At Capital Weekly 31 Aug 2008

31 August 2008 AT CAPITAL RESEARCH
AT Capital Weekly Update

Weekly News Update
Key themes in this issue are:

Bangladesh:
• The decision by Grameenphone to issue BDT 4.25bn (around USD 60mn) of
bonds has been welcomed as a potential catalyst to the development of
Bangladesh’s nascent corporate bond market.
• If there is a clear commitment and partnership among the Bangladesh Bank,
SEC, multilateral agencies and the private sector financial market players,
there is no reason Bangladesh cannot move towards a vibrant bond market.
• The collapse in Pakistan’s equity markets has triggered a panic response from
the SEC who put in an artificial floor. The prospects remain extremely bearish.
• Sri Lanka and Pakistan’s near 30% inflation rates risk further macro-economic
and market instability.
Global Markets:
Markets:
• US Q2 GDP analysis – despite strong exports, weaker than 3.3% looks.
• China likely to extend lead over India in growth stakes/resilience.
• Convergence technologies and prospects for Telecoms.
• Lessons from Katrina on potential impact of Hurricane Gustav on US.
In this week’s Special Focus on the Bond Market we discuss::

• Why Bangladesh Needs a Bond Market: The benefits for both issuers and
investors
• International lessons for the development of Bangladesh’s Bond Markets
Asian Tiger Capital Partners
EDITORS
• The corporate debt market in India
Ifty Islam • The Malaysian PDS market – Global Competitiveness in Islamic Bonds
Managing Partner
ifty.islam@at-capital.com
Syeed Khan Pakistan equities euphoria turns to fear prompting SEC panic
Partner
syeed.khan@at-capital.com
Professor Jahangir Sultan

Senior Advisor
jahangir.sultan@at-capital.com
Asian Tiger
Capital Partners
UTC Building, Level 16

8 Panthapath, Dhaka-1215
Bangladesh
Tel: 8155144, 8110345
Fax: 9118582
www.at-capital.com
Contents Page
Overview – Bangladesh 3
Grameenphone and the prospects for a Bangladesh Corporate Bond Market 3
The long saga of the non-development of Bangladesh’s Bond Markets 3
Lessons from Pakistan equity markets on what Bangladesh should not do! 4
Overview – Global Markets 5

US Q2 GDP 3.3% gain reflects domestic recession and export boom but also misleadingly low inflation 5
India to lag China in resisting the US Slowdown? 5
Perspectives on Convergence Technologies and the prospects for Telecoms in the Data Market 7
Lessons from Katrina on the potential impact of Hurricane Gustav 8
Special Focus 9
Why Bangladesh Needs a Bond Market 9
International lessons for the development of Bangladesh’s Bond Markets 13
Kunming Asia Corporate Bond Market Conference Highlights 13
The corporate debt market in India 14
The Malaysian PDS market – Global Competitiveness in Islamic Bonds 15
Growth and acceptance of Islamic bonds 15
Stock Market Weekly 17

Weekly Stock Market Commentary 18
Stock Market News 18
Economics 20
Economic News 21
Sector News 22
Appendix 29
_______________________________________________________________________________________
AT Capital Weekly Update 2
Ifty Islam, Managing Partner
recently began privatizing selected state-owned companies

Overview – Bangladesh and deregulating the financial market, progress has been
slow, leaving financial market participants skeptical about
Grameenphone and the prospects for a Bangladesh whether the government can succeed in this endeavour.
Corporate Bond Market Bangladesh finds it difficult to move forward for several
reasons: weak governance at the institutional and market
The decision by Grameenphone to issue BDT 4.25bn levels; high nonperforming assets among the nationalized
(around USD 60mn) of bonds has been welcomed as a commercial banks (NCBs); poorly defined and overlapping
potential catalyst to the development of Bangladesh’s responsibilities of the Bangladesh Bank, Securities and
nascent corporate bond market. In fact, the issue is a private Exchange Commission, and Ministry of Finance; and the lack
placement with each bond having BDT 10mn (USD 0.14mn) of incentives and private initiative to drive market
face value, a 2 year maturity and paying a coupon of 14.5%. developments. These four problems are the principal
obstacles to the development of bond markets in
As can be seen from the table below, the Grameenphone Bangladesh. The government is aware of them, and the
bond issue is by far the largest private placement of bonds World Bank and other organizations have been pushing for
seen solutions. However, change is slow.”
Issuer Size (USD Million) Tenor (Years) (Michael Kwiback, Bangladesh, Chapter 14)
IDLC 2.8 5
IDLC 5.1 5 The full book is available online at:
BRAC 15.0 1
IPDC 5.2 5
http://www.ifc.org/ifcext/publications.nsf/AttachmentsByTitle/Building
ULC 5.8 5 _Local_Bonds_FullReport/$FILE/Building_Local_Bonds_FullReport.
pdf
It is even large compared to the size of recent syndicated
loan deals which have been dominated by the Telecoms The private sector in Bangladesh, and the quality of potential
sector. corporate issuers, has developed considerably over the past
9 years but the bond market has failed to take off even in a
Borrower Amount in Tenor limited way.
USD Milliion (Years)
TM International (Aktel) 44 6 In the appendix at the end of this Overview, we have
Warid Telecom 44 6 replicated a full day seminar held in 2004 hosted jointly by
Shung Shing Power 41 6 the Bangladesh Bank and the SEC on developing
Orascom Bangladesh (Banglalink) 35 5 Bangladesh’s bond markets. On the one hand I am
Pacific Bangladesh Telecom impressed the by the breadth and depth of the discussion. If
(Citycell) 31 5.8 you click on the hyperlinks, a number of the presentations
GrameenPhone 29 5 are available.
But beyond the fact that a large private placement increases In addition to the appendix, the details of the conference can
issuers and investor’s familiarity with an alternative means to be found online at:
bank financing, the fact that Bangladesh has failed to
develop any secondary market for corporate debt and an http://www.bangladesh
bank.org/seminar/iwdbmbd/seminarbmbd.html
extremely limited government bond market underlines the
challenge ahead. Islami Bank mudaraba perpetual bond
On the other hand, financial market participants ought to be
(issue size BDT 3 billion) was the only public bond issue in
frustrated that almost none of the discussion that occurred 4
the recent years and it is clearly a specialized issue.
years ago has yet manifested itself in terms of the growth in
The long saga of the non- terms of size and liquidity of the bond market. The secondary
non-development of
of Bangladesh’s
government bond market has seen only limited development,
Bond Markets
forget a corporate, securitized or derivatives/swaps market.
In researching the development (or rather lack of it!) in
As is clear from our two special focus articles this week, we
Bangladesh’s bond market, I came across the following
believe it is very much in the interests of the Bangladesh
excerpt from an IFC book published in 1999:”Developing
capital markets’ evolution to strengthen and deepen the bond
Local Bond Markets: An Asian Perspective” edited by Alison
markets. If there is a clear commitment and partnership
Harwood.
between the Bangladesh Bank, SEC, multilateral agencies
“Numerous factors in Bangladesh today suggest that and the private sector financial market players, there is no
reason Bangladesh cannot move towards a vibrant bond
Bangladesh will not be able to develop an active, local--
market. It is all about a collective focus and will which in turn
currency fixed--income market. Economic and financial
transactions are highly regulated, and the economy does not will reflect the extent to which the benefits are recognized
provide a sufficient number of appropriately structured and and it becomes a policy priority.
skilled issuers and investors. Although the government
_______________________________________________________________________________________
Lessons from Pakistan equity markets on what Bangladesh further deteriorated. Note the surge in inflation in the chart
should not do! above with Pakistan and Sri Lanka competing for the most
inflationary economy in South Asia (we discuss Sri Lanka
The following developments in our two neigbouring countries below). Bangladesh Bank should take credit for the
and competitors should give Bangladeshi policymakers some impressive relative performance of Bangladesh.
comfort in the face of the major power crisis and food
inflation the country has faced. Fearing a complete meltdown The latest media reports indicate that the Pakistani stock-
of stock prices at Karachi Stock Exchange, Pakistan's market regulator will review the freeze imposed on the
Securities and Exchange Commission imposed a floor of market within the next 12 days. It is almost certain the market
9144 for the market's benchmark KSE-100 index. The index will continue to slide as soon as the freeze is lifted, unless
closed at 9144 level on Wednesday, Aug 27, the day the political stability and economic fundamentals show any signs
KSE and SEC announced their decision to not allow the of clear improvement.
KSE-100 to trade below this arbitrary level. This
extraordinary action, the first of its kind since the exchange
opened its doors in 1948, came after investors pushed down
the index to its lowest level in more than two years.
Sri Lanka is keeping pace with Pakistan.
While Sri Lanka's long running civil war has largely been
limited to the north and east, leaving the populous, well-off
Karachi stock exchange saw very thin trading on Friday and west largely unscathed, its stresses are beginning to show in
the KSE-100 index finally closed at 9,208.26 points, with a the island nation's economy.
meager gain of 4.48 points. The KSE-30 index increased by
15.87 to close at 10,198.05 level. The KSE-100 has lost The Economist reports that Sri Lanka's annual inflation is
34.6% of its value this year, as investor confidence has been close to 30%, the highest in South Asia. The rupee has
hurt by political uncertainty and a long list of economic appreciated against the dollar, further hurting exporters. By
troubles, including skyrocketing inflation, disappearing one estimate, economic growth—which was 7.6% in 2006—
foreign exchange reserves, declining rupee and a soaring will be 4.3% this year. As elsewhere, inflation is being driven
deficit. by high food and energy prices. But in Sri Lanka, 25-year
average annual inflation is 12%. Monetary policy has been
too loose, in part to finance the war. Including the cost of
resettling refugees, the war eats up around 30% of the
government's budget.
Sri Lanka's exports and economy have been propped up by

special EU preferences for Sri Lankan textiles. Under a
concession known as "GSP Plus", awarded in 2005 to help
Sri Lanka rebuild after the 2004 tsunami, Sri Lankan
exporters enjoy preferential tariff treatment from the EU. As a
result, the EU is Sri Lanka 's biggest export market,
accounting for annual sales of around $1 billion; about half
are covered by GSP Plus. But there is a problem with the
rules of GSP Plus. Beneficiaries must comply with 27
international conventions, on environmental, labour and
human rights standards. And on the last of these, Sri Lanka
is struggling. The agreement expires at the end of 2008. The
Economist believes that it will not be renewed.
Prior market stabilization measures introduced by Karachi
Stock Exchange in June included tighter circuit breakers on
the downside and a complete ban on short selling. However,
when these measures were reversed in July, the market
continued its downward slide because the fundamentals
_______________________________________________________________________________________
side and on the industry side), although the weakness in
import enters as a positive contribution to GDP – note that the
positive contribution to GDP that came from the slump in
imports was larger than the one of personal consumption
(1.45% versus 1.24%). Moreover, exports win the medal
from the strongest contributor to growth this quarter, with a
contribution of 1.65%.
Gross domestic income (GDI), or the money earned by the

people, businesses and government agencies whose
purchases go into calculating gross domestic product, rose
0.3 percent in the 12 months ended in June after adjusting
for inflation.
The 1.9 percentage-point difference between the GDI and

GDP over the last 12 months is the biggest in the post World
War II era. Corporate profits were down 7 percent in the year
to June, the biggest drop since the last economic contraction
in 2001, according to the Commerce Department. Also part
As the Economist has noted, what has upset the EU are of the reason real GDP was higher was that the inflation
various reports indicating government complicity in the adjustment was lower than expected. But based on the
abduction or murder of hundreds of Tamil and Muslim men. It accompanying graph of the GDP inflation figure and headline
is at war with human-rights groups. It has refused to let the CPI (which most people already believe is lower than reality),
UN High Commissioner for Human Rights set up an office in there seems to be something of a disconnect between the
Sri Lanka. The EU cancellation of Sri Lankan preferences two (which would imply, of course, that U.S. economic
would mean 4% cut in Sri Lanka's garment exports. Overall, growth is a lot lower than reported).
it would cost 2% of GDP. If the EU renewed the agreement
without progress on human rights, it might be challenged at
the World Trade Organization—as happened to an EU trade
sop to Pakistan in 2004.
Overview – Global Markets
US Q2 GDP 3.3% gain reflects domestic recession and

export boom but also misleadingly low inflation
Real gross domestic product -- the output of goods and

services produced by labor and property located in the
United States -- increased at an annual rate of 3.3 percent in
the second quarter of 2008, (that is, from the first quarter to
the second quarter), according to preliminary estimates
released by the Bureau of Economic Analysis. In the first
quarter, real GDP increased 0.9 percent.
The increase in real GDP in the second quarter primarily India to lag China in resisting the US Slowdown?
reflected positive contributions from exports, personal
consumption expenditures (PCE), federal government An interesting recent commentary from Columbia Professor
spending, nonresidential structures, and state and local Arvind Subramanian, who is also a fellow of the Peterson
government spending that were partly offset by negative Institute.
contributions from private inventory investment, residential
fixed investment, and equipment and software. Imports, “Can China and India sustain their current growth rates? A
which are a subtraction in the calculation of GDP, decreased. traditional answer to this question is conditional: yes,
provided they continue to implement policy reforms. But
Net export contributed to 3.1% of the 3.3% growth. The real historical experience allows a less guarded answer. There
growth rate of export was revised upward from 9.2% to are few examples of countries that have grown as strongly
13.2% (and the contribution to real GDP growth from 1.16% and for such long periods as India and China have—6 percent
to 1.65%). The real growth rate of imports was revised and 10 percent, respectively, for nearly three decades—and
downward from -6.6% to -7.6% (and their contribution was then suffered a sharp slowdown or collapse. If history is a
therefore revised up from 1.26% to 1.45%). reliable guide, then barring major upheavals, economic
growth looks likely to continue in both countries until some
These numbers expose the weakness of U.S. domestic threshold level of prosperity is attained.
demand which is clear from both the performances of
personal consumption and imports (both on the consumer
_______________________________________________________________________________________
But why does growth beget more growth? One mechanism is capacity. Over the last thirty years, the Chinese state has
simply that growth signals the fact of profitable economic successfully created physical infrastructure and delivered
opportunities, which encourages investors to rush in, first in essential services.
response to these opportunities but then in response to each
other—this is growth as a confidence trick—creating a virtuous Contrast that with the Indian experience. While there are
circle. If countries are relatively poor, if their markets are many exceptions, and at the considerable risk of over
large, and if their policy framework is basically sensible—all of generalizing, the Indian state, despite rapid economic
which are true of China and India—the chances of the growth- growth, has deteriorated over time. Whether it is providing
begetting-growth dynamic taking hold are high. China's task basic law and order, ensuring sanctity of contract, or
of improving its private sector seems easier to accomplish delivering public services, the stench of decline is hard to
than India's task of arresting institutional decline. ignore. For example, on a crude measure of government
effectiveness on which I compiled data across time, India's
But in addition to the signaling effect, growth may itself cause performance declined sharply: In the early 1960s, India was
changes that have in turn a growth-reinforcing effect—a kind in the top 5th percentile of countries in the sample, slipping to
of positive feedback loop. A good example is education. For the middle of the pack in recent years (see Subramanian
long, development economists bemoaned the poor levels of 2004, "The Evolution of Institutions in India and its
educational attainment in India, directing their critique at the Relationship with Economic Growth". The education example
government's failure to supply better education. But discussed earlier is an exception to the growth-institutions
economic growth changed the education picture dynamic, made possible only because of private alternatives
dramatically. It increased the returns to, and hence the to state supply. For the core public-sector functions, where
demand for, education. And if government supply remained such an alternative does not exist, the growth-institutions
weak, consumers simply turned to the private sector to meet dynamic has been weak or nonexistent.
their demand for education. Improvements in educational
attainment over the last 15 years are attributable in part to So, growth in India has come with a more entrepreneurial
more rapid growth. private sector but accompanied by deteriorating state
capacity. China has a vastly superior state capacity but an
An important question then is whether India and China can indigenous private sector that is still finding its feet. Which
take the positive feedback loop for granted, especially in combination augurs better for the future?
relation to two key determinants of long-run growth: state
capacity or effectiveness and the private sector's There is a fundamental asymmetry between state and
entrepreneurial capacity. In other words, is it inevitable that markets. It is easier to create markets than it is to create
over time growth will itself improve the quality of private state capacity or to prevent its deterioration. Creating
entrepreneurship and public institutions? Consider each in markets is a lot about letting go, establishing a reasonable
turn. policy framework, and allowing the natural hustling instinct to
take over. In other words, hustling is the natural state.
Policy reforms have created the conditions for the private Building state capacity, on the other hand, is quite different. It
sectors in both countries to flourish. Yasheng Huang of MIT involves overcoming collective-action problems, mediating
in his new book, Capitalism with Chinese Characteristics, conflict, creating accountability mechanisms where outputs
argues that the Indian private sector, especially the are multiple and fuzzy and links between inputs and outputs
indigenous part, is more efficient and entrepreneurial than its murky, and contending with the deep imprints of history. In
Chinese counterpart. Weber's memorable words, building public institutions is like
the "slow boring of hard boards."
One crude measure of relative sophistication or
entrepreneurial capability is how much direct investment In that light, China's task of improving its private sector
(FDI) these countries are exporting, especially to richer seems easier to accomplish than India's task of arresting
countries and especially in sophisticated sectors. Based on institutional decline. So, while China and India can probably
new data on mergers and acquisitions, Aaditya Mattoo of the both count on more years of high growth, the odds still favor
World Bank and I calculated that India's FDI exports to the China pulling off that feat than India. That, and not just the
OECD countries overall and even in the manufacturing meager medal tally, should be what India mulls over as the
sector were substantially greater than China's (measured as curtain descends on the Beijing Olympics.”
a share of GDP). China is rightly considered the world's
manufacturing powerhouse and export juggernaut, and yet in India versus China – Manufacturing versus
versus Services
the manufacturing sector, Indian entrepreneurial and
managerial capital (in the form of FDI) has been more Another interesting perspective on the India versus China
successful than China's in taking control of and managing debate has been covered by two Dallas Fed Economists,
assets in the sophisticated markets of Europe and the United Michael Cox and Richard Alm. They argue that for decades,
States. So, while both private sectors have improved, India China and India plodded along under ideologies that favored
can claim today that it is ahead of China in fostering the visible hand of government over the invisible hand of
entrepreneurial capitalism. markets. Their economic systems stifled growth and left both
countries poor. In 1980, real per capita income stood at $556
Turn next to institutions. In the case of China, the focus of the in China and $917 in India.
world, and indeed the disappointment, has been the absence
of the positive political feedback loop: Growth and the To jump-start their economies, China and India shifted
attendant economic freedoms have not led to greater political strategies, letting private enterprise flourish and opening
development and openness. Implicitly, there has been less markets to trade and investment. The new policies have led
concern about the effect of growth on the state's economic to rapid economic development. China’s real per capita
_______________________________________________________________________________________
income has grown an average of 8.4 percent a year since Computer Corp. (HTC) expects its sales in India to double in
1995, climbing to USD 4,766. India’s 5 percent average 2008, from 100,000 in 2007 to 200,000 in 2008. Although
annual growth has raised per capita income to USD 2,534. reliable figures are not available, Blackberry is finding
traction in Pakistan and HTC is promoting its low-cost
Both China and India have unleashed pent-up economic smartphones. Overall, there is room for substantial growth. In
energy, but they’re not traveling the same development path. terms of wireless voice and data, markets with large
China has followed the traditional route, becoming a center populations and relatively low penetration rates, such as
for low-wage manufacturing and exporting clothing, toys, India, China, Philippines, Pakistan, Vietnam and Indonesia,
electronics and other goods. India has emphasized services, will continue to grow at a rapid rate, according to an Aug
using its large English-speaking labor force for call centers, 2008 report by Paul Budde Communication Pty Ltd.
data-processing operations and the like.
Each platform provider is vying for greater developer
Growth rates give China’s goods-dominated strategy the mindshare and faster wireless networks to add value to its
better track record so far. But India’s approach may pay off device and gain market share to become the standard in
better longer term. A look at per capita incomes around the mobile computing and communication. These developments
world shows that the wealth of nations eventually depends are pulling together all of the necessary ingredients for
more on services than industry. explosive growth of mobile internet business in the coming
decades. Though it's early, this ongoing mobile platform
revolution could easily eclipse the PC and Internet
revolutions of the 1980s and 1990s. The reason is simple:
The cost and convenience of mobile devices makes them
much more affordable and useful to a much larger population
of the world today.
In an earlier post titled Mobile Internet for Pakistan (see

http://www.riazhaq.com/2008/02/mobile-internet-for
pakistan.html) , he wrote :” With the personal computers and
the Internet penetration in Pakistan in single digit
percentages and the mobile phone penetration approaching
50%, should Pakistanis still aspire primarily for the Western
style PC/Internet access model? The answer to this question
is clearly a resounding NO. Here is an opportunity for a
strategic leapfrog to ubiquitous Internet connectivity via the
most prevalent device owned by the largest number of
people--the mobile phone. It makes sense from many
perspectives: Device cost, connectivity options, electricity
availability, usefulness for the vast majority of people, etc.”
So what would the mobile internet do for people? Many

consumers already use programs that come with their
phones to send text messages, browse the web or take and
The full article can be found at: email pictures. In addition to standard widgets like time,
temperature, stock prices, and maps, Apple is offering an
http://dallasfed.org/research/eclett/2008/el0808.html iTunes like online store called AppsStore that lets users
download and install applications. iPhone owners can install
Perspectives on Convergence Technologies and the programs that let them tune into Internet radio stations or get
prospects for Telecoms in the Data Market directions to the nearest gas station.
Given the upcoming Grameenphone IPO, there is a great In future, phones will be able to do a lot more. San Jose
deal of focus on the prospects for mobile phone companies Mercury quotes analysts as saying:
earnings prospects. One potential growth area is in greater
mobile penetration (Bangladesh has 50 mn subscribers 1. By simply using your phone's camera to take a picture of a
versus 80mn in Pakistan despite the similar populations). But bar code, you will find out instantly whether the store across
a key determinant will be in the ability of mobile providers to
capture the data market in direct competition from Wimax the street or one online is selling a coffee maker at a lower
technologies. price than the store you are at.
The report below from Riaz Haq provides an interesting 2. Whenever your bank account dips below a certain
perspective. He argues that mobile application developers balance, your phone will notify you — and allow you with one
and high-bandwidth wireless data network operators are click to instantly move more money into the account.
being dramatically boosted by latest innovations, growing
popularity and rising demand of smartphones such as 3. If you have a medical device implant, you will be able to
iPhone, Blackberry, Palm Treo and other mobile platforms. use your phone to instantly and automatically alert your
Some 10 percent of phones shipped worldwide — and some doctor to any troubling conditions.
19 percent of phones sold at retail in the United States — are
smart-phones. Taiwanese smartphone maker High Tech 4. Your phone will be able to tell you when you need to leave
_______________________________________________________________________________________
your house or office to make an appointment on time, given Today, housing is in a recession, consumer spending is
existing traffic conditions along your route. sluggish (even with tax rebate checks), and business
investment is falling. Credit is tight, and long market rates, for
As PC-like standards emerge in the mobile space and all- consumers and corporates alike, are relatively high.
you-can-eat data services become inexpensive, the natural According to data from Moody’s economy.com, almost half of
progression toward cloning and commoditization will happen, all states are in recession, including Georgia and Alabama.
thereby making highly useful and multi-functional mobile Louisiana is at risk of slipping into recession. Any sustained
platforms more affordable and ubiquitous in emerging loss of economic activity in the Gulf States this time around
markets such as India and Pakistan. won’t be offset by better output elsewhere.
Lessons
Lessons from Katrina on the potential impact of Hurricane Worse still, port closings along the Gulf Coast could hurt the
Gustav one bright spot: exports. Much of the current export boom
can be traced to farm products and industrial supplies. In the
Signs that Hurricane Gustav is losing strength is a welcome first half, the value of agricultural exports was up 50%,
relief to both oil markets and Gulf Coast resident. But it could thanks to rising commodity prices and increased global
yet gather new momentum. A recent article in the Wall Street demand. Exports of soybeans, corn and wheat almost
Journal by Kathleen Madigan provides a useful backdrop to doubled. Industrial supply exports were up 31%.
the potential disruption from Hurricane Gustav from the
impact Hurricane Katrina had on New Orleans 3 years ago. The Gulf ports handle about 500 million tons of cargo each
Tropical Storm Gustav’s path to the U.S. could be a replay of year, including half of the grain exports in the U.S. If ships
the track Katrina took in 2005. But the economic landscape are unable to get through, export growth will suffer — even if
the current storm will sweep over is very different from the temporarily.
one three years ago.
The one area that may ride out this storm better than it did
Hurricane Katrina ravaged New Orleans and other Gulf last time is the energy sector. Thanks to high prices, demand
cities, but its impact on the overall U.S. economy was fairly for energy is down this year, so a supply shock may not be
minimal. The same might not be true for Gustav. The so disruptive to consumer spending this time. Even the spike
economy today is more vulnerable than it was in 2005. in oil prices this week, to nearly $120 per barrel, doesn’t look
as ominous since Americans were dealing with oil at $140 a
It’s impossible to know how much havoc Gustav might wreak barrel just two months ago.
or where. But given the importance of the Gulf Coast to the
energy industry and the region’s busy ports to the export Plus, after Katrina, oil prices fell back quickly. Consumers
industry — any longer-lasting damage will exacerbate the may expect the same to happen this time around, resulting in
drags already hitting labor markets, growth, and exports. less of a drag on spending and confidence. The Gulf Coast
and its infrastructure may be better prepared to withstand the
The main evidence of Katrina’s hit on the economy was in weather’s fury. But it could be harder to protect the U.S.
the labor markets. The Bureau of Labor Statistics estimated economy from whatever Gustav might bring.
that about 160,000 jobs were lost due to the hurricane. Even
so, the overall labor market hardly registered an impact from
Katrina (or Rita which hit about a month later). After a
slowdown in September and October, payrolls jumped by
361,000 new jobs in November. For the year, payrolls were
up 2.5 million slots.
In 2008, however, the labor markets are much weaker,

undermined by the bursting of the housing bubble and the
constriction of credit across the economy. Today’s jobless
rate of 5.7% compares poorly with the 5% prevalent at
Katrina’s time. An average of 66,000 jobs per month have
been lost so far in 2008. Any sustained Gustav-related
payroll drops will darken an already bleak picture.
The differing labor markets reflect diverging economic

pictures. The 2005 economy was powered by a housing
boom, robust consumer spending, and strong business
investment in equipment. Credit was easy, and long-term
rates were low.
Katrina devastated the regional economies that were hit. In

addition to the loss in wages, drops in earnings for small
business proprietors and landlords totaled $80 billion in the
third quarter of 2005. But because other regions of the U.S.
were booming, real GDP grew by a 3.8% annual rate that
quarter and 2.9% for the year.
_______________________________________________________________________________________
Professor Jahangir Sultan, Senior Advisor
Special Focus 13 countries have seen much progress (see below).

Philippine currently boasts a stable bond market of $60
billion (2007). Malaysia has a bond market equal to $122
Why Bangladesh Needs a Bond Market billion (2007) out of which, the corporate bond market
constitutes half, making it the third largest Asian corporate
Bonds are fixed income instruments, issued by governments bond market. Vietnam’s local currency denominated bond
and corporations, that promise to pay fixed amount market is currently valued at $11.9 billon, out of which, $1.6
periodically, known as the coupon, and pay back the face billion comes from the corporate sector, and the rest is the
value at the end of the maturity. According to Merrill Lynch, government bond market.
at the end of 2007, the size of the global bond market was
$67 trillion, compared to $51 trillion global equity market.
The size (2005 data) of the bond market (as a percentage of
GDP) varies across countries: China (11%) and USA
(112%). In advanced capital markets, bond markets are
integral part of asset allocation and asset-liability
management programs. Bangladesh currently does not have
a well-functioning bond market.
The popularity of bond markets in advanced developed

countries reflects growing appetite among borrowers to
reduce over reliance on commercial banks for long-term
funding. Suppose a manufacturer wants to borrow long-term
to finance its future expansion. Having already issued
shares earlier, it can issue more stocks which will dilute the
ownership base and may be sold at unfavorable prices in the
market, depending on market conditions. Alternatively, it can
approach a bank, but borrowing long-term is difficult and
costly because banks use short-term deposits to fund short- Overall, according to the Asian Development Bank, the Asian
term loans. The sound choice for a corporation is to issue bond market is expected to grow rapidly, with Vietnam
long-term debts, IOUs (I owe you), which are promissory leading the way (251%) in terms of growth rate (see below).
notes and interest expenses are tax deductible. By mixing
debt and equity, corporations can achieve the desired capital
structure to lower their cost of capital and maximize
shareholder wealth. Of course the firm has to be prudent as
to how much debt it incurs. As the level of debt increases
beyond a certain level, the probability of financial distress is
higher.
Investing in bonds can be risky. If the yield on alternative

investments increases, then the investor with an existing
bond portfolio loses out an opportunity to earn higher yield
elsewhere. As a result, the value of her holding decreases,
that is, the bond price falls. The second most important risk
is the possibility that the issuer may default on its existing
bonds. Of course, if the corporation is liquidated, the court
may distribute some portion of the bond value to the existing
bondholders. Much of it also depends whether or not the
country has well developed bankruptcy laws.
In terms of bond market development, our Asian neighbors

have been quite active. At the end of 2006, the size of the
Asian bond market was approaching $2.8 trillion. At a recent
(2008) meeting of Asian finance ministers in the Philippines,
the 10-members of Asian Bond Markets Initiative (ABMI) plus Closer to home, bond markets in India, Nepal and Sri Lanka
China, Japan, and South Korea, has agreed to undertake a seem to be on an upward trajectory. According to the World
series of actions to increase the growth of the bond market. Bank, the size of the bond market as a percent of GDP in
Among the initiatives undertaken are: improving the bond these countries is as follows: India (35%), Nepal (15%) and
trading infrastructure (clearance and settlement), improving Sri Lanka (50%). Where does Bangladesh stack up?
liquidity, promoting credit culture among firms, and Bangladesh does not have a developed government or
conducting financial analysis. The ultimate objective of these corporate bond market. According to the World Bank, the
initiatives is to avoid the contagion of 1997. According to the total size of the Bangladesh bond market is approximately
Asian Development Bank, since 2003, bond markets in these $7.35 billion (12% of the GDP), and the liquidity is very low.
_______________________________________________________________________________________
At present, government securities worth $2.9 billion are listed significantly reduce their risk by holding both stocks and
on Dhaka and Chittagong stock exchanges but their liquidity bonds. In times of crisis, investors flee the stock market and
is dismal. In fact, they do not trade at all. This is an important move to the safety of the bond market. This flight to safety is
drawback that retards the growth of the financial market and essential for a country to lessen the impact of falling equity
most importantly the development of structured products to prices. When bonds become less attractive, investors can
help corporations raise capital. The lack of a developed switch to stocks. History is replete with examples where a
bond market also reduces the extent to which foreign lack of bond market exacerbated the adverse effect of
investors bring much needed additional capital into the systemic shocks. Take the 1997 Asian currency crisis. Most
market. So, the existence of a bond market is crucial to a of the Asian economies did not have a developed bond
developed stock market. Both are needed. market at that time to allow investors to diversify portfolios
using stocks and bonds. The result, the 1997 Asian currency
On a macro level, Bangladesh really needs a bond market. crisis led to a double digit declines in many Asian countries.
The 1997 Asian financial crisis was largely due to a
combination of some key factors: massive current account What are the essential building blocks for developing the
deficit that was financed by un-hedged short-term capital bond market? A simple bond valuation exercise will highlight
inflow, a heavy reliance on commercial banks for loans, and these basic ingredients. Suppose ABC corporation has
an inadequately supervised banking sector that lacked sound issued a 20-yr AAA bond with 8% coupon, paid
risk management (Masahiro Kawai, Asian Development semiannually, with a face value of TK1,000. An investor
Bank), excessive foreign borrowing, rapidly depreciating purchasing this bond is guaranteed TK40 every 6 months for
currencies, a lack of sound corporate governance practices, the next 20 years and a full payment of TK1,000 at the end of
and macroeconomic problems. In particular, local firms were the 20-yr period. How much would an investor pay for this
borrowing foreign funds heavily. Unfortunately, as the local bond now? That depends upon what the returns on
currencies depreciated against major currencies, the cost of alternative investments in the market are. Suppose that the
borrowing skyrocketed in local terms. As firms defaulted on market interest rate is 12% per annum. The value of the
their loans, the Asian economies suffered one of their worst bond is simply the discounted value of the coupons plus the
economic crises. Many experts are of the opinion that the discounted value of the face amount. The present value of
magnitude of this catastrophic event could have been the coupons is TK601.85 and the present value of the
lessened had there been a developed banking sector. What principal is TK97.22. Therefore, the price of the bond is
was needed at that point was a matured bond market that TK699.07. If the bond is selling below this price, it is selling
would have provided much needed capital to firms interested cheap. A price greater than 699.07 indicates the bond is
in borrowing long-term (instead of borrowing from foreign expensive and not worth buying.
countries). Additionally, a matured bond market would have
provided much needed external monitoring of managerial This short example brings out some of the necessary
performance of the corporate community, the disciplining ingredients for a thriving bond market in Bangladesh:
mechanism which was sorely absent at that time. Overall,
the bond market, along with sound regulatory controls, would Credit Rating Agency: Credit rating agencies reduce
have lessened the impact of this crisis on Asian economies. information asymmetry in the financial market. Investor
sometimes cannot tell which bond is good and which bond is
bad. Equally, firms are also unable to let investors know that
their projects, which need funding, are good projects. Credit
rating agencies, like Standard & Poor or Moody in the United
States, can reduce such information asymmetry. Their job is
to stay neutral, examine the borrower’s financial statements,
and determine its creditworthiness. In other words, credit
risk determines a firm’s ability to pay back its debt. Bonds of
the best creditworthy firms get a score of AAA and the worst
ones receive a credit score of D. Typically, if you are
investing in a bond that is rated anything less than BBB, you
would demand a higher yield from investing in the bond.
This would come from two sources, a higher coupon and a
lower price today. A credit rating agency’s stamp is a critical
indicator of the safety of the bond.
Government Bond Market: The corporate bond market

thrives when there is already an established government
bond market. To nurture the government bond market, the
Do investors in Bangladesh need a bond market? The government can issue short and long-term bonds to fund its
answer is yes. Without a local bond market, investors are economic development. These short and long-term bonds
unable to invest long term as well as hedge their investments are typically risk-free because they are issued by the
in the stock market. Bonds offer known cash flows and are sovereign government in which we have complete faith in its
great instruments for long-term investments. We all know ability to repay its debt. To increase broader market
that a proper mix of equities, bonds, and cash, for example, participation, the monetary authority can require banks to
is needed for asset allocation. When stocks and bonds are hold required reserves in the form of short-term government
negatively correlated, as they often are, investors can
_______________________________________________________________________________________
notes. Trading on these instruments fosters the growth of prospectuses should be filed online and book building in
the secondary bond market. IPOs can allow fairness in pricing and increased participation
by investors. With increased information, the bid-ask spread
Secondary
Secondary Market: Once bonds are issued and sold initially also declines, lowering transaction costs.
through IPOs (the primary market), they are then traded on
the secondary market. A vibrant secondary market is Infrastructure: The bond market infrastructure includes
important for increasing transparency and liquidity of the trading platforms, real-time data distribution, market makers,
bond market. financial analysts for valuing bond, determining the riskiness
of the bonds, timely clearing and settlements systems, and
Benchmark Yield Curve: These government securities offer government supervision of trading activities.
something critical to the overall bond market – the yield curve
– or the benchmark yield curve. The yield curve is based on In summary, the Bangladesh economy is making great
the yield on these short and long-term bonds and is used to strides in financial and regulatory reforms to promote the
value all other corporate bonds of similar maturities. To price financial sector. It has withstood the effects of the Sub-prime
a corporate bond, you look at its credit score, and then add crisis and massive price increases in agricultural, metals,
an interest rate spread on top of the government bond yield and energy. While some of the neighboring countries have
of similar maturity to arrive at the proper discount rate. Using experienced huge equity market falls (Vietnam, 60%, India,
that discount rate, you can determine the present value of 29%), the Bangladesh stock market has demonstrated
the corporate bond. The interest rate spread is contingent relative resilience. Resilience in the stock market reflects
upon the credit rating of the bond. The riskier the bond, the growing confidence in the corporate community and the
greater is the spread. This is typically known as the default outlook for economic and political stability. Having a bond
risk premium. Low quality firms usually issue high yield market is the next logical step towards developing a well
bonds to compensate investors for potential default on the functioning capital market. A local bond market reduces
bond. foreign exchange risk, interest rates, and refunding risk. It
reduces the over reliance on bank loans, increases the size
Repo Market: A repurchase market is where brokers/dealers of the financial sector, and improves efficiency by promoting
borrow or lend short-term excess funds that are backed by competition among issuers. From an investor point of view,
collaterals such as government securities (bills, notes, and bonds and stocks are an integral part of asset allocation to
bonds) and shares. A repo is an agreement to sell a diversify portfolio risk. Pension funds and life insurance
security, buy it back at a later date, and pay interest on the firms, for example, can match their long-term liabilities with
use of the funds for the duration. The availability of short- long-term assets such as bonds. Regarding supply of
term government securities is critical for allowing smooth capital, institutional and retail investors can inject much
trading of excess cash, increasing the liquidity and depth of needed capital into the economy by investing in bonds. The
the financial markets. development of the government bond sector allows the
government to supply liquidity and transparency in the
Regulatory Aspects: There are four most critical regulatory economy. At the same time, these government securities
aspects of a bond market. First, there should be laws to can become vital instruments for the central bank to conduct
detect and penalize illegal insider trading in the bond market. prudent monetary policy, in much the same way the Federal
Illegal insider trading occurs when officers of the issuing firm, Reserve conducts open market operations (OMO) in the
for example, those with fiduciary responsibilities towards United States. And finally, on a macroeconomic setting, the
shareholders, conduct insider trading while in possession of existence of a bond market allows a country to lessen the
material private information. Sometimes, bond markets are impact of external shocks like 1997 Asian currency crisis.
not closely monitored and as a result insiders conduct illegal
insider trading in the bond market. Second, the government The government of Bangladesh can quickly promote a
needs to consider making investor-friendly tax laws to vibrant bond market. First priority should be to establish a
encourage investor participation in the bond market. In government bond market by issuing short and long-term
particular, the government needs to design tax policies to government securities for funding development projects, like
attract domestic as well as non-resident investors. One way the $5.4 billion strategic transportation program. Next, to
to achieve this would be eliminate withholding tax on interest develop the corporate bond market, several important
and capital gains. The third regulatory aspect of a bond building blocks are needed. The government needs to
market development is to remove exchange controls so that develop the benchmark yield curve, streamline the issuance
foreign investors can freely repatriate their income anywhere process for corporate bonds, increase the pool of issuers and
in the world. The fourth piece of regulation needed for a investors, establish the secondary market to improve
thriving bond market is one that removes restrictions on liquidity, and finally introduce risk management instruments
foreign ownership of corporate and government bonds. such as derivatives instruments.
Information Availability: The development of the bond market All these may sound like a tall order but it is doable.
relies heavily on how investors are able to collect information Bangladesh does not need to reinvent the wheel. All it has to
on the bond issues and credit risk of the issuers. In the do is to examine what our Asian neighbors have achieved in
United States, all listed firms are required to file online their a relatively short span of time. To put it bluntly, when it
financial statements such as 10Q, 10K, etc. An investor can comes to having a bond market, our Asian neighbors have
access these statements free of cost. Similarly, bond left us in the dust.
_______________________________________________________________________________________
References:
Wikipedia.“The Anatomy of Local Bond Markets in Emerging Market

Economies: Sharing Malaysia’s Experience,” Rahamat Bivi Yusuff,
Malaysian Ministry of Finance, May 2007.
“Developing an Asian Bond Market as a Means for Regional

Financial Cooperation,” Olarn Chaipravat, Thai Ministry of Finance,
October 2004.
“Bond Market Development: The Case of Singapore,” Ng Nam Sin,

Monetary Authority of Singapore, June 2005.
“Asian Bond Market Development: Progress, Opportunities and

Challenges,” Masahiro Kawai, Asian Development Bank, November
2006.
“Building Corporate Bond Markets in Emerging Countries,” Alison

Harwood, International Finance Corporation, March 2002.
“Vietnam Tightens Bond with Global Economy,” HSBC, June 2008,

http://www.hsbcnet.com/country/vn/globaleco_bond.html
http://asianbondsonline.adb.org/administrative/abm_overview.php
“Asian Finance Ministers Set New Bond Market Road Map,” GMA
NewsTV, August 2008,
http://www.gmanews.tv/story/115381/Asian-finance-ministers-set-
new-bond-market-road-map
“Bangladesh bond market smallest in S Asia,” Financial Express,

March 1, 2008.
_______________________________________________________________________________________
Ifty Islam, Managing Partner
Special Focus a good public image, which produce a product that is widely
used and easily monitored, have an incentive to bypass bank
loans in order to exploit their transparency to lower their
International lessons for the development of Bangladesh’s external finance premium.
Bond Markets
Nevertheless, firms with direct access to the bond market
In the aftermath of the 1997-8 Asian bond market crisis, continue to fund themselves in part with bank loans because
there has been extensive research on the need to establish banks provide a number of other financial services. These
both a regional bond market as well as accelerate the
include: backstop financing with a line of credit; access to
development of national bond markets in Asia. Perhaps the
debtor-in-possession borrowing in the event of bankruptcy;
three most extensive and broad-based discussions of the
customised borrowing (as opposed to standardised debt
issues occurred at a BIS conference held in November 2005 instruments used to access the credit market directly); and
in Kunming, China, another held in 2005 in Korea and confidential borrowing, for instance when secrecy is needed
another BIS conference held in March 2004.
for a borrower to appropriate the returns to investment
financed with external funds.
Kunming Asia Corporate Bond Market Conference Highlights
Too much reliance on bank loans or direct bond finance,
Why Should We Have a Corporate Bond Market? however, exposes a firm to excessive risk of bankruptcy in
the event of default. Hence, in developed economies firms
Marvin Goodfriend, Professor of Economics at Carnegie
have come to rely on a portfolio of external finance that
Mellon University, gave a valuable perspective on the
usually includes substantial equity, as well as bond and bank
evolution of internal external bank and external bond market loan finance. Equity finance gives a firm financial flexibility in
financing in his presentation on “Why have a Corporate the choice of the payment of dividends - flexibility that a firm
Bond Market?” he noted that, in the earliest stages of can utilise to avoid default on bank loans or bonds. Outside
economic development, firms finance investment by building equity, however, involves a cost of its own: too much of it
up savings from internally generated funds. Self-funding is blunts the incentive of managers to run a firm efficiently
supplemented by loans from close relatives, extended family
because external ownership allows managers to retain only a
members, friends in the community and the like. Such
fraction of every dollar of value they create for the firm above
“inside” funding overcomes information and credibility
revenue needed to pay off fixed obligations, which include
problems, and provides an incentive for owners to use the
debt and fixed salaries. Therefore, equity, bank loans and
funds energetically, as promised. The borrower is bonded by
bonds generally coexist in the capital structure of modern
its close relationship to family and community. Indeed, close
corporate borrowers.
relationships monitor the borrower’s behaviour and can
enforce discipline on the borrower if need be. A market for direct debt also improves the incentive for banks
to remain efficient and to innovate. A market for short- and
As an economy develops, self-funding and inside funding
long-term corporate debt disciplines and ultimately
become insufficient to finance firms that must manage
strengthens the banking system by providing competition for
complex production processes and serve broader markets.
information-intensive bank loans at the margin. Banks have
Firms must attract additional financing from external sources.
an incentive to be efficient in order to retain clients with
Banks arise to provide information-intensive external funding,
actual or potential access to direct finance. A market for
and, in effect, recreate the kind of information, bonding and
direct debt encourages banks to innovate because products
monitoring that come with family relationship lending, only
initially created and customised by banks often have the
with more funding. The cost of external funding through potential to be commoditised, standardised and moved from
banks involves credit evaluation, loan monitoring, and a banks to capital markets, which provide them at lower
component to allow for the risk of default and the cost of overhead cost.
managing a default if it occurs. These costs of external
finance create an external finance premium that a borrower
Developing
Developing corporate bond markets
must pay over and above the opportunity cost of self-funding
or funding from close associates.
As Jacob Gyntelberg, Guonan Ma and Eli Remolona
highlighted in their presentation, development of multiple and
As an economy continues to develop, some firms need complementary institutions for performing financial
increasingly large external funds. Firms that are widely intermediation takes time and effort and cannot be
known can bypass information-intensive bank lending and accomplished in the short run. Significant efforts have
access lenders directly with corporate bond funding. In the
already been undertaken in Asian economies in this regard,
19th century, railroads were among the first large-scale as the other chapters in this volume have abundantly
enterprises in the United States to borrow directly with long- illustrated.
term corporate bonds. Railroads were able to utilise direct
bond finance because they had a relatively transparent
The supply of and demand for credit and liquidity is at the
public image and a physical capital structure (railroad tracks
heart of financial intermediation. In order to develop an
and cars) that was relatively easy to monitor. Hence, alternative to intermediation driven primarily by banks, it is
railroads reduced their external finance premium by necessary to simultaneously make progress on a number of
borrowing directly from the public. More generally, firms with fronts:
_______________________________________________________________________________________
• Free flow of capital and market-based interest The following factors are often cited as impeding the
rates,legal frameworks, bankruptcy reform and development of corporate bond markets in Asia:
investor protection,corporate governance standards
to mitigate wasteful agency costs, and control – Low investor participation. With ample liquidity in the
premiums to reduce the cost of corporate borrowing banking system, it is true that Asian banks and financial
• Prudent regulatory frameworks that promote self- institutions have increased their appetite for bonds in recent
regulation, but establish enforcement of disclosure- years. Institutional investors other than banks, such as
based rules pension funds or provident funds, have also played a more
• Provision of stable and reliable government active role as the amount of funds under management is
benchmark yield curves even when governments growing alongside an aging population. However, retail
are running a surplus (the Australian and the US investors’ participation is still low, while in some markets,
experiences are illustrative of the benefits of this restrictions on cross-border investment in individual markets
policy). have discouraged foreign investors.
• Developing transparent and efficient primary and
secondary markets (the recent initiative by the – Low liquidity. There is a lack of liquidity in the secondary
Securities and Exchange Commission (SEC) in the markets for corporate bonds. Such a low degree of liquidity is
United States to create TRACE (Trade Reporting often associated with the relatively small size of issues and
and Compliance Engine) is worth studying in this infrequent issuance. In Asia, where there are a large number
connection. of small and medium enterprises, corporate issues are
• Broadening the investor base through the creation commonly constrained by the size of the balance sheet of the
of bond funds company. Furthermore, the buy-and-hold strategy of most
• Open access to currency and credit markets bond investors further reduces the liquidity in the secondary
market.
• Provision of market mechanisms for credit risk
transfer, such as credit default swaps and
– Low price transparency. There is a lack of price
collateralised debt obligations.
transparency in the trading of bonds in the secondary
markets. This is because the majority of bonds, particularly
A thriving credit culture has a crucial role to play
corporate bonds, are traded over-the-counter (OTC). This
opaqueness in pricing has contributed to wide bid-ask
A sound credit culture is characterised by 1) appropriate
spreads, making transactions unnecessarily costly and
understanding of the creditworthiness of borrowers, i.e. their
inefficient to investors.
willingness and ability to meet their obligations; and 2) the
ability of investors to decide whether or not to lend, and the
The corporate debt market in India
price of lending based on proper credit assessments.
V K Sharma and Chandan Sinha, of the Reserve Bank of
Moody’s understands that this view is shared by officials
India, made a useful presentation highlighting the key
directing China’s economic reform. The more advanced a
aspects of the Indian experience in developing their bond
country is economically, the more advanced its credit culture
markets. There has been no one process through which
is generally!
corporate bond markets have developed. However, based on
experience from around the world, we can say that there are
a number of preconditions for the growth of a local corporate
bond market including:
1. The share of the private sector in the economy is large and

its financing requirements are met directly by the market
through the issue of both equity and debt instruments.
2. Interest rates are completely deregulated, and financial
markets integrated.
3. The government securities market is well developed, so
that it can provide the benchmark yield curve for bond
pricing.
4. Clearing and settlement systems are up to date, in terms
of both infrastructure and investor protection. A well
functioning depository system is in place for ease of issuance
and trading.
5. There is a regulatory framework that provides for adequate
disclosure, accounting
standards, proper corporate governance and the like.
6. Laws are enacted to provide for regulatory oversight and
investor protection.
7. A credible system of experienced rating agencies exists in
order to get opinions about debt issues into the public
domain.
8. The government has a clear policy with respect to the
development of the corporate bond market.
_______________________________________________________________________________________
Insofar as the preconditions for the development of a address capital needs more effectively, and allows
corporate bond market are concerned, India is fairly well corporates to match their asset-liability profiles. A well-
placed. There is a developed government securities market developed corporate bond market also plays a vital role in
that provides a dependable yield curve. The major stock risk diversification of the financial system, and adopting a
exchanges have trading platforms for debt securities. The market mechanism in the allocation and pricing of credit
existing depository system has been working well. would also ensure greater efficiency in the allocation of funds
to borrowers.
Looking ahead, the authors note that for most developing
countries, where dependence on bank loans is substantial, The Islamic PDS (Corporate Bond Market)
corporate bond markets are small, marginal and
heterogeneous in comparison with corporate bond markets in The Malaysian Islamic PDS (corporate bond market) market
developed countries. India has a bank-dominated financial has shown remarkable progress since its introduction in
system that was, until recently, supplemented by DFIs 1990. Malaysia has successfully created a niche market in
specialising in project finance. First, because of the this area: it is estimated that 85% of the total global Islamic
conversion of DFIs into banks, an institutional gap for long- bonds that have been issued were issued in Malaysia,
term finance now exists in India. Second, for the commercial making Malaysia one of the world’s largest Islamic bond
banks themselves, the proportion of long-term deposits markets.
(longer than five years) to total deposits is showing a
declining trend. Because of regulations relating to debt Structure of Islamic products
issuance and asset-liability management, banks may not be
able to fill the gap in long-term finance. Third, Indian A prerequisite for Islamic bonds, or Sukuk, is compliance
enterprises now have the ability to raise funds in foreign with the Shariah (Islamic laws), which prohibits the charging
capital markets. Indeed, an underdeveloped domestic market of interest (riba). A Sukuk instrument is structured so that it
can push the better-quality issuers abroad, thereby involves an exchange of Shariah-compliant assets for a
accentuating the problems of developing the corporate debt financial consideration that allows the investors to earn
market. The ability to raise funds efficiently has implications profits and rentals from transactions in the future.
for the overall growth of the economy. The development of
the corporate debt market, therefore, remains critical for There are various types of Islamic-based structures used for
achieving and sustaining high growth rates of 8% or so. the creation of Islamic bonds, but the more prominent are
sale and purchase of an asset based on deferred payment
The Malaysian PDS market – Global Competitiveness
Competitiveness in (bai’ bithaman ajil); leasing of specific assets (ijarah); and a
Islamic Bonds profit- and loss-sharing scheme (musyarakah). There are
also a number of innovative instruments recently pioneered
Muhammad bin Ibrahim and Adrian Wong of Bank Negara by market players involving the gamut of Islamic financial
Malaysia in their presentation highlighted that at the end of principles, including istisna (project finance), murabahah
1986, the PDS market was virtually non-existent in Malaysia. (cost-plus sale), mudharabah (profit-sharing), and qard
This was in contrast to the equity and government debt (interest-free loan).
markets, both of which had achieved a reasonable level of
sophistication and maturity by that time. PDSs outstanding in In the case of Malaysia, the majority of Islamic bonds are
1987 amounted to only MYR 395 million (0.5% of GDP), debt-based instruments, i.e. murabahah and bai’ bithaman
versus the market capitalisation of the Kuala Lumpur Stock ajil. With the new Guidelines on Offering Islamic Securities
Exchange (KLSE) of MYR 73.8 billion (91% of GDP) and the issued in 2004 by the SC, issuers are no longer constrained
outstanding amount of Malaysian Government Securities by the legal concept of debentures (debt-based), as required
(MGS) of MYR 48.8 billion (60.2% of GDP). for conventional products. It is envisaged that these
guidelines will promote the development of new Islamic
Importance of a functioning corporate debt market products, and, in particular, encourage the issuance of
products that are based on profit- and loss-sharing, such as
The period of strong economic growth in the early 1990s mudharabah and musyarakah. In an effort to promote
created high demand for funds from the corporate sector. issuance of Islamic debt securities via the principles of
Therefore, the development of the corporate bond market mudharabah, musyarakah and ijarah, expenses incurred by
was aimed at meeting the financing needs of the expanding issuers are allowed as deduction for computation of income
Malaysian economy, particularly those of privatised tax for a period of five years.
infrastructure projects. Specifically, the PDS market was
intended to provide an alternative means of financing to bank Growth and acceptance of Islamic bonds
borrowings, and complement the more mature and
sophisticated market in MGS and equities. The increasing popularity of Islamic bonds is attributable to
several factors. First, Islamic PDSs provide an avenue for
The PDS market would also serve as a new avenue for Islamic-based investors who need to invest in Shariah-
savings in a wide range of financial assets, in the context of a compliant instruments. Second, Islamic products have also
high domestic saving rate. appealed to conventional investors who are constantly
looking for liquid, attractively priced instruments to obtain
It is a well-recognised fact that a diversified financing capital gains and income. The strong demand by investors
structure, comprising financial intermediaries from the equity, also provides the opportunity to issuers to finance borrowing
bond and banking markets, is needed for an economy to at a lower cost. Third, the Malaysian government has been
allocate resources in the most efficient manner. Such actively involved in creating an efficient price discovery
diversification also provides businesses the opportunity to
_______________________________________________________________________________________
process for Islamic securities through its issuance of
Malaysian Islamic Treasury Bills (MITBs) and Government
Investment Issues (GIIs), which has led to the establishment

of an Islamic benchmark yield curve.
Over the years, Islamic capital market products have

garnered universal acceptance as viable alternatives to
conventional products. There has been clear evidence of the
acceptability of the products to non-Muslims, both issuers
and investors. As an indication of the success of Malaysia’s
Islamic capital market, 49.4% of funds raised in the PDS
market in 2004 were through Islamic products. The success
of “mainstreaming” Islamic bonds could be replicated
internationally, considering the estimated size of the global
Islamic financial system and the latent demand for Shariah-
compliant financial instruments.
References
Developing Corporate Bond Markets In Asia, BIS Paper No.

26
http://www.bis.org/publ/bppdf/bispap26.pdf
Asian Bond Markets, Issues and Prospects, BIS Paper No 30

http://www.bis.org/publ/bppdf/bispap30.pdf?noframes=1
_______________________________________________________________________________________
Stock Market Weekly
DSE performance: 52 weeks
weeks Market news
• GP to raise BDT 4.25bn (USD 62mn) through bonds
• Wise up to stock market: SEC
• Fresh SEC move to amend direct listing regulations
• SEC fines One Bank for 'breach' of market discipline
DSE performance: 30 days Regional stock market performance (last week)
Market summary Valuation snapshot
DSE General Sector P/E

Index performance DSE 20
Index Apr-08 May-08 Jun-08 July-08
Opening of this week 2,706.6 2,395.1 Banks 22.2 22.6 21.7 19.2
Closing of this week 2,765.5 2,425.9 Cement 14.7 17.6 12.4 11.2
Change within a week (%) 2.2% 1.3% Ceramic 43.7 42.7 42.0 50.3
Change within a week (Point) 58.8 30.8 Engineering 38.9 41.4 39.1 38.4
Food & Allied 28.2 28.5 13.2 19.3
Fuel & Power 25.8 26.2 23.6 16.1
This Last %
Capitalization and turnover Insurance 28.1 32.4 26.9 22.8
Week Week Change
Investment 64.9 65.2 53.1 33.5
Number of Trading Days 4 4
IT 18.4 17.6 20.0 20.3
Market Capitalization (USD bn) 14.07 13.83 1.7%
Jute 16.4 16.0 16.0 16.3
Total Turnover (USD mn) 156 121 28.8%
Miscellaneous 23.0 25.9 23.2 25.2
Daily Avg. Turnover (USD mn) 39 30 28.8%
Paper & Printing 9.2 9.5 9.2 7.9
Total Volume (mn) 61 53 16.2%
Pharmaceuticals 26.7 29.8 28.1 25.6
Daily Avg. Volume (mn) 15 13 16.2%
Service & Real Estate 20.5 19.5 20.8 20.5
Tannery 25.1 23.1 19.8 21.3
This Last 15.2 16.3
Weighted avg. P/E Ratio* Issues Textiles 14.9 14.4
Week Week
Source: Dhaka Stock Exchange
This Week 20.12 Advanced 178 102
Last Week 19.78 Declined 54 131
% Change 1.72% Unchanged 13 10
*Weighted on Market Cap. Not Traded 42 44
_______________________________________________________________________________________
Weekly Stock Market Commentary tenure bond will be BDT 10mn (USD 0.14mn) each and the
coupon rate will be no more than 14.50 percent. "We have
The bullish trend that started in the earlier week continued approved GP's proposal to raise the funds from the bond
this week. The marked gained on all 4 trading days this week market," said another high official of the capital market
closing up 2.2% on the week. regulator.
Almost all the sectors gained except the banking sector. The cellphone operator had earlier announced a USD 300mn
Insurance companies and the mutual funds were the major (BDT 20.58bn) equity raising – USD 150mn from the stock
gainers. The state owned companies (SOEs) in the fuel and market and the rest through private placement or pre-IPO.
power sector (e. g. Power Grid, Desco, Jamuna, Padma, The initial public offering proposal is still pending with the
Titas) were not doing well in recent weeks but gained SEC. GP sought approval from SEC for bond issue before
significantly this week. They are expected to declare their submitting the IPO proposal.
annual earnings and dividends in the next few weeks
GrameenPhone announced that it plans to issue BDT 4.25 http://thedailystar.net/story.php?nid=52234
bn of bonds this week. While they will be placed privately and
will not be listed, we welcome a good quality bond issue. See Wise up to stock market: SEC
our Special Focus piece on Developing a Bond Market. The Daily Star, Friday, August 29, 2008
The average trading volume in the week was BDT 2,667mn, The Securities and Exchange Commission yesterday urged
12% higher than the average volume of trade in August but merchant bankers and brokerage houses to organise regular
slightly lower than the average this year. Trading volumes awareness programmes for investors to help them make
started increasing significantly since 2007, now representing rational investment decisions. At least 0.1mn new investors
8 times that in 2006. have entered the capital market in the last two years and
most of them have no clear knowledge about the market and
Daily Average Turnover (USD mn) investment tools and techniques, said Faruq Ahmad Siddiqi,
chairman of the SEC. In most cases, the capital market
regulator said, investors sometimes make decisions based
on rumours instead of analysing company fundamentals.
“Such investor awareness programmes will help the
investors to make knowledge-based investment decisions in
lieu of rumour-based investment decisions,” Siddiqi said.
http://thedailystar.net/story.php?nid=52355
Fresh SEC move to amend direct listing regulations

The Financial Express, Thursday, August 28, 2008
The Securities and Exchange Commission (‘SEC’) has

recently formed a committee, comprised of various
stakeholders representatives, to amend the direct listing
regulations introduced about three years back, following
recent issues with the Titas direct listing and significant
The growth of capital market activities in recent times has volatility of the Jamuna Oil listing. Mr Bhuiyan, the head of
been beneficial not only to issuers and investors, but also the committee, said, "the committee, in its first meeting
those who earn their keep on commissions, margin lending recently, has already identified the merits and demerits of the
and advice - the brokers and merchant bankers. Times have regulations in the light of experiences gathered the trading of
been tough in the past with many players feeding on a small five state-owned issues under the regulations".
pie - there are 200+ brokers in a market with 263 listed
companies! The top five market participants have seen their http://www.thefinancialexpress-
share prices increase dramatically. If one bought stock in bd.info/search_index.php?page=detail_news&news_id=43915
those five companies on January 1, 2007 and still hold them
today, returns would have been exceptional - 356% (AB SEC fines One Bank for 'breach' of market discipline
The Daily Star, Tuesday, August 26, 2008
Bank), 1153% (Lanka Bangla Finance), 391% (IDLC
Finance), 1128% (Investment Corporation of Bangladesh)
The Securities and Exchange Commission (SEC) has fined
and 553% (Prime Finance) to date.
the directors of One Bank BDT 0.1mn (USD 1,460) each for
their failure to submit audited financial statements for year
Stock Market News ended 31 December 2007, by 11 May 2008, the annual
reporting deadline. The SEC imposed the fine on 20 August
GP to raise BDT 4.25bn (USD 62mn) through bonds
and asked the directors to deposit the penalty within 15 days.
The Daily Star, Thursday, August 28, 2008
Should the company fail to pay the fine in time, the SEC will
Grameenphone announced it plans to raise BDT 4.25bn file a 'certificate case' against the bank said SEC Executive
through issuing bonds. The country's largest mobile operator, Director Farhad Ahmed.
majority-controlled by Norway's Telenor, has received the
http://www.thedailystar.net/story.php?nid=51877
green light from the Securities and Exchange Commission to
raise the funds through a private placement, an SEC official
said. According to the official, the value of the two-year
_______________________________________________________________________________________
DGEN Performance LTM DGEN Performance YTD
Turnover leaders Best performers* Worst performers*

(All figures in mn) BDT USD % Change % Change
Titas Gas 949 13.9 ICB 39.9 Pubali Bank -30.1
Beximco Pharma 576 8.4 Peoples Insurance 30.9 Maq Enterprises -12.5
BEXIMCO 442 6.5 1st BSRS 30.5 Kohinoor Chemicals -10.0
Islami Bank 435 6.4 Popular Life 27.2 Bd.Thai Aluminium -8.8
AB Bank 424 6.2 Lexco 24.5 Renwick Jajneswar -6.7
Lankabangla Finance Com 390 5.7 Agrani insurance 23.6 Wonderland Toys -6.1
Uttara Bank 313 4.6 National Polymer 23.4 Jamuna Bank -5.0
Keya Cosmetics 305 4.5 Prime Islami Life 23.1 Rahim Textile -4.6
ACI Limited. 261 3.8 Reliance Insurance 22.9 NBL -3.9
Square Pharma 259 3.8 Eastern Cables 21.6 Shahjalal Islami Bank -3.8
*By closing price
Market cap. by sector*
Banks 52.6%
Fuel & Power 12.2%
Pharmaceuticals 10.4% Correlation with other Indices*
Cement 5.7% S&P NIKKEI KSE FTSE
500 Sensex 225 100 SSECI 100 HangSeng DSE
Insurance 5.7%
S&P500 1
Miscellaneous 3.0%
Sensex 0.49 1
Engineering 2.6%
NIKKEI225 0.40 0.50 1
Foods 2.4%
KSE100 0.13 0.31 0.10 1
Textile 2.1%
Tannery 1.5% SSECI 0.28 0.41 0.22 0.04 1
Service & Real Estate 1.0% FTSE100 0.81 0.48 0.41 0.21 0.38 1
IT 0.5% Hangseng 0.65 0.58 0.46 0.09 0.50 0.73 1
Ceramics 0.1% DSE 0.10 0.14 0.09 0.06 0.03 0.13 0.11 1
Paper & Printing 0.1% * Based on the last 80 months’ USD returns
Source: AT Capital Research
Jute 0.03%
Total 100%
*As of July 31, 2008
Research Team
Professor Jahangir Sultan

Shahidul Islam
Senior Advisor
Investment Manager
shahid.islam@at-capital.com
Rashed Hasan Syed Najibullah

Research Associate Research Assistant
rashed.hasan@at-capital.com syed.najibullah@at-capital.com
_______________________________________________________________________________________
Economics
Export performance across different

different sectors (USD mn) Market news
%
% • Remittances of USD 9bn this year
Export increase
Exports increase
Product target over
(2007-
(2007-08) over
(2007-
(2007-08) 2006-
2006-07
target
exports • NBR expansion on the cards
All products 14,110.8 14,500 -2.7% 15.9%
RMG knit 5,532.5 5,465 1.2% 21.5%
• Strong dollar to cut imports, but inflation unlikely to
RMG woven 5,167.3 5,400 -4.3% 10.9%
ease
Frozen food 534.1 600 -11.0% 3.6%
Jute goods 318.3 350 -9.0% -0.8%
Home textiles 291.4 310 -6.0% 13.4% • Consumer Rights Protection Ordinance approved
Leather 284.4 295 -3.6% 6.9%
Petroleum
185.1 95 94.9% 120.6%
by-products • BEPZA signs USD 100mn investment deals in July
Footwear 169.6 165 2.8% 24.8%
Raw jute 165.1 175 -5.7% 12.2%
Chemical
91.3 130 -29.8% -27.0%
fertilizers
Textiles fabrics 66.6 40 66.4% 84.5%
Bicycles 64.3 60 7.1% 18.9% Latest treasury yields
Vegetables 60.5 40 51.2% 69.7%
Pharmaceuticals 43.0 32 34.4% 52.8%
Weighted average
average
Agri processed 40.7 26 56.3% 77.2% Auction date Tenor & security type
yield
Ceramics 38.3 35 9.5% 28.0%
Computer 27-Jul-08 91-day T-bill 7.78%
23.1 30 - -
services*
Tobacco 22.4 20 11.9% 24.1% 27-Jul-08 182-day T-bill 8.01%
Camera parts 18.8 25 -25.0% -12.3%
27-Jul-08 364-day T-bill 8.51%
Tea 14.9 8 86.1% 114.6%
*Export figure for the 11-month (July 2007-May 2008) period 19-Aug-08 5-year T-bond 10.60%
Source: Export Promotion Bureau 5-Aug-08 10-year T-bond 11.72%
12-Aug-08 15-year T-bond 12.14%
Top exported items (USD mn) 22-Jul-08 20-year T-bond 13.07%
Source: Bangladesh Bank
Export price and volume indices
Total Primary Manufactured

exports products products
Index by price (+) 1.82% (+) 12.22% (+) 1.09%
Index by volume (+) 14.05% (+) 6.44% (+) 14.58%
Source: Export Promotion Bureau
S Adeeb Shams
Research Associate
adeeb.shams@at-capital.com
_______________________________________________________________________________________
Economic News Garment exports to hit USD 25bn in 2013
The Financial Express, Wednesday August 27, 2008
Budget deficit to reach 5.2pc of GDP in FY 09 Economist
Intelligence Unit says According to the President of the Bangladesh Garment
The Daily Star, Friday, August 29, 2008 Manufacturers and Exporters Association (BGMEA), Anwar-
Ul-Alam Chowdhury Parvez, the country's garment exports
The Economist Intelligence Unit (EIU) has forecasted will hit USD 25bn by 2013, as buyers remain impressed with
Bangladesh's budget deficit for the 2008-09 fiscal at 5.2% of the country's quality products and competitive prices, despite
GDP, which is marginally higher than the official target of 5%. its rickety infrastructure and a growing shortage of skilled
Real GDP is expected to grow at 6% in the current fiscal, manpower.
driven by strong household spending and investment.
Despite a relatively poor performance during the first quarter,
According to the EIU, consumer price inflation is expected to
export earnings from the garments sector recovered to reach
remain high over the forecast period, averaging 8.2% in 2008
and 8.8% in 2009 and the trade deficit is expected to USD 10.7bn in the 2007-08 fiscal – a16% increase from the
increase to record levels this fiscal, as demand for industrial prior period. Parvez also mentioned that the growth rate of
the industry in the last three years was 64%.Authorities have
raw materials rises and international oil prices remain high.
set an ambitious target of achieving exports receipts of USD
http://www.thedailystar.net/story.php?nid=52364 18bn by 2010, and USD 25bn by 2013.Such an expansion
will create jobs for approximately 1.4mn people directly
More amendments to forex law soon: BB governor within the ready-made garments industry and will open up
The Financial Express, Sunday, August 31, 2008 further opportunities across other sectors. The sector
currently accounts for 10% of GDP and employs 2.4mn
Bangladesh Bank (BB) Governor Salehuddin Ahmed said on people, which is about 40% of the country's total industrial
Saturday that a proposal to amend the foreign exchange workforce.
regulation act, the Foreign Exchange Regulation Act 1947, is
awaiting final approval from the government. The interim http://www.thefinancialexpress-
government earlier sought a final draft report from the central bd.info/search_index.php?page=detail_news&news_id=43545
bank on the amendments to the existing Foreign Exchange
Regulation Act to make it time-relevant and ensure its Inflation back in double digits
effective implementation in line with international standards, The Daily Star, Tuesday August 26, 2008
officials said. Some neighbouring countries, including India,
Pakistan and Sri Lanka, have already amended their foreign
exchange rules and regulations in line with the international Point-to-point inflation soared to 10.04% in June, driven by
practices. high oil prices in global markets and increases in food prices.
Natural disasters exacerbated the global phenomena. This
http://www.thefinancialexpress- represented a 2.6 percentage point increase from 7.44% in
bd.info/search_index.php?page=detail_news&news_id=44175 May. Inflation had remained in double digits from July last
year, having reached close to 12% in December 2007,
before falling to 7.66% in April, despite soaring commodity
Credit flow to private sector goes up by 25pc in FY '08 prices in kitchen markets. The all-year inflation rate was
The Financial Express, Thursday August 28, 2008
9.94% in the last fiscal year, exceeding government
estimates of 9%. In the 2006-07 fiscal, the average inflation
Credit growth to the private sector recorded a significant 25% rate was 7.2%.
increase to BDT 379.6bn (USD 5.5bn) in the 2007-08 fiscal,
from BDT 198bn (USD 2.9bn) in the prior period. According http://www.thedailystar.net/story.php?nid=51875
to a senior central bank official, the rise was caused by
increases in private sector economic activity, financing for Aziz defends foreign aid
natural disasters and global price increases of imported The Daily Star, Tuesday August 26, 2008
goods. The central bank expects the existing trend to
continue for at least for the next five months in line with the The Finance Adviser Dr. Mirza Azizul Islam has defended the
ongoing monetary policy of the Bangladesh Bank, although need for foreign aid, saying it helps the government carry out
the upward trend in private sector credit may come down development activities. He said that in broader terms, the
slightly in the coming quarters, because of falling prices of inflow of aid has considerably declined and it will not be
petroleum products and those of some essentials in the possible for the country to meet the need on its own.
global markets. Additionally, some banks may also improve
their overall liquidity positions by the end of the calendar Foreign aid also helps the government halt the depreciation
year. of the taka against the dollar, which is of great significance
as Bangladesh is an import-dependent country. He made
http://www.thefinancialexpress- these remarks at the Accra Conference on Aid Effectiveness:
bd.info/search_index.php?page=detail_news&news_id=43917 Perspectives Bangladesh, organised by private research
organisation Centre for Policy Dialogue (CPD).
_______________________________________________________________________________________
Sector News
Agriculture & Food and Thursdays. One-way tickets on the route have been
fixed at BDT 5,595 (USD 82). The company has also
Food price hike pushed 4mn into poverty announced a one-month inauguration discount of BDT 1,000
The Daily Star, Thursday August 28, 2008 (USD 15) till September 25.
It has been estimated that food price increases coupled with Syedpur Airport is now open to flights will be reopened for
the effects of natural disasters have pushed more than 4mn the new flights after a period of sixteen months closure after
people into poverty. A 60 percent increase in the price of rice the caretaker government had halted operations of Biman on
alone in the last 12 months, has eroded nearly one-fifth of this route in order to cut down on its losses.
the income of a poor households. Forecasts suggest the food
price increases have caused the poverty rate to increase by http://www.thedailystar.net/story.php?nid=52040
3% - however combined with the effect of GDP growth, the
baseline poverty rate has fallen to 38% from 40% in 2005. Best Air adds new
new aircraft
New Age, Monday August 25, 2008
The report suggested that increasing productivity through
improved agricultural yields and crop management are Private airlines Best Air has announced it has added a new
critical to alleviating the pressure, as the population grows by MD83 aircraft to consolidate its international network.
2mn annually with cultivable land falling by 1% per year. Speaking to reporters while receiving the airplane at Zia
International Airport, Chairman and CEO of the Best Air, M
http://www.thedailystar.net/story.php?nid=52061 Haideruzzaman said the addition of new aircraft has now
http://www.thedailystar.net/story.php?nid=51875 increased the fleet strength to two with plans to further
expand its fleet this year.
Prices of non-
non-brand edible oil rise despite international
downtrend http://www.newagebd.com/2008/aug/25/busi.html
The Daily Star, Saturday August 23, 2008
Banking
Prices of non-brand edible oil, which had been falling in line
with a downward trend in the international market over the 80pc banks don’t evaluate board performance
last month and a half, suddenly went up in kitchen markets in The Daily Star, Thursday, August 28, 2008
Dhaka over the last three days. In wholesale markets, the
Some 80 percent of the banks and 88.9 percent of the non-
price of non-brand palm oil and soybean rose by BDT 100
(USD 1.46) and BDT 50 (USD 0.73) a maund (1 maund = bank financial institutions (NBFI) have no performance
37.32kg) over the last three days. Bangladesh Rifles (BDR) evaluation of their boards, a study revealed. The study found
started selling rice for the reduced price of BDT 28 (USD only 15 percent of the banks and 11 percent of the NBFIs
have had a performance evaluation system and five percent
0.41) a kilogram (kg) from its 100 fair-price outlets in the
of the banks refused to respond to the issue.
capital, under the Ramadan initiative announced by the
Government last week.
“Performance evaluation is critical to increase the efficiency
http://www.thedailystar.net/story.php?nid=51511 of a board. Such evaluation gives proper direction to
management to counter possible risk and to improve the
Fertiliser shortage threatens Aman target in 16 districts performance of any organisation,” said the study, conducted
The Daily Star, Saturday August 23, 2008 by Bangladesh Enterprise Institute (BEI) and placed before a
seminar on August 27.
The government is failing to supply adequate amount of
fertilisers to 16 northern districts for Aman cultivation. Price The two-day-long SAARCFINANCE seminar titled
hike in fertilisers is also limiting farmers’ abilities to cultivate “Corporate governance in banks and financial institutions”
their land. Inadequate use of fertilisers may hamper Aman was organised jointly by Bangladesh Bank (BB) and BEI.
production which may also affect subsequent crops like Boro SAARCFINANCE is a network of Saarc central bank
rice. The Department of Agriculture Extension planned to governors and finance secretaries who share experiences on
cultivate Aman on 1.7mn hectare of land in 16 northern macroeconomic issues. BB Governor Dr Salehuddin Ahmed
districts to achieve 4.3mn MT of rice production this season. chaired the inaugural session of the seminar. He said good
corporate governance in banks and NBFIs helps financial
http://www.thedailystar.net/story.php?nid=51514 stability and accelerates economic growth. He commented
that very few banks and NBFIs have written code for
Aviation corporate governance, which is necessary for Basel II
implementation.“Unless you (banks and NBFIs) have a
Aviana opens direct flight on Dhaka-
Dhaka-Syedpur route guideline, it is difficult to practice corporate governance,” he
The Daily Star, Wednesday August 27, 2008 said.
Aviana Airways has introduced a direct flight from Dhaka to http://thedailystar.net/story.php?nid=52240

Syedpur aiming to establish more efficient air
communications between the northern parts of the country
with the capital. The flight, with a Dash-8-102 aircraft made
by Bombardier of Canada, operates on Sundays, Tuesdays
_______________________________________________________________________________________
Govt, private sector to float venture capital co soon demand. The price of per ounce gold reached USD1,000 in
The Financial Express, Saturday, August 30, 2008 February-March of 2008 from below USD 300 in 2001.
The government plans to form a 'venture capital company' in Income from foreign currency revaluation witnessed 100
coming months with private partnership to provide collateral percent and 38 percent growth respectively. Total profit from
currency revaluation stood at about BDT 18bn (USD
free loans to companies with strong growth prospects. 262.8mn).
Finance ministry officials said such a company will have an
initial capital of BDT 5.0 billion and will be majority controlled The foreign exchange reserve position crossed USD 6bn
by the government. mark for the first time in Bangladesh's history in February
2008.
"About 51 per cent of the capital of the company will be
invested by the government. Private entrepreneurs will invest http://www.thedailystar.net/story.php?nid=51874
the rest," said a senior finance ministry offical. The finance
ministry has sought opinions on the outline and modus Mobile banking rattles banks, Bangladesh Bank promises to
operandi of the 'venture capital company' from the central listen to growing concern
bank and the Securities Exchange Commission. The Daily Star, Wednesday, August 27, 2008
Banks, the traditional leader in payment systems, see mobile
"We hope after the completition of the necessary banking as a new threat if private telecom operators are
consultations, the first venture capital company can go into allowed to use their outlets for money transfers. The central
operation within months," he added.
bank governor has taken the bankers' concerns into account
and asked them to submit recommendations in writing in two
The Finance ministry examined rules and operational weeks, a senior bank official said.
methods of successful venture capital funds across the
globe, but mainly adopted the Indian experience while
Bangladesh Bank Governor Dr Salehuddin Ahmed held a
preparing the outline. India has emerged as one of the top
meeting with the bankers yesterday over the issue, which
magnets for big global venture capital funds after allowing
came to a head after the central bank moved to introduce
them to operate since 1988. policies on mobile banking.
The move to form a venture capital fund came after a central “We have given our opinions at the meeting and told the
bank study found that many companies with strong growth central bank that banks have no objection to using modern
potential have limited access to credit from the conventional technology as a tool of expanding delivery channels,”
banking system. The study said limited banking finance is a
Mahmud Sattar, president of the Association of Banks
major constraint to the growth of the country's small and
Bangladesh (ABB), told The Daily Star.
medium enterprises (SMEs), which account for almost 80 per
cent of total employment in manufacturing sector.
But the transactions must be done through the banks, and
mobile phones should be used as a mere banking tool, he
http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=44068 said. “A mobile phone outlet cannot be used as a bank
branch." “We won't let anything, which hurts the banking
industry, happen. Banks have been asked to submit their
Bangladesh Bank profit up 50pc proposals in two weeks on the proposed policies,” said a
senior central bank official.
Increases in gold prices and income from foreign and
domestic sources have helped Bangladesh Bank (BB) to The decision to consider banks' recommendations came at
post a 50 percent increase in net profit in the fiscal year. the meeting between the bankers and the BB governor. The
meeting discussed two proposed policies -- a guideline for
The central bank's earnings reached BDT 51.8bn (USD mobile phone banking and a set of rules for mobile-phone
756mn) in the 2007-08 fiscal year (FY), a 49.57 percent rise payment systems. If the policies are approved, the banks
from BDT 34.6bn (USD 505.3mn) in FY 2006-07.Of the say, mobile operators' outlets will be used as payment
amount, BDT 27.4bn (USD 400mn) is payable to the national centres. Banks fear the phone companies will take away a
exchequer for FY 2007-08, according to central bank large swathe of their business through thousands of outlets
officials. BB had contributed BDT 21.9bn (USD 319.8mn) to across the country.
the government in FY 2006-07 and BDT 10.85bn (USD
158.5mn) in 2005-06.
Bangladesh Bank offers $60m OD facility to two SCBs
Income from gold and silver increased by 832 percent in FY The Financial Express, Thursday, August 28, 2008
2007-08. Gold and silver accounted for BDT 2.23bn (USD
32.5mn) in FY 2007-08 from only BDT 240mn (USD 3.5mn) The central bank provided US$60 million overdraft (OD)
in FY 2006-07. facilities to two state-owned commercial banks (SCBs) in the
last couple of days to help them settle fuel oil and fertiliser
“Revaluation gain increased due to the fluctuation of import bills. "We've provided the SCBs such facilities against
conversion rates of the taka against major currencies and government approved securities to settle import payment
increased gold value in the international market,” a senior BB bills for petroleum products and fertiliser," a senior official of
official said. Gold prices have been rising constantly since the Bangladesh Bank (BB) told the FE on August 27.
July 2001 due to the changing balance between supply and
_______________________________________________________________________________________
In addition, to the two USD 30mn facilities, an OD facility for narrow the spread. At least 12 commercial banks raised the
USD 7.0mn was provided to another SCB for paying fuel interest rates on deposits in August to encourage people to
import bills. The senior official said the central bank will keep their money with the banks.
continue to give such foreign currency support to the
The banks have raised the interest rates on deposit by 0.25
commercial banks particularly to the SCBs for making import to 1.0 percentage points to collect fresh funds from general
payments against petroleum products and essential items
including food grains and fertiliser. depositors, officials said. Also, at least 10 out of 48 banks
have reduced interest rates on lending this month in line with
The BB has continued its intervention in the inter-bank the commitment made by the Bangladesh Association of
foreign exchange market by directly selling and buying of the Banks (BAB) to the central bank.
US dollar and providing short term facilities to the banks
aiming to keep the foreign exchange market stable, they "Some banks, especially private commercial banks (PCBs),
added. have slashed their interest rates on industrial term loans and
working capital for productive sectors on the basis of BAB
http://www.thefinancialexpress- commitments," a senior official of the Bangladesh Bank (BB)
bd.info/search_index.php?page=detail_news&news_id=43937 told the FE. The Bangladesh Association of Banks had
proposed to the central bank that they would reduce interest
Dhaka making steady progress on anti-
anti-money laundering rates on industrial term loans to 14.75 per cent from the
issues existing 16.00 per cent while the interest rates for the
The Financial Express, Thursday, August 28, 2008 productive sector will be brought down to 14.50 per cent from
existing 15.50 per cent.
David Shannon, team leader of the Assessment Team of
Asia-Pacific Group (APG) on Money Laundering said He added, the central bank expects more banks to cut their
Bangladesh is progressing steadily with anti money lending rates on productive sectors from the next month. The
laundering activities. The APG team, an autonomous and weighted average spread between lending and deposit rates
collaborative international organisation founded in 1997 in in the country's banking sector came down to 5.75 per cent in
Bangkok, is currently in Bangladesh to compiling a March from 6.05 per cent in December, according to the
comprehensive report. The APG conducts mutual evaluation central bank statistics.
of its members to determine to what extent they comply with
their obligations to implement the global anti-money http://www.thefinancialexpress-
laundering and anti-terrorist financing standards. bd.info/search_index.php?page=detail_news&news_id=43845
David Shannon said the Anti-corruption Commission rules Limited bank

bank funding impedes SMEs' growth, says BB study
and promulgation of anti money laundering ordinance-2008 The Financial Express, Monday, August 25, 2008
have contributed much in improving the country's money
laundering situation. He said, "the aim of the assessment is Limited bank financing is a major constraint to the growth of
to create a level playing field among the countries, especially the country's SME sector, although it accounts for almost 80
in the cases related to investment, cash money and good per cent of the total employment in the industrial sector and
governance." 23 per cent of the country's total labour force, according to a
central bank study.
bd.info/search_index.php?page=detail_news&news_id=43931 'Limited access to bank financing is one of the critical
constraints facing the SMEs in Bangladesh,' said the central
Lack of corporate governance code in banks, NBFIs irks BB bank study, titled 'A Note on the Contribution of Small and
Governor Medium Enterprises to GDP.'
The Financial Express, Thursday, August 28, 2008
The study also said large enterprises have a greater capacity
Bangladesh Bank Governor Salehuddin Ahmed Wednesday to raise capital from the capital market, but the small and
expressed concern that the commercial banks and non-bank medium enterprises (SMEs) still depend heavily on banks for
financial institutions (NBFIs) still have no written code for term loans as well as working capital. 'As a result, the SMEs
corporate governance, as the Basel II governance standard are somewhat crowded out from the banking sources,' said
deadline approaches. "Unless you (banks and NBFIs) have a the study prepared by the Bangladesh Bank (BB) policy
guideline, it's difficult to practise corporate governance," the analysis unit in June last.
BB Governor told a seminar on corporate governance at
Hotel Purbani. http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=43649
bd.info/search_index.php?page=detail_news&news_id=43882 Healthcare
12 banks raise interest rates on deposits, 10 cut rates on Private hospitals risk losing import duty exemption - 9
lending hospitals under NBR scrutiny
The Financial Express, Wednesday, August 27, 2008
The New Age, Sunday 24 August, 2008
Interest rates were raised on deposits and reduced on
The National Board of Revenue is considering the withdrawal
lending by commercial banks in the current month aiming to
of import duty immunity enjoyed by private hospitals since
_______________________________________________________________________________________
2005 for importing about 3,000 medical instruments. The Board’s Rural Power Company Limited at about BDT 4.3 US
NBR will investigate allegations of irregularities such as false Cents a unit.
declaration in duty-free imports of medical equipment and
failure to ensure quality health services at affordable costs. The Power Cell director general, Abdul Jalil, who heads the
Nine large referral hospitals that have been identified tender evaluation committee stated the committee would
primarily for scrutiny -BIRDEM, National Heart Foundation, evaluate the financial offer of the consortium and send the
Apollo Hospitals, Square Hospital, Sikdar Medical Hospital report to the government in a week.
and United Hospital in Dhaka, and Khawaja Younus Ali
Hospital, Ibrahim-Iqbal Memorial Hospital and Jalalabad http://www.newagebd.com/2008/aug/29/front.html#15
Ragib-Rabeya Hospital outside the capital.
Guidelines on power sector public-
public-private partnership drafted
This initiative follows allegations that private hospitals charge The New Age, Thursday August 28, 2008
exorbitant fees for medical services and many hospitals sell
equipment, imported duty-free, to other clinics for profit. The The Power Division has released draft guidelines on public-
NBR’s committee will examine whether the private hospitals private partnerships in the power sector. Provisions include:
maintained all the conditions under the import duty
exemption, including whether patients were benefited in • Private investors setting up power plants based on
terms of quality service at reasonable costs and whether any fuels other than gas, will be given priority in
official irregularities took place in awarding the hospitals the developing coal mines.
duty-free facility. The committee will also recommend if the • Any fuel supply or source of energy has to be
duty exemption scheme should continue. arranged by developers of such power plants
without government involvement.
http://www.newagebd.com/2008/aug/24/front.html#2 • Private investors can set up private power plants on
their own if they obtain appropriate licenses from
Only 17pc dentists, clinics sterilize equipment the Bangladesh Energy Regulatory Commission
The Daily Star, Monday 25 August, 2008 (‘BERC’) and sell power to their own buyers. Public
power agencies can also purchase electricity from
Dentists at a round table organized by Oral Health and these plants.
Research Foundation (OHRF) expressed concerns over the • All distribution utilities should provide non-
fact that only 17% of dental clinics or dentists sterilize their discriminatory open access to their transmission or
equipment regularly in line with international standards. They distribution systems for the private power plant or
commented that such negligence is exposing dental patients its buyers by paying wheeling and any other
to the risks of diseases like Hepatitis B, C and HIV/AIDS charges fixed by the BERC.
http://www.thedailystar.net/story.php?nid=51752 The draft also stated that some old and inefficient public
sector power plants could be handed over to private
Infrastructure & Energy investors for rehabilitation on an own and transfer basis.
Investors would be selected through open tenders and
Energy ministry plans to place again draft coal policy before successful bidders will be required to pay the value of the
cabinet existing assets of the power plants or through adjustments to
The Daily Star, Saturday August 30, 2008
proposed tariffs subject to the government approval.
The Ministry of Energy plans to place again the draft coal http://www.newagebd.com/2008/aug/27/front.html#5
policy before the Cabinet Division by the end of September,
clarifying all the queries that were raised.. Most of the New private ICD goes into operation next week
advisers put up questions about the rehabilitation and land Financial Express, August 25, 2008
reclamation provisions laid down in the draft policy, which
proposed not to give back the acquired land to its original A private Inland Container Depot (‘ICD’), Incontrade, will
owners after completion of coal mining andqueried the start its operations next week. This will be country's largest
royalty fixing provision. ICD after they introduce barge operations within nine
months. This is the first private ICD in the country to have
http://www.thedailystar.net/story.php?nid=52487 provision for riverine transport. Built on 23-acres of land on
the estuary of the river Karnaphuli, Incontrade also houses
Lone Bibiyana bidder offers high power price
The New Age, Friday August 29, 2008 the country's single largest Container Freight Stations. The
new depot will help ease congestion at Chittagong port,
The consortium bidding for the 450MW Bibiyana which handles more than 90 percent of the country’s US$35
independent power plant installation has offered to sell billion foreign trade, by speeding up shipment of inbound and
electricity to the Power Development Board at a price of outbound cargoes. At present, there are 15 private ICDs in
4.5394 US Cents a kilowatt-hour. The price offer of the operation in and around Chittagong port. Among these,
consortium is almost double the price for which the Power Essack Brothers Container Depot is the largest with capacity
Development Board (‘PDB’) buys power from the 450MW to handle over 150,000 containers.
Meghnaghat and 360MW Haripur independent power plants
installed in 2001. The PDBbuys electricity from the 90MW bd.info/search_index.php?page=detail_news&news_id=43643
single-cycle Westmont IPP at a price of about 4.31 US Cents
and from the 210MW power plant of the Rural Electrification
_______________________________________________________________________________________
Elevated expressway for capital by 2011 The government plans to develop several SEZs across the
The Daily Star, August 28, 2008 country to attract investment. The SEZ, the first of its kind in
the country, will be modeled after similar zones have been
A draft of the second PRSP (Poverty Reduction Strategy successfully set up in China, Vietnam, South Korea, Dubai
Paper for 2009-2011) will be submitted to the National and Jordan. The proposed ordinance was drafted after
Economic Council, chaired by the chief adviser. The first consultation with SEZ authorities in other countries and
PRSP had been introduced for the period of 2005-2007, the representatives of local and foreign chambers and export
tenure of which was extended up to the last fiscal. The PRSP oriented trade bodies.
has been prepared with advice from International Monetary Unlike the existing publicly owned and managed Export
Fund (IMF) and the World Bank. Processing Zones (EPZs), SEZs will be larger in scale and
In the second PRSP the government plans to construct an be linked to the domestic market. They will be established as
elevated expressway in the capital and a Dhaka-Chittagong public-private partnerships with the Special Economic Zone
expressway by 2011 in a bid to ease traffic congestion and to Authority overseeing development and plot allotments.
speed up communication with the port city. The government Experts believe the spillover effects -- job creation,
also plans to upgrade Dhaka-Chittagong, Dhaka-Khulna, investments, transfer of management skills and technology --
Dhaka-Sylhet, and Dhaka-Tangail highways to four lanes, of SEZS will be much greater than traditional industrial parks
and to construct the Padma Bridge by 2011. It also includes such as EPZs.
a plan to construct a ring road around the capital and a
flyover across Pragati Sarani in Gulshan area. Bangladesh set up its first EPZ in 1983 and since then its
eight EPZs have attracted over $1.5 billion in investments,
The second draft PRSP also discloses plans for instituting accommodating more than 283 industrial plants and creating
new policies and regulatory frameworks for enabling private 220,00 jobs. The EPZ factories exported US$2.43 billion last
investments in economic zones and for improving land year, around 20 per cent of the country's annual export.
zoning for industrial purposes.
http://www.thedailystar.net/story.php?nid=52189 bd.info/search_index.php?page=detail_news&news_id=43642
Work on 20-
20-year transport plan starts to ease city traffic jam BPC in fresh row with KPC over demurrage
Financial Express, August 28, 2008 The New Age, Thursday August 28, 2008
The government has drawn a 20-year transport plan to The state-owned Bangladesh Petroleum Corporation (BPC)
alleviate traffic congestion problems in the capital, reports has been locked a fresh row with the Kuwait Petroleum
the UNB. The Strategic Transport Plan (STP) will be Corporation (KPC), as the latter has claimed a demurrage
implemented on a stretch of 17,500 square kilometres in charge of USD 2.5mn against fuel supplies. KPC claimed the
Dhaka city, Narayanganj, Munshiganj, Narsingdi, Gazipur money for the delay in settlement of payments against a
and Manikganj districtsThe 20-year STP will be implemented letter of credit opened by BPC for importing fuel which
in three phases by the Dhaka Transport Coordination Board caused the overstay of the vessels that arrived in Chittagong
(DTCB). Construction of three Bus Rapid Transit (BRT) port for discharging the cargo. Earlier BPC paid USD 1.5mn
lanes, construction, reconstruction of 330 km of roads and as demurrage charge to KPC against 28 fuel-laden vessels
construction of a 60 km underground train line have been between August 2005 and June 2007. The cash-strapped
proposed in the plan. BPC has previously secured a loan of USD 250mn from the
Islamic Development Bank to meet its increasing fuel import
http://www.thefinancialexpress- costs. KPC is the major supplier of fuel to BPC supplying
bd.info/search_index.php?page=detail_news&news_id=43939 3.8mn tonnes of petroleum products annually.
Govt to set up SEZ Authority by year-

year-end to boost http://www.newagebd.com/2008/aug/28/front.html#15
investment
Financial Express, August 25, 2008 Deals with IOCs likely by October
The Financial Express, Thursday August 28, 2008
The government plans to establish a Special Economic Zone
Authority by year-end to speed up local and foreign The Energy Ministry plans to sign contracts by October this
investment in the Special Economic Zone (‘SEZ’) industrial year with the newly selected bidders in the 3rd round
parks. The chief advisor's office is reviewing the final draft of international bidding for hydrocarbon exploration in the
the proposed 'Special Economic Zone Ordinance-2008' country's offshore territory. Two International Oil Companies
under which the authority would be created. The proposed (IOCs) - Conoco Philip and Tullow were selected as bidders
ordinance has already been approved in principle by the for nine offshore blocks in the Bay of Bengal under the latest
council of advisers. The ordinance is being expedited after bidding round that took place in May 2008.
the advisory council last month approved the creation of a
SEZ in Sylhet. An official close to the CA Office said: "The A total of 15 bids were received from seven IOCs - Conoco
ordinance will come into force soon to help establish the SEZ were selected for eight blocks, while Tullow was chosen for
authority at least within the tenure of the caretaker one block.
government.
bd.info/search_index.php?page=detail_news&news_id=43932
_______________________________________________________________________________________
Shahjibazar Power Plant goes into operation next month BGFCL wants its gas sales tariff doubled
likely The Daily Star, Monday August 25, 2008
The Financial Express, Wednesday August 27, 2008
With the burden of exploring and producing gas, the
After successful completion of the 50MW Kumargaon Power country's biggest natural gas provider, the public sector
Plant, Energy Prima is going to start the operation of the Bangladesh Gas Field Company Ltd (BGFCL) is seeking to
Shahjibazar 50MW Rental Power Plant in the first week of improve its financial position given the significant investment
September. it plans to make in the next four years increasing gas
production by 270mn cubic feet per day. Currently it is loss
http://www.thefinancialexpress- making and has had to turn to the Asian Development Bank
bd.info/search_index.php?page=detail_news&news_id=43793 for a USD 100mn loan to undertake projects to increase gas
production and maintain the Titas gas field. The company
New gas distribution company opens on August 26
now produces 700mmcfd gas from the Titas, Bakhrabad,
The Financial Express, Tuesday August 26, 2008
Rashidpur, Narsinghdi and Kailastila gas fields.
A new state-owned gas distribution company - Sundarban
Gas Company Ltd (SGCL) started operations on August 27 It argues, the current public sector intra company tariff
to supply natural to the south-western region of the country. system allocates profits inappropriately favouring public
For the Chittagong region, Karnafuli Gas Company Ltd sector companies in the value chain who have less onerous
(KGCL) will be established soon. Chief Advisor special investment obligations. BGFCL has requested that the
assistant, professor Tamim said a number of new gas government increase its gas sales tariff to BDT 14 (USD
distribution companies would also be established soon to 0.20) per thousand cubic feet (mcf) from the current rate of
ensure smooth supply across the country. BDT 7 (USD 0.10) which was fixed in 1991. BGFC currently
sells gas to the Gas Transmission Company Ltd (GTCL),
http://www.thefinancialexpress- another public sector company, for BDT 7, after which it is
bd.info/search_index.php?page=detail_news&news_id=43747 sold to public sector gas distribution companies for BDT 11
(USD 0.16). Ultimately, the average selling price to
Bibiyana IPP bidder withdraws condition of money-
money-back consumers is BDT 93 (USD 1.36) per mcf.
guarantee
The New Age, Tuesday August 26, 2008 http://www.thedailystar.net/story.php?nid=51791
The Power Division has approved the technical offer of the Leather
lone bidder for the installation of 450MW Bibiyana
independent power plant after the consortium, comprised of Youngone's factory in KEPZ misses deadline for takeoff
Powertek Berhad of Malaysia, Siemens Project Ventures of The Daily Star, Monday, August 25, 2008
Germany and the Korea Electric Power Company, withdrew
its condition that the government would have to provide a South Korean company Youngone Corporation, , has missed
USD 15mn guarantee for cancellation of the agreement. its schedule to put its shoe-making plant into operation
Following approval of the technical offer, Power Cell will now because of uncertainty over gas connections to the Korean
evaluate the financial aspects of the bid. Export Processing Zone (KEPZ), near south-eastern part of
Chittagong. The shoe-making factory, arguably the world's
http://www.newagebd.com/2008/aug/26/front.html#9 largest with 72 assembly lines, will employ 34,000 people
and produce more than 100,000 pairs of shoes a day i.e. 30
Energy ministry seeks USD 300mn Bangladesh Bank credit million pairs a year, for export. They are requesting a
to pay oil import bills minimum of 10 million cubic feet of gas although more than
The Financial Express, Tuesday August 26, 2008 80 million cubic feet is needed for the plant.
The Energy Ministry has sought USD 300mn credit line from Youngone has been operating in Bangladesh from 1978 with
the central bank through the three state-owned commercial annual export earnings of about USD 300 million Between
banks to finance the import of petroleum products by the 1999 and 2003, Youngone invested about BDT 1,000 (USD
Bangladesh Petroleum Corporation (BPC). In 2007, the 14.6) million to procure 2,500 acres of land for the EPZ.
central bank provided USD 300mn credit support for the first Licensed to operate in May 2007, the KEPZ plans to install
time to three state-owned commercial banks (SCBs) - Sonali, 500 industrial units requiring an estimated USD 1 billion of
Janata and Agrani for a six-month period. investment and will create about 100,000 direct
employments.
Currently, the central bank is offering overdraft (OD) facilities
to the SCBs for import payments of essential items, including http://www.thedailystar.net/story.php?nid=51746
petroleum products, food grains and fertiliser. The state-
owned BPC has been facing significant losses due to fuel Renewable Energy
subsidies it provides. The state-owned enterprise that was
once a profitable entity suffered losses of around BDT 65bn Role of renewable
renewable energy stressed for solving rural power
(USD 949.3mn) in fiscal 2007-08. crisis
The New Nation, August 30, 2008
bd.info/search_index.php?page=detail_news&news_id=43738 Speakers at a view exchange meeting said that the
renewable energy can play a vital role for solving power
crisis in the rural areas of the country. About 22 million of
_______________________________________________________________________________________
cattle generate 220 million kilograms of dung per day in our RMG workers demand revised pay scale
country. This quantity of dung can produce huge amount of The New Age, Tuesday, August 26, 2008
biogas in the country that can also be used to generate The Bangladesh Garment Sramik Karmachari Federation
electricity. The climate of Bangladesh is suitable for most of
called on the interim government to take steps to restructure
the renewable energy technologies like biogas, solar, micro-
the wage structure of garment workers introducing a
hydro.
minimum wage of BDT 5,000 (USD 73). Leaders of the
garments labour rights body said that the current exorbitant
The Grameen Sakti (GS), Infrastructure Development prices of essential goods have made it impossible for the
Company Limited (IDCL) and Renewable Energy Journalists' workers to run their families on their present salaries. The
federation demanded the introduction of a 50% dearness
Forum of Bangladesh (REJFB) jointly organised the view
allowance, the introduction of a low-price food rationing
exchange meeting. system, housing and travel allowance, and payment of all
wage arrears before the forthcoming Ramadan. The labour
http://nation.ittefaq.com/issues/2008/08/30/news0188.htm
leaders held the factory owners responsible for the recent
Telecoms labour unrest in some garment units as they did not pay them
regularly or clear wage arrears.
Bangladesh Bank Drafting Mobile Banking Guidelines
www.bdnews24.com, Tuesday August 26, 2008 http://www.newagebd.com/2008/aug/26/busi.html
Bangladesh Bank has drafted a set of regulations to speed

up money transfer by expatriates through mobile banking.
The central bank has asked banks to submit their written
opinions on the draft regulations proposing money transfer
via SMS with mobile phone outlets working as payment
centres. Expatriate workers sent back a record $8 billion in
‘07-‘08 fiscal year, registering 30% increase from the
previous fiscal year, a direct result of more money being
transferred through proper banking channels. However, a
large amount of money still comes through illegal routes, as
banking channels are costlier and more time-consuming.
The mobile banking system will operate on the basis of
branches or exchange houses of the banks in other countries
informing a local bank or exchange house when money is
sent by an expatriate Bangladeshi worker. The local bank or
exchange house will then inform the recipient of the
remittance through an SMS and they can collect the money
from a mobile phone outlet which will operate as payment
centres.
Textiles
Textile millers
millers reiterate demand for adequate gas supply
The textile mill owners reiterated their plea for the adequate
supply of gas to their plants on priority basis to maintain
production. Bangladesh Textile Mills Association (BTMA)
President Abdul Hai Sarker, along with the owners of major
textile factories, made the plea at a press conference in
Dhaka on Monday. The BTMA chief said that inadequate gas
supply to the textile mills would adversely affect the country's
export volume, as the country's export of readymade
garment depends on the backward linkage of the textiles
industry. At present, the local textile millers are capable of
supplying 90% and 40% of the raw materials used in the
knitwear and woven sub-sectors, respectively. The rest of the
demand is met through imports, mainly from China. Textile
factories in Kanchpur, Araihazar, Bhulta, Narsingdi, Baburhat
and Demra areas have been severely affected due to the
interrupted gas supply.
http://thedailystar.net/story.php?nid=51879
_______________________________________________________________________________________
Appendix
International Workshop on the Development of Bond Market in Bangladesh

December 1-
1-2, 2004
BRAC Centre—
Centre—Rajendrapur, Dhaka
Hosted by
Bangladesh Bank (BB) and the Securities
Securities and Exchange Commission (SEC)
DAY 1 WEDNESDAY, DECEMBER 1, 2004

8:30 a.m. Workshop Registration and Distribution of Information Folder
Lobby Area
9:30 a.m. Welcome Remarks: Governor, Bangladesh Bank & Chairman, SEC -
Main Hall Address by Chief Guest: Honourable Minister for Finance and Planning -
Special Guests: Ms. Christine Wallich, World Bank Country Director
Mr. Nissanke Weerasinghe, IMF Mission Chief for Bangladesh
[Participants include: Senior officials
officials of the World Bank, IMF, Bank Negara, Malaysia, Reserve Bank of India, State
Bank of Pakistan and Central Bank of Sri Lanka and a number of resource persons from other regions]
10:45 a.m. Tea Break

SESSION I DEVELOPMENT OF GOVERNMENT BOND MARKET
MARKET (Two parallel sessions)
11:15 am – 1 pm Session A: Developing Yield Curve—Best Practices in Issuance and Management
Division,
Chair: Mr. Zakir Ahmed Khan, Secretary, Finance Divisio n, Ministry of Finance
-Debt strategy, maturity choice, issuance cycle, buyback and distribution
-Monetary and interest rate policy
Lead Speaker: Dr. A. G. Karunasena, Assistant. Governor, Central Bank of Sri Lanka
Mr. Zafar M. Shaikh, Head of Treasury and Debt Management Department
State Bank of Pakistan
Main Discussants: Mr. A. M. Kazemi, Deputy Governor, BB; Ms. Usha Thorat, Executive Director, RBI, Dr. -
Shahabuddin M. Hossain, Advisor to the Governor, BB
Rapporteur: Mr. Imam A. Sayed, MPD, BB.

11:15 am – 1 pm Session B: Bond Market Infrastructure and Secondary Market Development
Fakhruddin
Chair: Dr. Fakhruddi n Ahmed, Governor, Bangladesh Bank
-Trading, clearing and settlement systems
-Practical issues for banks and NBFI in managing bond portfolios (asset-liability management and performance goals
for treasuries)
Lead Speaker: Dr. R. H. Patil, Chairman, Clearing Corporation of India

Mr. Ibrahim, Director: Investment Operations, Bank Negara, Malaysia
Mr. Mangala Boyagoda (Consultant, SEC).

Main Discussants: Mr. M. Rumee Ali, Deputy Governor, BB; Mr. Subbaraman, Citigroup, India; Mr. Alam, Executive
Director, SEC; Mr. Samad, CEO, CDBL;
Rapporteur: Mr. Zulker Nyen, FRTMD, BB.

1:00 – 2:30 pm Lunch Break
SESSION II DEVELOPMENT OF CORPORATE BOND MARKET (Two parallel sessions)
2:30 – 4:00 pm Session A: Corporate Debt Instrument—
Instrument—Bonds and Short-
Short-term Papers
Chair: Mr.
Mr. Syed Manzur Elahi, Chairman APEX Group
-Past problems and current prospects in Bangladesh (including the role of Trustees)
-Institutional framework and underwriting issues
_______________________________________________________________________________________
Lead Speakers: Mr. Ziaul H. Khandker, MD, Investment Corporation of Bangladesh (ICB)
Mr. Yawar Sayeed, CEO, AIMS Bangladesh
Main Discussants: Maj. Gen.(retd.) Amjad Khan (Pran Group); Mr. Anis Khan, CEO, IDLC; Mr. Majedur Rahman, DMD,
IPDC
Rapporteur: Ms. Shanila T. Azhar, IPDC.

2:30 – 4:00 pm Session B: Building Investor Confidence
Chair: Dr. Mirza Azizul Islam, Chairman, the SEC, Bangladesh
-Role of rating agencies, disclosure requirements; accounting standards
-SEC registration and supervision; enforcement of law
Lead Speaker: Mr. R. Ravimohan, MD & CEO, CRISIL Ltd, India
Main Discussants: Mr. McMullen (FIDP), BB; Mr. F. Ahmed, ED, SEC; Mr. Muzaffar. Ahmed, CEO, CRISL Bangladesh;
Representatives of Insurance Companies.
Rapporteur: Mr. Naved Mahbub, Head of Treasury, United Leasing Company (ULC).
4:00 – 4:30 p.m. Tea Break
4:30 – 5:30 p.m. Combined Roundtable on Key Issues - Q& A Session
Chair: Mr. Nissanke Weerasinghe, IMF Mission Chief for Bangladesh
Panelists: Prof. Abu Ahmed, Chairman, Shilpa Bank; Deputy Governors of BB; Mr. Md. Ali, Member, SEC; Mr. M. Alam,
E.D. SEC; Ms. Usha Thorat (RBI); Mr.Z. H. Khandker, MD, ICB; Mr. Patil (Clearing Corporation of India); Mr.
Ravimohan (CRISIL, India)
Rapporteur: Ms. Saima Rahman, IDLC.

7:30 – 9:00 p.m. Dinner and Speech Cultural Event—Local Dance and Music
9:00 – 10:00 p.m.
DAY 2 THURSDAY, DECEMBER 2, 2004
SESSION III SECURITISATION (Two parallel sessions)
9:00 – 11:00 am. Session A: Scope and Opportunities for Securitisation
Rahman,
Chair: Mr. Aminur Rah man, Secretary, Ministry of Commerce
-Securitization and bond market development
-Identifying asset classes for securitization in Bangladesh
Lead speakers: Mr. C. M. Alam, MD, IPDC
Mr. Prashant Purker (ICICI, India);
Discussants: Mr. Martin Essenburg, MD & Global Head of Asset Securitisation, Standard Chartered Bank, Mr. H.
Zoarder, Executive Director, SEC
Rapporteur: Mr. Md. Kamrul Hassan (CBSF), BB.
9:00 – 11:00 am. Session B: Structuring and Collateral Issues in Securitization

Chair: Ms. Christine Wallich, World Bank Country Director
-Pooling issues, senior/subordinated structuring; credit rating
-Credit enhancement; bond insurance; legal/regulatory issues
-Roles and responsibilities of the Trustees and Servicers
Lead speakers: Mr. Bruce Arnold, Australia (FIDP);
Ms. Kerry Adby, Australia (FIDP)]
Discussants: Mr. Samir Ahmed (Agrani Bank); Mr. M. Boyagoda (Consultant, SEC)
Rapporteur: Mr. Atiqur Rahman, Senior Manager, IPDC.
11:00 – 11:30 am Tea Break
SESSION IV HOUSING FINANCE & MORTGAGE BACKED SECURITIES (parallel sessions)
11:30 am – 1:00 pm Session A: Best Practices in Public Private Partnership
Chair: Mr. Md. Martial Islam, Chairman IIDFC (Founder National Housing Bank)
-Subsidized financing- government guarantee -Tax, transaction and legal issues
Lead speaker: Mr. R. V. Varma, Executive Director, National Housing Bank, India
_______________________________________________________________________________________
Mr. Juan Costain, Lead Economist, South Asia Region, World Bank
Main discussants: Mr. Prashant Purker (ICICI); Mr. M. Aminuzzaman, MD NBL; Mr. Ala, MD, DBH, Mr. Ansaruddin,
MD, National Housing; Mr. Shaha, MD, HBFC
Rapporteur: Ms. Sabah Azim, IPDC.

11:30 am – 1:00 pm Session B: Mortgage Backed Securitisation (MBS)
Chair: Mr. Md. Allah Malik Kazemi, Deputy Governor, Bangladesh Bank
Chair
-Standardization of mortgage; pooling mortgages into MBS
-Government guarantee and institutional framework
Lead speaker: Mr. Martin Essenburg, M.D. & Global Head of Asset Securitisation,
Stan Chart Bank, UK;
Mr. Mustafa Chowdhury, MD, Deutsche Bank, NY.
Main discussants: Mr. Nigel Spratt (FIDP); Mr. Aslam Habib, Head of Finance, DBH
Rapporteur: Mr. Arif Khan, GM, IDLC.
1:00 – 2:30 pm Lunch Break
SESSION V LEGAL & REGULATORY FRAMEWORK—
FRAMEWORK—REGIONAL EXPERIENCE
2:30 – 4:30 pm Session A: South Asian Experience in Bond Market Development
Chair: Mr. Khairuzzaman Chowdhury, Chairman, National Board of Revenue
-Pro-active role of regulators and the Government
-Tax regime; Evolution of legal and regulatory framework
Lead speaker: Ms. Usha Thorat, Executive Director, RBI, India
Main discussants: Mr. M. Boyagoda (Consultant, SEC); Ms. Lee Marium Khan (Lee Khan & Associates); Ms. Kerry
Adby (FIDP)
Rapporteur: Mr. Ahmed Taneem Muzaffar, Independent University of Bangladesh (IUB)

2:30 – 4:30 pm Session B: Addressing Critical Market Impediments in Bangladesh
Chair: Mr. Syeduzzaman, Chairman, Bank Asia (former Minister for Finance)
Chair
-Investor confidence, market infrastructure & developing a liquid market
Lead speaker: Mr. Ziaul Hassan Siddiqui, Bangladesh Bank
Main discussants: Mr. Abbasuddin Khan (SEC); Mr. Abrar Anwar (Citibank, NA)
Rapporteur: Mr. Rashed Rubaiyyat (Citibank, NA)
rd
END OF WORKSHOP: [Tour of Dhaka City for the invited guests on Friday (Dec. 3 ) 8:00 a.m.]
_______________________________________________________________________________________
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 akhter.ahmed@at-capital.com
Masud Khan Senior Advisor (880-2)-8155144, ext. 113 masud.khan@at-capital.com
Junaid Khan Investment Advisor (880-2)-8155144, ext. 121 junaid.khan@at-capital.com

Shahidul Islam, CFA Investment Manager (880-2)-8155144, ext. 122 shahid.islam@at-capital.com
Taufique Hasan Investment Manager (880-2)-8155144, ext. 123 taufique.hasan@at-capital.com
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S Adeeb Shams Research Associate (880-2)-8155144, ext. 128 adeeb.shams@at-capital.com
A. M. A. Bari Nahid Research Associate (880-2)-8155144, ext. 130 nahid.bari@at-capital.com
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Sohana Alam Seraj Office Manager (880-2)-8155144, ext. 132 sohana.alamseraj@at-capital.com
Ahmad Sajid Research Associate (880-2)-8155144, ext. 135 ahmad.sajid@at-capital.com
S.M. Rashedul Hasan Research Associate (880-2)-8155144, ext. 137 rashed.hasan@at-capital.com
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Abdullah-Al-Farooq Research Analyst (880-2)-8155144, ext. 133 abdullah.farooq@at-capital.com
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Syed Najibullah Research Assistant (880-2)-8155144, ext. 136 syed.najibullah @at-capital.com
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Rasidul Hasan Research Assistant (880-2)-8155144, ext. 136 rasidul.hasan @at-capital.com
AT Capital Team – North America

Zarif Munir Senior Advisor zarif.munir@at-capital.com
Professor Jahangir Sultan, Ph.D. Senior Advisor jahangir.sultan@at-capital.com
M. Nasim Ali Senior Advisor nasim.ali@at-capital.com
Iqbal Hussain Senior Advisor iqbal.hussain@doctors.org.uk
© Copyright 2008. Asian Tigers 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 of investment, legal or tax advice. Any views
expressed reflect the current views of the author, which do not necessarily correspond to the opinions of
Asian Tigers Capital Partners or its affiliates. Opinions expressed may change without notice. Opinions
expressed may differ from views set out in other documents, including research, published by Asian
Tigers Capital Partners Limited. The above information is provided for informational purposes only and
without any obligation, whether contractual or otherwise. No warranty or representation is made as to the
correctness, completeness and accuracy of the information given or the assessments made.
_______________________________________________________________________________________

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31 August 2008 AT CAPITAL RESEARCH

AT Capital Weekly Update

Key themes in this issue are:

In this week’s Special Focus on the Bond Market we discuss::

Professor Jahangir Sultan

UTC Building, Level 16

Overview – Global Markets 5

Stock Market Weekly 17

recently began privatizing selected state-owned companies

Sri Lanka is keeping pace with Pakistan.

Sri Lanka's exports and economy have been propped up by

Gross domestic income (GDI), or the money earned by the

The 1.9 percentage-point difference between the GDI and

Overview – Global Markets

US Q2 GDP 3.3% gain reflects domestic recession and

Real gross domestic product -- the output of goods and

In an earlier post titled Mobile Internet for Pakistan (see

So what would the mobile internet do for people? Many

In 2008, however, the labor markets are much weaker,

The differing labor markets reflect diverging economic

Katrina devastated the regional economies that were hit. In

Special Focus 13 countries have seen much progress (see below).

The popularity of bond markets in advanced developed

Investing in bonds can be risky. If the yield on alternative

In terms of bond market development, our Asian neighbors

Government Bond Market: The corporate bond market

Wikipedia.“The Anatomy of Local Bond Markets in Emerging Market

“Developing an Asian Bond Market as a Means for Regional

“Bond Market Development: The Case of Singapore,” Ng Nam Sin,

“Asian Bond Market Development: Progress, Opportunities and

“Building Corporate Bond Markets in Emerging Countries,” Alison

“Vietnam Tightens Bond with Global Economy,” HSBC, June 2008,

“Bangladesh bond market smallest in S Asia,” Financial Express,

1. The share of the private sector in the economy is large and

Investment Issues (GIIs), which has led to the establishment

Over the years, Islamic capital market products have

Developing Corporate Bond Markets In Asia, BIS Paper No.

Asian Bond Markets, Issues and Prospects, BIS Paper No 30

• GP to raise BDT 4.25bn (USD 62mn) through bonds

• Wise up to stock market: SEC

• Fresh SEC move to amend direct listing regulations

• SEC fines One Bank for 'breach' of market discipline

DSE performance: 30 days Regional stock market performance (last week)

Market summary Valuation snapshot

DSE General Sector P/E

Fresh SEC move to amend direct listing regulations

The Securities and Exchange Commission (‘SEC’) has

Turnover leaders Best performers* Worst performers*

Professor Jahangir Sultan

Rashed Hasan Syed Najibullah

Export performance across different

12-Aug-08 15-year T-bond 12.14%

Top exported items (USD mn) 22-Jul-08 20-year T-bond 13.07%

Source: Bangladesh Bank

Export price and volume indices

Total Primary Manufactured

Aviana Airways has introduced a direct flight from Dhaka to http://thedailystar.net/story.php?nid=52240

David Shannon said the Anti-corruption Commission rules Limited bank

Govt to set up SEZ Authority by year-

Bangladesh Bank has drafted a set of regulations to speed

International Workshop on the Development of Bond Market in Bangladesh

DAY 1 WEDNESDAY, DECEMBER 1, 2004

10:45 a.m. Tea Break

Rapporteur: Mr. Imam A. Sayed, MPD, BB.