Monthly Business Review - September 2013

COVER STORY
Jute Industry of Bangladesh: Opportunities on
the Horizon
Jute, once dubbed as the golden fiber of Bangladesh,
has lost much of its luster as the most prospective
export earners of the country; yet, Bangladesh still
holds the position of the top jute producing country in
the world. Archaic technology, inappropriate market
strategy, lack of fresh investment and so on plagued
the growth of this sector allowing other countries to
better position themselves and capture market share.
However, in a world, where green alternatives are the
next big thing, the jute industry still has the capacity to
hog the limelight again by being a major contributor of
country s export basket.
ANALYSIS MONITOR
Bangladesh Bank unveils Financial Stability
Report 2012
Bangladesh Bank s 2012 edition of Financial Stability
Report sheds light on different aspects of country s
financial landscape and analyzes the health of local
banks and financial institutions. It also explains
several policy initiatives that BB has taken to ensure
implementation of international best practices in the
local market.
IDLC NEWS
IDLC SME Accredits its Heroes
IDLC organized SME Sales Conference 2013 to
recognize and reward the sterling performance of its
SME team.
Volume 9 Issue 09 September 2013
IDLC
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c o n t e n t s
ECONOMY
RMG drives output growth 13
Forex Reserves Hit USD 16 bn 14
Inflation edges down, close to govt. target 15
TRADE
Due to Falling Investment, Banks ADR drops below 74% 16
Onion Import Loans get Cheaper 16
Shrimp Exporters Shine as Disease Hurts Competitors 17
BUSINESS
Online shopping transactions in the mainstream 18
The Next Big Thing ‒ 3G 18
Shariah Banking Fights Recession Better 19
REGULATORY NEWS
BB Takes Steps to Introduce Online
Transaction through Cards 20
Banks asked to open accounts for garment workers 20
MARKET ROUNDUP
Major Currency Roundup 21
Commodity Market Roundup 22
INTERNATIONAL
Microsoft to Buy Nokia s Devices Unit 23
British car industry firing on all cylinders 23
MONTH IN REARVIEW
Business Firm Specific 25
CAPITAL MARKET REVIEW
Market Commentary 28

2
IDLC MONTHLY BUSINESS REVIEW
- Avijith Barua & Md. Sayeed
JUTE INDUSTRY OF BANGLADESH
OPPORTUNITIES ON THE HORIZON
O
ne of the most affordable fibers in the world and most commonly known as the golden fiber, jute is only second to cotton in terms
of usage, global consumption, production, and availability. Made up of long, soft, shiny vegetable fiber that can be spun into rough,
strong threads, jute fibers have been mainly used to make burlap, Hessian and gunny ‒ all different types of cloth. Comprehensively, it
is one of the most versatile natural fibers that have been used as raw materials for packaging, textiles, non-textile, construction, and agricultural
sectors. Beyond its historical usages, jute also represents alternative in this world of fast-depleting resources in that it is largely bio-degradable
and, hence, environment-friendly. The highest density of this plant can be found in the Bengal Delta Plain in the Ganges Delta, most of which
falls in the territory of Bangladesh. Thus, it is not surprising that jute is one of the few sectors where Bangladesh is a global leader both in
terms of production and export volume. However, this dominance is largely unreflected in the trials and tribulations of the jute industry in
Bangladesh, which has experienced a bumpy ride over the last 50 years.
For centuries, jute has been an integral part of the culture of Bengal, in the entire South-west of Bangladesh and some portions of West Bengal.
During the British Raj in the 19th and early 20th centuries, much of the raw jute fiber of Bengal was exported to the United Kingdom, where
it was then processed in mills concentrated in Dundee. Initially, due to its texture, it could only be processed by hand until it was discovered
in Dundee that by using whale oil, it could be treated by machine. The industry boomed ( jute weaver was a recognized trade occupation in
the 1901 UK census), but this trade had largely ceased by about 1970 due to the appearance of synthetic fibers.
The jute products manufacturing sector is one of the oldest
traditional manufacturing sectors of Bangladesh. The industry really
emerged in the 1950s while the growth engine kicked up another
gear during the 1960s and 1970s, where the jute industry occupied
a large share of the manufacturing sector in national income and
total manufacturing employment levels. Exports of jute and jute
goods were the two most important sources of foreign exchange of
the then East Pakistan during the 1960s. However, both share and
importance of jute and jute goods in manufacturing, export and
overall foreign exchange earnings, and the Gross Domestic Product
(GDP) have gradually declined over time. As of May 2013, the jute
industry accounted for a little less than 1% of the country s export
basket. Considering that this composition was 3.9% only 6 years ago
and 89.9% in 1973, it all points to a gradual downward slide in the
significance of the raw jute sector vis-à-vis other sectors. Many have
cited the ascendancy of the export-oriented readymade garments
(RMG) as a major reason. In spite of reduced significance, however,
Bangladesh remains the global market leader in the supply of raw
jute.
Incidence in Bangladesh

3
Output Levels
Historically, the production trend of jute in the country can be broadly
categorized into 4 time eras.
First phase (1950-1970)
Second phase (1972-1981)
Third phase (1982-1990)
Fourth phase (1991-onward)
During these four phases, jute manufacturing sector had experienced
various changes in policies, and also in the pattern of utilization
of jute and jute goods. In the pre-independence period, jute mills
were owned by a small number of private entrepreneurs. During
this phase, average hessian production was 155,586 metric ton
(MT) per year, of which 87% was exported; the comparable figures
for sacking were 267,614 MT and 78% respectively. Production
reached its peak in 1969, with an output of 0.574 mn MT. Due to
the struggle for independence in 1971, operations of jute mills was
seriously hampered. Consequently, production declined in 1971 and
1972 but rebounded healthily afterward. In the second phase (1972-
1981), government decided to nationalize the jute manufacturing
sector, and took control of all the private sector jute mills. During the
1970s, average level of production of hessian was about 165,000 MT,
of which 94% was exported, while comparable figures for sacking
were 225,460 MT and 86% respectively. Growth in the production of
jute goods between 1960 and 1980 can be attributed to the growth
in production of hessian, sacking and carpet backing cloth (CBC)
products.
Periodic Trend of Jute Goods Production, Periodic Average
(in Metric ton)
Period Hessian Sacking CBC Yarn/Twine
Upto 1970
155,586
(86.9)
267,614
(78.2)
23,929
(96.7)
0 (0.0)
1972-82
165,033
(93.7)
225,458
(86.3)
635,78
(95.5)
19,53 (73.3)
1981-91
219,048
(94.8)
270,556
(83.7)
80,415
(97.0)
61,090
(69.1)
1992-05
87,968
(99.5)
196,839
(71.7)
39,777
(89.7)
163,830
(90.8)
Production of yarn/twine accounted for a small share of total
production during the 1970s. During the 1980s (third phase), the
then-government decided to de-nationalize a number of jute mills
in line with the initiative of economic liberalization. A mixed trend
is observed in the production of jute goods during this phase,
which reached its peak in 1990 with a production of 0.596 mn MT.
Productionofyarngraduallyincreasedinthe1980s.Mostimportantly,
production of hessian and sacking ̶ two major traditional products
gradually declined, especially since the late 1980s. Production of CBC
declined as well. In the fourth phase (1990-onward), following the
suggestions of the World Bank, government started to denationalize
a number of public sector jute mills which inadvertently led to the
closing of other peripheral jute mills as well. However, production
of jute goods did not significantly raise even after the adoption of
various policy measures. Indeed, production of traditional products
such as hessian, sacking and CBC has continued to decline with the
exception of growth in the production of yarn and twine. Yarn/twine
now accounts for the major portion of jute goods; and over time, its
production has also been on a steady rise. During 2006, Bangladesh s
share in the global production of jute goods was approximately 18%.
Both public and private sector jute mills sell their products either in
the domestic market or in the international market. Bangladesh is
the leading exporter of jute goods in the world and her share in the
global market is gradually increasing̶which accounted for 60% of
the global exports in 2006. If export of raw jute is taken into account,
total export reaches more than 75%. Over the last decade, between
FY2000-01 and FY2009-10, export growth of raw jute and jute goods
were 13.3% and 6.4% respectively. This reemergence of the jute
sector as an important export commodity reinforces the importance
of focusing on the sector. It is interesting to note that during the
financial crisis year of FY2008-09, export of raw jute and jute goods
suffered significantly and posted negative growth rates of -10.5%
and -15.4% respectively. However, in FY2009-10 both the items were
able to regain positive and high growth rates, and attained 32.5%
and 100.6% growth rates respectively. For FY2010-11, export target
for raw jute and jute goods had been set at USD 255.2 mn and USD
860.2 mn, which were 30% and 59.3% higher than the actual export
in FY2009-10.
According to Bangladesh Jute Association (BJA), Bangladesh
exported about 2.67 mn bales of jute goods in FY2007-08 while India
stood at 1.6 mn tones in that year. Cumulatively, Bangladesh and
India currently meet more than 90% of the global export demand for
jute and jute goods; to compare, this share was 79% in 1970. As of
2012, Bangladesh alone makes up 95.27% of global yarn exports and
90.99% of global raw jute exports alone.
The jute sector of Bangladesh has experienced important changes
since the 1990s. Export volume of raw jute was below 0.3 mn tonnes
during late 1980s and continued to fall till 1994. Export trend saw
Source: BJMC, BJMA & BJSA.
Source: FAO.
Source: FAO.
Share of Jute Export Items

4
some turnaround since then, but again experienced a trough during
2001 (severe than the previous deep of 1994). 2004 onwards export
of raw jute and jute goods have continued to post an increasing
trend. It is important to note here that export volume of jute goods
was significantly higher than raw jute throughout any time period.
Another characteristic of the jute sector is that the base of exportable
jute items has continued to remain rather shallow and undiversified.
Bangladesh s export basket is concentrated in only about eight
products other than the raw jute item.
Composition of Jute manufacturers
A total of 72 jute mills were operated by the public sector in 1982,
immediately before the initiative of denationalization. Since 1982-83,
government started to denationalize the public sector jute mills ̶
out of 72 public sector jute mills, the government denationalized 34
jute mills between 1982 and 1985. Out of these 34 privatized jute
mills, 6 were composite, 21 were conventional and 7 were CBC jute
mills. A total of another 22 jute mills were privatized during the last
two decades. Besides, a number of new jute mills (mostly of spinning
type) were established under the private sector initiative. Currently
a total of 129 jute mills are in operation, of which 18 mills operated
under the public sector and the remaining 111 mills operated under
the private sector. Of the 111 private mills, 61 mills were owned by
the BJMA members while the remaining 50 mills were owned by the
BJSA members.
A total of 25,792 looms were in operation in the 72 jute mills during
1981-82. In other words, average number of looms in a jute mill was
358. The number of operable looms increased to 26,033 by 1991-92,
as a number of new mills was established during this period. In 2006-
07, there were 22,944 looms in 129 mills, an average of 178 operable
looms in a mill. It shows that though the number of installed looms
did not change by a significant quantity during the decade of 1981-
1991, operable looms declined by almost half on the average. It
implies that capacity utilization of the mills has substantially declined
over time, from as high as 103% during 1982-83 to 50% in 2005-
06 in BJMC mills and 94% to 19% in mills owned by the BJMA. It is
important to note here that capacity utilization had substantially
declined in cases of hessian, sacking and CBC mills in mid 1990s,
especially in the private sector jute mills. Capacity utilization in yarn/
twine mills is found to be relatively better when compared against
other mills.
On the average, there were 403 looms in operation in a BJMC mill,
which was more than double the number that were in operation in
a private sector jute mill. Large scale BJMC mills are operated with
745 looms. Average market value of machineries in a BJMC mill in
2007 was BDT 5.47 bn, while that of a BJMA mill was less than half the
amount at BDT 1.693 bn.
BJSA mills usually had relatively less number of machineries, mainly
because operation of these mills ended in the mid-stage of the
production chain (i.e. in the spinning stage).Hence, these mills
used relatively lower number of workers compared to other mills.
Nature of operation in a spinning mill is not significantly different
from composite mills where hessian, sacking and CBC are produced.
However, in order to ensure quality of output, use of raw materials
and some other applied techniques are different in those composite
mills.
A majority of the public and private sector jute mills are operating
with machines that were installed during the 1960s and 1970s.
Most of the mills established in the 1980s, 1990s and after 2000
have used machineries which were used earlier by BJMC and BJMA
mills. A number of factories established after 2005 used machineries
that were used in the Adamjee Jute Mills. This indicates that
machineries which are not being used for various reasons in public
and private sector jute mills can be easily made operational with a
minimum cost for repairing. A large amount of investment is not
required to serve this purpose. Some of the jute mills have started
to use new machineries (but in a very small way) in order to enhance
productivity and to produce acceptable output which meets the
quality standards.
Financial position of the Jute Mills
A report by World Bank presented a portrait of Bangladeshi Jute mills
where it was quite evident that most of the firms were profitable
before the Bangladesh s Independence in 1971. However, the
scenario changed dramatically during the post-war era as most of the
jute mills face financial losses except few private firms.
Most of the jute mills have been experiencing poor financial
conditions since the inception of the country. According to the
World Bank (1986), jute mills were profitably operated by the pre-
independenceregime,whenfinancialprofitperunitofmanufacturing
hessian product was BDT 4,977; however, when considering the
other economic costs such as subsidy and fiscal incentives, overall
economic profit can be considered to be negative (-BDT 1,545). In
the following years, both financial and economic profits of jute
mills have continued to decrease. According to the BJMA, private
jute mills suffered a loss of BDT 7,420 for manufacturing one MT
of hessian in 1988, which marginally declined to BDT 6,640 during
1996-97. Similarly, BJMC mills had a negative profit of BDT 5,184 from
manufacturing of one MT of hessian product in 1988, while the loss
further increased to reach BDT 11,075 during 1994-95.
In order to compensate losses, the government provided various
kinds of support to jute mills. Between 1985 and 1988, the then
government compensated losses incurred by the mills against
difference in the exchange rate between Bangladesh and India in the
form of XPB (Export Bonus). From 1989 to 1991, government paid
cash subsidy to all mills against their losses. Under the World Bank
programme (Jute Sector Adjustment Credit or JSAC), government
Source: BJMA.
Capacity Utilization of Machines

5
compensated the mills through export loss finance for BJMA mills
between 1992 and 1995 and up to 1995-96 for BJMC mills. The loss of
finance to BJMC mills ranged between 31% and 67%, or at an average
of 50%; on the contrary for the BJMA mills this was 16% during 1992-
93 and 20% between 1993 and 1995. Of note is that, when the mills
were denationalized in 1982 some were given back to their former
management, and some given to new management. In both these
cases all the previous loans and liabilities were also transferred.
Those debts and liabilities, according to private entrepreneurs,
had come into surface because of inefficient management during
the nationalized regime. However, a part of those liabilities also
originated even before that period, in the 1960s.
Nevertheless, in pursuit of knowing the present financial condition
of Jute Mills, the report studied 20 sample firms. To minimize the
sampling error, as the sample size is considerably small, this report
attempted to classify 3 asset classes to dig out the present financial
positions of the firms. Furthermore, it tried to focus on very basic
financials ratios, e.g. Net Profit Margin & Debt-Equity Ratio.
Description
Sample
Size
Avg.
D/E
Standard
Deviation
(SD) of D/E
Net Profit
Margin
(NPM)
SD of
NPM
Class A (Asset
Size>BDT 700 mln)
4 3.05 2.16 3.52% 2.52%
Class B (700 mln>Asset
Size>BDT 400 mln)
10 8.47 5.33 1.92% 1.01%
Class C (Asset Size
<BDT 400 mln)
6 0.58 0.38 8.56% 2.87%
From the above table, it is apparent that companies whose Asset size
are more than BDT 400 mn are usually tend to be highly leveraged.
In effect, these companies face very low Net profit margin due to
high Operating & Financial Leverage. Moreover, recent sluggish
export growth amid Middle-East crisis & devaluation of Indian rupees
ignite the situation more seriously for the highly levered firms. On
the other hand, firms whose assets sizes are below BDT 400 mln
faces considerably low Debt-equity ratio, in effect these firms face
relatively high Net Profit Margin.
Retrospectively, from the above study, it can be concluded that highly
leveraged firms are not profitable from economic point of view as
100yds/Bags sells at BDT 7,488 at FOB value. In light of this, highly
leveraged firms make net profit of BDT 188.50 on average. However,
discarding the direct government benefits in the form of export
subsidy, there will be an accounting loss of BDT 561.20. Therefore, in
such case, the economic profit of producing such items is economic
losses in the form of welfare losses to the economy.
The above stated analysis signifies that high leverage is a chronic
problem of local Jute Mills. According to industry insiders, most of
the firms take high debt on their equity position and eventually
divert the fund to support their sister concerns in other industries.
As a result of such, firms are unable to earn enough profit margins,
as funds are invested elsewhere rather than building up its existing
structure or capital machineries. Most of the firms are relaying on
export subsidy to cover up their high operating leverage. In the
absence of such govt. incentives, those highly leveraged could have
been in big trouble.
Industry Competitiveness
Revealed Comparative Advantage (RCA)
As the name suggests, RCA is used to recognize a condition, when
an open economy allows a particular country to gain from increasing
specialization in activities where it has strong comparative advantage
(opportunity cost for producing a good is relatively low). Therefore,
it indicates the relative export performance situation of a country
and industry, defined as a country s share of world exports of an item
divided by its share of total world exports. If RCA value of a product
is more than 1, the product is considered to be having comparative
advantage in the global market (Leung and Cai 2005).
Description
RCA Bangladesh RCA India
2012 2009 2012 2009
Jute and other textile bast fibres,
raw or retted
617.58 648.7 2.99 2.6
Carpets and textile floor
coverings
0.1149 0.1 10.44 14.2
Sacks and bags, for packaging of
goods, of jute or of other textile
253.58 239.9 27.25 18
Footwear 0.0554 0.1 0.0343 0.1
Yarn of jute or textile 646.66 688.9 1.75 2.7
Data Source: Trade Map Database.
Bangladesh is enjoying comparative advantage in all major jute
exporting products except Carpets than India, which is considered
as one of the major competitors of Bangladesh in export market.
However, the matter of concern is that Bangladesh s comparative
advantage is declined in Raw Jute, Jute Yarn & Footwear, where the
first two products are major jute exporting items from Bangladesh.
Moreover, Bangladesh is holding a very strong presence in the Raw
Jute and Jute Yarn items as it is holding more than 90% of total
world s export market. In addition, in manufacturing Jute Sacks, it
is holding second position, however the total market share relative
to India s market share is low (India is holding number one position
in the Jute sack export market). Nevertheless, Carpet manufacturing
and Jute Shoe industry can be a trigging Industry, as both of the
products possess high total export market relative to Raw Jute, Jute

6
Yarn and Jute Sacks. Bangladesh has great potential to succeed in
these industries.
Product
% of world's total
export market by
Bangladesh
Position
in world
Export Mkt.
Total Exp.
Mkt.
(in USD mln)
Jute and other textile bast fibres,
raw or retted
90.99% 1 209,200
Carpets and textile floor coverings 0.02% 58 1,624,087
Sacks and bags, for packaging of
goods, of jute or of other textile
37.36% 2 375,444
Footwear 0.01% 64 6,878,353
Yarn of jute or textile 95.27% 1 228,310
Product Segment Insight
Item
Exported
growth
in value
between
2008-2012
(%, p.a.)
Exported
growth in
quantity
between
2008-2012
(%, p.a.)
Exported
growth
in value
between
2011-2012
(%, p.a.)
Jute and other textile bast
fibres, raw or retted
11 5 -26
Sacks&bags, for packg of
goods,of jute or of other
textile bast fibres
15 6 35
Carpets and other textile
floor coverings, nes
18 - -24
Footwear, nes 20 - 319
Yarn of jute or of other
textile bast fibres, single
30 23 7
Raw jute and carpets product segments each saw negative
growth of over -20% in export value for the 2011-12 period.
On the other hand, footwear products saw a sizeable
appreciation in export value, growing by 319% during the
same period.
Looking at the value-over-quantity export growth, we see
that all three products ‒ raw jute, jute sacks & bags and
yarn ‒ exhibited very low ratios for the 2008-2012 period.
For raw jute, India imports over 90% of Bangladeshi exports
and thus has monopoly power over price determination.
In the case of jute sacks, India again is the largest importer,
standing at 40%. The tariffs imposed on Bangladeshi jute
sacks have depressed the multiplier effects on export by
value growth against gains made in export volume growth.
As for yarn jute, Bangladesh faces an average of 4% in tariff
on 38% of its total export value from the countries of India,
China and Egypt. This has lead to only 30% export value
growth against volume growth of 23%.
Price Competitiveness
Technological development and other factors contributed to
the advantage enjoyed by synthetic fibers, especially the price
competitiveness. Polypropylene is the single most important
syntheticsubstituteforjute.Inthecontrary,rawjutepricesaresubject
to extreme instability and seasonal fluctuations. High competition
prevails in the market with Jute fiber products and other related
alternative products, particularly polypropylene. Although, the price
of raw jute is almost half of the price of propylene, jute sack price
usually tends to be more than twice as expensive as polypropylene
sacks. This price difference affects the competitiveness of jute sacks.
On the other hand, Carpet weaving is also severely affected due
to such price differential with synthetics. Due to the widespread
availability, prices of Polypropylene fell quickly compared to jute, as
a result of which, during the early 1970s, jute textile packaging lost
much of its market share to synthetics. During FY1984-85, jute prices
increased abruptly due to some unfavorable weather conditions in
major producing countries, this created shortage of supplies in the
international market. Accordingly, this shortage of supply resulted
in a rise in prices, which provided the opportunity to Synthetic fibers
to penetrate into the international market, mostly in the developed
countries; and as the Jute products lost its market, it failed to regain
its market share due to high cost and supply constraints.
(f.o.b. prices in BDT/
tonne)
2004 2006 2008 2010 2012
2013
(June)
Propylene-Polymer 679 1048 1304 1084 1832 1345
Raw Jute (Tossa Quality) 319 409 520 536 538 689
Source: Food and Agriculture Organization (FAO).
InternationalTradeOverview(VariousTradeBarriers)
Tariff Measures
Tariff barriers faced by Bangladesh are varied across country to
country. Bangladesh faces highest tariff rate for raw jute in Singapore,
Colombia and Vietnam with 10 %, and Brazil with 8% among its
exporting countries. However, very high rate prevails in Kenya and
Iran about 74% and 50% respectively for raw jute. Nevertheless, it
faces zero duty in UK, EU, Japan & Australia for all of the Jute items
Under the MFN (Most Favored Nation) status.
In terms of exporting Jute Yarn, Bangladesh faces zero tariffs with
Turkey, which accounts for about 47% of total export of Bangladesh.
Other than that highest tariff regimes for Jute yarn includes Brazil,
Bolivia & Algeria, ranges from 7.1% to 15%.
Another potential jute products, Jute Shoe faces zero tariff from
France, Belgium & Singapore where three of these countries account
for about 70% of total export, where the highest tariff rate is faced
by South Africa which is accounted for 5% of export market of Jute
Shoe. Moreover, in terms of Carpets, Bangladesh faces Zero tariff
to its major exporting nations, e.g. Australia & France due to MFN
status.
Source: Trade Map Database.
Source: Trade Map Database.

7
North America
USA is the largest importer of jute in North America. In USA,
Bangladesh is benefitted from zero MFN tariffs on raw jute, yarn,
woven fabric, ropes, carpets, sacks and bags. In addition, Bangladesh
does not have any GSP facility for its Jute products. However, prior
to the recent ban on GSP facility by USA, Bangladesh enjoyed GSP
facility on Footwear, where the tariff rate for footwear exporting is
8.15%, currently which is under zero MFN tariff regime. Nevertheless,
Bangladesh s export share of Jute Footwear in USA market is close
to zero.
European Union
Bangladesh is enjoying the GSP facility provided by the EU under its
Everything But Arms (EBA) scheme from January 2001. Moreover,
the same gets ZERO MFN duty in raw Jute and Yarn. The EU-GSP
treatment is subject to fulfillment of the relevant Rules of Origin
(RoO). According to export data of 2012, the EU export market is
about 35% of total export of Raw Jute & Jute products.
South-Asia
India and Pakistan are two major markets for Bangladesh s Jute
items in South Asia. India is the largest importer of Raw Jute from
Bangladesh, where Bangladesh faces zero tariffs according to
SAFTA agreement. In addition, Pakistan, which is another potential
market for Bangladesh, imposes zero tariffs on Raw Jute Import from
Bangladesh. In case of other items, such as - Jute Sacks, Bangladesh
faces 4% tariff to its major market India, which holds about 49% of
Jute Sacks export of Bangladesh.
Non-Trade Barriers (NTB)
Yarn and Twine
Bangladesh faces various non-trade barriers, such as - TBT (packaging
requirement, labeling requirement, etc.), SPS (sanitary and phyto-
sanitary), customs and administrative procedures, import licensing
requirement on export of jute yarn and twine. These barriers work
as a hindrance to export growth due to additional formalities, time
and cost.
Jute Sacks and Woven Fabrics
Some countries have some set of rules for importing jute sacks. India,
the largest Jute Sacks Importer from Bangladesh, issued a rule in 2010
by which labeling of a country of origin for Jute bags is mandatory
for export. Moreover, it was mandated that it should be machine
stitched on four sides; in effect the same raises the manufacturing
cost for the exporters. Exports to ASEAN (Association of Southeast
Asian Nations) countries also face some. Exporters to these countries
need to undertake testing of products, and have to submit certificate
during the trading process. This causes extra time and costs.
Policy Implications
Present Scenario
Currently, Jute goods are drawing great interest in the world due
to its product features as an environment-friendly, bio-degradable
one. Moreover, everyone in the world is discouraging artificial fibers.
Furthermore, the government of Bangladesh is trying to shift their
focus on Jute Industry as one of the most promising sectors. In line
with this, successive policies have also been taken. Export Policy of
2009-12 has identified Jute sector as special development sector and
stated about placing in facilities in the form of low cost debt, cheap
air fare for carrying goods, facilities for technological up-gradation
and initiatives for attracting FDI in this sector. Moreover, the new
rules to enforce a compulsory use of jute sacks to pack food grains
and other items will certainly help the jute industry during slump
in prices due to reduced demand from India, which is the major
importer of Jute Sacks from Bangladesh. Although, it will have other
micro-economic implications by the way of surge in the price of rice
or other grains, it will certainly help farmers and farms to grow in the
short-run.
In addition, Industrial Policy 2010 has also cited reform measures to
reactivate the closed jute industries. As a nominated thrust sector,
jute industries will have the privilege to avail special incentives
and financial benefits such astax exemption, and will be excluded
from double taxation. From FY2008-09, jute industries have been
incorporated in the list of industries enjoying tax holidays.
Recommended Strategies
Support for the SMEs
SMEs, which are involved with manufacturing activities, should be
patronized more vigorously by the way of financial and technical
support. In India, International Trade Centre (ITC) runs various
engagement programs with designers, market specialists, jute mills
and SMEs to promote marketability of jute products. In Bangladesh,
currently we rarely find such engagement programs. Besides, the
financial support in the form of low cost debt, which is reportedly
7% is very hard to obtain and moreover, the tenure of such loans are
very short-term in nature. In effect, such fund is usually helpful for
endorsing working capital requirements.
Nevertheless, for further development in the Jute Sector, it is very
important to develop infrastructure. To fuel up such development,
financial assistance in the form of soft loan is imperative, which can
take the form of long-term loan with low interest rates. Additionally,
longer period of grace period will be beneficial for the rewarded
firms, as they will have the option to capitalize the interest that will
certainly help to match their asset and liability position.

8
Removal of Trade Barriers
Tariff barriers and Non-Tariff barriers are deterrent to trade growth
of Bangladesh. To address some of these issues, Bangladesh will
simply need to enhance its domestic capability. Moreover, it should
continue to pursue various multilateral and bilateral negotiations for
the withdrawal of these barriers. In addition, various efforts should
be taken to resolve any dispute through platforms, such as- WTO,
Regional Trading Agreements (RTAs) and other platforms.
Appropriate Market Development Strategies
Appropriate market development strategies are imperative to long-
term growth of Jute industry. However, this crucial issue remains
unaddressed for a long period of time. In such case, local market
development can be an effective strategy. However, the government
should take necessary steps to control prices in the local market as
export subsidy provided by the same will eventually raises the price
level in the local market of jute products. Local market development
can bring in various important aspects, such as- strengthening of
market size and accessing global market by advantage of economies
of scale and product development.
Product Name Potential Market** Trade Barriers
Raw Jute
Egypt (33%), El Salvador
(37%), Malaysia (53%)
NTB
Carpets
France (1171% growth in
export value)
NTB
Jute Sacks &
Bags
Thailand (235%),
Mozambique (345%), South
Africa (124%)
7.5% & 10% respectively
in Mozambique &
South Africa
Footwear
South Africa (261%), Thailand
(108%), France
South Africa (24.4%)
tariff
Jute Yarn
Hong Kong (223%), China
(124%), Egypt (56%)
China (3%), Egypt (5%)
** Parenthesis represents export trade growth in respective countries in volume from 2008-2012.
Data Source: ITC calculations based on UN COMTRADE statistics (Trade Map Database).
Market development efforts, which did not obtain the required
consideration in the past, should be given owing precedence.
Many countries legislate the mandatory use of natural fibers, which
is a looming opportunity for Bangladesh; however, opportunities
emitting from this have been wasted due to the lack of appropriate
product development strategies. Development of new products
could have been a good strategy to combat such situation. Market
promotional activities and development activities need to be
commenced by the Government of Bangladesh (GoB) to disseminate
and highlight the advantages of Jute. Moreover, potential export
market should be identified and long-term strategy should be
formulated in line with this. The following table shows the sources of
potential market for Bangladesh. The same shows the export growth
in the respective countries in the last 5 years in terms of quantity
taking into account of positive export growth in value as it entails
stable price negotiation with these countries. While, in the case of
other major importers such as India, it is getting difficult to negotiate
price of products, which ultimately reduces the trade growth in
value in the last 5 years.
A Micro-Economic Perspective
Other than the various macro-economic factors that hinges
export growth of Jute products, it is very prospective that Jute
products are gaining its popularity in the developed countries.
A recent study shows that price Elasticity of Jute products is
only 0.06, which entails consumers are not concerned regarding
any price appreciation of Jute products. Therefore, it is also very
positive news for the Jute Industry as well from the long-run
perspective.
Jute, once known as the golden fibre of Bangladesh, has recently lost some of its lustre. A concoction of incorrect policy selection &
implementation, lack of industrial oversight and tendency to focus on Bangladesh s existing trump card ‒ namely the RMG sector ‒ has
culminated that the jute industry becoming an afterthought in the country s export basket, stagnating at only 0.9% total cumulative exports
in May 2013. Peculiarly, beyond all odds, Bangladesh has retained its historic number one position in global raw jute production; however the
gap between the top two spots have never been narrower as India has emerged as a serious contender in the global jute market in recent
years. Unlike Bangladesh, India is not content with the status-quo and has deployed a host of policy and infrastructural reforms and initiatives
to catch up. The message for Bangladesh is very clear ‒ shape up or move aside. So far, the trade subsidies bestowed on the jute sector are only
a short-term solution ‒ they serve to buffer jute mills from global competition while at the same making jute products domestically pricier.
Fortunately, the intrinsic strengths of the Bangladeshi jute sector can be built upon. To prosper, Bangladesh needs to adopt a long-term
outlook. It can do this through a variety of ways ‒ it can encourage SMEs and work with them through a variety of investment tools (as well as
providing debt and equity instruments to help struggling jute mills sustain and eventually expand); it can rescind protectionist policies and
allow the jute industry to build true resiliency from global competition and it can encourage local consumption through public policy, further
strengthening the base for foreign consumption. Furthermore, to remain competitive, the jute industry must diversify into jute products and
discontinue its infatuation with raw jute, all the while exploring new avenues for export.
Also, jute represents a green alternative ‒ compared to polypropylene, its closest substitute, jute products require 10 times less energy
consumption for both manufacturing and transport, and does not possess harmful manufacturing side-effects such as acid-rain and
carcinogenics-release. As we move towards a world of depleted fossil fuels and ecological imbalance, demand for environment-friendly
products will not only increase exponentially, but skyrocket. Since the turn of the 20th century, Bangladesh has been gifted with a goldmine
for green alternatives in the form of the jute industry. All it now needs to do is safeguard it, and ensure that the walls don t cave in.
(The writers are working as analysts in the Credit Risk Management department of IDLC Finance Ltd. and can be reached at avijith@idlc.com and
msayeed@idlc.com)

9
ANALYSIS MONITOR
A larger expansion in import expenditure compared with the increase
in export earnings caused the widening of the trade deficit. But in
spite of this, a substantial surplus was reported in the overall balance
of payments for CY 12.
As at December 31, 2012, the Gross foreign reserves were USD 12.18
bn. This, according to the central bank, is sufficient to pay for the
import payments of almost five months. At the end of June 2013, the
forex reserve reached USD 15.3 bn.
There was noticeable growth in the balance sheet size of the banking
sector. The credit figures to the private sector also increased in CY 12.
Bangladesh Bank unveils Financial Stability Report 2012
According to the Financial Stability Report 2012 published by the central bank, Bangladesh economy showed significant amount of growth
in 2012. In the FY 20111-2012, the country achieved a real GDP growth of 6.3%, improvement in the banking sector caused by development
of infrastructure and domestic demand being the main causes of such remarkable growth.
Bangladesh Real GDP Growth
Imports covered by reserves
Banking sector asset structure: end-DecemberTrends of trade, current account and overall balances
Source: Bangladesh Bank. Source: Compilation (Aggregate balance sheet of banking industry) : FSD, BB.
Source: Bangladesh Bank.

10
In comparison to the last year, investments in the government
securities by the banks increased, showing a high government
borrowing from the scheduled banks. There was a decrease in the
money at call which is expressed as a percentage of total assets, by
the end of Dec 12 compared to the last year. This indicated a rise in
the availability of liquid funds of banks in order to meet immediate
requirements.CY 12 also experienced a downgrading of assets. This
was caused by examination of asset quality of banks by Bangladesh
Bank (BB) before finalizing bank account, financial crimes in the
banking system and increase in frequency of loan examination
by the central bank. The banking sector persisted to indicate high
dependence on term deposits in CY 12. Signifying a comprehensive
safety net for small depositors, the deposit insurance coverage rose
considerably.
Because of creation of additional provision due to new stricter loan
loss provision regulation adopted by BB in 2012, the profitability
indicators of the Banking sector- Return on Equity (ROE) and Return
on Assets (ROA) fell in the same year. Although the Capital Adequacy
Ratio (CAR) in the banking sector fell, but nearly all the banks were
able to maintain the minimum required CAR of 10.00%. Still, the
country stands way behind other South Asian countries like India, Sri
Lanka and Pakistan in terms of development of the banking sector.
Although the CAR is minimum 10% under Basel-II Accord/Framework,
the CAR is significantly higher for most of the Islamic banks.
International comparison of capital adequacy indicators
Countries
CAR (%)
2009 2010 2011 2012
India 14.0* 14.6* 13.5*** 14.3*
Pakistan 14.0 14.0 14.1** NA
Sri Lanka 16.1 14.9 14.5*** NA
Bangladesh 11.7 9.3 11.4 10.5
Source: RBI, SBP, CBSL, BB.
*as of end March, **as of end June, ***as of end September, NA-not available.
The weighted average interest spread of the banking industry
persisted to drop till it fell to 4.99%. While the banks maintained a
surplus of Statutory Liquidity Reserve (SLR) and the average SLR was
almost one fourth of the total demand and time deposit, the overall
Advance to Deposit Ratio (ADR) reached a stable state by the end of
December 2012.
Signifying generally better quality of assets in their portfolios, the
ROA of the Islamic banking industry was higher than that of the
overall banking industry. Islamic banking industry also experienced
considerably better ROE than overall banking industry in CY 12. This
was due to better investment management by these banks and
greater future access to investor s capital.
As the ratio of classified loans and leases to total loans and leases
recorded slight increase, Non- Banking Financial Institutions (NBFIs)
experienced a drop in asset quality in CY 12. Due to a decline in non-
Source: Data: DOS, BB; Computation: FSD, BB.
Source: Data: DOS, BB, Compilation (Aggregate P/L account of banking industry): FSD, BB.
Source: Data: DOS, BB, Compilation (Aggregate P/L account of banking industry): FSD, BB.
Sector return on assets (ROA): CY 2011-12
Banking Sector return on Equity (ROE): CY 2011-12
Selected income ratios of Islamic banks & the banking sector
Capital adequacy ratio of the banking sector

11
interest income and fee income from capital market activities, this
sector also experienced a drop in profit ability.
Positivity in the capital market was brought by stable growth in
the issued capital (including IPO), stable price-earnings ratio and
improved Herfindal-Hirchman Index. On the other hand, the market
turnover, market capitalization and general price index persisted to
decline.
There was significant development in the financial infrastructure
in CY 12. This was led by launching of a National Payment Switch
by the central bank in order to create a common platform for bank
cards, internet banking and mobile based Bangladesh; introduction
of Electronic Fund Transfer (EFT) to facilitate the banks in making
high value payments instantly using less materials and manpower;
introduction of Mobile Financial Services (MFS); issuance of
guidelines on uniform accounting procedures for Repo transactions
of government securities by BB; introduction of online trading of
govt. securities aiming to create a vibrant secondary market; creation
of a Financial Integrity and Customer Services Department at BB;
introduction of a Large Loan Monitoring Software in its premises for
closer monitoring of large loans; procurement of goAML software
by BB aiming to combat international terrorist financing and money
laundering; and initiation of an elevator reporting system titled
Quick Review Report (QRR) on a half yearly basis with a view to
analyzing banks overall condition, financial disclosure requirements
and financial position.
Source: Department of Financial Institutions & Markets, BB.
Source: Monthly Economic Trends, Issue: December, 2012.
Source:Department of Financial Institutions & Markets, BB.
Source: Recent Market Information, www.dsebd.org
Source: Data: PSD, BB; Compilation: FSD, BB.Source: Recent Market Information, www.dsebd.org
NBFIs classified loans and leases trend
DSE General Index Movement (CY 2012)
Market Capitalization Ratio (FY 2003-04 to FY 2011-12)
NBFIs borrowings, deposits & capital trend
Turnover to Market Capitalization Ratio (Dec. 2004- Dec. 2012)
Automated Cheque Clearing Operations

12
Three Challenges to Slash Inflation
The Bangladesh Bank has identified
three challenges to reduce inflation as
predicted in the target for the current FY
2013-2014, shown in the national budget
as 7.0%. According to the latest quarterly
report released on the 23rd of September,
both the old and new inflation base-data
indicate that inflation remains a major
challenge for Bangladesh. The challenges,
as identified by Bangladesh Bank, are
given below:
The likely wage increase in the public
and private sectors, which will create
aggregate demand pressures.
Possible supply side disruptions,
particularly affecting food inflation,
due to nationwide strikes and
weather-related factors affecting
agricultural yields.
The recent rise in Indian inflation,
which could be transmitted to
Bangladesh as shown by historical
long-term trends.
The central bank has estimated the Gross
Domestic Product (GDP) growth at 6.03%
in FY 13, lower than 6.23% growth of FY 12
and the 6.2% average for the previous
decade. The reason was ascribed to the
slower growth in agriculture and services
sector. Looking ahead to FY 14, the BB s
current forecast is that output growth
is unlikely to deviate significantly from
the last ten-year average of 6.2%. This is
based on current and projected trends
of a number of variables including global
growth, domestic and foreign investment,
exports, imports, remittances, etc. The
forecasts would be updated by the central
bank regularly.
Average inflation, using 1995/96 base-
year, has been declining steadily over
the past fifteen months, from a peak of
10.96% in February 2012 to 7.70% in June
2013, according to Bangladesh Bureau of
Statistics (BBS). This decline was driven
by a steady fall in point-to-point food
and non-food inflation until October
2012, when food inflation bottomed out
at 5.57%; since then, food inflation had
begun to rise and in June 2013 it was
8.53%. Non-food inflation fell from a peak
of 13.96% in March 2012 to 6.76% a year
later, BBS data revealed. However, point-
to-point non-food inflation has increased
to 6.99% in June 2013. However, point-
to-point inflation has increased to 6.99%
in June 2013. Point-to-point inflation
data, using the 2005/06 base, broadly
shows similar trend as the pattern using
the 1995/96 base, although the absolute
numbers differ, the central bank said.
Using the 2005/6 base, point-to-point
food inflation has risen from 1.75% in
September 2012 to 8.26% in June 2013.
Point-to-point nonfood inflation is
declining, having peaked in October 2012
at 11.28% to 7.75% in June 2013. The
rise in food inflation was also pushing up
average inflation, which bottomed out at
6.06% in January 2013 and rose to 6.78%
in June 2013.
f fl f f
(2005/6 Base) Source: BBS.

13
ECONOMY
Resilience becomes Bangladesh - the favorite adage of domestic industrialists has been substantiated again, by the prolific output from the
RMG sector. According to data from Export Promotion Bureau (EPB),
In comparison to August 2012, the figure of total export earnings was 3.18% higher this year.
Between July and August, knitwear exports raked in USD 2.1 bn, up by 17.19% from a year ago.
Woven garments fetched USD 2.05 bn, a 16.98% year-on-year rise.
Startlingly, the total exports of other products took a down-turn, dropping 33.42% to USD 2.01 bn in August from July. Export earnings in
August were 20.85% below the target of USD 2.54 bn. Export portfolio of Bangladesh now stands even more reliant on the RMG sector.
According to the EPB, if the trend continues this way, Bangladesh RMG would successfully achieve this fiscal year s export target of USD 30.5
bn. Prosperity of the RMG sector is to be credited to the EU market, where 52% of the country s products are exported to; in addition, the
sector is bolstered by the rise in the emergence of solid export destinations such as Japan, Russia, and South Africa. Furthermore, exports to
SAARC and ASEAN countries are also on the rise.
Banks net profit slumped by 40.6% to BDT 44.66 bn in 2012 due to stricter
provisioning requirements against their default loans, according to
Bangladesh Bank. The banks made a net profit of BDT 75.20 bn in 2011.
However, the banks operating profit rose by 5.6% to BDT 197.30 bn in 2012
compared to a year ago.
Increased provisioning is expanding the capital base of the banks, which will
brighten their image to their foreign counterparts, according to Bangladesh
Bank.
The net investment in the national savings
certificates and bonds increased by 184.90%
in the first two months (July-August) of this
fiscal year 2013-14 compared with that in the
same period of the FY 2012-13 because of a
dull investment situation in the productive
sector and a lower rate on the banks savings
products. According to the Directorate of
National Savings data released on the 24th
of September, the net investment in the
savings instruments was BDT 13.1677 bn
in the first two months of the FY14 while
it was BDT 4.6218 bn in the same period of
the FY13. In July-August FY2013-14, the net
investment in the savings instruments also
surpassed the net investment of BDT 7.7284
bn made in the previous fiscal year.
Rate of Interest
Five-year Bangladesh savings
instruments
13.19%
Three-monthly profit-bearing
savings certificates
12.59%
Pensioners savings instruments 13.19%
Family savings certificates 13.45%
RMG drives output growth
Banks’ net profits slump 40%
Jul-Aug Investment in Savings Tools Surpasses FY13 Figure
Export Growth
YEAR-ON-YEAR/IN %
Export Performance
July-August 2013-2014
Banking Sector s Net Profits
(in crores of BDT.)
Source: BB.
Source: Directorate of National Savings.
Source: EPB.

14
Foreign currency reserves have reached USD 16 bn, although imports have started rising at the start of the current fiscal year.
Imports rose by 7.78% year-on-year in July, backed by food grains and capital machinery, according to data from Bangladesh Bank. In July,
imports of rice and wheat shot up by 118% year-on-year and capital machinery by 21% and raw materials by 10.58%, according to the LC
settlement statistics. In the last fiscal year, imports fell by 4.36% due to a sluggish investment situation, compared to the previous year.
Bangladesh s net imports last fiscal year went
negative by 4.36% for the first time since
fiscal 2001-02, to take the country s current
account balance to the surplus. According to
data from the central bank:
In fiscal 2012-13, some USD 33.97 bn
worth of goods and services were
imported, down from previous year s
USD 35.52 bn.
Bankers and analysts attributed the
negative growth to less food grain,
capital machinery and luxury item
imports as well as price benefits on
petroleum imports.
The country imported USD 31 mn
worth of rice in fiscal 2012-13, down
from USD 288 mn a year ago and USD
830 mn in fiscal 2010-11. The letters of
credit (LC) settled for capital machinery
imports stood at USD 2.12 bn, which is
down by nearly 16% from a year ago.
Meanwhile, the petrol bill, too, dropped
on the back of favorable exchange rate.
Petroleum imports last fiscal year stood
at USD 4.39 bn, down from FY 2011-12 s
USD 4.48 bn.
Bangladesh s major import items
include petroleum products, chemicals,
cotton, yarn, textiles and articles, capital
machineries and edible oil.
The decline in imports has sent the
country s current account balance to
USD 2.5 bn in the surplus for FY2012-13,
which were USD 447 mn and USD 1.68
bn in the negative in fiscal 2011-12 and
2010-11 respectively.
Forex Reserves Hit USD 16 bn
Net imports go negative after 11 years
The country s commercial banks have begun reducing their lending
rates thanks to the excess liquidity in the money market and
Bangladesh Bank s (BB) move to rationalize the interest rate spread
(the difference between the average lending and deposit rates).
The lending rates are being reduced to help increase the banks
loans and advances while bringing the spread down to within the
desired level. Having a huge amount of idle money accumulated due
to poor demand for loans, the commercial banks have proceeded
on a heavy cut on the deposit rates, pushing up the spread above
the desired level (set by BB) of 5%.
According to Association of Bankers Bangladesh (ABB), the spread
increased mainly due to lower deposit rates that came down due
to a slump in banks business, whereas, the lending rates remained
unchanged. The spread had been climbing since the beginning
of this year. Barring a few exceptions, the average spread is not so
alarming.
Bangladesh Bank (BB) data shows that the average spread was
4.91% in April, 2011 and that this has increased gradually to
stand at 5.23% in July 2013. The average annual lending rate
of the private banks stood at 14.36% and the deposit rate
at 9.13% as of July down from the previous month s rates of
14.44% and 9.1% respectively.
The interbank call money rate remained stable at a range of
between 7% and 7.5%, showing signs of adequate liquidity
in the money market. The call money rate came down to its
lowest at 7% in last couple of weeks, and went as high as 8%
in the last year. It, however, rose to 9% for just over one week
ahead of Eid-ul Fitre. According to Bangladesh Bank, banks
should cut the lending rate now as the deposit rate has already
been reduced.
The ratio of NPLs to the total loans for the banking sector, in
both gross and net terms, increased at the end of third quarter
of FY13 compared to the second quarter, as per BB data. Gross
NPLs went up from 10% at the end of second quarter to 11.9%
at the end of the third quarter. The overall banking industry
NPL was 2.6% higher at the end of the third quarter of FY13
than the last five years average of 9.3%.
High Interest Rate Spread Persists Despite Down Trend in Banks’
Lending Rate
Spread of Leading & Deposit Rate
Growth rate of Bangladesh s Imports (in %)

15
Inflation (p-to-p) declined by 0.46 percentage points from 7.85%
in July 2013 to reach 7.39% in August 2013. The inflation figures
this time were arrived at following the new base year of 2005-06,
which replaced 1995-96 as the base year. Both food and non-food
inflation dropped in August. Food inflation decreased to 8.09% in
August from 8.14% in the previous month and non-food inflation
decrease to 6.35% from 7.40%.
Though the point-to-point inflation decreased, average inflation
increased from 6.99% in July to 7.19% in August 2013. Average
inflation in the food sub-sector increased by 0.49 percentage point
to 6.20% in August than that in July this year, because of high food
price that prevailed in the preceding months compared to their
matching period a year ago. Average non-food inflation, however,
declined to 8.71% in August from 8.96% of July 2013.
The export-import balance (Balance of Trade)
recorded a lower deficit of USD 129 mn during
the first month of FY2013-14, compared to
the deficit of USD 476 mn in the same period
of FY2012-13. But the large inflow of workers
remittances in July 2013 was at a USD 1232 mn
lead to a current account surplus of USD 754 mn
on July 2013, against a lower surplus of USD 284
mn during the same period of the last fiscal.
However, the Financial Account saw a deficit
of USD 444 mn, Nevertheless, Bangladesh s
positive trend in its overall Balance of Payments
(BoP) continued from July 2012 with the BoP
registering a surplus of USD 369 mn for July FY
2013-14 against a surplus of USD 553 mn during
July FY2012-13.
Rate of Inflation remains stable
Balance of Payment continues positive trend

16
Remittance inflow to Bangladesh from top
six countries has been on a gradual decline,
according to Bangladesh Bank statistics. The
six countries ̶ Saudi Arabia, United Arab
Emirates, Kuwait, the US, the UK and Malaysia
̶ accounted for USD 11.69 bn or 80.87% of
Bangladesh s total remittance inflow of USD
14.46 bn in fiscal 2012-13. Contribution of
these countries was 82.63%, 84.20% and
83.76% in fiscal 2011-12, 2010-11 and 2009-
10 respectively. The Bangladeshi diaspora
in Saudi Arabia sent the highest amount of
foreign currencies, worth nearly USD 3.83
bn in 2012-13, followed by the UAE at USD
2.83 bn and the US at USD 1.86 bn, central
bank data shows. Remittance inflow from
the UAE, Oman, Bahrain, Kuwait, Libya, the
US, Malaysia, Singapore, Australia and South
Korea increased in 2012-13 compared to that
of a year ago. However, remittances from
Qatar, the UK, Germany, Japan, Italy and
Hong Kong witnessed a negative growth in
2012-13 compared to 2011-12.
TRADE
Due to Falling Investment, Banks’ ADR drops below 74%
Onion Import Loans get Cheaper
The credit or advance-deposit ratio in the banking sector declined
below 74% in August as credit demand in the private sector continued
to drop in the current fiscal year 2012-13 due to dull business situation
in the country amid political unrest.
Eight banks and 10 Islamic wings of the conventional banks posted
negative credit growth as of August 1, 2013 on year-on-year basis.
According to the latest BB data, the overall ADR in the banking sector
dropped to 73.34% as of August 1, 2013 from 76.59% as of December
31, 2012.
The ADR was 80.33% as of June 7, 2012. As per BB rules, the
conventional commercial banks are not allowed to invest more than
85% of their deposits while Islamic banks and Islamic wings of the
conventional commercial banks can invest up to 90% of their deposits.
A number of banks had high ADR in 2011 and in the first half of 2012,
but now the situation has changed as the credit demand from the
private sector continued to decrease due to the ongoing political
unrest. Banks had also taken a cautious policy in sanctioning fresh
loan as the banking industry recently faced a number of scams. The
ADR in the banking sector along with its credit growth will decline
further in the coming months if the ongoing political instability
continues.
The ADR ratio in the state-owned commercial banks dropped to
61.72% as of August 1, 2013 from 68.95% as of December 31, 2012,
that of the local private commercial banks to 78.06% from 79.65%
and that of the Islamic banks and Islamic wings of the traditional
bank to 83.10% from 86.89%.
Onion importers will get loans at an interest not more than 12% as Bangladesh Bank impose the lending rate limit on September 23. The rate
takes immediate effect and will continue until the year end. The central bank also relaxed the loan-margin ratio to make the import cheaper
and said the banks are free to set the margin at minimum level based on relationship with their clients. It relaxed the terms of financing onion
imports to facilitate adequate supply of the essential commodity in the market, said a circular issued to the commercial banks. It said price of
the commodity recently witnessed volatility in the local market due to high price in the international market. The commerce ministry earlier
requested Bangladesh Bank to take steps to cut the interest rate to 10% and consider a relaxed margin ratio to help bringing down the prices
ahead of Eid-ul-Azha and Durga Puja.
Remittance Inflow in FY 12
Remittances from Top Six Countries on the Decline
81%
19%
Top Six Countries
Others
Inflow of Remittances
From Saudi Arab, UAE, Kuwait, USA, UK
and Malaysia (in % of Total)

17
USD in mn
Item
Jul-Sep
12-13
Jul-Sep
11-12
Change
Knitwear 2,539.83 2,579.52 -2%
Woven RMG 2456.86 2234.56 10%
Frozen Food 263.27 300.43 -12%
Home Textile 198.77 183.75 8%
Leather 75.74 77.28 -2%
Chemical Products 24.56 41.94 -41%
Foot Wear 111.47 106.56 5%
Engineering Products 68.78 93.18 -26%
Agricultural Products 133.73 114.04 17%
Raw Jute 53.08 65.54 -19%
Others 365.36 366.93 0%
Total 6291.45 6163.73 2%
Source: Export Performance for July FY2013-14; Export Promotion
Bureau, Bangladesh Bank.
Shrimp Exporters Shine as Disease Hurts Competitors
Shrimp exports from Bangladesh surged 42% to USD
109 mn in July-August as malaise has brought down
production in other exporting countries̶Thailand,
China and Vietnam. The disease, known as Early
Mortality Syndrome (EMS), has affected white shrimp
or Vannamei production in the competitor countries,
creating a shortage in supply and raising the prices.
Bangladesh Frozen Foods Exporters Association hopes
to exceed the export target of Bangladesh for the fiscal
year as demand and current prices are likely to sustain
until June 2014. Shrimp processors had earlier targeted
USD 477 mn in export earnings in fiscal 2013-14, which is
5% higher than the actual export figures of USD 454 mn
in fiscal 2012-13, according to Export Promotion Bureau.
Category wise Export Import LC statistics
USD in mn
Items
July, 2013 July, 2012
FLCO SOLC OSTLC FLCO SOLC OSTLC
Capital Machinery 255 239 3,040 157 197 2,315
Textile Fabrics (B/B & Others) 525 479 2,807 408 390 2,270
Rice and Wheat 192 143 551 62 65 184
Chemicals & Chem. Products 262 290 1,350 283 336 1,221
Petroleum & Petro Products 614 382 1,323 255 330 1,311
Edible Oil & Oil Seeds 90 149 756 178 90 808
Raw Cotton 160 208 1,009 139 193 880
Scrap Vessels 135 67 464 111 76 341
Pulses 19 42 233 31 25 161
Cotton Yarn 89 91 526 93 95 477
Paper and Paper Board 29 31 89 26 26 72
Synthetic Fibre & Yarn 45 50 271 42 36 239
Sugar and Salt 78 65 572 38 48 728
Others 27,435 24,545 5,334 28,536 27,629 5,255
Total 29,928 26,781 18,324 30,358 29,538 16,264
FLCO = Fresh LC Opening, SOLC = Settlement of LC, OSTLC=Outstanding LC.
Source: Major Economic Indicators: Monthly Update, August 2013, Bangladesh Bank.
Shrimp
Export
(in mn.
Of $ Jul-Aug)
Source: EPB.

18
BUSINESS
Online shopping transactions in the mainstream
The Next Big Thing – 3G
According to the Bangladesh Association of Software and Information Services (BASIS), the annual online sales amount to nearly BDT 200 mn
in the country. Bangladesh Telecommunication Company Ltd (BTCL) states that the country currently has about 400,000 internet users. The
regulatory body believes that the number would take a hike if -
Internet bandwidth prices were reduced.
Traders engaged in extended publicity to make it more popular.
An approximate number of 40 e-stores are serving to the country s online shoppers, supplying a variety of products including groceries, foods,
cloths, home appliances, electronics, jewelleries, books, shoes, and so on. In Bangladesh, the local shoppers pay either on cash or through
debit or credit cards or bKash service. The orders are placed over the phone or online, and an additional service charge is included based
on the lead time requested by the customers. These stores are already receiving orders from Nepal, India and the UK, with the response far
exceeding what they had anticipated. Currently, they are serving a niche market and would need more time to expand their business further
overseas. Online shops and payment systems need to be 100% secured and approved by Bangladesh Bank for the companies to operate.
Four mobile phone companies̶ Grameenphone, Banglalink, Robi and Airtel̶ got the 3G license in the beginning of August for providing
3G cellular services. The mobile phone companies also got 4G and LTE licenses with the 3G license and they would be able to launch 4G
services without any further formality. The four operators ̶ Grameenphone, Banglalink, Robi and Airtel̶ bought 25 MHz spectrum on
September 8 in the 3G spectrum auction from available 40 MHz by paying only USD 21 mn for each MHz whereas the opening base price
was USD 20 mn per MHz. The government expected that it would net in
revenue worth at least USD 800 mn from four licensees but it got only
USD 525 mn as GP took 10MHz with USD 210 mn, Banglalink, Robi and
Airtel took 5 MHz each with USD 105 mn.
According to the 3G guideline, the four companies have to deposit 60%
of the auction winning price in Taka or equivalent US dollar within 30
working days from the auction result notification and remaining 40% in
180 days. The operators will get the licenses for 15 years with an option
to launch 4G and LTE services.
According to the BTRC s roll-out plan the operators must have to launch
the 3G service within six months from getting the license and reach out
the service to all divisional headquarters within nine months. Currently,
only Teletalk, state-run operator, offers 3G service in selected regions of
the country.
NBR Hosts Fourth Tax Fair
Offering people one-stop services such as assistance with filing of
tax returns and tax payment either manually or electronically, the
fourth weeklong tax fair ended on September 22, amid a rush of
taxpayers, enabling the revenue authority to register its highest
revenues from the showcase. The event fetched the National
Board of Revenue (NBR) BDT 11.174 bn this year, up 34.46% from
the previous year, thanks to its expansion throughout the country.
This year, the show was held in all divisional cities, 54 district towns
and three hilly districts. It has also beaten previous records of visitor
turnout and tax returns submission.
This fair enabled taxpayers to complete tax-related work without
any hassle. One offering which went down well with the visitors
is the assistance with the online registration and re-registration of
taxpayer identification numbers (TINs), launched in July to establish
an electronic payment system. Some 74,356 existing TIN holders
re-registered online to comply with NBR s directive to complete
electronic re-registration by December 31, 2013.
Over the past several years, the collection of income or direct
tax has been growing thanks to steady economic growth and
rising income. Revenue authority s motivational campaigns for
tax payment and efforts to curb tax evasion and increase tax net
facilitated the growing income tax receipts, now the second biggest
source of revenue after value-added tax. Income tax collection shot
up by 28% year-on-year in July to BDT 18.37 bn, according to NBR.
For fiscal 2013-14, the revenue authority aims to collect BDT 482.97
bn in income tax, 32% higher than last fiscal year s receipts.

19
Shariah Banking Fights Recession Better
BD to import power from India
During the last global economic crisis, the Islamic banks and financiers emerged successful compared to the conventional ones, which
probably had encouraged expansion of such banking even in non-Muslim countries, according to Bangladesh Bank (BB). Islamic banks
have been operating in the countries since the 1980s. Currently, there are eight Islamic banks that run wholly on Sharia Principles. Further,
as many as 17 conventional banks including one foreign bank are running Islamic branches.
More conventional banks have requested for approval to become the wholly Shariah-based, which indicates robust customer demand
in Bangladesh for Islamic financial services. Barring one exception of a small sick Islamic bank in process of restructuring, the Islamic
banks in Bangladesh generally have higher capital adequacy ratios and lower non-performing loan ratios than their conventional banking
counterparts. Aggregate assets and deposits of Islamic banks in Bangladesh have nearly doubled in the last four years; by end 2012
aggregate assets and deposits both crossed trillion taka thresholds, comprising around a fifth of total banking sector assets and liabilities.
It is noteworthy how these banks already have significant engagement in agricultural, SME and microfinance, so far without any refinance
support like those available for conventional banks. BB has also put stress on the challenges which are coming hand in hand with the
ongoing growth trends and the emerging new growth prospects.
The much-talked about power import from
India began on trial basis on September
27, by adding 50 megawatts (MW) to the
national grid. The 50 MW electricity was
supplied around 10:45am to a sub-station of
Power Grid Company of Bangladesh (PGCB)
in Bheramara in Kushtia. The load was
raised up to 175MW by 5:00pm when it was
suspended for a detailed technical study on
the both sides of the border. Initially 50 to 175
MW electricity will be imported and supplied
to national grid every day till October 5, when
it will be formally inaugurated by the leaders
of both countries. After the inauguration, the
transmission will be increased up to 250 MW,
and 500 MW at the end of November. PGCB
has set up the substation on 112 acres of
land at Gopinathpur in Bheramara with link
to substation at Baharampur in West Bengal.
The Bheramara substation is capable of both
importing and exporting electricity from and
to India.
A 125-kilometre transmission line has
been constructed between Bheramara
and Baharampur. Of this line, 40 km fell
inside Bangladesh. A Memorandum of
Understanding (MoU) was signed between
the two countries in 2010 on import of a
total of 500 MW power from India.
Half of this power will be coming from the
Indian central government electricity quota
and the rest from its open market. The total
amount of electricity, to be imported under a
35-year contract, is expected to improve the
country s power crisis situation now being
tackled through costly but short-term rental
power plants.
Tariff, along with
Wheeling Charge for
Imported Power
BDT 6 to BDT 6.35
per kilowatt-hour
or unit
Tariff from Rental
Power Plants
BDT 7.5 to BDT 22
per unit
Tariff from Large,
Local Gas-fired
Power Plants
BDT 2.5 to BDT 4.8
per unit

20
Banks asked to open accounts for garment workers
BB resets limit on banks’ share credit
The central bank asked all scheduled banks to open bank accounts for apparel workers with an initial balance of BDT 100. The Green
Banking and CSR Department of Bangladesh Bank (BB) issued a circular in this regard on the September 18. There will be no obligation of
maintaining minimum balance, and banks cannot charge any fees for the services, according to the circular. Garment workers must show
the copy of their national and employment identity cards to open their accounts. Banks can transact against these accounts on vouchers if
they (banks) run short of cheque books, BB said. Respective banks have to submit reports on the update of these accounts to the banking
regulator on a quarterly basis. Earlier, the BB helped farmers open bank accounts with BDT 10 only, and nearly 10 mn farmers have come
under the banking services though many of the accounts remain unused.
Banks will be able to disburse no more than
BDT 30 mn in share credit to any stock dealer
as the central bank set the limit in line with a
revised law. The loans will only be allowed for
A- and B-category shares, Bangladesh Bank
said in a notice. The credit amount may cover
up to 70% of the last six months weighted
average prices of A-category shares and 60%
of B-category shares, but that must not cross
BDT 30 mn in any case. The previous limit
was BDT 10 mn. The Banking Companies
(Amendment) Act 2013, gazetted on July 22,
empowers the central bank to set the credit
limit time to time. However, the banks total
exposure to the capital market would not
cross 25% of their total regulatory capital.
According to the Central Bank, the banks
which have over-exposure to capital market
will have to reduce the exposure by July 21,
2016.
The banks will also have to regularly submit
a central bank prescribed report on their
investment exposure to the stock market
within first 10 days of a month, emphasizes
Bangladesh Bank.
REGULATORY NEWS
BB Takes Steps to Introduce Online Transaction through Cards
The Bangladesh Bank asked scheduled banks to introduce two-step
authentication and online alert systems for the use of credit and debit
cards for online transactions by April 1 of next year. The BB issued a
circular to the banks asking them to implement the new method of
additional authentication or two factor authentication for Card Not
Present (CNP) transactions.
CNP is referred to a transaction a consumer carries out without
presenting his/her credit or debit card. A consumer can make online
payment for any purchase of product by using his/her credit or debit
card s number and password, without swiping the card through any
machine. This type of transaction is usually used in the e-commerce.
The BB circular said that the banks would introduce an online alert
system for the cardholders for CNP transactions of value of BDT 5,000
and above. The CNP transactions are considered very convenient for
consumers as these allow them to make purchases using a personal
computer or mobile phone device. Currently, clients of the banks use
a fixed password in CNP transactions.
In the current system, fraud risk is high as such type of fixed password
can be easily accessed by hackers.
In order to check fraudulence in the CNP transaction, the banks will
issue a one-time password for every transaction to their clients so
that their transaction process would remain safe and secured. Banks
will send the one-time password to their clients through mobile
numbers and emails. The transaction will be executed when a client
will insert the one-time security code in the process.
The incidents of credit card fraudulence have recently increased
in the country. So, the BB has made mandatory for banks to adopt
policy required to tackle online fraudulence to protect consumers
and financial institutions.
Besides, the banks will have to provide online alert to clients when
they make the CNP transaction amounting to BDT 5,000 and above.
Banks will provide the online alert to their clients through emails and
mobile numbers.

21
Exchange And Forward Rates (As on September 29, 2013)
Major Currency Exchange Rates
Currency
BC Sell
BDT
TT Buy
BDT
USD 78.25 77.25
EUR 106.35 102.3
GBP 126.8 122.77
AUD 76.51 71.64
JPY 0.85 0.77
CHF 88.44 83.91
SEK 12.27 10.99
Major Currency Exchange Rates
Currency
BC Sell
BDT
TT Buy
BDT
CAD 79.59 74.58
HKD 11.09 9.9
SGD 63.8 60
AED 21.48 20.86
SAR 21.2 20.54
DKK 14.18 12.82
KWD 273.73 268.26
Exchange Rate of Some Currencies
Currency
Currency Per
USD
BDT per
Currency
INR 62.65 1.24
PKR 105.74 0.74
LKR 132.03 0.59
THB 31.38 2.48
MYR 3.26 23.86
Source: Standard Chartered Bank.
MARKET ROUNDUP
September 2013
Money Market
The Bangladesh interbank call money rate was around 6.75 ‒ 7.25% on September 30.
Foreign Exchange Market
Local: The USD/BDT interbank rate remained stable on Monday. Trading volume was also fairly stable. The USD/BDT market remained liquid.
International: The euro fell broadly on September 30 as political tensions in Italy escalated, while investors shunned the dollar as a deadline to
avert a government shutdown in Washington approached. The Swiss franc and the yen, which tend to benefit in times of financial uncertainty,
rose. The euro was down 0.7% at JPY 131.82 having earlier fallen to a three-week low of JPY 131.385. The single currency fell 0.2% versus the
franc at FF 1.2225, off a low of FF 1.2215; it s weakest since early May. It was down 0.3% at USD 1.3488.
Strategists said the euro s fall versus the dollar could be limited by month-end and quarter-end euro buying by Asian accounts and due to
dollar weakness as a deadline to break a political impasse over funding and avert a federal government shutdown approached.
The dollar was flat against a basket of currencies at 80.336. Latest weekly Commodity Futures Trading Commission data showed currency
speculators had cut their bets in favour of the Dollar to the lowest net long in seven months. The dollar was down 0.4% at JPY 97.83, having hit
a one-month low of JPY 97.53 earlier. The British pound hit a 9-month high of USD 1.6183 and 8-1/2 month high of 83.38 pence per euro. The
Australian dollar was down 0.1% at USD 0.9300, having earlier dipped to a two-week trough of USD 0.9280 after data showed factory activity
in its largest export market.
Currency Market Roundup
Financial Sector Prices
The spread of lending and deposit rate in August 2013 slept to 5.02%.
The weighted average call money rate in the inter-bank market rose to 8.25% in August, 2013 because of high credit demand ahead of
Eid festival.
Bangladesh Bank has changed repo and reverse repo rate at 7.25% and 5.25% respectively after a downward revision by 50 basis point
effective from 01 February, 2013.

22
Food prices in August 2013 were 1.9% below
its July value and 5.1% less than in August
2012. Last month s decline, the fourth in
a row, was driven by continued falls in the
international prices of cereals and oils, as
dairy, meat and sugar prices rose slightly.
Cereal prices were down 7.2% from July and
19% from August 2012. This steep decline
follows an already sizeable drop in July,
is consistent with expectations for strong
growth in world cereal production this year
and, especially, a sharp recovery in maize
supplies. While prices of wheat and rice were
down by 2 to 3%, the fall reached 14% in the
case of maize in spite of some late-month
gains on concerns over drought and heat
stress conditions in the United States.
Prices of oils and fats fell 3.0% below the
July value. This marked the third consecutive
monthlydecline.Theslideinpricescontinued
to be driven by palm oil, as ample inventories
in Southeast Asia kept prices under pressure.
Soy oil values first eased on abundant export
availabilities from Argentina and generally
good crop prospects for FY2013-14, only
to regain strength when the United States
lowered the forecast for its own forthcoming
soy harvest.
Prices of dairy products appreciated by
1.2% in August 2013. Prices increased for
the majority of all dairy products except
butter, as export supplies remain limited
in major trading countries. Furthermore,
with milk production declining seasonally
in the northern-hemisphere and the new
production season only just starting in
Oceania and South America, availabilities for
the remainder of 2013 are uncertain. This
has lent support to prices, as importers seek
to cover commitments for coming months.
Costs of meat also saw an slight increase
of 1.3%, reflected mainly by stronger prices
for swine meat. Conversely, poultry prices
registered a fourth consecutive monthly
decline, dropping by 1.3%, partly as a result
of lower feed costs.
Sugar prices were up 1.1% in August 2013.
The small rebound in sugar prices after three
months of consecutive declines was mostly
due to estimates showing that Brazil, the
world s largest sugar producer and exporter,
was using more sugarcane for ethanol
production at the expense of sugar. Overall,
sugar prices displayed large volatility during
the month, amid uncertainties regarding the
size of the anticipated production surplus in
the major producing areas.
Commodity Market Roundup
Steady Growth of Lubricant Market Driven by Power Plants
The lubricant market has been witnessing steady growth on the back of strong demand
from automotive and industrial sectors. The market is now worth BDT 24 bn, which was BDT
12 bn five years ago.
Annual domestic consumption now stands at around 100,000 tonnes, with the market
growing at almost 3% a year, which is on par with India but behind China. Lubricant
consumption by the industrial sector, especially by power plants, has increased significantly
in the last 2-3 years. The automotive sector accounts for 70% of total lubricant consumption
in Bangladesh and the industries the remaining 30%. Mobil is the market leader with its 30%
share, followed by British Petroleum at 11%, French brand total at 5% and Shell, Castrol and
Caltex with 2% each. Omera Fuels, a sister concern of MJL Bangladesh, has a 2% share as
well. The remaining 46% share of the market is held by over 70 brands. Cement, steel and
fertilizer industries also consume a good amount of lubricants.
Global food prices keep tumbling
International Commodity Prices
Commodity Unit Price Sep 28 2013 (USD/unit) Price Aug 29 2013 (USD/unit) Change +/(-)
Crude Oil Barrel 102.33 108.7 -5.86%
Gold Ounce 1326.5 1407.75 -5.77%
Silver Ounce 21.68 24.11 -10.08%
Nickel Tonne 14001 14132.5 -0.93%
Tin Tonne 23370 21575 8.32%
Lead Tonne 2102.8 2200.4 -4.44%
Aluminium Tonne 1834.2 1864.8 -1.64%
Zinc Tonne 1909.7 1952.8 -2.21%
Copper Tonne 7270.8 7252.5 0.25%
Source: LBMA; Worldal; WTRG.
Market share of Lubricant Brands (in %)
Source: MJL Bangladesh.

23
Markets
Index
Sept.
25th
% Change on year-on-year
One
Week
Dec 31st
, 2012
In local
currency
In USD
United States (DJIA) 15,273.3 -2.6 16.6 16.6
United States (S&P 500) 1,692.8 -1.9 18.7 18.7
United States (NAScomp) 3,761.1 -0.6 24.6 24.6
Japan (Nikkei 225) 14,620.5 0.8 40.6 23.2
China (SSEA) 2,301.2 0.3 -3.1 -1.4
Britain (FTSE 100) 6,551.5 -0.1 11.1 9.8
Canada (S&P TSX) 12,836.7 -0.7 3.2 -0.2
Germany (DAX) 8,665.6 0.3 13.8 16.6
Hong Kong (Hang Seng) 23,209.6 0.4 2.4 2.4
India ( BSE) 19,856.2 -0.5 2.2 -10.2
Pakistan (KSE) 23,060.9 0.6 36.4 25
Singapore (STI) 3,208.6 0.5 1.3 -1.3
Source: The Economist.
International Market Movement
International Economic Forecast
Year on year
percentage
change
GDP CPI
2012 2013 2014 2012 2013 2014
Global (PPP
Weight)
3.20% 3.00% 3.70% 3.90% 4.00% 4.10%
Advanced
Economies
1.20% 1.20% 2.20% 2.00% 1.40% 1.80%
Euro Zone -0.60% -0.20% 1.50% 2.50% 1.40% 1.50%
Developing
Economies
5.10% 4.70% 5.10% 5.90% 6.60% 6.30%
Forecast as of August 2013 1Aggregated using PPP weight
Source: Wells Fargo Securities, LLC
INTERNATIONAL
Microsoft to Buy Nokia’s Devices
Unit for USD 7.2 bn
Twitter to go for IPO
British car industry firing on all
cylinders
Microsoft Corp. is spending EUR 5.44 bn (USD 7.2 bn) to buy Nokia
handset unit so it can gain ground on Apple Inc. and Google, in a
smartphone market it let get away. Nokia s devices and services unit,
which accounted for half of the company s 2012 revenue, along with
32,000 employees, will transfer to Microsoft. Nokia CEO Stephen
Elop, 49, will return to Microsoft after a three-year stint running
the Finnish manufacturer. The move stoked speculation he may be
a successor to CEO Steve Ballmer, who said last month he d retire
within 12 months.
Microsoft is deepening a push into hardware as dwindling computer
sales sap demand for the programs that made it the world s largest
software maker. Nokia shares jumped as much as 48% in Helsinki as
the sale removes a money-losing handset business and lets it focus
on higher-margin networking gear. Even combined, the companies
have less than 4% of the smartphone market, leaving them far
behind Apple and Google.
Twitter has submitted papers for the most hotly anticipated stock
offering in the tech sector since Facebook s in 2012. The company
has confidentially submitted an S-1 to the SEC for a planned IPO.
Twitter s market value has been estimated around USD 10 bn based
on early venture capital investments, but the initial public offering
(IPO) is likely to bring a higher amount. According to private company
research firm PrivCo, Twitter s IPO is expected to be conservatively
priced at USD 15 bn, with about USD 500 mn in revenue. Twitter has
become one of the fastest-growing and most influential social media
services, used widely by celebrities, journalists, politicians and others.
Britain is accelerating away from its European competitors in the car-
making sector with investment flowing into the factories of Nissan
and Jaguar Land Rover as Chinese and American demand drives sales.
To note, Jaguar Land Rover has pumped GBP 1.5 bn (EUR 1.8 bn, USD
2.4 bn) into its plant in Solihull near Birmingham, creating 1,700 jobs
and giving a welcome fillip to industrial central England. In northeast
England, Nissan has been granted permission to extend its already
vast plant in Sunderland, securing jobs in an area where major
employers are in short supply. Analysts at ETX Capital have credited
the British government with reviving an industry that once looked
close to extinction. The UK decided in early 2013 to inject GBP 500
mn into the auto sector, precipitated by signs that UK auto-making
industry was fast becoming a dying sector as car factories produced
high volume motors by low-skilled manufacturing. However, the UK
government s initiatives to kick-start manufacturing activity may
result into transforming the country s auto making industry into one
of premium niche manufacturing.

24
Selected Economic & Financial Indicators
% change on year-on-year
Country
Global domestic product Consumer prices
Unemployment
rate, %
Current account balance Interest rates,
% 10-year gov t
bonds, latest
Latest qtr* 2013** latest 2013** rate, %
% of GDP
2013**
United States 1.6 2.5 1.6 1.5 1.5 7.3 -412.9 -2.7 2.62
China 7.5 7 7.5 2.6 2.6 4.1 211.6 2 3.94
Japan 1.2 3.8 1.8 0.7 0.1 3.8 51.5 1.2 0.68
Britain 1.3 2.7 1.3 2.7 2.7 7.7 -96.7 -2.7 2.77
Canada 1.4 1.7 1.7 1.1 1.4 7.1 -59.6 -3.1 2.58
France 0.3 1.9 -0.1 0.9 1.1 11 -49.4 -2.1 2.36
Germany 0.5 2.9 0.5 1.5 1.7 6.8 246.3 6.6 1.82
Russia 1.2 0 2.2 6.5 6.4 5.2 47.9 2.5 7.6
Hong Kong 3.3 3.2 2.9 4.5 4.1 3.3 5.8 2.4 2.18
India 4.4 -2 5 9.5 9.6 9.9 -87.8 -3.9 8.79
Singapore 3.8 15.5 2.3 2 2.4 2.1 49.9 18.3 2.35
Brazil 3.3 6 2 6.1 6.4 5.6 -80.6 -3.4 11.6
Mexico 1.5 -2.9 1.7 3.5 3.6 4.8 -22 -1.6 7.75
*% change on previous quarter, annual rate. Source: The Economist.
** The Economist poll or Economist Intelligent Unit estimate/forecast.
Global business barometer
Businesspeople have become more gloomy about future
business conditions, according to the latest Economist/FT global
business barometer, a quarterly survey of over 1,500 executives.
Overall, the balance of those who think global business
conditions will improve over those who think it will worsen fell
from +5.2 percentage points in the second quarter of this year,
to +2. Conﬁdence has deteriorated in all regions except Europe
(though 83% there reckon the euro-area crisis is not over).
Latin America and Asia had the sharpest falls, and sentiment is
once again negative. North American bosses used to be fairly
optimistic, but their sentiment has turned negative.
Insight Analysis
A developed nation is
a prosperous nation.
At IDLC, we help you
contribute to this
process.
We are in the business
of financing happiness.

25
MONTH IN REARVIEW
Business-firm Specific
Accenture, a global management consulting, technology
services and outsourcing company, has completed all the
formalities to take over 51% stakes in Grameenphone s IT wing
GPIT. As of September 2013, the firm is responsible for GPIT s
management. Although Accenture has taken the charge of
management from this month, there will be no major change
within the board right now. Grameenphone would continue to
hold the remaining 49% stake in GPIT.
Mastercard, an American multinational financial services
corporation, looks to strengthen its footprint in Bangladesh
through a modern electronic payment system. According to
Mastercard for South Asia, Bangladesh is a terrific market for
the electronic payment industry. Mastercard is set to open its
first country office in Bangladesh in November and wants to
offer innovative payment services, spearheaded by the mobile
phone. Bangladesh has around 1.2 mn credit cards and 1.7 mn
debit cards, while mobile subscription is more than 100 mn.
According to Mastrcard for Asia, the convergence of mobile
and card devices, therefore, is inevitable and the full-fledged
arrival of 3G services would accelerate the process.
Mobile operator Airtel Bangladesh will invest up to USD 50 mn
in the next three years to roll out its 3G network. The operator
has recently signed an agreement with Chinese telecom
vendor Huawei to install 3G equipment. The company has
already invested USD 125 mn for 3G spectrum purchase and to
pay other relevant charges including VAT. According to Airtel,
the telecom company has already covered 80% population
and around 75% area of the country. Airtel has developed 3G
network in around 15 countries, including India, Sri Lanka and
some African countries.
Appollo Ispat Complex is bringing in an environment-friendly
technologytoproducelead-andacid-freecorrugatedironsheet
from next year. The non-oxidising furnace (NOF) technology of
Germany will also help increase the CI sheet maker s efficiency
and reduce cost of production. The new technology, in addition
to the existing continuous galvanising process, will be applied
to an extension, construction of which is going on in the 17-
acre factory area at Shimrail in Narayanganj. Once the new
technology is introduced, hot roll (HR) coil ̶ the raw material
for cold roll (CR) coil ̶ will be cleaned through heat, instead
of caustic soda and acid. Appollo Ispat now imports HR coil,
mainly from Japan, and transforms those into CR coil, the raw
material for CI sheet. Appollo Ispat has recently got a go-ahead
from the stockmarket regulator to raise BDT 22 bn by issuing
1.0 bn ordinary shares of BDT 10 each, in addition to BDT 12 as
premium per share. From the IPO proceeds, they plan to spend
around BDT 15.3 bn on loan repayment, BDT 6.0 bn for the NOF
project and the rest to bear the IPO expenses.
Transcom Mobile Ltd has launched an e-store, an online
marketplace through which consumers can now purchase
Samsung smartphones. The devices will also be sold in
installments through the online store, the first ever initiative
taken by Transcom, the distribution partner for Samsung
mobiles. Anyone can purchase Samsung smartphones by local
or international card such as Visa, Mastercard, DBBL Nexus card,
DBBL Mobile Wallet, Q-cash and bKash Mobile Wallet through
the e-store. The delivery for orders within Dhaka is free and
takes three business days.
VLCC, an Indian wellness brand, is set to open its first
manufacturing plant in Bangladesh in a bid to grab the
country s growing beauty market. VLCC has already established
a factory̶its first in South Asia̶outside India, at the BSCIC
Industrial Area in Jamalpur with an investment of about BDT 6.1
bn. The company plans to manufacture skincare, hair-care and
sun-protection products in the factory. At present, the country s
beauty market is said to be worth BDT 65.5 bn, which is almost
three times its value in 2008.

26
IDLC SME Accredits its Heroes
IDLC Finance Holds Workshop on Anti-Money Laundering & Anti-Terrorism
Regulations
IDLC NEWS
SME Sales Conference 2013 was held at the Celebration & Grand Summit Hall of Dhaka Regency Hotel on September 20, 2013 to recognize and
reward the remarkable individual and collective performances of IDLC SME team. The sales conference was the platform where efforts and
attainments of the SME team were showcased, best of the best performers were awarded and success recipes of various teams were shared.
Above and beyond, this was the time when all the colleagues of all the teams of SME got together under a single roof and celebrated the
success that the team had achieved in the preceding year.
The CEO and Managing Director of IDLC Finance Limited, Mr. Selim R. F. Hussain was present at the ceremony as the Chief Guest and Mr. Zahid
Ibne Hai ‒ General Manager and Head of SME along with the Management Committee members were among the special guests. The CEO &
Managing Director, while recognizing the SME Team as a champion team of IDLC, underscored that this momentum of soaring performance
be preserved and further accelerated. Great food and fun set the buoyant mood for this gala event that ended the show celebrating the Spirit
of Togetherness and Passion.
IDLC Signs a MoU with Grameenphone on Vehicle Tracking System Services
IDLC Finance Limited has recently signed
a Memorandum of Understanding (MoU)
with Country s Largest Telecom Operator
Grameenphone Ltd. on Vehicle Tracking
Systems. Mr. Irteza A. Khan, Head of
Consumer Division, IDLC Finance Limited
and Mr. Ferdous Alam Khan, Head of
Business Market, Grameenphone Limited
signed the MoU on behalf of respective
organizations. Senior Officials from both
companies were also present during the
MoU signing event.
In order to offer Value Added Services to
its customers, IDLC Consumer Division
always looks for effective initiatives. As a
part of those initiatives, IDLC is now proud to be associated with Grameenphone Limited for offering the best possible VTS services in the
country with attractive features. Under this partnership agreement, all customers & employees of IDLC Group will avail the VTS services from
Grameenphone at a special price.

27
After successful completion of CD CHAMPS-2013 , the largest sales campaign of IDLC Consumer Division, a Grand Award Distribution
Ceremony was held at All Community Club, Gulshan on September 7, 2013.
The purpose of the event was to honor the winners for their outstanding contributions to Business during the campaign period (Jan ‒
Jul 2013) and to celebrate the success of the Campaign. Mr. Ziaul Hoque Khan, DMD & CFO, IDLC Finance Limited presented the awards
among the winners. The New Sales Campaign Mission Invincible was launched simultaneously in the same event.
“CD CHAMPS-2013” Award Distribution Ceremony & Launching of
New Campaign
IDLC Finance Holds Workshop on Anti-Money Laundering & Anti-Terrorism
Regulations
IDLC Finance Limited, the largest multi-product Non-Banking
Financial Institution in Bangladesh, recently organized a day-long
workshop on Anti-Money Laundering & Anti-Terrorism Regulations
for its employees.
Branch managers, mid level executives and IDLC s capital market
units participated in the workshop, which was inaugurated by
M. Mahfuzur Rahman, Executive Director, Bangladesh Bank. The
workshop was conducted by Mohammad Mahbub Alam, Joint
Director, Bangladesh Financial Intelligence Unit and Md. Masud
Rana, Deputy Director, Bangladesh Financial Intelligence Unit,
Bangladesh Bank. The workshop educated the audience regarding
the Money Laundering Prevention Act, the Anti Terrorism Act,
consequences of non-compliance, provided guidance on how to
prevent and detect money laundering and terror financing etc.
Selim R.F. Hussain, CEO & Managing Director of IDLC Finance
Limited, said, IDLC has always been a standard-bearer for statutory
compliance in the financial industry and we intend to ensure
that this reputation remains untarnished. He also addressed AML
compliance framework at IDLC, importance of KYC (Know Your
Customer) and KYE (Know Your Employee) etc. M. Mahfuzur
Rahman, Executive Director, Bangladesh Bank, congratulated IDLC
for taking this initiative and emphasized all out support from the
central bank in helping to educate staff in the financial sector in
these new concepts.
Selim R. F. Hussain, CEO & Managing Director of IDLC Finance Limited and M. Mahfuzur Rahman, Executive Director, Bangladesh Bank, in the
workshop on Anti-Money Laundering & Anti-Terrorism Regulations organized by the IDLC Finance for its employees.

28
Advance/Decline (September, 2013)
Advanced Declined Unchanged
All Category 100 151 6
Top Ten Gainers List (September, 2013)
Top Ten Gainers 30-Sep-13 29-Aug-13 % Change
RAHIMAFOOD 55.70 16.80 232%
LEGACYFOOT 44.60 14.60 205%
DSHGARME 76.90 30.20 155%
HAKKANIPUL 35.10 17.60 99%
JMISMDL 259.30 134.00 94%
BDAUTOCA 45.30 23.80 90%
ANWARGALV 27.50 15.80 74%
ISNLTD 21.40 13.40 60%
IMAMBUTTON 11.10 7.30 52%
LIBRAINFU 529.80 379.80 39%
Index Movement (September, 2013)
Index Point Change % Change YTD change
DSEX 3,937.68 -189.80 -4.60% -2.91%
DS30 1,440.53 -99.50 -6.46% -1.35%
Monthly Market Statistics
Market Statistics (September, 2013)
Unit 30-Sep-13 29-Aug-13 % Change
Mcap (All)
Mn BDT 2,529,249 2,640,739 -4.22%
Mn USD 32,077 33,491 -4.22%
Mcap (Equity)
Mn BDT 1,938,412 2,049,261 -5.41%
Mn USD 24,584 25,989 -5.41%
Turnover
Mn BDT 2,720 5,407 -49.70%
Mn USD 34.50 68.58 -49.70%
Top Ten Losers List (September, 2013)
Top Ten Losers 30-Sep-13 29-Aug-13 % Change
MEGHNACEM 133.80 171.70 -22%
BSCCL* 215.60 275.70 -22%
FAREASTLIF 92.40 115.50 -20%
GPHISPAT 41.00 51.20 -20%
7THICB 66.00 81.10 -19%
SUNLIFEINS 52.30 64.10 -18%
RECKITTBEN 799.00 928.90 -14%
RENATA 703.20 805.80 -13%
KEYACOSMET* 23.30 26.30 -11%
GHCL 45.10 50.90 -11%
*% change includes post record date effects.
CAPITAL MARKET REVIEW
With the fear of potential turmoil in political frontier amid stronger
volatile market phenomenon ahead of long closure of Eid-Ul-Adha, the
bourse observed gradual wane in excitement. Profit taking tendency,
especially naturalizing quick return gained stronger momentum this
month, resulting a downward pressure both in indexes and turnover.
As month ended, DSEX lost 189.80 points and levelled at 3,937.68
points after breaking one & half months psychological level of 4,000
points. In the meantime, turnover went below BDT 3,000 mn level and
streamlined at months lowest point of BDT 2,719.95 mn. However, as
long closure due to Eid-Ul-Adha was approaching, tendency to cash
out was strongly observed amid investors.
Previous month s declining vibe stretched this month also. Although,
month started with green signal, it could not hold more than single
session and sheds off started with the news of decline in foreign
investment in national dailies. Meanwhile, volatile market scenario
backed by surge in scrip wise swings and shadow in future market
directions insisted investors to realize short-term but higher return
of Mini Cap and Micro Cap scrips throughout the months. Those
combinely forced investors confidence to dwindle gradually amid
downbeat market scenario and focus on frequent selling spree.
Continuous pressure from foreign diplomats on political parties to
ease up political frontier knocked investors sentiment positively
and acted as a core catalyst for sudden hype at the mid- session of
month. Additionally, news of High Court s repeal of postpone order
on RNSPIN s dividend declaration attracted some of the participants
to it and thus made a spike in Textile sector s turnover to capture one-
forth part of total turnover and leading position in return. As investors
continued to stay watchful over ongoing developments, session
repeated the trend of starting with hype but eventually slowing down.
However, a natural re-bounce with the surge of 45.96 points took
place at the mid part of month. Meanwhile FAREASTFIN made 90%
gain in its debut trading. But trading halts of certain stocks, unrest in
RMG sector and fear of potential turmoil dragged down this upbeat
vibe and kept bourse flat for next few sessions. Then, market started
to take toll with 178.49 points at six negative sessions out of last eight
sessions. Consequently, DSEX broke psychological level of 4,000
points at the second last session of the month and turnover broke 33
sessions record and went below BDT 3,000 mn level.
Corporate activities increased during the month. BSEC decided
to delist 1STBSRS managed by BDBL and delisted ICBAMCL1MF
managed by ICB AMCL and approved for converting it from close-
end to open-end mutual fund. Additionally, it gave notch to
Mozaffar Hossain Spinning Mills Ltd. for Initial Public Offering (IPO).
Meanwhile, the regulator approved Guideline for Market Surveillance
System. At the ending part of month, BSEC approved so far expected
Demutualization Scheme. Alongside these, it ordered DSE to submit
investigation report on some Small Cap scrips regarding abnormal
price increase within 15 days.

Monthly Business Review - September 2013

Monthly Business Review - September 2013

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