Professional Documents
Culture Documents
Overview:
• There has been a steady rise in protectionist rhetoric globally in recent months. This has
been seen in the US in terms of “Buy America” clauses in the stimulus package. There
have also been strikes in the UK against overseas workers.
Weekly News Update
• Emerging economies are suffering from the collapse of the US and European financial
sectors. Hedge funds are pulling back. And more importantly, capital constrained banks
are pulling back.
• Such growing protectionism occurs at a time when the major export nations, especially in
Asia, such as Japan, Korea and Taiwan are seeing an unprecedented collapse in their
trade activity.
• Bangladesh is actually a more “open” economy than either India or Pakistan. Thus rising
protectionism, the collapse in global trade and the substantial retrenchment by global
banks is likely to have an increasingly negative impact on Bangladesh.
• Although RMG is nearly 80% of exports, the other 20% is showing significant signs of
slowdown. Ceramics export demand is falling sharply as is the demand for Agro-products,
especially frozen food exports.
• Global banks have been cutting back international lending including trade finance, partly
due to balance sheet pressure and in part from moral suasion by governments who have
EDITORS bailed them out. This is already being reflected in terms of tougher Letters of Credit (LC)
terms for Bangladeshi exporters.
Ifty Islam • In addition, domestic banks, some of whose clients have lost substantial amounts due to
Asian Tiger Capital Partners
Managing Partner falling commodity prices during the second half of 08 are also risk averse.
ifty.islam@at-capital.com
Syeed Khan • Indian External Affairs Minister Pranab Mukerjee visits Dhaka Feb 8. We discuss some of
Partner the major issues in India-Bangladesh Relations. We recognize there are challenges but
syeed.khan@at-capital.com
argue there are also significant mutually beneficial opportunities.
Jisha Sarwar
Senior Research Associate
jisha.sarwar@at-capital.com
Global Protectionist Pressures Set to Rise in 2009
Asian Tiger
Capital Partners
www.at-capital.com
08 February 2009 AT CAPITAL RESEARCH
Contents Page
Overview
Growing Global Protectionism 3
Global Exports are Collapsing 3
What does rising protectionism mean for Bangladesh? 5
Indian Foreign Minister arrives in Dhaka this week 6
India an Opportunity not a Threat 6
Composition of India’s Trade with Bangladesh 7
Trade and transaction costs 7
Energy Cooperation 8
“India+1”: Bangladesh attracting diversification investment from India 8
Economics 13
Economics News
15
Sector News
Agriculture & Food/ Aviation/ Banking 15
Infrastructure & Energy 16
Leather Goods/ Real Estate/ Ship Building 17
Telecoms/ Textiles 18
Tourism 19
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AT Capital Weekly Update 2
08 February 2009 AT CAPITAL RESEARCH
Ifty Islam, Managing Partner
ifty.islam@at-capital.com
Overview
Growing Global Protectionism
There has been a steady rise in protectionist rhetoric that has Such growing protectionism occurs at a time when the major
manifested itself in different ways, from the proposed inclusion of export nations, especially in Asia, such as Japan, Korea and Taiwan
“Buy American” in the Congressional Stimulus package, to strikes are seeing an unprecedented collapse in their trade activity. As
and demonstrations in the UK against Italian workers at refineries. the Economist notes:”many of Asia’s tiger economies seem to
New Treasury Secretary Tim Geithner’s pointed accusation of have been hit harder than their spendthrift Western counterparts.
Chinese currency manipulation in his confirmation hearings played In the fourth quarter of 2008, GDP probably fell by an average
to a receptive Congress and public. China is also at the receiving annualized rate of around 15% in Hong Kong, Singapore, South
end of a ban on its toy exports to India for 6 months. Korea and Taiwan; their exports slumped more than 50% at an
annualized rate”.
In France and Britain, politicians pouring taxpayers’ money into
ailing banks are demanding that the cash be lent at home. Since In the fourth quarter of 2008, real GDP fell by an annualized rate
banks are reducing overall lending, that means repatriating cash. of 21% in South Korea and 17% in Singapore, leaving output in
Regulators are thinking nationally too. Switzerland now favours both countries 3-4% lower than a year earlier. Singapore’s
domestic loans by ignoring them in one measure of the capital its government has admitted the economy may contract by as much
banks need to hold. This contrasts with foreign lending which as 5% this year, its deepest recession since independence in 1965.
counts in full. In comparison, China’s growth of 6.8% in the year to the fourth
quarter sounds robust, but seasonally adjusted estimates suggest
This is economic nationalism, but of a less obvious type. The output stagnated during the last three months. Asia’s largest
purpose is to steer banks towards supporting businesses and jobs economy, Japan, is yet to report its GDP figures, but exports fell by
at home, not abroad. That has an undercurrent of protectionism 35% in the 12 months leading to December. In the same period,
about it. Taiwan’s exports dropped by 42% and industrial production was
down by an extraordinary 32%, worse than the biggest annual fall
As Brad Stetser of the Council for Foreign Relations has noted, in America during the Depression.
that’s not to say that the problems emerging economies now face
trying to raise funds originated in the emerging world. They didn’t. South Korea released preliminary data for January external trade.
They are suffering from the collapse of the US — and European — The results were grim. Exports tumbled by a great-than-expected
financial sector. Hedge funds are pulling back. And more 32.8% y/y. While that is a terrible figure, looking at the actual total
importantly, capital constrained banks are pulling back. That — decline in exports is perhaps even more shocking - exports are
not the fiscal deficit — is what is pulling funds out of the emerging down 47% since the middle of last year. So the theme of
world. Emerging economies in that sense are no different than collapsing global trade looks to be alive and well. The sheer scale
any other borrower facing difficulties getting a bank loan. He of the fall in Korean and Taiwanese exports shows up most cleanly
concludes that “The fact that the financial sector now depends on if monthly exports are plotted over time (charts below courtesy of
a government backstop may have prompted the banks to pull Brad Stetser).
back more from foreign markets than their home markets, though
they are clearly doing both. Deglobalization — particularly
financial deglobalization — isn’t going to be pretty.”
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AT Capital Weekly Update 3
08 February 2009 AT CAPITAL RESEARCH
Source: Bespokeinvest
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AT Capital Weekly Update 4
08 February 2009 AT CAPITAL RESEARCH
As the chart below from Paul Swartz of CFR also illustrates, things unemployment rises, that consumers in developed markets cut
seem to be getting worse in the current US downturn. The fall in back on all discretionary expenditure, even in lower priced
industrial production in the current cycle is already worse than the products which might outweigh the substitution benefits for
fall in an average post World War 2 recession. Bangladeshi garment exports. Anecdotal evidence from textile
producers as well as cotton importers we have spoken to in
Bangladesh suggest dramatic declines in raw material imports
which in turn suggest a scaling back of future RMG production.
Indian Foreign Minister arrives in Dhaka this week We are working on a more detailed analysis on India- Bangladesh
Relations but in the interim, please see an expanded version of
Indian External Affairs Minister Pranab Mukherjee arrives in the Daily Star Column reproduce below:
Dhaka Feb 9 for a one day visit. The Times of India stated Feb 3
that Bangladesh is as yet 'undecided' about acceding to India's India an Opportunity not a Threat
long-pending plea for transit facility to the latter's northeastern
region and Bangladesh might offer a trade concessions-for-transit With the upcoming visit of Indian Foreign Minister Pranab
when Mukherjee visits. Media reports have also indicated that Mukherjee, it is important to discuss a mutually beneficial regional
while Delhi wants a bilateral anti-terror pact with Dhaka, the latter integration strategy. India- Bangladesh relations might be
wants to talk of a regional task force that would include other characterized, simplistically, of one of relative indifference on the
South Asian nations. The report went on to state that “During India side to one of fears of being overwhelmed by the much
Mukherjee's visit, Bangladesh and India may sign two key larger “big brother” on the Bangladesh side. At the beginning of
agreements on bilateral trade, and investment promotion and October 2008, I participated in an Indian Private Equity seminar in
protection. The trade agreement needs to be signed as the Mumbai. I was surprised at the lack of awareness of recent trends
existing three-year bilateral trade agreement will expire in March in the Bangladesh economy among many of the 300 attendees I
this year and be renewed through a fresh accord.” had a chance to speak to. Many were focused on “Incredible
India” companies buying up assets in Europe and the US.
Manik Sarkar, Chief Minister of Tripura, told a Bangladeshi Bangladesh appeared an after-thought.
business delegation recently that transit and trans-shipment
facilities can help both India and Bangladesh promote business However, a re-newed interest by India in their neighbor is justified
and investment enormously, especially in seven northeastern given what one might argue has been a disastrous strategy of
Indian states, including Tripura. over-rapid globalization by a number of Indian companies. Tata’s
purchase of Corus and Jaguar sees them sitting on billions of
To say the relationship between Bangladesh and India is complex dollars of paper losses and an extremely challenging operational
is the height of understatement. This has accurately summed up environment in the developed economy steel and auto sectors
in the following quote: respectively. By contrast, Bangladesh offers a relatively stable
Island of stability in a global sea of extreme volatility for
“Bangladesh’s relations with India are multi-dimensional - prospective Indian corporate investors.
ideological, political and also economic. An extreme sense of
distrust, insecurity and perceived domination by India has shaped What is needed on the Bangladesh side is to form a clear
Bangladesh’s foreign policy in recent years. It at the same time, consensus among not just businessmen and policy makers, but
hesitant and finds it uncomfortable to function within a bilateral critically the broader general public, that India is an opportunity,
parameter. Whether it is trade, export of gas, provision of transit not a threat.
or the water issue, Bangladesh has argued for multilateral
arrangements. Though India played an important role in the A number of valuable themes emerged. For us to see greater FDI
creation of Bangladesh, it is primarily seen by the political class in will require a number of changes. Firstly a focused and proactive
Dhaka as a concern due to its overwhelming size and presence but strategy by Bangladesh, both the government and the private
more importantly because of the nature of domestic politics of sector, to market sectors and specific JV opportunities to Indian
the country. A divided polity polarized on ideological lines and an companies. There needs to be a quarterly series of seminars held
extremely sensitive political atmosphere has made Bangladesh’s alternatively in Dhaka and Mumbai/Delhi attended by the
relations with India subject to domestic dynamics.” (Smruti S respective foreign and commerce ministers and secretaries along
Pattanaik, 2005) with leading corporate sector representation by the FICCI and
FBCCI. Secondly, greater encouragement of higher level
Below we reproduce the Feb 5 Daily Star Column “India as an interaction can come about through easing up visa restrictions
Opportunity not a Threat”. With apologies to our domestic and also establishing direct flights between Dhaka and Mumbai +
audience who may well have read the article already,, many NE Indian cities. Thirdly, we may want to extend the Special
international readers of the AT Capital Weekly may not have seen Economic Zones initiative to offer affirmative action or incentives
it. In addition, we have expanded the discussion. for Indian FDI.
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AT Capital Weekly Update 6
08 February 2009 AT CAPITAL RESEARCH
At the time of Indian Independence, intra-regional trade was 19%,
which fell to 2% in the 1990s and has since risen to around 4%. On
reducing the trade deficit, one school of thought was that we
import cotton and yarn from India and our RMG creates value-
added products that go to the west so our Indian deficit is a
necessary side-product of our surplus with the US. But I also feel
that a focused policy of industrial and export diversification will
also help reduce the India-Bangladesh trade deficit. Simply put, if
we made more of the goods India wanted to import, we could
reduce our trade deficit. Other practical steps we could take
include warehouses at the land stations and more staff on both
sides of the border to reduce delays in the passage of goods. The
adoption of a Free-Trade Area will also help, but the impact will be
limited in the absence of progress in Bangladesh’s industrial
diversification strategy.
India has a large number of exportable goods. The composition of Source: World Bank
India’s exports to Bangladesh is diversified with cereals, cotton,
and vegetable products accounting for a quarter of India’s exports Another major opportunity is for Bangladesh to be a regional
to Bangladesh in 2004–2005. Next in importance comes textile transport hub. There has been a great deal of sensitivity to the
and textile products, followed by base metals and related articles. issue of transit rights. But if we think more broadly about
Over five years starting in 2000-01 while the share of vegetable integrating into the regional network for not only India, but also
products increased, that of textile and textile article declined. The Nepal, Bhutan and indeed China, then we can away from some of
shares of most of the remaining product group increased, the security sensitivities. One transportation expert at the seminar
reflecting greater product diversification. The top 10 export underlined the fact that the proposed $ 6bn Chittagong deep sea
commodity groups (at HS 2-digit level) from India to Bangladesh port is not economically viable on the basis of Bangladesh trade
account for about 70% of India’s total exports to Bangladesh. The flows, but would be a compelling proposal if we could act as a hub
degree of trade complementarity between Bangladesh’s imports for countries in the region including even Kunming in China. We
and India’s exports was quite high during 1980 to 2004. The trade could charge for transportation services to foreign companies that
complementarity index for India’s exports to Bangladesh was 59% would effectively subsidize faster port facilities that would also
on average for the period 1980–2004, whereas the same for enhance Bangladesh competitiveness.
Bangladesh’s exports to India was 28%. In other words, estimated
indices indicate that India’s exports to Bangladesh enjoyed Trade and transaction costs
comparatively higher complementarity than Bangladesh’s exports
to India. Supply constraints make it difficult for Bangladesh to take The Petrapole crossing in India handles by far the largest share of
advantage of the Indian market. Nevertheless, India’s tariff the recorded India-Bangladesh land border trade. Petrapole is on
concession has been helping Bangladesh expand its export baskets a major road 95 kilometres from Kolkata. The neighbouring town
to India, the results of which were reflected in higher exports in on the Bangladesh side of the border is Benapole, which in turn is
2005–2006. linked by a highway to Jessore and Dhaka. The infrastructure
deficiencies and procedural hazards at Petrapole include
inadequate and congested roads, absence of government bonded
warehouses, irregular power supplies, inadequate sanitary
facilities and drinking water, prevalence of theft and other crimes,
frequent strikes, prevalence of speed money, a single border gate
which handles all truck and other traffic as well as individual
travelers and which is wide enough for only one truck at a time to
pass through.
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AT Capital Weekly Update 7
08 February 2009 AT CAPITAL RESEARCH
economic benefits that would otherwise occur if tariffs or other “India+1”: Bangladesh attracting diversification investment from
trade barriers were to be reduced. Without very substantial India
investments in infrastructure and administrative capabilities,
increases in trade would be slowed down or blocked by increases Another major opportunity for Bangladesh is to pursue an
in congestion and the associated increases in economic rents, and “India+1” strategy in the same way that Vietnam has attracted $
an FTA would become ineffective. 40bn of FDI in 2008, in part by being an effective “China+1”. By
this, I mean that Bangladesh can be an alternative manufacturing
Hence, both countries will need to improve the infrastructure – hub for global companies and investors who already have over-
physical and administrative-at their land border Customs posts. reliance on India for a wide range of services and products, from
This would need to be done in a coordinated way-there would no IT outsourcing to truck assembly and auto parts. The government
point if the infrastructure were improved on one side of the should commission a detailed analysis of which companies and
border but bottlenecks were to remain or even increase on the investors have entered India in the past 5 years and then have a
other side of the border. targeted strategy to persuade them to consider setting up similar
facilities in Bangladesh in industries where we have, or can
Energy Cooperation develop, a competitive advantage. “
India has also offered to link Bangladesh to its electricity grid and
sell it power to help it overcome persistent shortages in peak
demand periods. At the DCCI 50th Anniversary conference held in
November, Indian State Minister for Power, HE Jai Ram Ramesh
stated that Bangladesh could buy electricity from plants in
Tripura, where generation capacity exceeds demand, and other
north-eastern Indian states bordering Bangladesh. "India is ready
to pen a deal with Bangladesh to sell up to 1,000 MW of
electricity."
Country-
Country-wise distribution of India’s outward FDI in the SAARC Region (US$ Mn)
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AT Capital Weekly Update 8
08 February 2009 AT CAPITAL RESEARCH
Stock Market Weekly
DSE performance: 52 weeks Market news
While the DSE fared much better than its EM counterparts in 2008
- the DSE was truly one of the most decoupled stock markets in
the world falling by only 7% versus around 38% for the US S&P
500, 50% in India, 65% in China, and more than 70% in Dubai - the
risk in 2009, is that the Bangladesh economy and exports will
likely slow to a greater extent than in 2008, given that the global
recession is getting worse. In the fourth quarter of 2008, real GDP
fell by an annualised rate of 21% in South Korea and 17% in
Singapore, leaving output in both countries 3-4% lower than a
year earlier. Singapore’s government has admitted the economy
may contract by as much as 5% this year, its deepest recession
since independence in 1965. The US and Europe also see a
deepening slowdown with Japan in even worse shape.
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AT Capital Weekly Update 10
08 February 2009 AT CAPITAL RESEARCH
Stock Market News
The country’s finance minister, AMA Muhith, has assured that the
government will take all necessary steps to strengthen the
country’s securities market, which can be a vital source for
industrialisation of the country.
The minister stated, "About 92% scrip less shares are now being
traded, indicating that the market is developing.” He also pledged
to activate the bond market, and stated that measures will be
taken to increase the number of beneficiary owners' (BO)
accounts from the existing 1.9mn to 5.0mn.
http://www.thefinancialexpress-
bd.com/search_index.php?page=detail_news&news_id=58315
The ZCB will be listed and publicly traded in the country’s stock
exchanges. The investors will have the option of converting 20%
of the face value upon each maturity of outstanding bonds at a
predetermined Conversion Strike Price into common stocks of ACI
Ltd.
http://www.thefinancialexpress-bd.com/2009/02/04/57874.html
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AT Capital Weekly Update 11
08 February 2009 AT CAPITAL RESEARCH
DGEN Performance YTD DGEN Performance LTM
Research Team
Ifty Islam
Syeed Khan
Managing Partner
Partner
ifty.islam@at-capital.com
syeed.khan@at-capital.com
_______________________________________________________________________________________
AT Capital Weekly Update 13
08 February 2009 AT CAPITAL RESEARCH
Economic News FDI rises 101% in July-November
The Daily Star, Thursday February 5th, 2009
Recession to hit Bangladesh: CPD
The Daily Star, Sunday February 8th, 2009 In the first five months of the current fiscal year foreign direct
investment (FDI) rose by 101%, although portfolio investments
The global financial crisis will certainly affect Bangladesh as the declined.
country is exposed to global economies, said Prof Mustafizur
Rahman, executive director of Centre for Policy Dialogue (CPD). The country's external balance sheet witnessed a deficit of over
USD 500mn because of the global currency market volatility
The Bangladesh economy is worth USD 84bn, with USD 21bn stemming from the ongoing financial crisis. The balance of
imports and USD 14bn exports. Any event in the global economy payment had a surplus of USD 77mn during July-November, 2007.
will certainly affect the country, said Rahman, while speaking as
the chief guest at a seminar in Dhaka called "Global Financial According to Bangladesh Bank (BB), FDI inflow was USD 480mn
Crisis: Are We Ready". during July-November 08, compared to USD 238mn during the
same period a year earlier. According to the central bank, the
Rahman added that as a safeguard measure, the country should purchase of AKTEL's 30% stake at USD 350mn by a Japanese
strengthen its institutions, as several countries, including the US, company was a major factor contributing to the surge in
have undertaken steps to reform their institutions. Bangladesh's FDI inflow. On the contrary, during July-November
08 portfolio investment dropped by USD 34mn, compared to an
Prof Mahmood Osman Imam, chairman of the finance increase of USD 45mn during the same period in 2007.
department, also spoke at the seminar and stated that the global
financial crisis is likely to affect remittance earning. http://www.thedailystar.net/newDesign/news-
details.php?nid=74421
http://www.thedailystar.net/newDesign/news-details.php?nid=74932
Intervention in forex market ruled out
Capital machinery import plummets amid global recession The Financial Express, Wednesday February 4th, 2009
The Daily Star, Friday February 6th, 2009
Finance Minister AMA Muhith ruled out the possibility of any
Import of capital machinery declined sharply by 32% in January government intervention in the country's foreign currency market.
from a year ago, as the global economic crisis has started to The existing free-floating exchange rate mechanism will remain,
impact the country's manufacturing sector. he stated.
http://www.thefinancialexpress-bd.com/2009/02/06/58125.html
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AT Capital Weekly Update 14
08 February 2009 AT CAPITAL RESEARCH
Sector News
start exporting processed agro products to Papua New Guinea,
Agriculture & Food East Timor, Brunei, Mauritius, Algeria and some other countries
soon.
Tea output slightly below target
The Daily Star, Sunday, February 8, 2009 http://www.thedailystar.net/story.php?nid=74944
The tea industry failed to meet its production target last year, Aviation
owing mainly to a delay in the supply of fertilizer by state-run
Bangladesh Chemical Industries Corporation (BCIC). Total tea RAK Airways shuts operation
output stood at around 58.75mn kg against the target of 60mn. The Daily Star, Thursday February 5, 2009
Industry insiders and a number of tea scientists, however, said a
good yield of tea was possible because of comparatively favorable UAE-based carrier RAK Airways has shut down its operation in
weather conditions throughout the year. In 2007, production Bangladesh as the global recession is causing a decline in air
stood at 57.96mn kg, and in 2006 it was 53.41mn kg. travel. Resultantly, 15 employees at the Airline’s Dhaka office
have lost their jobs.
Tea Production in Bangladesh
Year Production (mn kg) However, according to the carrier's General Sales Agent (GSA), the
1997 50.83 airline will suspend its operations in Bangladesh only on a
1998 55.83 temporary basis.
1999 47.19
2000 52.64 Earlier, Singapore Airlines declared that it will reduce its flights
2001 56.82 from Dhaka to five days a week from seven days a week presently.
Slowing demand for air travel also prompted Thai Airways to
2002 53.62
suspend operations from Chittagong earlier and cut the number of
2003 58.30
flights from Dhaka.
2004 56.00
2005 60.14 http://www.thedailystar.net/newDesign/news-details.php?nid=74420
2006 53.41
2007 57.96 Banking
2008 58.75
According to producers, tea is a very sensitive crop, which needs Islami Bank total deposit reaches BDT 202.89bn
uniform rainfall and sunshine, especially from March to October. The Daily Star, Saturday February 7th, 2009
The region experienced good rainfall from the beginning of March
and the temperature was favorable. However, a delay in supple of The total deposit of Islami Bank Bangladesh Limited (IBBL) reached
fertilizers resulted in a low output of tea. BDT 202.89bn (USD 2.94bn) in January 09, growing by 22% since
Jan 08. Total investments of the bank grew by 15% in January
Potash and NPK fertilizers are very important for tea plants during from a year ago, reaching BDT 205.55bn (USD 2.98bn).
the March-April period; however, tea gardeners did not receive
these imported fertilizers on time. Furthermore, most of the http://www.thefinancialexpress-bd.com/2009/02/07/58174.html
gardeners failed to apply the second installment of urea as the
BCIC supplied it much later than its required time. Bankers fear slow loan payback from spinners
The Daily Star, Thursday February 5th, 2009
There are 160 tea estates. Roughly, two third of the productions is
consumed at home, while the remaining is exported. Bankers are concerned that the import of low-cost yarn from India
will affect them as this will increase the rate of defaults among
http://www.thedailystar.net/story.php?nid=74930 their clients. According to the CEO of Eastern Bank, loan
repayments from spinning millers have already slowed. He added
Pran signs deal on USD 1.5mn exports to Somaliland that banks are at risk as they have a large exposure to spinning
The Daily Star, Sunday, February 8, 2009 mills, which are capital-intensive industries.
Pran Export Ltd, a local company, will export processed agro-food According to industry insiders presently the BDT 270bn spinning
products worth USD 1.5mn to Somaliland over the next year. An mill industry of the country is struggling with an inventory of
agreement was signed between Pran Export Ltd, a concern of the 250,000 tonnes of yarn worth BDT 25bn that could not be sold
Pran-RFL Group, and Hadrawi Trading Establishment at the due to a decline in demand and an influx of comparatively low
National Press Club in Dhaka. According to Hadrawi Trading cost yarn from India. Manufacturers are now importing Indian
Establishment, there is a huge demand for Bangladeshi processed yarn at 15 to 20 cents per pound lower than locally produced
agro-food products in African countries. Pran products are being yarn.
exported to 70 countries across the globe and the company will
http://www.thedailystar.net/newDesign/news-details.php?nid=74418
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AT Capital Weekly Update 15
08 February 2009 AT CAPITAL RESEARCH
IBBL projects BDT 10.47bn operating profit in 2009, 50% increase to the cabinet for a final nod." During the previous caretaker
in remittance government the energy ministry had finalised the draft of the coal
The Daily Star, Thursday February 5th, 2009 policy and had placed it twice to the council of advisers, but did
not receive a final approval.
The country's largest private bank IBBL has projected an ambitious
BDT 10.47bn (USD 0.15bn) operating profit in 2009 (an increase of Investment proposals in the coal sector worth several billion US
26% from 2008), but sees over-investment in the garments and dollars from a number of foreign companies have long been
textile sector as a risk. pending with the Board of Investment (BoI). The UK-based Asia
Energy, South Korean Luxon Global and US-based Global Vulcan
IBBL’s operating profit of BDT 8.30bn (USD 0.12bn) last year was Energy are among the foreign companies that are now eagerly
almost double the amount of Prime Bank, and at least 30% more waiting for the national coal policy and subsequent government
than Sonali Bank. decisions to develop and extract coal from the coalmines. Indian
business conglomerate Tata group that had made investment
In 2009 the bank with 196 branches expects to handle at least BDT proposals worth USD 3.0bn for projects including development of
211bn (USD 3.06bn) in remittances, or about 30% of the country’s a coalmine and setting up a coal-fired power plant, recently pulled
total remittances. IBBL also projects a 45% growth in its import back after waiting for over two years due to the indecisiveness of
business, 40% in export and a 28% increase in deposits. The bank the government.
expects to increase its deposit by 28% to BDT 256.5bn (USD
3.72bn) and increase investments by 29% to BDT 255.5bn (USD The draft national coal policy does not allow foreign companies to
3.71bn). develop coalmines independently - foreign companies must have
joint venture with local partners to develop and extract coal. Like
http://www.thefinancialexpress-bd.com/2009/02/04/57872.html elsewhere in the world coalmines in Bangladesh can be developed
by either open pit or underground method. But the mining
Infrastructure & Energy method should be determined on the basis of geological structure
and reserve potentials, the draft policy recommended. The draft
Hopes high for new gas discoveries as Total to share Bay survey policy has not kept any option for coal export other than 'cocking
results coal' from the country.
The Financial Express, Sunday February 8, 2009
http://www.thefinancialexpress-
French energy giant Total will share its offshore gas survey results bd.com/search_index.php?page=detail_news&news_id=58213
with Bangladesh authorities later this month, with the officials
expecting discoveries of new reserves in the country's Petrobangla asked to raise gas production
southeastern region. Total, the world's fourth largest energy The Financial Express, Thursday February 5, 2009
company conducted surveys in the offshore blocks no. 17 and 18
in Cox's Bazar and Teknaf areas, hoping to strike major natural gas The energy ministry has asked Petrobangla to increase gas
fields close to the hydrocarbon rich Myanmar border. production to meet the growing demand for fuel in the country.
The energy ministry's instruction to raise gas production came
If gas is discovered, Total will make a work-plan for field after Petrobangla failed to initiate gas supply of around 40mn
development and submit it to Petrobangla for approval; it will cubic feet per day (mmcfd) from two fields.
take four to five years to produce gas from the structures.
According to Petrobangla's existing work-plan, the country has
Total E &P conducted a two-dimensional (2D) seismic survey in an established sources for fresh supply of only 155 mmcfd from five
830 square kilometre-long area in 2007 and a three-dimensional gas fields by 2011. But the overall gas supply might not increase to
(3D) survey in March last year in Saint Martin's and Shahporir that extent as the supply from existing fields might decline. For
Dwip areas in the Bay. Total E&P holds a 30% stake in the two producing gas beyond that level Petrobangla needs to conduct
blocks. Irish oil company Tullow has 32% stake, while Thai energy exploration and discover new gas reserves. Petrobangla's
giant PTTEP owns 30% stake 0and US companies Oakland and subsidiary, Bangladesh Petroleum Exploration and Production
Rexwood have 8% stakes. State energy corporation Petrobangla Company Ltd (BAPEX), has planned to conduct explorations in
rented the two blocks to US joint venture Rexwood-Oakland in seven new gas fields by 2011.
January 1997, but the companies did not carry out any exploration
work due to poor gas demand in the country during the time. At present, around 1800 mmcfd of gas is supplied against the
demand for over 2050 mmcfd. Half of the produced gas comes
http://www.thefinancialexpress-bd.com/2009/02/08/58317.html from gas fields operated by Petrobangla subsidiaries, and the
remaining half is supplied from fields run by international oil
Government starts reviewing draft coal policy companies (IOCs). The government stated that the country needs
The Financial Express, Saturday February 8, 2009 at least USD 7.7bn (USD 111.7mn) worth of investment in gas
exploration and development to sustain a moderate annual
The government has started reviewing the draft national coal economic growth of 7.0% until 2025.
policy in order to make a final decision regarding the policy. A top
government official said, "On completion of the review the draft http://www.thefinancialexpress-
of the national coal policy will be placed to the Prime Minister, bd.com/search_index.php?page=detail_news&news_id=58044
who is also the minister for energy, for consent before placing it
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AT Capital Weekly Update 16
08 February 2009 AT CAPITAL RESEARCH
BDT 3.4bn (USD 49.3mn) boost for Bapex “The cost of production of quality leather shoes is lower in
The Daily Star, Thursday February 5, 2009 Bangladesh than in China and India, and this is the main reason for
receiving more orders from European countries,” said Tipu Sultan,
The Executive Committee of the National Economic Council former chairman of Bangladesh Finished Leather, Leather Goods
(Ecnec) approved a BDT 3.4bn (USD 49.3mn) project that will help and Footwear Exporters Association.
Bapex increase its oil and gas exploration capability, and will help
Bakhrabad Gas Field Company increase its gas supply to China, India and Vietnam were the largest leather shoe exporters
Chittagong within two years. Ecnec also approved a BDT 2.75bn in the world, but in recent years these countries are failing to
(USD 39.9mn) district road development project in Barisal and a make and sell quality low-cost leather shoes. According to Sultan,
BDT 2.25bn (USD 32.6mn) district road development project in Bangladesh is now getting more orders from Germany, Italy,
Rajshahi. France, Japan and Canada.
Under the project, Bakhrabad along with Bapex will build a 65km http://www.thedailystar.net/story.php?nid=74580
10-inch pipeline from the recently developed Semutang gas field
up to Chittagong. This pipeline is expected to increase gas supply Real Estate
to Chittagong by 20mn cubic feet per day by June 2010.
Illegal VoIP trade makes a comeback Moreover, import of capital machinery declined by a sharp 32% in
The Daily Star, Thursday February 5, 2009 January compared to the same month last year. As the textiles
sector is one of the largest importers of capital machinery in the
The illegal business of voice over internet protocol (VoIP) has country, a decline in import of machines indicates that
revived after the new government came into power. This illegal manufacturing in the sector is declining, perhaps due to the global
telecom business has been eroding the market for new legal economic crisis.
international gateway (IGW) businesses. Industry insiders said
VoIP based call termination businesses already captured 40% of One of the important issues raised last week is the local textile
the market of all incoming and outgoing international calls. The sector’s inability to enter the Japanese market. According to the
three new IGWs were handling 12mn minutes of calls a day while Head of Japanese External Trade Organization (JETRO) in Dhaka,
BTCL was handling 20mn, till December 2008. But the numbers the China + 1 Strategy adopted by the Japanese apparel buyers
rose significantly in January as illegal VoIP operators returned. has encouraged Japan to import from low cost producers such as
Bangladesh. Moreover, Japanese buyers are impressed with the
BTRC recently awarded six licenses to the private sector to handle quality of products from Bangladesh. However, the lack of
international voice and data traffic. Among the six call handlers, foresight of Bangladeshi exporters who prefer to receive big
three IGWs are mainly responsible for handling international voice orders from Europe or America than smaller orders from Japan
calls.Two other legal interconnection exchanges (ICXs) transmit has hindered exports to Japan. The exporters need to understand
the calls between the IGWs and telecom operators. that Japanese companies usually start with small orders, but
eventually increase their orders with quality assurance.
http://www.thedailystar.net/newDesign/news-details.php?nid=74477
RMG exporters upbeat on target
Textiles The Daily Star, Sunday, February 8, 2009
ATC Comment Garments exporters are optimistic about meeting the current
fiscal year’s export target, although exports of some other
During last week, there were both positive and negative news products from Bangladesh have declined during the July-
regarding the country’s textile sector. Exporters are quite December period. Bangladesh exported woven garment worth
optimistic about exceeding EPB’s tentative apparel export target USD 2.8bn against the target of USD 2.73bn, knitwear worth USD
of USD 25bn by 2013. Indeed there is reason for optimism - global 3.24bn against the USD 3.17bn target, terry towel worth USD
apparel buyers are seeking cheaper sources such as Bangladesh 66.39mn against the USD 59.83mn target, and textile fabrics
for importing garments, as their purchasing power is declining due worth USD 41.63mn against the target of USD 38.49mn in the
to the economic collapse. Hence, foreign buyers are increasingly July-December period of FY 09. However, during the same period
shifting their orders from China and Cambodia to Bangladesh; exports of raw jute, handicrafts, jute goods, electronics, leather,
furthermore, local textile companies have increased their frozen foods and ceramic products declined, according to the EPB
productivity and have adopted new diversification strategies, data.
which are also attractive factors for international buyers.
The export trend of RMG products shows that the export target of
In the July-December period of the current fiscal year, woven USD 12.27bn for woven and knitwear products for FY 09 is
garment exports surpassed the target by 2.5%, knitwear by 2.2%, achievable.
terry towel by 11%, and textile fabrics by 8.2%, according to data
of Export Promotion Bureau (EPB). http://www.thedailystar.net/story.php?nid=74879
The sector is also attracting significant investments – S&S Clothing Exporters' lack of vision blamed for slow entry of Bangladeshi
Limited, a USA-Bangladesh joint venture company, has decided to apparel to Japan
set up a USD 2.67mn garments factory in the EPZ. The Financial Express, Friday, February 6, 2009
Other positive developments in the industry last week include the Apparel exporters' lack of foresight has slowed RMG exports to
launching of a ‘Productivity Improvement Cell’ by BGMEA in Japan, according to the Head of Japanese External Trade
collaboration with GTZ. The project was implemented under the Organization (JETRO) in Dhaka.
'BGMEA Competitiveness Enhancement Programme' managed by
international experts from Rajesh Bheda Consulting (RBC), which He also said that Bangladesh's apparel export to Japan is poised to
increased the labor productivity of 10 factories by over 10%, and jump three-fold to USD 100mn in the current fiscal year. But the
trained 80 middle managers in the industry. The project will growth would have been several times more had not Bangladeshi
undoubtedly be useful in enhancing performance in the sector. manufacturers rejected some of the small orders placed by big
Japanese retailers, he added. Japan is the world's fourth largest
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AT Capital Weekly Update 18
08 February 2009 AT CAPITAL RESEARCH
apparel buyer with its knitwear market alone worth over USD textile and garments, dyeing and finishing and embroidery and
10bn. The largest economy in Asia, however, buys some 90% of its knitting will be put on display at the exposition.
apparel from its traditional source, China. In recent months
Japanese yen's appreciation has prompted the companies to http://www.thedailystar.net/story.php?nid=74447
diversify their supply chains. Resultantly, top Japanese retailers,
notably Fast Retailing, Seiyu, Ito-Yokado and Aoyama Trading have BTMA points to 'crisis' in primary textile sector
started to seek cheaper sources such as Bangladesh, Vietnam, The Daily Star, Monday, February 5, 2009
Cambodia and Pakistan. Around five-six Japanese buyers have
been visiting Bangladesh each week, and they are impressed with Spinning mills, apparently affected by the global financial crisis,
the quality of Bangladeshi products. have reported BDT 300bn (USD 4.37bn) worth of yarn in unsold
stocks. Leaders of the Bangladesh Textile Mills Association (BTMA)
The reason for poor export to Japan, Kinomoto, the Head of sought a stimulus package from the government to overcome the
JETRO, explained, is due to the lack of foresight of Bangladeshi situation. Most spinning mills are facing a serious liquidity crisis, as
exporters who prefer big orders from Europe or America than a huge amount of yarn remains unsold, according to the BTMA. As
smaller orders from Japan. Japanese companies usually start with yarn could not be marketed, the mills cut their production by 30%.
small orders, and eventually increase the orders as they gain If the situation goes unchecked, a large number of workers will
confidence in the quality of products. lose their jobs at the mills and the number of loan defaulters will
increase, BTMA leaders said. There are 1150 mills under the
Kinomoto, however, is hopeful that the situation will change once BTMA, including spinning, dyeing and finishing factories, which
Japanese companies set up trading posts here. At present, only a have an investment of BDT 400bn (USD 5.83bn).
number of companies, including Fast Retailing, have a buying
house in Dhaka. The BTMA made a series of demands, including a hike in cash
subsidy to 15% from 5%, deferring term loan repayment and
http://www.thefinancialexpress-bd.com/2009/02/06/58127.html freezing of interest for two years, the formation of a research and
development fund and devaluation of the taka against the dollar.
USD 2.67mn US-Bangla co to produce garments accessories
The Financial Express, Thursday, February 5, 2009 http://www.thedailystar.net/story.php?nid=73953
S&S Clothing Limited, a USA-Bangladesh joint venture company, EPB eyes USD 25bn RMG exports by 2013
will set up an industry in the Karnaphuli Export Processing Zone in The Financial Express, Thursday, February 5, 2009
Chittagong, Bangladesh. The company will invest USD 2.67mn in
setting up their plant and will produce garments accessories. The 76 % of the country’s total export trade is attributed to the
company is expected to create employment opportunities for textiles sector - if the trend continues, the country is likely to earn
2,028 local people and two foreign nationals. up to USD 25bn by the year 2013, stated an EPB official during a
seminar. Other speakers at the seminar pointed out that,
http://www.thefinancialexpress-bd.com/2009/02/05/57974.html international buyers have been seeking cheaper options for
importing apparels as their purchasing power has been declining,
BGMEA opens productivity improvement cell As comparatively better quality goods are produced in Bangladesh
The Financial Express, Thursday, February 5, 2009 at cheap rates, the demand for Bangladeshi products is on the rise
in developed countries.
The Bangladesh Garment Manufacturers and Exporters
Association (BGMEA) recently launched a 'Productivity http://www.thefinancialexpress-bd.com/2009/02/04/57878.html
Improvement Cell', in collaboration with GTZ. The project was
implemented under the 'BGMEA Competitiveness Enhancement Tourism
Programme' managed by international experts from Rajesh Bheda
Consulting (RBC), which increased the labor productivity of 10 Radisson’s profit increases
factories by over 10%, and trained 80 middle managers in the The Daily Star, Sunday February 9, 2009
industry.
In 2008 the gross operating profit of Radisson Water Garden Hotel
http://www.thefinancialexpress-bd.com/2009/02/05/57980.html Increased by 8.9% to USD 7.33mn, driven by a high occupancy
rate. The hotel earned USD 14.71mn in revenues in 2008, a 10 %
Textile, garment machinery expo starts Sunday rise from a year ago. Total foreign currency revenue earned in
The Daily Star, Thursday, February 5, 2009 2008 was USD 9.95mn (cash and credit cards).
The sixth Dhaka International Textile and Garments Exhibition The hotel gained a 40% share of the total market of five-star
began at the Bangladesh-China Friendship Conference Centre in hotels in the capital and achieved an occupancy rate of more than
the capital on Sunday to showcase textile and garment machinery. 80 % in 2008. According to Industry insiders, Radisson’s profits
The four-day exhibition will continue until February 11 where were partly driven by the fact that the hotel is located in the
around 600 leading textile and garment machinery producers northern part of the city, which has better access to Zia
from 30 countries will exhibit products at 800 booths. Bangladesh International Airport and the garment belt in Ashulia-Savar.
Textile Mills Association (BTMA) and ES Event Management of
Malaysia have co-organized the exhibition. The machinery used in http://www.thedailystar.net/story.php?nid=74584
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AT Capital Weekly Update 19
08 February 2009 AT CAPITAL RESEARCH
Sheraton's star at risk
The Daily Star, Thursday February 5, 2009
http://www.thedailystar.net/newDesign/news-details.php?nid=74463
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AT Capital Weekly Update 20
08 February 2009 AT CAPITAL RESEARCH
AT Capital Team – Dhaka
Ifty Islam Managing Partner (880-2)-8155144, ext. 132 ifty.islam@at-capital.com
Syeed Khan Partner (880-2)-8155144, ext. 109 syeed.khan@at-capital.com
Akther Ahmed Senior Advisor (880-2)-8155144, ext. 108 akther.ahmed@at-capital.com
Masud Khan Senior Advisor (880-2)-8155144, ext. 113 masud.khan@at-capital.com
© Copyright 2008. Asian Tiger Capital Partners Limited, Level 16, UTC Tower, Panthapath, Dhaka – 1215, Dhaka, Bangladesh.
All rights reserved. When quoting please cite “AT Capital Research”. The above information does not constitute the provision
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AT Capital Weekly Update 21