over Mutual Funds managed by it.

Sectoral Indicators Sector Per-formance

Sector Turnover(BDT Mn) % of Total Turnover Industry Cap (Equity) Annualized PE Trailing PE Price/BV Return (%)Pharmaceuticals & Chemicals 632.2 11.7% 15.8% 22.7x 22.5x 4.9x 0.0%Bank 377.6 7.0% 15.5% 7.8x 6.4x 1.1x -1.9%Telecommunication 80.8 1.5% 14.0% 17.8x 18.7x 9.4x 1.3%Fuel & Power 729.3 13.5% 12.8% 12.1x 11.8x 2.5x -1.9%Food & Allied 363.8 6.7% 9.7% 30.9x 29.6x 19.0x 3.7%Engineering 945.5 17.5% 5.8% 18.2x 20.9x 2.9x -4.0%NBFI 282.6 5.2% 5.8% 19.5x 16.0x 2.1x -0.7%Cement 120.4 2.2% 5.5% 27.6x 27.2x 5.5x -3.7%Textile 751.5 13.9% 3.4% 12.1x 13.0x 1.5x 4.3%Miscellaneous 326.6 6.0% 3.2% 27.3x 26.4x 1.5x 1.1%Life Insurance 86.1 1.6% 1.7% N/A N/A N/A -7.9%Mutual Funds 48.9 0.9% N/A N/A N/A 0.6x N/ANon Life Insurance 52.5 1.0% 1.2% 10.9x 11.1x 1.2x 4.0%Ceramics 82.3 1.5% 1.1% 30.1x 33.1x 9.8x 8.8%Tannery 33.8 0.6% 0.9% 24.3x 23.7x 4.4x -3.4%Travel & Leisure 91.9 1.7% 0.8% 19.0x 20.3x 0.6x N/AServices & Real Estate 182.2 3.4% 0.7% 25.0x 26.4x 2.3x -10.6%IT 180.8 3.3% 0.5% 21.1x 24.4x 2.6x 5.0%Corporate Bond 0.6 0.0% N/A N/A N/A N/A N/APaper & Printing 28.6 0.5% 0.1% 29.3x 18.2x 1.6x 7.9%Jute 6.7 0.1% 0.0% N/A N/A 45.1x -9.0%

5,404.6 100.0% 100.0% 15.2x 14.4x 2.5x -

42


DSE Code Name of Mutual Funds" Price

(Jan 28, 2016) "

Latest NAV/unit Price/NAV

%Change of Price from last week

%Change in NAV from last week

YTD Change in

NAV*Performance against

DSEX (YTD)Redemption

YearFund

Manager

3RDICB 3rd ICB M.F. 310.6 379.3 81.9% 0.1% 0.7% 9.3% Outperformed 2016 ICB

7THICB 7th ICB M.F. 117.4 99.5 117.9% 0.0% -1.3% 5.4% Outperformed 2016 ICB

4THICB 4th ICB M.F. 222.5 248.7 89.5% -5.3% -0.2% 5.0% Outperformed 2016 ICB

8THICB 8th ICB M.F. 75.2 60.7 123.9% 4.9% -2.7% 4.3% Outperformed 2016 ICB

1STPRIMFMF Prime Finance First Mutual Fund 10.1 10.7 94.2% -9.8% -0.6% 3.5% Outperformed 2019 ICB AMCL

ICBEPMF1S1 ICB Employees Provident MF 1: Scheme 1 6.7 7.9 85.2% 6.3% -1.3% 3.4% Outperformed 2019 ICB AMCL

ICB1STNRB ICB AMCL 1st NRB Mutual Fund 18.8 22.1 85.1% 0.5% -1.3% 3.4% Outperformed 2017 ICB AMCL

ICBAMCL2ND ICB AMCL Second Mutual Fund 4.5 8.6 52.1% -4.3% -1.1% 3.2% Outperformed 2019 ICB AMCL

ICB3RDNRB ICB AMCL Third NRB Mutual Fund 4.4 7.7 57.0% -2.2% -0.9% 3.1% Outperformed 2019 ICB AMCL


ICB2NDNRB ICB AMCL 2nd NRB Mutual Fund 7.9 10.8 73.2% 0.0% -1.0% 2.8% Outperformed 2018 ICB AMCL

PF1STMF Phoenix Finance 1st Mutual Fund 4.4 8.0 55.3% -2.2% -1.1% 2.2% Outperformed 2019 ICB AMCL

PRIME1ICBA Prime Bank 1st ICB AMCL Mutual Fund 4.5 8.3 54.2% -2.2% -1.1% 2.1% Outperformed 2019 ICB AMCL

ICBSONALI1ICB AMCL Sonali Bank Limited 1st Mutual Fund

6.0 8.9 67.3% -1.6% -0.9% 2.1% Outperformed 2023 ICB AMCL

GRAMEENS2 Grameen One : Scheme Two 10.0 17.0 58.8% 0.0% -0.7% 2.0% Outperformed 2023 AIMS

GRAMEEN1 Grameen Mutual Fund One 17.7 25.6 69.2% -0.6% -0.4% 1.7% Outperformed 2015 AIMS


IFILISLMF1 IFIL Islamic Mutual Fund-1 6.2 9.4 65.7% -1.6% -1.0% 1.4% Outperformed 2019 ICB AMCL

AIMS1STMF Aims 1st M.F. 18.8 26.6 70.7% 1.6% -0.5% 1.2% Outperformed 2015 AIMS

SEBL1STMF Southeast Bank 1st Mutual Fund 9.3 12.4 74.8% 0.0% -0.2% 1.1% Outperformed 2021 VIPB

FBFIF First Bangladesh Fixed Income Fund 6.5 10.9 59.5% -1.5% -0.3% 1.1% Outperformed 2022 RACE

NLI1STMF NLI First Mutual Fund 9.5 13.2 72.1% -1.0% -0.2% 1.0% Outperformed 2022 VIPB

1JANATAMF First Janata Bank Mutual Fund 4.5 10.8 41.6% 0.0% -0.3% 0.7% Outperformed 2020 RACE

ATCSLGF Asian Tiger Sandhani Life Growth Fund 7.5 12.1 62.2% 2.7% 0.1% 0.5% Outperformed 2021ATCP AMCL

TRUSTB1MF Trust Bank 1st Mutual Fund 4.6 10.8 42.6% -8.0% -0.3% 0.4% Outperformed 2019 RACE

RELIANCE1 RELIANCE ONE MUTUAL FUND 6.9 11.7 58.8% -1.4% -0.8% 0.3% Outperformed 2021 AIMS

ABB1STMF AB Bank 1ST Mutual Fund 4.7 11.2 42.0% -4.1% -0.1% 0.3% Outperformed 2022 RACE

SEMLLECMF SEML Lecture Equity Management Ltd. 10.5 10.1 104.5% -6.2% 0.1% 0.2% Outperformed 2026 SEML

PHPMF1 PHP First Mutual Fund 4.3 10.5 40.8% -2.3% -0.4% 0.2% Outperformed 2020 RACE

EBLNRBMF EBL NRB MUTUAL FUND 4.5 10.5 42.9% -2.2% -0.4% 0.1% Outperformed 2021 RACE

EXIM1STMF EXIM Bank 1st Mutual Fund 6.0 10.5 57.1% 1.7% -0.3% 0.1% Outperformed 2023 RACE

EBL1STMF EBL First Mutual Fund 4.5 10.6 42.5% 0.0% -0.3% 0.1% Outperformed 2019 RACE

POPULAR1MF Popular Life First Mutual Fund 4.3 10.8 40.0% -2.3% -0.3% 0.1% Outperformed 2020 RACE

IFIC1STMF IFIC Bank 1st Mutual Fund 4.6 10.6 43.6% 0.0% -0.1% -0.1% Outperformed 2019 RACE

VAMLBDMF1VANGUARD AML BD Finance Mutual Fund One

- 10.8 91.4% -3.9% -0.3% -0.3% Outperformed 2026 VAML

MBL1STMF MBL 1st Mutual Fund 6.5 11.3 57.5% 1.6% -1.6% -0.9% Outperformed 2021 LR Global

AIBL1STIMF AIBL 1st Islamic Mutual Fund 7.4 11.7 63.3% 1.4% -1.4% -1.0% Outperformed 2021 LR Global

GREENDELMF Green Delta Mutual Fund 4.9 10.4 47.3% 0.0% -1.6% -1.1% Outperformed 2020 LR Global

LRGLOBMF1 LR Global Bangladesh Mutual Fund One 5.5 10.1 54.5% 0.0% -2.3% -1.7% Underperformed 2021 LR Global

NCCBLMF1 NCC Bank Mutual Fund 1 6.8 10.8 62.7% 3.0% -3.9% -3.5% Underperformed 2022 LR Global

DBH1STMF DBH First Mutual Fund 5.5 10.4 53.1% 0.0% -5.0% -4.1% Underperformed 2019 LR Global

YTD Change in DSEX -1.9%* RACE, LR Global, AIMS and VIPB managed funds’ YTD is calculated from the NAV of Dec 24 2014. * ICB and ICB AMCL managed funds’ YTD is calculated from the NAV of Dec 30 2014. * YTD of ATCL AMCL managed fund is calculated from the NAV of March 25, 2015.

43


Terminologies Free Float: % of total shares not owned by Sponsors/ Directors, and Govt. Annualized PE: Based on annualized earnings of the latest declared quarterTrailing PE: Based on last 12 months earnings

Company ProfileMatin Spinning Mills Limited (DSE: MATINSPINN) is a manufacturer and marketer of cotton and synthetic yarn. The company was incorporated in 2002. It started its commercial operation four years later in 2006. Later in 2010, MATINSPINN was converted into a public limited company. The company was listed both in DSE and CSE in 2014.

MATINSPINN operates as a backward linkage of garments manufacturing units of DBL Group, which is a business group consisting of 18 different companies. MATINSPINN has an associate company titled DBL ceramics Ltd. Where it has 25% equity stake. The associate company is not operational yet.

Key Revenue Drivers & Company InsightRevenue of MATINSPINN comes from producing and supplying cotton and synthetic yarn to the fabric and apparel manufacturing counterparts within DBL Group. Sales of MATINSPINN are considered ‘Deemed Export’, as its product is ultimately used in export oriented garments industry. Top line growth was negative in previous years, due to shift in customers’ demand to lower price products. Besides, high capacity utilization constrained volume growth opportunity. However, to induce business growth the company initiated production capacity expansion. It is implementing a project to establish a Mélange producing unit with a capacity of 10 ton yarn/day, expected to be operational within this year. It is to be financed by the BDT 1.3 billion worth of IPO of the company. In addition, MATINSPINN plans to implement another expansion project of synthetic yarn with a capacity to produce 7 ton yarn/day.

Financial PerformanceRevenue of the company has been shrinking since 2012, as final product price has been reduced. However, volume sales increased by 3.4% annually during the same period. In coherence with product price decline, cost shrank as well, which helped Gross Profit Margin (GPM) stay quite stable at 19.5% in 2014 and 2015. But, Operating Profit Margin (OPM) increased in 2014 to 14.8% from 13.6% in the year before. Net Profit Margin (NPM) took an even higher leap in 2015, reaching 20.5%, resulting from interest of IPO fund kept in bank, as well as lower financial expenditure. The interest income largely helped the company attain 26.5% CAGR in Net profit since 2012.In HY 2016, revenue declined further by 6.0%. But GPM boosted to 24.4%, which in turn pushed OPM up to 17.0%. Increased Operating Profit and continued interest income helped NPM increase to 21.2%, posting a 5.1% YoY growth in bottom line. Recently, the company has reported consolidated NPAT (excluding non-controlling interests) of BDT 205.5 million with consolidated EPS of BDT 2.1 for the period of six months (Jul’15 to Dec’15) as against BDT 196.5 million and BDT 2.0, respectively for the same period of the previous year.

Matin Spinning Mills Limited (DSE: MATINSPINN)Current Price (January 28, 2016) 41.0Total Number of Share (Million) 97.5Free Float (%) 35.0%Annualized PE* – MATINSPINN 9.7xTrailing PE – MATINSPINN 9.4xAnnualized PE – Textile 12.7x

* Based on annualized earnings of HY 2016.

Financials (BDT Million)** 2014 2015 HY, 2016

Revenue 2,334 2,029 968Gross Profit 454 396 236Operating Profit 318 301 164Net Profit after Tax 317 416 205Total Assets 4,959 5,718 6,136Total Equity 3,843 4,039 3,980

Per share (BDT) 2014 2015 HY, 2016Restated EPS 3.3 4.3 2.1Restated BV Per Share 39.4 41.4 40.8

3 years’ CAGR PeersMATINSPINN SQUARETEXT MALEKSPIN SAIHAMCOT

Revenue -8.2% -4.8% 10.9% 16.4%NPAT 26.5% -0.7% - -3.1%

Source: Financial Statements of MATINSPINN, SQUARETEXT, MALEKSPIN, and SAIHAMCOT; Research, IDLC Investments Limited.

Others 2014 2015 HY, 2016Gross Profit Margin 19.5% 19.5% 24.4%Operating Profit Margin 13.6% 14.8% 17.0%Net Profit Margin 13.6% 20.5% 21.2%ROA 7.2% 7.8% 3.5%ROE 10.4% 10.6% 5.1%Stock Dividend - - -Cash Dividend 25.0% 27.0% -

** Accounting year Jul-Jun

Growth (%) 2014 2015 HY, 2016Revenue -2.6% -13.1% -6.0%Net profit after tax 26.1% 31.0% 5.1%

50 60 70 80 90

100 110 120 130 140

Apr-

14

May

-14

Jun-

14

Jul-1

4

Aug-

14

Sep-

14

Oct

-14

Nov

-14

Dec

-14

Jan-

15

Feb-

15

Mar

-15

Apr-

15

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec

-15

Jan-

16

Reba

sed

Pric

e

DSEX MATINSPINNMATIN SPINNING MILLS LIMITED

Investment Insight Phone: +88 02 9898442 ext: 135

Email: [email protected]

MOHAMMAD SAMIUL ALAMADNAN RASHIDPhone: +88 02 9898442 ext: 153Email: [email protected]

FARAH MARJANPhone: +88 02 9898442 ext: 135Email: [email protected]

MD. JULKER NAIMGreen Finance ReasearcherEmail: [email protected]

ASIF SAAD BIN SHAMSPhone: +88 02 8834990 ext: 102Email: [email protected]

44

This Document has been prepared and issued by IDLC Finance Limited on the basis of the public information available in the market, internally developed data and other sources believed to be reliable. Whilst all reasonable care has been taken to ensure that the facts & information stated in the Document are accurate as on the date mentioned herein. Neither IDLC Finance Limited nor any of its director, shareholder, and member of the management or employee represents or warrants expressly or impliedly that the information or data of the sources used in the Document are genuine, accurate, complete, authentic and correct. Moreover, none of the director, shareholder, and member of the management or employee in any way is responsible about the genuineness, accuracy, completeness, authenticity and correctness of the contents of the sources that are publicly available to prepare the Document. It does not solicit any action based on the materials contained herein and should not be construed as an offer or solicitation to buy sell or subscribe to any security. If any person takes any action relying on this Document, shall be responsible solely by himself/herself/themselves for the consequences thereof and any claim or demand for such consequences shall be rejected by IDLC Finance Limited or by any court of law.

DISCLAIMER

Phone: +88 02 9898442 ext: 135Email: [email protected]

MOHAMMAD SAMIUL ALAMADNAN RASHIDPhone: +88 02 9898442 ext: 153Email: [email protected]

FARAH MARJANPhone: +88 02 9898442 ext: 135Email: [email protected]

MD. JULKER NAIMGreen Finance ReasearcherEmail: [email protected]

ASIF SAAD BIN SHAMSPhone: +88 02 8834990 ext: 102Email: [email protected]

monthly business review - january 2016

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