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S M Anisuzzaman, SAVPANM Farukh, EOMd. Golam Moula, EOAshique Iqbal, MT

Research & Development DivisionPrime Bank Ltd.SBC Tower (6th Floor)37/A Dilkhusha C/ADhaka-1000Tel : 956 5564PABX: 9568184, 95657594 (Ext: 221)email: r&d@primebank.com.bd

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A Newsletter of Research & Development Division, Prime Bank Ltd.

A new year begins, 2010, but impacts of global recession still continue as Singapore's economy shrank 6.8% in the fourth quarter to December from the previous three months. The government declared the recession to be over in November, but cautioned that the strength of its recovery would depend on the pace of rebound in Singapore's major trading partners such as the United States, the European Union and Japan. On the other hand, Bank of America posted a loss of 194 million dollars in the fourth quarter of 2009, and that repayments of government aid boosted the loss for shareholders to 5.2 billion dollars. In the continent of Europe, ten out of hundred people, who could be working are now unemployed. In Spain, one of continental Europe's biggest economies, the rate has now hit a shocking 19.4%. But at the same time, countries are trying boost their way out of the recession, Taiwan aims to create 100,000 jobs. Taiwan's Council for Economic Planning and Development has set a target for lowering the island's jobless rate from just under six percent in 2009 to 4.9% this year, a goal that will not be an easy task.So, we can see, though world is getting out of the recession but, it is not over yet, hopefully at the end of 2010 we will see some better results, till then we may keep our fingers crossed.

There are some news that makes us believe that recession is really fading way like, The World Gold Council (WGC) said on January 11 that gold sales across the countries in Middle East will considerably pick up in 2010, thanks to better market conditions and rising demand for the yellow metal in the Middle East, led by the United Arab Emirates (UAE). Another Middle Eastern country, Iran planned next year's budget based on an oil price of US$ 60 per barrel, nearly double the price from the last year, indicating rising optimism over energy prices. Last year, the parliament approved a budget based on US$ 37.5 per barrel for the fiscal year ending in March, reflecting the steep drop in prices that severely impacted the economy.

Macro-economy of Bangladesh is also showing some good news, in 2009 the stock market grew by 82.22%, to a total capitalisation of Tk 1,90,322 crore, from the capital base of Tk 1,04,380 crore in the previous calendar year. The daily average transaction increased to Tk 604.63 crore during the year ended in December '09, compared to from Tk 281.84 crore daily average in the previous year. In 2008, the inward foreign remittance was US$ 8.97 billion. Remittance crossed US$ 10 billion mark for the first time in Bangladesh history in the year 2009 because migrants, a main driver of the country's economic progress, sent more money home despite all odds during global recession. With 20% growth, inward foreign remittance inflow reached US$ 10.72 billion last year. A very welcoming news is that, The Bangladesh Bank governor, Dr. Atiur Rahman, said Bangladesh was on the right track to be promoted as a middle-income country by 2012. Atiur pointed out that, the per capita gross national income had risen by about 50% to reach US$ 690 in four years, till June 2009. 'Reaching the middle-income threshold of US$ 976 should not take more than four more years,' said BB governor.

Investment climate of the country is showing some good indications; two foreign companies will invest more than US$ 52 million at Uttara and Adamjee EPZs. The companies will also create employment opportunity for 15,017 Bangladeshi and 17 foreign nationals. A local company, will expand its garments manufacturing industry in the Karnaphuli Export Processing Zone (KEPZ). This 100% locally-owned company will invest US$ 1.74 million in setting up its unit and will produce specialised garment items. The company will also create employment opportunity for 1,500 Bangladeshi workers.

After recession, export of the country is also getting some new boost; local export of personal leather goods, such as belts and wallets to the US market has increased. Some 1,07,000 pieces of personal leather goods were shipped from Bangladesh in January-October 2009 for the US$ 70 billion plus US market of personal leather goods. The country's medicine exports may witness an impressive jump in 2010 thanks to the aggressive marketing the local manufacturers pursued in the early days of the global economic crisis. Local pharmaceuticals' exports have received a blow at the start of the last fiscal year 2008-09 as many importing countries shied away as they were not able to continue their orders due to the recession. Now they are opening letters of credit as the situation is improving worldwide. But, currently they have come up and started importing medicines again. Similarly, many countries in South America, who also stopped importing, have started importing. Georgia and many African countries such as Ethiopia, Kenya and Congo are taking our products. A three-member delegation of the European Union (EU) arrived in Dhaka to observe the shrimp industry, as freshwater shrimps worth Tk 300 crore have been prepared here for export. Export of freshwater shrimps to the EU resumes this month after six months' suspension since June last following detection of health-hazardous antibiotic Nitrofuran in consignments of exported shrimps in January 2009.

Despite global economic recession, local commercial banks posted record operating profits in 2009. Operating income for most banks rose by 5 to 100% in 2009 compared to previous year, according to data collected from different banks. Officials said private banks were able to make huge profits from the share market. Besides, their earnings were boosted by the remittances and export-import business. Bangladesh Bank is taking many new reform measures, for the financial sector of the country like; Dhaka Inter-bank Offered Rate (DIBOR) will be officially launched denoting the country's benchmark interest rate and aimed at bringing discipline in its financial market. Under the DIBOR, banks in Bangladesh will publish five rates-overnight, one week, two weeks, one month and three months-initially to ensure transparency in the country's money market. This also turns out to be the first ever index-based floating rate transaction in Bangladesh Taka. Bangladesh Bank has directed all banks that they must take prior permission from it for purchasing land, floor space or any other permanent structure. The government has created a new administrative division on banking and finance under the finance ministry. The new division has been named as the Bank and Financial Division, an official handout said. Bangladesh Bank opened a separate department for the small and medium enterprises (SME). The department will focus on the SME sector, helping both the banks and the borrowers flourish their businesses, said BB governor Dr. Atiur Rahman while inaugurating the new wing at the central bank headquarters in the city.

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Singapore economy shrinks 6.8% in Q4Singapore's economy shrank 6.8% in the fourth quarter to December from the previous three months, but the slowdown was less than expected for the whole year, the trade ministry said today. The decline in gross domestic product was attributed to weakness in the key manufacturing sector, which shrank 38.4% on a seasonally adjusted quarter-on-quarter annualised basis, it said. The government declared the recession over in November '09, but cautioned that the strength of its recovery would depend on the pace of rebound in Singapore's major trading partners such as the United States, the European Union and Japan. With the economy contracting less than feared, Singapore escaped what could have been its worst recession since independence in 1965, thanks in part to a 20.5 billion Singapore-dollar (US$14.5b) government stimulus package. (Source: The New Age, January 5, 2010)

Global financial regulation overhaul seen in 2010 Global financial regulation has changed little since the 2008 banking crisis, but that won't be the case much longer. US and EU authorities are expected to hammer out the definite shape of a new regulatory order in 2010 that will fundamentally change how world banks and markets operate. Banking lobbyists and Republicans are working to block reforms. Senate debate will resume this month, with analysts expecting passage of legislation in early spring. The Senate and House will then have to agree on a single measure to send to president Barack Obama. That could happen in April or May'10. In Europe, EU member states and the European Parliament must still rule on a range of proposed regulations for banks, markets, insurers, hedge funds and private equity groups. The European Parliament will hold a confirmation hearing that day with Michel Barnier. He is the Frenchman the European Commission has proposed oversee the EU's financial services industry and play a core role in drafting legislation. (Source: The New Age, January 7, 2010)

Unemployment hits 10% across eurozone Ten people in a hundred who could be working are now unemployed across the 16 countries that use the euro, the EU said as the human cost of the economic crisis was laid bare. New figures for November 2009 showed that the seasonally-adjusted unemployment rate hit a miserable 10%, with 102,000 more people left without their own income compared to October. In Spain, one of continental Europe's biggest economies, the rate has now hit a shocking 19.4%. Unemployment is the last indicator to turn around as economies re-configure to get over the pain of recession. The unemployment rate throughout the EU as a whole was registered at 9.5% in November. The wider picture was illustrated sharply on January 7 by a fall in euro retail sales and with the Bank of England leaving its key interest rate at a record low. Fears abound for stretched households across the continent over the impact of rising credit repayments when interest rates begin to rise. (Source: The New Age, January 9, 2010)

Gold demand to rise in Middle East in 2010The World Gold Council (WGC) said on Monday that gold sales across the countries in Middle East will considerably pick up in 2010 thanks to better market conditions and rising demand for the yellow metal. Countries in the Middle East, led by the United Arab Emirates (UAE), are major consumers of gold, after China and India, globally. Dubai, part of the UAE, is the largest importer and consumer of gold in the Gulf region. WGC Managing Director for Middle East and Turkey Anan Fakhreddin told reporters that people in the Middle East are increasingly betting on gold as a safe haven asset. "Gold demand in the region is picking up and thus gold sales are increasing," he said. (Source: Commodity Online, January 12, 2010)

Bank of America posts loss Bank of America said January 20 it posted a loss of 194 million dollars in the fourth quarter of 2009, and that repayments of government aid boosted the loss for shareholders to 5.2 billion

dollars. For all of 2009, the largest US bank by assets had a profit of 6.3 billion dollars, but for shareholders the results were a loss of 2.2 billion following payments to the US Treasury stemming from bailout aid. The last quarter's results were affected by a charge of 4.0 billion dollars to repay the US government for its capital aid under the Troubled Asset Relief Program (TARP), a massive effort to stabilize the banking system, Bank of America said. (Source: The Daily Star, January 21, 2010)

Taiwan aims to create 100,000 jobsTaiwan's President Ma Ying-jeou said his government aimed to create 100,000 jobs this year in a bid to cut the island's unemployment rate significantly. Taiwan's Council for Economic Planning and Development has set a target for lowering the island's jobless rate from just under six percent in 2009 to 4.9% this year, a goal that Mr. Ma said would be "no easy task." He said there were encouraging signs for employment, including a gradual recovery in the high-tech and electronic sectors and a consecutive decline in the unemployment rate for the last four months of 2009. (Source: The Daily Star, January 25, 2010)

Iran budgets US$ 60 for crude oilIran planned next year's budget based on an oil price of US$ 60 per barrel, nearly double the price from the last year, the official news agency reported, indicating rising optimism over energy prices. Last year, the parliament approved a budget based on US$ 37.5 per barrel for the fiscal year ending in March, reflecting the steep drop in prices that severely impacted the economy. About 80% of Iran's foreign revenue comes from oil exports. (Source: The Daily Star, January 25, 2010)

World Bank praises China anti-inflation steps The World Bank said recent moves by China to clamp down on rampant lending were the "best way" to tackle the problem of rising inflation and the threat of asset bubbles. "It is very tricky once you are in this situation of heavy credit growth to try to come off that. It is a very fine line between doing it too quickly and not doing enough," Ardo Hansson, lead economist of the World Bank in Beijing, said at a news conference. Beijing moved this month to calm growing inflationary pressures and soaring stock and property prices caused by runaway bank lending, which last year nearly doubled from 2008. It followed an earlier move on its benchmark one-year treasury bills and official data that showed the world's third-largest economy grew by 8.7% in 2009 and 10.7% in the fourth quarter. (Source: The Daily Star, January 26, 2010)

South Korea to hold FTA talks with Japan and China South Korea, Japan and China will hold talks this week to launch a joint research project into a possible free trade pact, officials said. The three countries agreed at their summit in October 2009 to push for the joint research. South Korea has been actively pushing for free trade agreements worldwide to bolster its export-dominated economy. It already has free trade agreements with Chile, Singapore, India, the European Free Trade Association and the Association of Southeast Asian Nations. A free trade pact was signed with the European Union in October 2009 and awaits ratification. A deal signed with the United States in 2007 also needs ratification. (Source: The Daily Star, January 26, 2010)

Govt banks likely to open more branches after 8-year restrictions State-owned commercial and specialised banks are planning to open more branches this year, after restrictions on such expansion for eight years now, to net more clients for low-cost deposits, finance ministry officials said. The government has a verbal restriction on the banks not to open any more branches as the banks are incurring losses by running loss-making branches. (Source: The New Age, January 9, 2010)

Stock market grew by 82.22% in 2009 The stock market grew by 82.22% to a total capitalisation of Tk 1,90,322 crore last year from the capital base of Tk 1,04,380 crore

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the previous calendar year. The daily average transaction increased to Tk 604.63 crore during the year ended in December '09 compared to from Tk 281.84 crore daily average in the previous year. 13 IPOs were floated in the stock market last year to collect a total of Tk 726.22 crore. Same number of IPOs also came to the market in the previous year but their capital mobilisation stood at Tk 435.34 crore. (Source: The New Age, January 10, 2010)

SCBs won't be allowed to float shares nowBanks in the country should go for merger to become strong, or else it would be difficult for them to survive under stiff competition in the future, said finance minister AMA Muhith. "They can survive in 2010, but in 2015 when the financial sector will be opened, it will be difficult for them to survive," he said at a press briefing after meeting with the officials of Bangladesh Bank and three state-owned commercial banks (SCBs).The country does not have merger culture as the business is less mature, but it is popular in other countries, the minister said. The finance minister rejected outright the idea of floating shares of the SCBs on the capital market now. "We are not going to allow any SCB to float share right now as their financial barometers are not strong," he said. (Source: The Financial Express, January 11, 2010)

Analysts urge India to erase trade barriers to BangladeshIndia should act fast to eliminate non-tariff barriers (NTBs) and cut the negative list to help Bangladesh export more to the neighbouring country for reducing the huge trade gap between the two states, experts said on January 10, 2009. Bangladesh's exports to India nosedived by nearly 23% to US$ 276 million in fiscal 2008-09 ended in June 2009 against US$ 358 million a year ago. The trade gap widened to over US$ 3 billion in fiscal 2007-08 from less than US$ 1 billion in 2001-02. The gap narrowed to around US$ 2.6 billion in 2008-09 mainly because of less imports by Bangladesh worth half a billion dollars. According to businesspeople and trade experts, India also deprives Bangladesh of getting a special treatment as a least developed country under the South Asia Free Trade Area (SAFTA) framework. (Source: The Daily Star, January 11, 2010)

Govt hopes to get Tk 2,100cr from US millennium challenge fund The government is likely to get Tk 2,100 crore of the US-sponsored millennium challenge fund for the next financial year as Bangladesh is set to fulfill all the conditions required, finance ministry officials said. The finance ministry at a meeting today discusses the possibility of getting the fund aimed at narrowing the deficit in the budget for the next financial year. Bangladesh has met nine conditions that include good governance, investment in people and fostering entrepreneurship for being selected for funds from the Millennium Challenge Corporation of the United States, the officials said. (Source: The New Age, January 13, 2010)

Public-Private Partnership (PPP) policy may be finalised this monthThe government is likely to finalize Public-Private Partnership (PPP) policy within this month as the Board of Investment (BoI) sought approval of the cabinet regarding its draft guideline last week, officials said Thursday. The officials said BoI has already devised the policy titled "Bangladesh Public Private Partnership Policy and Guideline 2009" and sent it to the cabinet division to place it before the cabinet meeting. Prime Minister Sheikh Hasina has already given her consent to the draft policy on PPP, a new investment model to attract private investment aimed at steering economic growth through infrastructure development, a BoI official told the FE. The government started to frame the PPP policy early this year in order to upgrade the country's ailing infrastructure, especially transport and energy sectors. The government in the current financial year has introduced the PPP concept that has turned popular in neighboring India, and allocated Tk 25 billion in the current national budget. (Source: The Financial Express, January 16, 2010)

Lentil import from Nepal faces hurdle The government's move to import 15,000 tonnes of red lentil from Nepal has faced hurdle as Kathmandu has asked Dhaka to participate in an international tender. A four-member government

delegation went to Nepal in the past week to make the deal on the import of 15,000 tonnes of lentil by the Trading Corporation of Bangladesh. But a Memorandum of Understanding (MoU) was finally signed between the two governments for the import of lentil which says the Trading Corporation of Bangladesh will participate in an international tender to be floated by Nepal trading agency, said commerce ministry officials. (Source: The New Age, January 17, 2010)

36 brokerage branches await SEC approvalThe Securities and Exchange Commission (SEC) has approved 341 branch offices of brokerage houses so far and another 36 branch offices are awaiting the SEC nod to enhance the operation of the capital market as well as to create more employment opportunities. Dhaka Stock Exchange (DSE) officials said the number of brokerage houses has increased to 396 in January 2010, from 272 in January 2009. At the same time about 253 authorized representatives are also waiting for the SEC nod to work in the capital market. In a meeting held recently with the DSE, the SEC said it would approve the prayers for new branch offices and authorized representatives within two weeks. (Source: The Financial Express, January 23, 2010)

Local company to invest US$ 1.74m in KEPZA local company, namely M/s Arrow Fabrics (Pvt) Ltd will expand its garments manufacturing industry in the Karnaphuli Export Processing Zone (KEPZ), said a press release. This 100% locally-owned company will invest US$ 1.74 million in setting up its unit and will produce specialised garment items. The company will also create employment opportunity for 1,500 Bangladeshi workers. (Source: The Financial Express, January 24, 2010)

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Selected Macroeconomic Indicators

P*- Provisional; R*- Revised (Source: Bangladesh Bank)

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BB says Bangladesh to become middle-income country by 2012 The Bangladesh Bank governor, Atiur Rahman, observed Bangladesh was on the right track to be promoted as a middle-income country by 2012. He made the observation as he released the bank's annual report 2008-09 at a briefing in his office in Dhaka. Atiur pointed out that the per capita gross national income had risen by about 50% to reach US$ 690 in four years till June 2009. 'Reaching the middle-income threshold of US$ 976 should not take more than four more years,' he said. (Source: The New Age, January 25, 2010)

Rangpur is declared as the 7th division The government has declared Rangpur the nation's seventh division. The decision was announced on January 25 by the National Implementation Committee for Administrative Reorganisation (Nicar), which is chaired by Prime Minister Sheikh Hasina. The new division comprises eight districts that were formerly under Rajshahi division -- Rangpur, Kurigram, Dinajpur, Lalmonirhat, Gaibandha, Nilphamari, Thakurgaon and Panchagarh. A committee was subsequently formed and its report on creating a new division was submitted to the government on July 21. Bangladesh's six other administrative divisions are Dhaka, Chittagong, Rajshahi, Khulna, Barisal and Sylhet. (Source: The Daily Star, January 26, 2010)

New subsidy scheme to boost farmingThe government will give farmers a 25% subsidy on the cost of buying agricultural implements to boost crops production and minimise wastage. An Executive Committee of the National Economic Council (Ecnec) meeting chaired by Prime Minister Sheikh Hasina on January 21, 2010 approved a Tk 149 crore project to that end. Titled “Enhancement of Crop Production through Farm Mechanisation”, the project will primarily be introduced to 237 upazilas under 25 districts, said a planning ministry official. Meanwhile, the agriculture ministry has proposed a Tk 1,400 crore increase in farm subsidies in the revised budget for the current fiscal year. (Source: The Daily Star, January 22, 2010)

Shrimps worth Tk 300cr prepared for exportA three-member delegation of the European Union (EU) arrives in Dhaka tomorrow to observe the shrimp industry, as freshwater shrimps worth Tk 300 crore have been prepared for export. The delegation of the EU's Food and Veterinary Mission will visit some shrimp processing factories, shrimp enclosures and hatcheries during their three-day visit. Export of freshwater shrimps to the EU resumes this month after six months' suspension since June last following detection of health-hazardous antibiotic Nitrofuran in consignments of exported shrimps in January 2009. The importers had cancelled over 50 consignments of lobsters bound for Europe. As a result, export of the frozen shrimps remained suspended, creating a crisis in the sector. Now, freshwater shrimps worth Tk 300 crore have been prepared for export. Bangladesh earned Tk 414.34 crore in shrimp export last fiscal year with Tk 300 crore from the EU countries. (Source: The Daily Star, January 23, 2010)

BB opens SME department Bangladesh Bank on December, 31 opened a separate department for the small and medium enterprises. The department will focus on the SME sector, helping both the banks and the borrowers flourish their businesses, said BB governor Atiur Rahman while inaugurate the new wing at the central bank headquarters in the city. The governor said that the BB in its five-year strategic plan has given priority to the SME sector. The new department reflects the commitment of the central bank. The governor also advised the central bank's official to keep close monitoring of SME lending so the right people get the loan timely. (Source: The New age, January 1, 2010)

Major banks hit by global recessionBanks with investment in stocks, techs romp homeSlowdown in exports and imports triggered by global meltdown cut through profits in major private banks in 2009 but the financial institutions that had invested heavily in stocks and technology ended the year on a high note. Un-audited initial operating profits of the country's 18 private banks have revealed extent of damages caused by the fallout of the global slump with the largest Islami Bank Bangladesh Limited (IBBL) being one of the victims. The IBBL still maintained its leadership in the private banking sector, but its operation profit - Tk 8.44 billion in 2009 against Tk 8.30 billion in 2008 - grew only 1.69%, the lowest in its recent history. According to the provisional figures, Prime Bank and AB Bank maintained their second and third positions in terms of un-audited operating profit (OP) - both gaining big ground on exposure to stock markets. Prime Bank's operating profit soared to Tk 5.80 billion in 2009 from Tk 4.30 billion in the previous year while AB Bank's profit jumped to Tk 5.70 billion, up from Tk 4.65 billion in 2008. Among the top-performers, Southeast Bank saw its operating profit rise by 55%, putting it among the top five. The bank made operating profits worth Tk 4.64 billion in 2009 against Tk 3.00 billion in the previous year. The OP of Pubali Bank, which has the largest number of branches among the private commercial banks, rose modestly to Tk 4.09 billion in the just concluded year from Tk 3.65 billion in 2008. National Credit and Commerce Bank Ltd (NCCBL) made Tk 3.14 billion operating profit in 2009 compared to Tk 2.36 billion in 2008 and the profit of City Bank was Tk 2.30 billion in 2009. The operating profits of Dutch Bangla Bank Ltd (DBBL) - the most tech-savvy bank - rose sharply to Tk 2.70 billion, up from Tk 2.18 billion in 2008. Dhaka Bank also made similar profit. Among the Shariah-based financial institutions, Social Islami Bank Ltd (SIBL) made the biggest gain among private banks, as it operating profits spiked 100% to Tk 1.30 billion in 2009 from Tk 650 million in 2008. The EXIM Bank Ltd - the country's second largest Islamic bank - posted OP worth Tk 3.20 billion against Tk 2.67 billion a year ago. The OP of Uttara Bank was Tk 2.50 billion last year compared to Tk 2.18 billion in the previous year. Mutual Trust Bank made Tk 1.70 billion OP in 2009 compared to Tk 1.23 billion of the previous year. Shahjalal Islami Bank Ltd faced the heat of the global slump as its OP grew a meager 1.44% to end at Tk 2.10 billion in 2009, Al-Arafah Islami Bank's OP climbed to Tk 1.81 billion from Tk 1.60 billion in 2008 and that of the Standard Bank rose to Tk 1.81 billion from Tk 1.47 billion. Premier Bank earned operating profit worth Tk 1.60 billion in 2009 against Tk 1.45 billion in 2008 and the profit of First Security Bank Ltd. was Tk 790 million in 2009. (Source: The Financial Express, January 1, 2010)

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BB's data showed. The Sonali Bank recovered 13% of default loans from their top 20 defaulters during January-September period of the last calendar year while the Janata Bank realised 38% of such loans. During the same period, Agrani Bank recovered only 7.0% of the loans from its top 20 defaulters while the Rupali Bank realised 46% of the loans. Currently, the SCBs have 3389 branches out of total 7019 bank branches across the country. (Source: The Financial Express, January 7, 2010)

Economists for reducing bank interest rate spread Economists have suggested banks in Bangladesh should reduce interest rate spread by increasing operational efficiency and competitiveness for sustainable economic development. Monzur Hossain, a BIDS research fellow who presented the key note paper at a seminar, said that high administrative costs and non-performing loans in the banking sector were responsible for higher interest rate spread in the country. (Source: The New Age, January 8, 2010)

Bank, financial division createdThe government has created a new administrative division on banking and finance under the finance ministry. The new division has been named as the Bank and Financial Division, an official handout said on Thursday. (Source: The New Age, January 8, 2010)

Banking goes aggressive, Credit-deposit ratio crosses 100% Banks' credit-deposit ratio continued to remain over 100% until the first four months of this fiscal year, much higher than Bangladesh Bank's norms of 82%. The ratio was above 100% in the first 11 months of last fiscal year, with 98.69 % in June. The trend indicates higher utilisation of loan-assets from deposits despite a sluggish investment demand amid the global crisis in 2009. BB's October 2009 statistics show average credit per bank branch at Tk 42 crore, while the figures were 41.15 crore, Tk 40.42 crore and Tk 40.14 crore in September, August and July. During the time, average deposits per branch were Tk 41.54 crore, Tk 41.25 crore, Tk 40.58 crore and Tk 39.86 crore respectively. As of June 30, 2009, the loan book of the banking industry showed that trade financing alone accounts over 35% of the total loans to the private sector worth Tk 209,050 crore, followed by industry (except working capital) 21.59% and working capital 17%. (Source: The Daily Star, January 10, 2010)

Committee to plan out for Expatriates Welfare Bank A three-member committee led by Expatriates Welfare Secretary Ilias Ahmed has been assigned to design modalities for the Expatriates Welfare Bank. The committee has been asked to submit recommendations in a month. The committee will recommend whether the proposed bank would be scheduled or

specialised, and see whether the banking sector is saturated or there is scope for any new scheduled bank to operate, Muhith said. The committee will also assess whether non-resident Bangladeshis (NRBs) could fully own the bank. In the case of ownership by NRBs, they would have to apply to the central bank and bring all capital in foreign currency from abroad. (Source: The Daily Star, January 11, 2010)

NBR plans e-pay for income taxThe National Board of Revenue (NBR) is set to introduce an e-pay system for income tax payers in July to reduce government revenue losses and taxpayers' hassles. The board sent a letter to Bangladesh Bank (BB) in this regard, requesting amendments to treasury rules. The treasury rules need to be revised to be able to accept e-payment, along with cash and cheques. “If we can initiate the e-payment system, it will help people pay tax without hassles," said Nasiruddin Ahmed, chairman of the board. "This will help us resolve procedural complexities and rescue large sums of revenue that the government losses every year.” The NBR introduced the online tax filing system this month, which can work effectively once authorities launch online tax payment. NBR will be able to verify daily tax payment statistics for individuals and companies in its tax circles after the system is introduced. (Source: The Daily Star, January 24, 2010)

Governor asks banks to invest more in disaster-prone areasBangladesh Bank Governor Atiur Rahman has called upon banks to increase investment in the disaster-prone areas, saying that poverty is now shifting from the northern region of the country to the south. The central bank governor said poverty has intensified in the natural disaster-prone areas although it has seen a cut in the monga-hit places in the north. The BB boss said the private banks only collect deposits from the rural areas but do not make sufficient investment there. He urged the banks to identify sectors, which need investment on the basis of region, and make investment accordingly. (Source: The Daily Star, January 24, 2010)

Recession pares down BB profitGlobal financial crisis has taken a heavy toll on Bangladesh Bank's profit although the central bank's prudential measures have helped commercial banks avoid losses during the recession period. Bangladesh Bank's operating profit declined by 20.6% or Tk 650 crore in fiscal 2008-09 compared to that of a year ago. The central bank earned Tk 2,500 crore as operating profit in fiscal 2008-09. The profit was Tk 3,150 crore in 2007-08. During fiscal 2008-09, the BB deposited Tk 1,000 crore less to the government account than that of the previous year. Out of the Tk 2,500-crore operating profit, Tk 1,730 crore was transferred to the government and Tk 770 crore to statutory funds, interest reserve account and other funds. (Source: The Daily Star, January 25, 2010)

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BB approval is a must for banks in land purchase Bangladesh Bank has directed all banks that they must take prior permission from it for purchasing land, floor space or any other permanent structure. BB sources said 15 private banks out of the 30 purchased land worth about Tk 800 crore in last two years for profit-making in violation of the Bank Company Act. A BB official said of the 15 banks which went for land purchase, some bought land worth about Tk 100 crore and most others between Tk 50 crore and Tk 60 crore. The circular mentioned that some banks have been selling and purchasing land or permanent structures without any logical ground or necessity which is a violation of the Act. (Source: The Daily Star, January 26, 2010)

Banks shift focus to home loansCommercial banks are increasingly coming forward to provide home loans, which they feel are more secure than other forms of loan. The banks' outstanding home loans have doubled to Tk 12,360 crore in fiscal 2009 from Tk 6,400 crore in fiscal 2006. Private banks led the tally with Tk 7,490 crore outstanding loans to the housing sector as on June 30, 2009, against just Tk 3,510 crore three years ago. Private banks' lending to the sector increased by over 113% in the three years to fiscal 2009. Housing loans from four state-owned banks also rose by over 42% in the same period. Outstanding housing loans by the four banks were Tk 2,580 crore in fiscal 2006, which rose to Tk 3,670 crore at the end of fiscal 2009. According to Bangladesh Bank (BB) statistics, housing loans reached Tk 18,180 crore at the end of fiscal 2009 from Tk 10,090 crore in fiscal 2006, a whooping 80% rise. Banks take 50-60% security against a home loan and charge up to 13% in interest. While commercial bank lending to the sector rose constantly, state-owned specialised housing loan provider, Bangladesh House Building Finance Corporation (BHBFC), is going down slowly. BHBFC's outstanding loan stood at Tk 2,490 crore at the end of fiscal 2009, which was Tk 2,630 crore in fiscal 2006. (Source: The Daily Star, January 27, 2010)

SCBs lose market to private banksThe market share of state-owned commercial banks (SCBs) has declined while that of the private commercial banks (PCBs) increased gradually, officials said. "In 2008 the SCBs held 31.1% of the total industry assets against 33.1% in 2007. PCBs' share rose to 54.2% in 2008 against 51.4% in 2007," the central bank said in its annual report for the fiscal 2008-09, released on January 24, 2009. The SCBs held 33.1% of the total industry assets in 2007 against 32.7% in 2006 while PCBs' share rose to 51.4% compared to 47.7% of the previous year, according to the central bank statistics. Currently, the SCBs have 3389 branches out of a total of 7019 bank branches across the country. Nine

foreign commercial banks (FCBs) held 8.0% of the industry assets in 2008, showing a declining trend by 0.2% age points over the previous year. However, the share of assets of government-owned development finance institutions (DFIs) was 6.7% in 2008 against 7.3% in 2007, the BB data showed. Total deposits of the banks in 2008 rose to Tk 2561.4 billion from Tk 2148.9 billion in 2007 showing an overall increase of 19.2%, according to the report. The share of four SCBs - Sonali, Janata, Agrani and Rupali - in deposits decreased from 32.6% in 2007 to 29.7% in 2008. On the other hand, 30 PCBs' deposits in 2008 amounted to Tk 1450.7 billion or 56.6% of the total industry deposit against Tk 1150.2 billion or 53.5% in 2007. During the period, the FCBs' deposits rose by Tk 30.7 billion or 16.7% over the previous year. In 2008, the DFIs' deposits were Tk 137.8 billion against Tk 115.6 billion in 2007 showing an increase of 19.2% over the year. (Souce: The Financial Express, January 27, 2010)

DBH posts rise in earnings Delta Brac Housing Finance Corporation Ltd (DBH) has posted an 88% increase in its earnings per share (EPS) in the first six months of the current financial year to December 31, 2009. The disclosure came yesterday from the company's half-yearly un-audited financial statements. According to the financial statements, the company's operating profit stood at Tk 343.2 million for the six-month period against Tk 216.5 million in the same period of the previous year, showing 58.52% growth. (Source: The Daily Star, January 27, 2010)

Bank spread comes down, 19 banks still beyond the limitThe overall spread in the banking sector has come down to five percent following a central bank directive, but it is still above the cap in 19 private and foreign commercial banks. The Bangladesh Bank (BB) in early 2007 directed all banks to bring down the spread (the difference between lending and deposit rates) below five percent to reduce high interest on loans. According to BB statistics as of September 2009, the overall spread in 48 commercial and specialised banks was 5.02%, which was 5.18% in September 2008 and 6.05% in December 2007. These banks are: The City Bank (5.21%), IFIC Bank (5.69%), United Commercial Bank (5.54%), Pubali Bank (6.67%), Uttara Bank (5.95%), Prime Bank (6.05%), Southeast Bank (5.47%), Dhaka Bank (6.30%), Social Investment Bank (6.32%), Dutch-Bangla Bank (7.08%), One Bank (5.79%), Premiere Bank (5.79%), Trust Bank (5.19%) and BRAC Bank (8.72%). Among the nine foreign commercial banks, the spread in five is above the limit. These are: Standard Chartered Bank (11.38%), Habib Bank (6.86%), Citibank NA (7.36%), Woori Bank (12.12%) and HSBC (9.04%). Most of the banks following the central bank directive brought down their average lending rate below 13%. They also lowered the spread by cutting the deposit rate. (Source: The Daily Star, January 28, 2010)

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Bangladesh Bank prioritises branchless bankingAiming at the speedy financial inclusion of rural people, Bangladesh Bank (BB) will give banks and other related organisations more support to expand branchless banking. The central bank is supporting banks and some other financial institutions to operate branchless services to cater to the major banking needs of rural and urban people. The branchless banking, where some major banking services including disbursing loan and getting repayment, sending and receiving money and remittance, will be the BB's priority to expand rural banking services, Bank Governor Atiur Rahman told a programme on January 27. Other branchless banking services like smartcards and point of sale (POS) terminals are at various stages of implementation. He said banks could usefully go for technology-based branchless banking to disburse and recover loan installments to and from small landholder farmers and rural non-farm enterprises cost effectively, with only occasional field visits to appraise borrowers and to complete documentations. (Source: The Daily Star, January 28, 2010)

Selected Financial Indicators

Ashuganj Power Company to get 2 new units, shut 5 old onesAshuganj Power Stations Company Ltd (APSCL) would conduct a major up gradation by installing two gas-fired power units having a combined 600mw capacity. In the process, it will scrap the existing five ailing units. The project is aimed at generating additional power utilizing the same amount of gas, company officials said Thursday. The company officials said the existing five power units with a combined capacity of 274 megawatt were set up 30 to 40 years ago, the efficiency of which has declined

drastically. They also consume more gas to generate electricity. "The five units consume nearly 50 million cubic feet (mmcfd) of gas per day to generate maximum 228mw power. Utilising the same gas, we will operate the proposed two 600mw capacity units," he said. The company MD said they have planned to invest Tk 23.10 billion to set up 600mw capacity two power units. The existing government and private sector power plants generate about 3800mw of power against the demand for over 5000mw per day. (Source: The Financial Express, January 7, 2010)

Power import from India to start thru' Kushtia borderRamkrishnapur under Bheramara upazila in Kushtia has been primarily selected for setting up of 250KV power sub-station aiming electricity import from India. The government has 600 acres of free land under railway (west zone) in Ramkrishnapur while only 250 to 300 acres of land is necessary for the new sub-station. Moreover, the site is only 35 kilometers from Nadia, a border district of India, they added. Besides, setting up of power station over there would reduce cost as a power network is already there due to Ishwardi sub-station. Only eight kilometers of cable connectivity will be necessary to supply electricity to Ishwardi sub-station, said the sources. (Source: The Daily Star, January 22, 2010)

Behind gas crisis; Neglect of nat'l companies causes short supply The country would not have faced any gas crisis now if the government paid a little attention to capacity building and modernising the companies under Petrobangla instead of becoming over-dependent on foreign oil companies to produce gas, experts say. Until recently, Bangladeshi companies possessed 78% of proven gas and foreign companies only 22%. In terms of reserve this means, national oil companies had 5.38 trillion cubic feet (TCF) gas and foreign companies 1.53 TCF. This estimate has drastically changed after Chevron submitted two studies on its Bibiyana gas field's reserve. The Bibiyana field was initially estimated to have 2.4 TCF recoverable gas (with 952 billion cubic feet proven reserve). Following studies and reassessment, Petrobangla recently increased its recoverable reserve to 5.76 TCF with its proved and probable reserve estimated at 7.43 TCF. (Source: The Daily Star, January 23, 2010)

Indian countervailing duty hits Bangladesh RMG exportsThe country's readymade garment exporters have been counting additional duty to enter the Indian market, as the latter has imposed countervailing duty on subsidized export items of other countries, industry insiders said. Apparel items imported from Bangladesh are being subjected to countervailing duty on the basis of MRP (maximum retail price) instead of ad-valorem. Presently, Bangladeshi products are entitled to enjoy quota facility under which it can export 8.0 million pieces of RMG duty free. In the finance bill, 2009, it issued a general order imposing the additional duty," said a Customs official. Necessary clarification should be sought during the upcoming visit of Prime Minister Sheikh Hasina to India, he said. Duty on cotton garment imported from Bangladesh will increase to 11.8% or US$ 21.52 from 8.46% or US$ 15.43 per piece due to changes in tariff in the recent budget. (Source: The Financial Express, January 9, 2010)

Bangladeshi RMG exporters want a machine in Indian market The country's garment exporters have urged the Prime Minister to take up with the Indian authorities the issue of duty-free market access for Bangladeshi garments into Indian market during her current visit to India. In the fiscal year 2008-09 that ended in June last year, Bangladesh's garment exports to the world market

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amounted US$ 12.35 billion but to the Indian market it was a paltry US$ 11 million. According to industry analysts, Indian retail apparel market is worth more than US$ 40 billion dollars, potentially lucrative market that is expanding fast with prospect for shares of imported clothing growing in equal pace. (Source: The New Age, January 11, 2010)

Gas rationing in RMG units from WednesdayThe country's main export earning apparel sector is being brought under gas rationing system from Wednesday with a view to increasing pressure of gas for industrial and household use. The decision was made on January 21, 2010 at a follow-up meeting between the leaders of the RMG and textile sectors and Petrobangla Chairman Hossain Mansur at the latter's office. Gas rationing was supposed to be implemented a lot earlier. The rationing of gas supply will start with RMG and textile units in Narsingdi and Ghorashal. Both industrial and household users have been suffering from the low gas pressure caused by a mismatch between supply and demand. The Petrobangla ultimately decided to ration gas to improve the situation and divided Dhaka and its adjacent areas into seven zones for the purpose, said a Petrobangla official. (Source: The Daily Star, January 22, 2010)

Industrial park underway for RMG: Barua The government has laid out a project to set up an industrial park outside Dhaka for garment factories, said Industries Minister Dilip Barua on January 28. Barua said the project is waiting for approval from the government. “The government will also provide loans to the factories to set up ETPs." (Source: The Daily Star, January 29, 2010)

Bharti agrees to buy 70% stake of Warid Bangladesh Bharti Airtel said on January 12 it had agreed to buy 70% of Bangladesh's Warid Telecom in its first overseas acquisition after a failed attempt for a US$ 24 billion deal with South Africa's MTN. The top Indian mobile operator will make a fresh investment of US$ 300 million in Warid and will have management and board control of the company, while current owners Abu Dhabi Group will retain a 30% stake, Bharti said in a statement. (Source: New Age, January 13, 2010)

Land-phone subscribers grow over 23%The country's land-phone subscribers grew more than 23% in 2009 although the state-owned Bangladesh Telecommunication Company Ltd (BTCL) failed to add a single user to its name. Last year, 13 public switched telephone network (PSTN) operators added 313,427 new subscribers to their customer base, up by 23.31% from 1,344,456 users of 2008. The total number of land-phone users now stands at 1,657,883, according to the figures of the state-owned Bangladesh Telecommunication Regulatory Commission (BTRC). (Source: The Financial Express, January 16, 2010)

BTCL reduces call charges for 55 countriesBangladesh Telecommunications Company Ltd (BTCL) has reduced call charge of its land phones facilities to land phones and mobile phones in 55 countries and the new tariff has already

been made effective, reports BSS. Clients can speak at Tk 6.00 per minute on land phone and mobiles to 23 countries. On the other hand, they could speak to 32 countries at Tk 6.00 per minute on land phone and Tk 16 on mobiles. Second-placed Ranks Telecom almost doubled its user number last year to reach 274,895 from 152,505. Although BTCL failed to add a new single user to its subscribers' base in 2009, the former BTTB retained its pole position as the country's top PSTN operator. BTCL has also reduced call charge to India to Tk 12 per minute from Tk 18 previously. (Source: The Financial Express, January 18, 2010)

LEATHERTanneries must move to Savar unconditionally: Dilip BaruaIndustries Minister Dilip Barua January 26, 2009 urged the tannery owners to shift their units immediately and without any condition from the city's Hazaribag area to the new tannery park at Savar. He also emphasised quick installation of the Central Effluent Treatment Plant (CETP) at Savar, as the tanners have been demanding it to start shifting the immensely hazardous industry. The tannery sector leaders demanded the government's intervention in directing the banks to help them repay their loans. They also expressed concern for delay in installing the CETP at Savar. (Source: The Financial Express, January 27, 2010)

PHARMACEUTICALPharma sector shakes off recession hangoverThe country's medicine exports may witness an impressive jump in 2010 thanks to the aggressive marketing the local manufacturers pursued in the early days of the global economic crisis, the industry people said. Local pharmaceuticals' exports have received a blow at the start of the last fiscal year 2008-09 as many importing countries shied away as they were not able to continue their orders due to the recession. (Source: The Financial Express, January 30, 2010)

SHIPBUILDINGGovernment moves on ship-breaking zone The government has tasked a technical committee to start work on creating a separate ship-breaking zone along Bangladesh's coast, following the prime minister's recent call for proper regulation of the hazardous industry. The move comes in the wake of renewed concerns for worker safety following a number of deaths at ship-breaking yards and continued environmental worries over the industry located mainly in the coastal districts of Sitakunda and Chittagong. The inter-ministry committee has been tasked with formulating separate rules and regulations for ship-breaking and reprocessing industries, said the state minister for environment and forests, Hasan Mahmud. (Source: The New Age, January 6, 2010)

DisclaimerThis newsletter has been prepared by the Research and Development (R&D) Division of Prime Bank Limited (“PBL”) for the benefit and use of the reader. The newsletter is proprietary to PBL and readers are allowed to disseminate it in unabridged and original form and reference should be made while quoting the newsletter.In preparing this newsletter, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to us by or on behalf of the source of information cited in the newsletter. We do not accept any obligation arising out of any decision made from the contents of this newsletter.