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MTBiz May-June 2014


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MTBiz is for you if you are looking for contemporary information on business, economy and especially on banking industry of Bangladesh. You would also find periodical information on Global Economy and Commodity Markets.

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MTBiz May-June 2014

  1. 1. Volume: 05 | Issue: 05 | May-June 2014 MTBiz 1 Disclaimer: MTBiz is printed for non-commercial & selected individual-level distribu on in order to sharing informa on among stakeholders only. MTB takes no responsibility for any individual investment decision based on the informa on at MTBiz. This review is for informa on purpose only and the comments and forecasts are intended to be of general nature and are current as of the date of publica on. Informa on is obtained from secondary sources which are assumed to be reliable but their accuracy cannot be guaranteed. The names of other companies, products and services are the proper es of their respec ve owners and are protected by copyright, trademark and other intellectual property laws. Contents THE MOBILE ECONOMY 2020: 5% OF WORLD GDP Ar cle of the Month page 02 Developed and Published by MTB Group R&D Please Send Feedback to: All Rights Reserved @ 2014 Design & Prin ng Preview MTBiz Ar cle of the Month 02 Na onal News BB Regula ons 06 Banking Industry 07 Business and Economy 09 MTB News & Events 12 Capital Markets 14 Industry Appointments 15 Interna onal News Business and Economy 17 Commodity Market 22 Economic Outlook 23 Economic Forecast 24
  2. 2. Volume: 05 | Issue: 05 | May-June 2014MTBiz2 The mobile industry is con nuing to see rapid growth in connec ons, subscribers and data traffic, and is playing a pivotal role in unlocking socio-economic progress across the world. Many industry sectors are increasingly digi zing and mobilizing their products and services, reducing costs and providing compelling new experiences for consumers. More advanced devices (such as smartphones and tablets) opera ng on increasingly ubiquitous mobile broadband networks are allowing users to adopt an ever growing range of new services and applica ons, which in turn is driving an explosion in mobile data traffic. These transforma ons and new services have been made possible thanks to the significant investments that mobile operators have been making to deliver the sustained growth and ubiquity of mobile broadband connec vity. Global market overview The mobile industry has scaled drama cally over the last decade. At the end of 2003, there were a li le over one billion unique subscribers globally, equivalent to just under one in six people. By the end of 2013 this figure had increased more than threefold to 3.4 billion, equivalent to a unique subscriber penetra on rate of 47%. By 2020, the majority of the world’s popula on (56%) is expected to have their own mobile subscrip on. Mul -SIM ownership means that at the end of 2013 there was a total of 6.9 billion SIM connec ons, with an average of 1.8 ac veSIMcardsperunique subscriber. The developed market average unique subscriber penetra on figure is now 79%, which is around the “demographic ceiling” at which subscriber growth tends to stall (with many developed countries already above this level). In contrast, unique subscriber penetra on on average in developing markets is only 41%. This highlights the growth poten al for mobile services in developing regions, with only four out of ten people in these countries having subscribed to mobile services. However, there are also challenges in many of these developing markets, with incremental subscribers typically genera ng low average revenues per user (“ARPUs”) and coming increasingly from rural or remote areas, raising issues for operators about how to bring services to these lower income popula ons on a cost effec ve basis. Mul ple SIM ownership is a feature of many markets across the world, in both developed and developing regions, driving a substan al differen al between unique subscribers and SIM connec ons in many markets. Global SIM penetra on now stands at 95%, and the figure is already over 124% on average in developed markets. We are now seeing a slowdown in the growth rate of connec ons across all regions of the globe, linked to slower subscriber penetra on growth. SIM connec ons have grown globally at a Compound Annual Growth Rate (CAGR) of 11.3% p.a. in the five years since 2008, but are now forecast to grow at a rate of 4.2% per annum for the period out to 2020, less than half of the previous growth rate. This will take the global penetra on rate by 2020 to 119%, with connec on penetra on passing through the 100% level before the end of 2014. The total number of connec ons will grow by almost another 2.3 billion by 2020: much of this growth in new connec ons will come from developing markets; adding 2.1 billion connec ons over the next seven years. ARTICLE OF THE MONTH THE MOBILE ECONOMY 2020: 5% OF WORLD GDP GDP 2013 Mobile Industry Impact US$2.4tn Mobile ecosystem directly contributed around 1.3% of global GDP in 2013 US$ 870bnMobile operators around 1% Handset manufacturers around 0.1% Distributers/ retailers around 0.1% Infrastructure and support services around 0.1% $$ 3.6%GLOBAL GDP 2013 Mobile Industry estimated to contribute around 5.1% of global GDP in 2020 2020 5.1%5.1% Global Mobile Connections (m, excluding M2M) SUB-SAHARAN AFRICA NORTH AMERICA MIDDLE EAST AND NORTH AFRICA LATIN AMERICA EUROPE COMMONWEALTH OF INDEPENDENT ASIA PACIFIC 20092008 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 4,039 4,665 5,369 6,029 6,465 6,886 7,385 7,800 8,153 8,457 8,723 8,960 9,179 CAGR 2008-2013 CAGR 2013-2017 5.1% Global SIM Connections Mobile Broadband Growth 6.9bn 9.2bn 3.4bn3.4bn 2.2b2.2b CAGRGR 3.5%CAGRGR Note: excludes M2M CONNECTIONS 2013 5.9b5.9b CONNECTIONS 2020 Unique Subscribers 2013 4.3bn4.3bn 2020 2013-2020 56% 47% 2020 2013 of the people on the planet LTE Networks 256 networks In 97 Countries 2017 >500 networks In 128 Countries 20132013 2013 20202020 4.2% 15%CAGR
  3. 3. Volume: 05 | Issue: 05 | May-June 2014 MTBiz 3 Global mobile industry : Market segmenta on The industry comprises four major segments. The Discoverer segment includes markets mainly in Africa and Southern Asia, where unique subscriber penetra on s ll stands on average at only a third of the popula on. Unique subscriber growth in recent years has been very strong, with this segment showing the highest growth rate of any segment at 15% over the last five years. However, with only one in three people having subscribed to a mobile service, there is clearly significant growth to come. The Fast Grower segment includes the major emerging markets of China, Brazil, Russia and South Africa (markets that together already accounted for a quarter of the world’s total subscribers at the end of 2013), as well as a number of other Eastern European, La n American and Asian countries. Unique subscriber penetra on growth among this segment has advanced at a steady pace over the last 10 years, reaching half of the popula on in 2013. Connected players segment includes many markets in the throes of recession, or with very minimal GDP growth, such as those found in Europe. Mobile revenues for this segment have con nued to decline over the last four years, with revenue declines forecast to con nue albeit at a more modest rate. Unique subscriber penetra on levels for the Connected Player segment are among the highest in the world, reaching 80% in 2009, with very limited growth since then. The Digital Pioneer segment includes the most advanced telecom markets in the world, including those in Northern America, Eastern Asia and the Nordics. In contrast to the Connected Players segment, mobile revenue growth for this segment has remained in posi ve territory over the last four years. While unique subscriber penetra on rates for the segment are approaching the 80% threshold, this does not appear to be impac ng revenue growth in the same way as in the Connected Player segment. Mobile broadband and smartphone uptake Investment by operators in deploying higher speed networkshasdrivenstrong growth in the number of mobile broadband (“MBB”) connec ons over recent years, from just over 200 million in 2008 to well over two billion by 2013 (excluding M2M connec ons). Mobile broadband is device agnos c and covers a range of technologies including CDMA 2000; EV-DO; WCDMA HSPA; TD SCDMA; WiMAX and LTE. Growth should remain strong in the future, with almost 4 billion MBB connec ons forecast to be added in the period out to 2020. HSPA allows operators to offer download speeds of over 14MBps, and HSPA+ offers significantly higher speeds. A rac vely priced proposi ons (and device subsidies) in many countries mean that mobile broadband offers consumers a viable subs tute for a fixed broadband connec on, especially in those markets where fixed broadband penetra on is rela vely low or where fixed broadband networks have not been fully upgraded to offer higher data speeds. Operators have also encouraged adop on at the lower end of the market for price-conscious consumers, by offering tailored data plans that trend towards prepaid tariff structures. The growth in mobile broadband connec ons in many regions of the globe is being driven by rising smartphone penetra on. According to data from Ericsson, around 55% of all mobile phones sold in the second quarter of 2013 were smartphones, compared to 50% in the first quarter and only 30% in 2012 as a whole. By the end of 2013, there were just under 1.5 billion smartphones in use, of which almost half were in Asia Pacific. Going forward, new smartphone connec ons will largely come from the Asia-Pacific region, with just under 900 million new smartphones expected in the region in the period out to 2017. Mobile ecosystem and its contribu on to global GDP The mobile ecosystem makes a significant direct contribu on to GDP as an industry in its own right, whilst there is also indirect impact of the mobile industry on the wider economy, both through raising produc vity for “highly mobile” workers as well as in more informal areas such as small-holding based agriculture ARTICLE OF THE MONTH MBB connections 215 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 364 624 1,030 1,530 2,163 2,774 3,332 3,886 4,435 4,964 5,465 5,934 (m, ex M2M) CAGR 2008-2013 CAGR 2013-2020 Connection Type 2G 3G 2008 2020 2020 2020 3622m 2008 416m 4G 2008 1m Note: excludes M2M 3,163m 3,898kbps US$ US$ US$ US$ US$ 1.2th 205bn 1.4th 576bn 2.9tn 3,732m 2,284m 2013 2020 2013 2020 2020 2013 Global Connection Speed Revenues 189 kbps2010 2017 OPERATOR REVENUES TOTAL ECOSYSTEM REVENUES Annual revenue growth 16% APPS, CONTENT AND ADVERTISING US$ 2tn Smartphones Installed Base 2017 2013 2,890m 1,457m 237m 2008 (Source strategy Analytics) 54%CAGR
  4. 4. Volume: 05 | Issue: 05 | May-June 2014MTBiz4 ARTICLE OF THE MONTH and fisheries services in developing markets. In 2013 the total contribu on from the mobile industry was equivalent to 3.6% of global GDP, while the mobile ecosystem directly supported 10.5 million jobs and contributed USD 336 billion to public funding (even before considering regulatory and spectrum fees). Mobile has empowered previously disenfranchised communi es, bridging the digital divide by bringing voice services and Internet access to the previously unconnected. Empowerment through financial inclusion Access to financial services through mobile can help low-income households manage day-to-day risks and provide a safety net to insulate them from financial shocks (e.g. a death in the family, illness, job loss, or natural disasters). However, an es mated 2.5 billion people in lower and middle-income countries are unbanked. The mobile technology opens up a wide window for these unbanked people to grow under the banking umbrella and thus accelerate the pace of financial inclusion which eventually comes up with financial growth and empowerment. Ensuring a healthy and prosperous digital future The GSMA has iden fied four key growth areas that present both significant opportuni es and benefits for consumers. These areas also provide clear opportuni es for mobile operators to collaborate and, in doing so, play an ac ve role in delivering them. Delivering the digital future will require a more collabora ve approach between mobile operators and other ecosystem players. A new focus on collabora on will bring greater scale to operator ac vi es in the global race to meet the needs of the customer in the future. The world of 2020 will offer a range of life enhancing services powered by a vibrant mobile ecosystem that connects the physical and digital worlds. The benefits of mobility will spread beyond communica ons to provide drama c improvements in sectors such as energy efficiency, security, health and educa on. Looking to the future, the world will con nue to see robust economic growth, but also a range of new challenges which society will endeavour to meet. As much as USD 48 trillion will have been added to the global economy as the world’s popula on hits 7.7 billion and average GDP per capita jumps a staggering 50%. Emerging markets will con nue to grow in importance, with 45% of GDP now generated from urban areas. This will create a new wave of middle class consump on. At a global level one in six people will be over 60, which will have a drama c impact on core public services such as health-care at a me when there are likely to be ongoing pressures on government spending. Innova on in technology presents the opportunity to address these pressing needs of society. The combina on of strong growth in the number of connected devices together with exponen al growth in average data consump on highlight the important role that connec vity will play in addressing these issues in 2020. When coupled with innova ons in big data analy cs, cloud compu ng and 3D prin ng the opportunity to connect the physical and the digital provides a unique pla orm to improve quality of life and produc vity. Transforming learning through mEduca on The tradi onal learning environment is rapidly being transformed by non-tradi onal mobile technology environments that will shape the future of educa on. mEduca on provides students, teachers, employees and all learners with the ability to learn anywhere, any me and on the move with educa onal content made available over mobile networks to devices such as tablets, smart phones and feature phones. mEduca on represents a powerful shi in the way educa on is delivered and received. It encompasses not only how learning is being delivered but enhances teaching & assessment plus educa onal administra on and management via mobile technologies. mEduca on is poised to become a USD 70 billion market by 2020. Connected car: Market to grow threefold within next five years The global connected car market will be worth 39 billion in 2018 up from 13 billion in 2012, according to new forecasts from research firm SBD and the GSMA. Over the next five years, there will be an almost sevenfold increase in the number of new cars equipped with factory-fi ed mobile connec vity designed to meet demand among regulators and consumers for safety and security features, as well as infotainment and naviga on services. The rapid development of the global connected car market will be driven in part by posi ve regional regulatory ac on in Europe, Russia and Brazil. Total mobile industry contribution to global GDP 2013 GDP impact (US$ Bn) 672 196 174 1325 2367 MOBILE OPERATORS MOBILE ECOSYSTEM RELATED INDUSTRIES GENERAL ECONOMY PRODUCTIVITY INCREASE TOTAL IMPACT 10% 0.3% 0.3% 2.0% 3.6% The world in 2020 (technology) BIG DATAANALYTICS CLOUD TECHNOLOGY Addressable amount of data for big data analytics 2013 2013 2020 2020 750EXABYTES 13,000EXABYTES 35% 75% 2013 2020 0% 5-20% US$ 200 - 400 billion worth relevant products could be 3D printable involving cost savings as well as added value from customisation Proportion of driverless or near driverless vehicles US$200Bnto US$ 400Bn
  5. 5. Volume: 05 | Issue: 05 | May-June 2014 MTBiz 5 ARTICLE OF THE MONTH mHealth: Transforming health care The mHealth Programme brings together the mobile industry and health care stakeholders to deliver sustainable mHealth solu ons that extend the reach and quality of healthcare while reducing costs. As demand for mobile technology accelerates and the various players develop and expand their mobile pla orms, the health care industry address a host of challenges related to cloud compu ng, social networks, big data analy cs and smart mobility. Innova on for connected living: Mobile enabled smart ci es Smart City makes extensive use of informa on and communica ons technologies, including mobile networks, to improvethequalityoflifeof its ci zens in a sustainable way. It combines and shares disparate data sets captured by intelligently-connected infrastructure, ci zens and vehicles, to generate new insights and provide ubiquitous services that enable people to access informa on about city services, move around easily, improve the efficiency of city opera ons, enhance security fuel economic ac vity and increase resilience to natural disasters. Empowering people and society The rapid spread of mobile technology has had a profound socio- economic impact on the economies of every country in the world. This impact is not only deep but broad, spanning many aspects of economic, poli cal and social life, making a striking contribu on to everything from cross-sector innova on to GDP growth. The mobile industry is a cornerstone of the global economy; this is evident both through the direct impact of mobile industry ecosystem, and through the indirect role that mobile technologies are playing in adjacent industry sectors. The mobile industry made a total contribu on of around 3.6% of global GDP in 2013. This includes a direct contribu on from the mobile ecosystem of USD 870 billion (1.3% of GDP), measured on the basis of “value add” (es mated as gross profit, or revenue less direct cost of sales). The mobile operators made the largest contribu on to this figure, equivalent to 1% of global GDP. Network 2020: Key pillar of the digital future Mobile networks will be at the heart of the all-IP mobile broadband era. They will serve an ever increasing volume of data, enabling a vast array of innova ve services. In order to be able to provide connec vity on a cost-effec ve and sustainable basis, mobile networks will need to be smarter, responsive, modular, flexible, scalable, adaptable and open. Driving digital inclusion in the developing world Mobile connec vity has transformed daily life across the globe, but mobile is playing a par cularly strong role in socio-economic development in many developing regions of the world. In some of the least developed regions, such as parts of Sub-Saharan Africa (“SSA”), there are much higher levels of mobile access compared to other basic services, such as electricity, sanita on and financial services. For example, in Nigeria there are 56 million people living without access to electricity, and 38 million without access to clean water. However, most of the popula on have the poten al to access health, banking and other essen al services through mobile networks (with network coverage for some operators at 90% of the popula on). Value of connec vity: Economic and social benefits As part of its global partnership,, Facebook commissioned a study to examine how extending internet access can change economies and socie es in developing countries and what benefits it would generate on a number of economic and social dimensions. The findings suggest that if developing countries could bridge the gap in internet penetra on to reach levels developed economies enjoy today, they would experience large increases in GDP growth and produc vity and improvements in health condi ons and educa on opportuni es. The study es mates that the resul ng economic ac vity could generate USD 2.2 trillion in addi onal GDP, a 72% increase in the GDP growth rate, and more than 140 million new jobs. Driving the digital dividend The most important new spectrum that has been allocated for mobile use in recent years is the Digital Dividend. This refers to the frequency bands made available for mobile broadband as terrestrial television broadcasters start to use their vast spectrum resources more efficiently – by adop ng digital radio transmissions. Digital Dividend bands are at rela vely low frequencies so have excellent coverage proper es, making them a crucial means of providing mobile broadband to rural areas in both developed and developing markets where fixed-broadband frequently fails to reach. This offers a unique opportunity to ensure that the economic and social benefits of broadband can be enjoyed by all. The first phase of this transi on is currently in progress with new 4G networks opera ng in the 800MHz band in many na ons in Europe, Africa and Middle East, and in the 700MHz band in the Americas and Asia Pacific. In 2015, a cri cal second phase should begin if the ITU gives final approval for the 700MHz band to be allocated to 4G services in Europe, Africa and the Middle East. This will provide vital addi onal mobile capacity in these regions as well as create a global 4G band which will help reduce the cost of mobile devices. However, emerging markets will only be able to benefit from 4G networks opera ng on Digital Dividend spectrum if consumers can afford the devices. This is why the GSMA is driving industry dialogue on how it can foster a new genera on of low-cost LTE devices which will open up the Internet to millions of new users.
  6. 6. Volume: 05 | Issue: 05 | May-June 2014MTBiz6 No me for leave! Dr. A ur Rahman, governor of Bangladesh Bank (BB), did not take any leave or day off from his du es as the chief of the country’s central bank in the past five years. The results out of his enduring and passionate endeavor have gone beyond the horizon of the country’s banking sector. Dr. Rahman was made the 10th governor on May 3, 2009. The first visible outcome of his set of new strategies was in the monetary policy that became more par cipatory than before. The average growth in the GDP in the past four years was 6.33% and it was expected that GDP growth would be above 6.0% at the end of this financial year. He made CSR and green banking rewarding for both the banks and the consumers that a racted a en on of central banks of different countries. Digi za on of banking sector including launching of online payment gateway, e-commerce, internet banking and mobile banking took the banking sectors towards the people’s doorsteps. Introduc on of Taka-10 account for farmers, garment workers, students and the recipients of benefits under the social safety- net programs also brought a huge popula on under banking network. The mul -level successes brought BB and the country some notable interna onal recogni ons including stable ra ngs from Moody’s and Standard and Poor’s when the JP Morgan puts the name of the country on the list of “Fron er Five” in the field of economic development. Goldman Sachs included Bangladesh in its “Next Eleven” list. BB gets sizeable responses from school banking Bangladesh Bank has introduced the school banking system as part of the bank’s efforts to spread financial inclusion across the country and encourage the students to develop a saving- habit from an early age. According to SK Sur Chowdhury, Deputy Governor of the Bank, school banking will create scope to acquaint the new genera on with banking opera ons and a saving-habit that will take financial inclusion into a new era in the country. According to the sta s cs available with the central state bank, 295,000 students have opened accounts under school banking in the country and the deposited amount stands at around BDT 300 crore ll December 2013. GDP growth to remain close to 6%: BB According to Bangladesh Bank analysis tled ‘Five Years of Changes and Transforma ons: Bangladesh Bank’, the country’s GDP growth is expected to remain close to 6% at the end of the current fiscal year (FY 2013-14) though the country witnessed 6.33% growth in the last four fiscal years (2010-2013) on average. The government has revised down fiscal 2013-14’s GDP growth target to 6.5% from 7.2%. The central bank analysis observed that the country’s overall economy remained comfortable in the last five years. Meanwhile, the first nine months of the current fiscal year witnessed a remi ance inflow of USD 10.49 billion. A paradigm shi in the policy regime of Bangladesh Bank: BB Governor Bangladesh Bank (BB) Governor Dr. A ur Rahman ar culated that the banking sector lent BDT 395 crore to 3,317 new women entrepreneurs in the last one year (2013), the number being 5% of the total new SME borrowers. He highlighted that half of our popula on are women and most of them are jobless. Unless we engage them in ac vi es where they have compe ve edge over others, we will be losing na onal output by underu lizing their skills and crea ve/innova ve ideas. BB governor emphasized that in the last five years, a paradigm shi has taken place in the policy regime of Bangladesh Bank, especially in the areas of SME and agriculture financing, which is somewhat unconven onal. Inclusiveness in all aspects of BB’s policy has been priori zed. Women entrepreneurship development is one of the important dimensions of that inclusive policy. BB to introduce rules on outsourcing by banks The central bank is going to introduce guidelines on outsourcing arrangements for the banks to avert risks and monitor compliance with regulatory requirements. Central bank wants to finalize the guidelines, to be introduced for the first me in Bangladesh, based on the opinions by the stakeholders. According to the dra guidelines, the banks should only outsource the ac vi es which can be effec vely supervised by them and compliance with legal and regulatory requirements can be monitored. The banks shall not, however, outsource core management func ons that require effec ve involvement of Board and senior management, including Internal Audit, Control, Compliance and Treasury func ons, ‘Know Your Customer exercise for deposit accounts, Credit evalua on and sanc oning. BB relaxes rules for enterprises in EPZs seeking foreign loan The central bank has relaxed foreign exchange regula ons allowing all industrial enterprises in export processing zones (EPZs) to borrow medium and long-term loan from overseas sources. Under the relaxed regula ons, industrial units in the EPZs will submit borrowing approval applica ons and related documents as per proforma of the Guidelines for Foreign Exchange Transac ons (GFET, 2009 edi on), through their nominated authorized dealer banks for onward referral via the Bangladesh Export Processing Zones Authority (BEPZA) to the Bangladesh Bank (BB). The borrowing proposals forwarded to the BB by the BEPZA will be scru nized at the Foreign Exchange Investment Department (FEID) of the central bank and disposed of with decisions at the governor’s level, according to an instruc on. The instruc on also said the decisions will be communicated simultaneously to the BEPZA, the applicant EPZ units, and their authorized dealers concerned. NATIONAL NEWS BB REGULATIONS
  7. 7. Volume: 05 | Issue: 05 | May-June 2014 MTBiz 7 Number of bank depositor booms to BDT 6.12 crore in 5 years The number of depositors with banks has soared by 63% to 6.12 crore in the last five years, according to Bangladesh Bank (BB) data, as it became main means of saving surplus incomes of middle-class people. BB data show that the number of depositors jumped to BDT 6.12 crore at the end of December 2013 from BDT 3.76 crore in January 2009. Total deposited amount with the banks stood at BDT 588933.20 crore at the end of February 2014. Central bank’s data for the year 2013 show that the yearly rise in deposits was slightly above 16% while the jump in the 2012 was at around 20% over the previous year. New private banks out of default loan danger According to Bangladesh Bank officials, the nine new commercial banks (South Bangla Agricultural and Commerce Bank Ltd., NBR Commercial Bank Ltd., Meghna Bank Ltd., Midland Bank Ltd., The Farmers Bank Ltd., NRB Bank Ltd., Modhumo Bank Ltd., NRB Global Bank Ltd. and Union Bank Ltd.) have no default loans during the October-December quarter of 2013 as their disbursed loans were li le as compared to other commercial banks. Default loans in banks rose by 1.52 percentage point or BDT 7,589 crore in the first quarter this year (2014), compared to the quarter that ended in December last year (2013). City Bank launches American Express®B2B Solu on City Bank has partnered with American Express to introduce the American Express B2B Expense Management Solu on, a unique end-to-end solu on that will help companies in Bangladesh reduce their cost of doing business. Rahimafrooz Distribu on Ltd. and Recki Benckiser Bangladesh Ltd. are the first in the market to implement this solu on with their distributor network. The American Express B2B Expense Management Solu on will reside on American Express’ Corporate Card Pla orm and will help streamline and simplify companies’ distribu on payment chain from paper based to electronic based. Once implemented, distributors adop ng the American Express B2B Expense Management Solu on will enjoy improved opera onal efficiency, as invoicing and payments will be electronically processed and will gain cost savings through an interest free credit period. Singer joins hands with Bank Asia to disburse remi ance Singer Bangladesh, an electronics and home appliances retailer, has partnered with Bank Asia and Western Union to provide money transfer services. With the help of Bank Asia, selected Singer outlets will distribute remi ances that will come in through Western Union, a global money transfer company. Money can be remi ed from more than 200 countries through Western Union and can be withdrawn from 371 Singer Mega and Singer Plus outlets across the country. Singer will make the payments on behalf of Bank Asia. Singer integrated its data system -- Singer Informa on System -- with Bank Asia and Western Union. Bank Asia will work as a se lement bank by being a principle agent of Western Union. FSIBL signs deal with Peninsula Hotel Chi agong First Security Islami Bank Limited (FSIBL) signed an agreement with The Peninsula Hotel Chi agong Limited recently. Azam Khan, Head of Marke ng and Development Division, FSIBL and Kamal Hossain Execu ve, Sales and Marke ng, the Peninsula Hotel Chi agong Limited signed the agreement on behalf of their respec ve sides. Under the agreement, employees of FSIBL will enjoy various privileges at The Peninsula Hotel Chi agong Limited. FSIBL Signs three Corporate Health Care Agreements First Security Islami Bank Limited (FSIBL) recently signed a Corporate Health Care agreement for FSIBL Employees with Shahabuddin Medical College Hospital, Dhaka, Na onal Hospital Cha agram Ltd. & Sigma Lab Ltd., Chi agong for medical services. Dhaka Bank Ltd. handed over of Memento of apprecia on to Square Toiletries Ltd. Mr. Niaz Habib Managing Director (MD) of Dhaka Bank Ltd., on behalf of the Board of Directors as well as the Management of Dhaka Bank Ltd., recently handed over a memento of apprecia on to the Mr. Anjan Chowdhury, Managing Director, Square Toiletries Ltd. Deputy Managing Director Mr. Emranul Huq and Head of Communica ons & Branding Division Mr. Khandaker Anwar Ehtesham of Dhaka Bank were present on the occasion. NBL Money Transfer branch opened in Malaysia The 8th branch of NBL Money Transfer was inaugurated at Melaka in Malaysia recently. Parveen Haque Sikder, Director and Chairperson, Execu ve Commi ee, Na onal Bank Limited inaugurated the branch as chief guest. A large number of Bangladeshi expatriates living in Malaysia also a ended the inaugural ceremony. UCBsignssyndicatedtermloanofUSD6.60millionwithSRLMarine A term sheet signing ceremony was executed between United Commercial Bank Limited (UCB) and SRL Marine Products Limited (SMPL) at the Corporate Head Office of UCB recently. UCB will act as Facility Arranger for raising the Syndicated Term Loan of USD 6.60 million in favor of SMPL in order to set up a 100% export oriented sea food processing plant at Ichanagar, Chi agong. NATIONAL NEWS BANKING INDUSTRY
  8. 8. Volume: 05 | Issue: 05 | May-June 2014MTBiz8 Rupali Bank wins ICMAB award The state-owned Rupali Bank Limited received Best Corporate Award-2013 for ensuring accountability and good governance. The Ins tute of Cost and Management Accountants of Bangladesh (ICMAB) announced Rupali Bank as best bank of the country a er evalua on annual statement of the financial ins tu ons in 2013. EBL Introduces Diners Club Interna onal Cards in Bangladesh Eastern Bank Ltd. (EBL) recently declared the launching of an exclusive range of cards in associa on with Diners Club Interna onal, a business unit of Discover Financial Services. EBL Diners Club cardholders would have direct and hassle-free access to the Diners Club Airport Lounge Program, which offers access to more than 500 lounges worldwide. In addi on, the cardholder would have complimentary access to the Sky Lounge facili es at Hazrat Shahjalal Interna onal Airport. UCB announced as the Best Emerging Market Bank in Asia Pacific One of the most pres gious business magazines in the world, ‘Global Finance’ hasrecentlypublishedtheirlistofawardees of the Best Banks in Asia Pacific for the year 2014. This list includes names of 30 banks from the Asia Pacific Region. The names of the banks have been selected through a strict survey. They have been announced based on their performances and their services provided to their customers. United Commercial Bank Limited of Bangladesh has been selected as one of the Best Emerging Market Banks by Global Finance, in the Asia Pacific Region. IFIC Bank signs mobile banking deal with a BEXIMCO company IFIC Bank Limited signed an agreement with a BEXIMCO company – Interna onal Knitwear and Appareals Limited – at the BEXIMCO Industrial Park at Kashimpur under Gazipur district for offering various mobile banking services. Under the agreement, workers and officials of the company will be able to enjoy various banking services including salary and wages disbursement by using mobile handsets. Bank Asia mobile financial service ‘Hello’ launched The Bank Asia has launched its mobile financial service ‘Hello’ aiming to bring huge number of unbanked popula on of the country under financial service network. The new ini a ve has a number of features including cash-in, cash-out, foreign remi ance payment, fund transfer, u lity bill payment, merchant payment, salary disbursement and tui on fee collec on. Bangladesh BancNet Ltd. will provide required system support and distribu on management services to the project. NRB Bank signs agreement with CRAB NRB Bank Ltd. and Credit Ra ng Agency of Bangladesh Ltd. (CRAB) signed an agreement at NRB Bank head office recently. Muklesur Rahman, Managing Director & CEO, NRB Bank and Hamidul Huq, Managing Director of Credit Ra ng Agency of Bangladesh Ltd., signed the deal on behalf of their respec ve organiza ons. Jamuna Bank, Progo Systems sign ‘SureCash Mobile Financial Services’ deal Jamuna Bank has signed Jamuna SureCash Mobile Financial Services agreement with Progo Systems Limited (PSL) at the bank head office. As per the agreement, Jamuna Bank has joined the SureCash mobile financial services network to deliver mobile banking and payment services to their customers under the Jamuna SureCash brand name. Using this service, a customer can open new account, deposit money or withdraw cash at any authorized SureCash agent. A customer may also send money to another customer, receive salary or pay bills from his account using his own phone without visi ng any bank branch. Standard Chartered Bank signs a deal with DuSai Hotel & Resorts Ltd. Standard Chartered Bank (SCB) signs a deal with DuSai Hotel & Resorts Ltd. recently. Under the deal, DuSai Resort will provide a range of exclusive benefits to Standard Chartered Bank employees, VISA Signature and VISA/ MasterCard Pla num credit or Priority Banking branded debit cardholders. BRAC Bank launches home loan for low, middle-income people outside Dhaka BRAC Bank has introduced an affordable home loan product ‘Nijer Bari’ for the low and middle-income group people outside Dhaka city. Sir Fazle Hasan Abed, Chairman, BRAC Bank Limited, formally launched the product at a programme recently at the bank’s headquarter in Dhaka by handing over the Loan Sanc on Le er to Suriya Begum, who is the first customer of Nijer Bari, BRAC Bank. NATIONAL NEWS BANKING INDUSTRY United Commercial Bank Ltd.
  9. 9. Volume: 05 | Issue: 05 | May-June 2014 MTBiz 9 BD an increasingly a rac ve FDI des na on: UNCTAD Dr. Mukhisa Kituyi, Secretary General of United Na ons Conference on Trade and Development(UNCTAD),iden fied Bangladesh as an increasingly a rac ve des na on for Foreign Direct Investment (FDI) in the sixth session of the Investment, Enterprise and Development Commission of UNCTAD held in Geneva recently. He emphasized that the Investment Policy Review (IPR) reflects the desire of Bangladesh to build a successful investment framework and policy environment that a racts not only foreign investors, but also promotes domes c private sector development. On the regulatory side, the IPR called for se ng out in a clear and transparent manner the condi ons for investment, enlarging the scope of the Foreign Private Investment Promo on and Protec on Act of 1980 (FPIPPA) and reconsidering the regulatory func ons of the Board of Investment. Bangladesh gets duty-free market access to 37 countries Presently, a total of 37 countries, including 27 member states of the European Union (EU), have been giving duty free market facili es for Bangladeshi products. According to the Ministry of Commerce, India has given duty and quota free market access to all Bangladeshi products except 25 tobacco and drug items under South Asian Free Trade Area (SAFTA) of the South Asian Associa on for Regional Coopera on (SAARC). Bangladeshi products that are ge ng duty free market access include readymade garments, knitwear items, frozen shrimp, ceramics, plas c products, leather and jute products, home tex les, bicycles and pharmaceu cals items. BDT 650 billion income tax collec on target likely for FY ‘15 The government is likely to fix a target of mobilizing BDT 650 billion as income tax for the next Fiscal Year (FY) 2014-15 by increasing the collec on of withholding tax and taking a few new tax measures. The target, if fixed, would be 35.41% higher than that of the current fiscal. The withholding tax, known as Advance Income Tax (AIT), currently contributes some 53% of the aggregate income tax collec on. It is likely to witness a substan al rise in the next fiscal through new measures. Income tax would cons tute some 44% of the aggregate tax collec on target for FY 2014-15 -- about BDT 1.49 trillion against the current BDT 1.25 trillion. Air condi oner, refrigerator see record sales as summer begins The country is experiencing a sweltering heat with the creeping up mercury mercilessly, promp ng the city dwellers to buy electronic home appliances such as air condi oner and refrigerator. Producers and importers say they are in pressure to supply the home appliances to meet the escala ng customers’ demand for the same as most of their stocks are coming to an end gradually. According to Execu ve Director of Walton Marke ng Department, sale of air condi oner of Walton increased by 38% in the last three months (February-April). He said last year (2013) Walton has sold out around 15,000 air condi oners and this year (2014) they set a target to sell 30,000-35000 air condi oners considering the rising demand. Structural reform needed to sustain global recovery: ICCB According to Interna onal Chamber of Commerce-Bangladesh (ICCB), the world gross product (WGP) forecasted to grow at a pace of 3.0% and 3.3% in 2014 and 2015 respec vely. It said the euro zone has finally come out of a protracted recession with gross domes c product star ng to grow again,theeconomyoftheUScon nues to recover and a few large emerging economies, including China seem to have stopped a further slowdown. Growth of world exports was projected to be 4.6% in 2014 and 5.1% in 2015. In addi on to macro-economic policies, the ICCB reported many countries, both developed and developing, have undertaken various ins tu onal reforms, including reforms in social security, income distribu on, financial sector, taxa on, energy, transporta on, educa on and healthcare. BDtogetduty-freeandquota-freeaccesstoChilemarketfromJan’15 According to Commerce Minister Mr. Tofail Ahmed, Bangladesh will sign a preferen al trade agreement (PTA) with Chile soon. Chile has decided to provide quota- free and duty-free market access for Bangladesh from 1st January 2015. Bangladesh is preparing a dra agreement to sign the PTA with Chile. He said Bangladesh is hopeful of retaining the Generalized System of Preferences (GSP) from the U.S., as many of the condi ons were fulfilled. The two countries have signed TICFA, which will help expand Bangladeshi products’ market there. ECNEC endorsed BDT 4.35 billion development projects The execu ve commi ee of the na onal economic council (ECNEC), in its 22nd mee ng of the current financial year (FY) 2013- 14, presided over by the Prime Minister Sheikh Hasina, endorsed the development projects at the Planning Commission office. The ECNEC recently gave its stamp of approval to four development projects at a combined cost of BDT 4.35 billion where BDT 3.17 billion funds will come from the government’s own exchequer and the rest BDT 996 million from the external sources. The ECNEC approved the Manikkhali Bridge on the Asashuni-Paikgacha road project at a cost of BDT 1.09 billion, Goalpara sub-sta on project at a cost of BDT 1.62 billion, development and expansion of the Chi agong Engineering and Technology University project at a cost of BDT 692.9 million and the ensuring employment for the poor at the northern region project at a cost of BDT 948.8 million. NATIONAL NEWS BUSINESS AND ECONOMY (Figure in Percentage) 100 80 60 40 20 0 1972-73 1980-81 Direct tax Indirect tax Projection 1990-91 2000-01 2010-11 2020-21 Direct & Indirect Tax Ratio 90.3 86.2 80 80.4 78.8 51 49 29.2 19.420 13.8 9.7 Source: NBR
  10. 10. Volume: 05 | Issue: 05 | May-June 2014MTBiz10 BDT 79,031 crore ADP for next fiscal The government has decided to allocate BDT 79,031 crore for the annual development program (ADP) in the financial year (FY) 2014–15, and priori se the communica ons sector in the ADP. The proposed size of the new ADP is 24% higher compared to the revised ADP of the current fiscal year, and 17% higher than the original ADP. The planning ministry has decided to allocate BDT 18,098 crore for the communica ons sector, including BDT 8,100 crore for the much-hyped Padma Mul purpose Bridge (PMB) project. Under the ADP alloca on, the Planning Commission has allo ed BDT. 6,852 crore for construc on of the PMB in the current fiscal. Of the total outlay of the ADP for FY 2014–15, BDT 51,331 crore (65%) will come from government funds and the rest BDT 27,700 crore will be arranged from project assistance. 23% of commercial loan goes to SMEs: CPD According to the survey conducted by Centre for Policy Dialogue (CPD), about 23% of the country’s total commercial loan, disbursed by the financial ins tu ons, in last year (2013) went to the Small and Medium Scale Enterprises (SMEs). Of the total SME loan por olio, only 3.2% loan was disbursed among the women entrepreneurs. Survey report ar culated that lack of knowledge and gathering informa on is one of the obstacles to credit access for women entrepreneurs which also consume an unusual span of me. It is also difficult for entrepreneurs belonging to lower middle class group to provide collaterals for sanc oning the loans. Most of the banks have women dedicated desk to promote Women entrepreneurs. Leather industry hits record exports According to data from the Export Promo on Bureau (EPB), the leather industry has crossed the record USD 1 billion mark in exports in the first ten months of this fiscal year (2013-14) on the back of compe ve pricing and quality improvement. Between July and April, the leather industry exported USD 1.06 billion of products, whereas the exports receipts for the whole of fiscal 2012-13 stood at USD 980.67 million. Leather goods exports, as EPB data shows, rose 70.14% to USD 197.36 million in the first ten months of this fiscal year, while it was 33.90% to USD 424.05 million in leather and 30.24% to USD 443.54 million in footwear. According to BB, between July and January, leather shipment rose 45.38% year-on-year in terms of value. NBR to recommend BDT 20 crore fee on foreign channels A commi ee of the Na onal Board Revenue (NBR) has decided to suggest the informa on ministry to impose a fee of BDT 20 crore on every foreign satellite channel for entering Bangladesh. NBR said that the commi ee led by revenue board member (income tax policy) recently made the decision in order to protect local culture from the aggression of foreign satellite channels and in a bid to ensure proper revenue collec on from the sector. The commi ee, consisted of representa ves of the revenue board and Associa on of Television Channel Owners of Bangladesh, also decided to recommend digi sa on of the channel distribu on system to ministries concerned to ensure collec on of value- added tax from the sector. Microcredit accounts for 33% of country’s total credit: Muhith Finance Minister AMA Muhith recently said that microcredit is one of the tools for poverty allevia on while healthcare and educa on should also be provided to the poor along with loan to li them from poverty level. He said microcredit was only 4% of the total volume of loan in 1986 before the establishment of Palli Karma-Sahayak Founda on (PKSF) which was provided by the Grameen Bank alone. Now the microcredit makes up 33% of the total loan and 5% of the microcredit is being disbursed among the women. Terming PKSF a ‘bank’ to the microcredit ins tu ons Muhith said that it has expanded microfinance to a large extent as it usually provides around BDT 3.5 billion credit through its 200 big and small micro lending ins tu ons. Banks, telcos seek access to na onal ID database Banks and telecom operators recently urged the government to immediately create an integrated pla orm enabling them to access the na onal iden ty database for checking the authen city of informa on. Mobile operators have to follow a similar process as banks when signing on new customers, so there is an urgent need to set up a common pla orm where the legi macy of informa on, photograph and na onal iden ty card (NID) can be verified. Provided the Elec on Commission changes the law and gives permission to the central bank, BB will open a portal to share NID data with private banks and non-banking financial ins tu on. In that case, BB will behave like a service provider and not a regulator. Raising exports to spur economic growth Bangladesh’s economy has achieved an average growth of 6.0% over the last five years primarily due to the healthy inflow of remi ance and rising exports. Both the exports and the remi ance flow from expatriate Bangladeshis have doubled over the last five years. NATIONAL NEWS BUSINESS AND ECONOMY Palli Karma-Sahayak Foundation(PKSF) cjøx Kg©-mnvqK dvD‡Ûkb 226.1 29.06 204.09 297.83 55.42 297.8 330.16 99.36 335.51 399.73 161.62 419.32 424.05 197.36 443.54 LEATHER INDUSTRY EXPORTS in millions of $ LEATHER FOOTWEARLEATHER PRODUCT FY10 FY11 FY12 FY13 FY14 (Jul-April)
  11. 11. Volume: 05 | Issue: 05 | May-June 2014 MTBiz 11 Bangladesh’s economy has progressed over the past five years despite various challenges like the global economic downturn and the country’s res ve poli cs marked by frequent strikes. The finance minister expects that the export income will increase in the coming days. According to him, the yearly export earnings will be USD 75 million within the next five years and will cross the target of USD 30.05 billion in the current fiscal year, 2013-14. Pay-roll tax from FY ‘16 to raise tax revenue: Muhith According to Finance Minister AMA Muhith, the government would consider imposi on of ‘pay-roll’ tax from the fiscal year (FY) 2015-16 to increase tax revenue collec on from the organized sector. The organized sector is now quite big with some 20 million employees that could contribute a significant amount of tax to the public exchequer. He implied that tax might be imposed on all of the organized sectors that have pay-rolls. It may not be introduced in next year (2015). However, it will start the process so that it can be introduced from the fiscal year 2015-16. Economy likely to rebound in FY ‘15 The Asian Development Bank (ADB) said, in its latest Bangladesh Economic Update, Bangladesh’s economic growth is expected to rebound to 6.2% in the coming fiscal year (2014-15), aided by higher remi ance and buoyant exports. The ADB said 6.2% growth is possible following a likely rise in consumer and investor confidence with the stabiliza on of poli cal situa on that would s mulate demand and strengthen growth momentum. The ADB said the agriculture growth accoun ng for 20% of the GDP is expected to rise to 3.0% in the FY 2014. It said the output of two crops -Aus and Aman - increased this fiscal year (2013-14) over that of the previous year (2012-13). The mul lateral lending agency suggested that Bangladesh needed to boost investment in infrastructure and skills development to raise the economy’s produc ve capacity and shi the economy to a 7.0-8.0% growth trajectory. Padma Bridge to receive BDT 81 billion in next budget for FY 2014-15 The Padma Bridge Project is likely to receive an alloca on of BDT 81 billion in the budget for the next fiscal (2014-15). The alloca on would include the en re USD 200 million or BDT 16 billion grant component of the Indian assistance worth USD 1.0 billion made available in 2010 for development of infrastructure in Bangladesh. The likely alloca on for the bridge project is BDT 60 billion higher than the alloca on made in the Revised Annual Development Program (RADP) of the current financial year (FY) 2013-14. In the original ADP for the current FY2013-14, the government had allocated BDT 68.52 billion for the project. Later, the alloca on was downsized to BDT 21 billion in the RADP due to non-u liza on of the allocated fund. NATIONAL NEWS BUSINESS AND ECONOMY
  12. 12. Volume: 05 | Issue: 05 | May-June 2014MTBiz12 MTB NEWS & EVENTS Date : Apr 12, 2014 Venue : Naogaon 6500 INAUGURATION OF ETTIHAD PLASTIC BAG INDUSTRIES LTD (FINANCED BY MTB SME LIGHT ENGINEERING) Mutual Trust Bank Ltd. (MTB) recently organized the Branch An -Money Laundering Compliance Officers’ (BAMLCO) Conference 2014 on An -Money Laundering (AML) and comba ng the Financing of Terrorism (CFT) at Bangladesh Academy for Rural Development (BARD), Comilla. Date : Apr 05, 2014 Venue : BARD, Comilla 3503 MTB BAMLCO CONFERENCE 2014 Mutual Trust Bank Ltd. (MTB) recently signed a Memorandum of Understanding (MoU) with Jamuna Resort Limited (JRL) at a simple ceremony held at MTB Corporate Head Office. Date : May 06, 2014 Venue : MTB Centre, Dhaka 1212 MTB SIGNS MoU WITH JAMUNA RESORT LTD
  13. 13. Volume: 05 | Issue: 05 | May-June 2014 MTBiz 13 MTB NEWS & EVENTS MTB SCHOOL BANKING CAMPAIGN 2014 Date : May 05, 2014 Venue : Mirpur, Dhaka 1216 Date : May 12, 2014 Venue : Dania, Dhaka 1236 Date : Apr 15, 2014 Venue : Mo jheel, Dhaka 1000 Date : May 09, 2014 Venue : Rangpur 5400 Date : Apr 12, 2014 Venue : Agrabad, Chi agong 4000 Date : May 03, 2014 Venue : Sylhet 3100
  14. 14. Volume: 05 | Issue: 05 | May-June 2014MTBiz14 BB, BSEC to work closely for capital market stability The central bank and the securi es regulator have decided to work closely for ensuring stability in the country’s capital market. The decision was taken recently at a mee ng of the senior officials of the Bangladesh Securi es and Exchange Commission (BSEC) held at the Bangladesh Bank (BB). According to the decision, the investment of banks in the capital market will be adjusted in line with the Banking Companies (Amended) Act 2013 without hampering the capital market growth. The mee ng also discussed different issues including the implementa on of rules and regula ons rela ng to share market exposures by the banks in line with the Banking Companies Act. Under the new provisions, the market value of the total investment of a banking company in the capital market on a consolidated basis will not exceed 50% of the sum of its consolidated paid-up capital, balance in share premium account, statutory reserve and retained earnings as stated in the latest audited financial statements. DSE plans to scrap lot-based trading system The Dhaka Stock Exchange plans to scrap the exis ng lot-based trading of shares by October 2014 in a bid to reduce investors’ hassle in trading odd-lot shares. Once the bourse scraps the lot-based trading system, the investors will be able to trade any amount of shares. When any company issues stock dividends, in most of the cases, shares of such stocks become odd lot and investors face difficulty to sell them. As per the exis ng process, investors are supposed to trade shares in lots. Lot differs from company to company as 10 shares of some companies make a lot while others make a lot in 50 shares. The DSE on March 21 signed an agreement with NASDAQ OMX, an American mul na onal financial services corpora on, for purchasing a matching engine and FlexTrade, a US-based mul na onal company, for order management system. ‘Z’ category companies on rise A company will have to recommend at least 10% dividend to exist in ‘A’ category. A company will exist in ‘B’ category if it declares the dividend which will be below 10% and above zero per cent. And a company will be shi ed to ‘Z’ category for not holding AGM (annual general mee ng) regularly or for not recommending any dividend or for not having con nuous opera on for more than six months. The number of ‘Z’ category companies con nued to rise in both the bourses as a good number of ‘A’ and ‘B’ category companies and newly listed ones have been placed to the poor performers’ group following their failure to recommend any dividends. Some companies have told that they have failed to recommend any dividend for the year ended on December 31, 2013 due to loss incurred in last quarter of that year (2013). According to data available on Dhaka Stock Exchange (DSE), 11 ‘A’ category companies were shi ed to ‘Z’ category group during the period of March 31, 2013 to May 4, 2014. Foreign investment in DSE jumps manifold in April Net foreign investment in the Dhaka stock market rose to a record BDT 572 crore by nearly six mes in April 2014 from the previous month, as overseas investors injected fresh funds into mul na onal companies. According to data from Dhaka Stock Exchange, foreign investors bought shares worth BDT 876.44 crore and sold shares worth BDT 304.35 crore in April. Lucra ve dividends declared by mul na onal companies encouraged the investors to park money in the securi es. Banks were ini ally the foreign investors’ preferred sector, but non- bank financial ins tu ons, power and energy, pharmaceu cals, mul na onals, telecoms and IT also caught their a en on. According to the DSE, during January-April period, foreign investors bought shares worth BDT 1,811.91 crore and sold shares worth BDT 743.45 crore to yield a net investment of BDT 1,068.46 crore. HC cancels 2% share rule for directors The High Court recently scrapped a provision imposed by the Securi es and Exchange Commission for sponsor- directors to individually hold at least 2% shares in listed companies. Hearing a pe on filed by a sponsor shareholder of NCC Bank, the HC said the provision has superseded Banking Companies Act 1940 that governs the banking sector. According to the pe oner’s counsel, the judgment is effec ve for all concerned, and there is no need for sponsor-directors to hold the minimum 2% shares of the paid- up capital of the listed companies. Jus ce Quazi Reza-Ul Hoque and Jus ce ABM Altaf Hossain passed the verdict a er hearing the writ pe on filed by a sponsor shareholder of NCC Bank. Coordinated regulatory regime a sine qua non The first priority of the chairman (CSE) of the demutualised stock exchange is to help bring transparency in capital market, help crea ng an enabling environment to restore and strengthen the confidence of investors at large and small and medium investors in par cular. According to the CSE chairman, the prevailing major crisis includes the lack of investors’ confidence coupled with ny or almost zeros investment by the banks. The CSE chairman has put light on ensuring corporate good governance inside management as well as inside the board of directors to ensure pro-ac ve regulatory compliance and enforcement for the sake of transparency and accountability in a demutualised stock exchange. He said the securi es regulator and both the bourses should work closely with ministry of commerce and ministry of finance as well to offload government shares in stock market. NATIONAL NEWS CAPITAL MARKETS NET FOREIGN INVESTMENT In crores of taka 572.09 278.37 121.04 Jan Feb Mar Apr 96.96
  15. 15. Volume: 05 | Issue: 05 | May-June 2014 MTBiz 15 Dhaka Bank reelects chairman Abdul Hai Sarker has been re-elected as chairman of Dhaka Bank Limited. Mr. Sarker accomplished his Post Gradua on Degree (M Com) from the University of Dhaka in 1970. Mr. Sarker is the former president of Bangladesh Tex le Mills Associa on (BTMA), former vice chairman of Bangladesh Associa on of Banks (BAB) and a former director of Federa on of Bangladesh Chamber of Commerce and Industries (FBCCI). He is the Founder Trustee of Independent University. UCB reelects chairman MA Hashem has recently been reelected as the chairman of United Commercial Bank. He is also the chairman of Partex Group, founder life member of NSU Trust and member of NSU Board of Trustees, member of IBAIS university trustee board and former member of the parliament. He is also an advisor of Janata Insurance Company Ltd and the founder of MA Hashem Degree College, kazirhat, Noakhali. New chairman of Jamuna Bank The Board of Directors of Jamuna Bank Limited in its 241st mee ng unanimously elected Shaheen Mahmud as the Chairman of the Board. Mr. Shaheen has set up a number of RMG, telecom and real estate business with related manufacturing units including backward linkages, under the umbrella of Co on Group of which he is the chairman. Mr. Shaheen is a successful exporter in the RMG sector of Bangladesh and earned confidence of global buyers and accolade from the Government of Bangladesh. New MD & CEO of NCC Bank Golam Hafiz Ahmed has been appointed as the Managing Director & CEO of NCC Bank Limited. Prior to this appointment, he was the Addi onal Managing Director and Ac ng Managing Director & CEO of the same Bank. Mr. Ahmed obtained his Masters and BSS (Hons) in Economics from the Department of Economics, University of Dhaka. He started his banking career as a Senior Officer with Pubali Bank Ltd. in 1983 through Banker’s Recruitment Commi ee (BRC), Bangladesh Bank. Mr. Ahmed has more than 31 years of banking experience. Na onal Bank gets independent director The Board of Directors of Na onal Bank Limited has appointed Md. Mahbubur Rahman Khan as an Independent Director. He was the Director of the same Bank for the period from September 2003 to October 2005. Mahbubur Rahman Khan has been engaged in Real Estate, Export-Import, Contractory business for last 30 years. At present he is the Managing Director of Himalay Trading Co. Ltd. and Hotel Raffels Inn. Mr. Rahman was the Chairman of the Faridpur Chamber of Commerce and at present he is a Director of Faridpur Chamber of Commerce. He was the President of Red Crescent Society, Faridpur Unit. He is a member of FBCCI and Regional Chairman of Lions Club. Md. Mahbubur Rahman has also been engaged in different social-cultural ac vi es. He is a freedom fighter. New DMD of Modhumo Bank Md. Touhidul Alam Khan has joined Modhumo Bank Limited as Deputy Managing Director. Prior to his new assignment, he was the Senior Execu ve Vice President and Head of Corporate Banking of Bank Asia Limited. Touhidul Alam Khan started his banking career as Senior Officer with Agrani Bank Limited in September 1993. In Agrani Bank, he achieved “Superior Achievement Cer ficate” for producing a superior level of achievement during working in Financial Sector Reform Project (FSRP). He completed hisMastersinFinancefromUniversityofDhaka.HeistheAssociate Member of Ins tute of Cost & Management Accountants of Bangladesh (ICMAB) and Associate Fellow Member of Ins tute of Islamic Banking and Insurance (IIBI), United Kingdom. Mr. Khan is a mul faceted management professional with 21 years of diversified experience in banking. New DMD of Mercan le Bank Ma ul Hasan has recently joined the Mercan le Bank Limited as Deputy Managing Director (DMD). Mr. Hasan started his career with IFIC Bank Limited in 1984 as proba onary officer. He was entrusted with many important assignments including manager of Principal Branch at Mo jheel. He also held the posi on of manager, Foreign Trade Division of IFIC overseas branch at Karachi and chief manager at Lahore Branch in Pakistan. Ma ul Hasan was the DMD of Nepal Bangladesh Bank Limited, a joint venture of IFIC Bank Limited in Nepal. Prior to joining the Mercan le Bank Limited, he was the DMD of IFIC Bank Limited. He a ended many seminars, workshops, training courses on banking and finance at home and abroad. He completed Diploma in Banking from ‘The Ins tute of Bankers’, Bangladesh and Associates of the Ins tute of Bankers in Pakistan. ICAB gets new secretary AKM Rahmat Ullah has joined the Ins tute of Chartered Accountants of Bangladesh (ICAB) as its secretary. Prior to the new appointment, he has been working as general manager for accounts and budge ng in Bangladesh Bank. He also served as financial management specialist (consultant) in the IDA Project, as a general manager of Social Development Founda on under the finance ministry and as a deputy director for audit in Bangladesh Open University. A fellow member of ICAB, he completed his masters in accoun ng from Dhaka University in 1981. NATIONAL NEWS INDUSTRY APPOINTMENTS
  16. 16. Volume: 05 | Issue: 05 | May-June 2014MTBiz16
  17. 17. Volume: 05 | Issue: 05 | May-June 2014 MTBiz 17 AT&T, DirecTV announce USD 49 billion merger AT&T announced recently that it was acquiring DirecTV in a USD 49 billion deal that would create a new telecom and television behemoth to rival cable firms — while raising fresh concerns about compe on and op ons for consumers. AT&T would gain DirecTV’s 20 million U.S. subscribers, a company with strong cash flows and an ability to fa en its bundle of offerings. The combined firm would be able to offer phone, high-speed Internet and pay- TV subscrip ons to more customers — packages that cable firms such as Comcast have sold most successfully. AT&T has agreed to acquire DirecTV for USD 95 a share, made up of USD 28.50 a share in cash and USD 66.50 a share in AT&T stock. AT&T says it expects to close the acquisi on within 12 months. The deal is the latest mega-merger to be announced this year (2014) in a drama cally shi ing telecommunica ons industry. The tans of the industry have recently rushed to bulk up — in overall size and in diversity of service offerings — as their legacy phone and TV businesses have frayed and consumers have turned to the Internet for communica on and entertainment. Unemployment rates below 6% in 25 U.S. states Unemployment rates fell in nearly all U.S. states in April 2014, and half the states now have rates below 6%. The figures are a sign of widespread, if slow, improvement in the na on’s job market. Unemployment rates fell in 43 states in April, the Labor Department, rose in two states and were unchanged in five. Hiring is picking up as well. Employers added jobs in 39 states, while 10 states posted job losses. Twenty-five states now have unemployment rates of 5.9% or lower. The Federal Reserve considers “full employment” to be between 5.2% and 5.6%. Rates at that level are considered “full employment” because if they fell lower, infla on could rise. The na onal rate fell to 3.9% in late 2000 without causing a spike in prices. Some larger states see improvement. Texas’ unemployment rate fell to 5.2% in April from 5.5 % in March. The unemployment rate in Pennsylvania, the na on’s sixth-largest state by popula on, declined to 5.7% from 6% as the state gained nearly 11,000 jobs. Ohio, the seventh- largest, saw a similar improvement. Its rate fell to 5.7% from 6.1%, with employers crea ng 12,600 new jobs. Fisker billionaire owner vows U.S. drive to take on Tesla: Cars The Chinese billionaire who bought Fisker Automo ve HoldingsInc.atabankruptcy auc on is planning to build a new slate of electric-drive cars in the U.S., challenging Tesla Motors Inc. on its home turf. Lu Guanqiu, the chairman and founder of China’s Wanxiang Group Corp., plans to manufacture electric cars in the U.S. and ul mately in China. Lu’s plan pits him against the likes of Elon Musk, the chief execu ve officer of Tesla, which has quickly added workers to churn out its USD 72,000 Model S. Each mogul aspires to move his company beyond the U.S. to sell lower-emission cars in China -- the world’s largest auto market, with some of the worst air pollu on. Britain’s economy returning to normal The Bank of England dampened expecta ons that interest rates in the U.K. will be raised imminently as Governor Mark Carney said the country’s economy has only begun heading back to normal. The Bri sh economy is s ll smaller than it was in 2008 following a deep recession brought on by the global financial crisis. According to Carney, as me has moved on and the recovery has been sustained, the economy has edged closer to the point at which bank rate will need gradually to rise. The exact ming will inevitably be the subject of considerable specula on and interest. Even when that’s achieved, Carney said borrowing rates will most likely rise only gradually. The bank’s benchmark interest rate stands at a record low level of 0.5%. It has stayed there for over five years. Carney resorted to a spor ng analogy to explain his logic, comparing the Bri sh economy to the interna onal soccer championship —the World Cup. Investment Banks’ fixed-income revenue drops 16% The 10 largest investment banks including Barclays Plc, Goldman Sachs Group Inc. and Deutsche Bank AG saw a 16% fall in fixed- income, currencies and commodi es revenue in the first quarter, according to analy cs firm Coali on. FICC revenue declined to USD 22 billion in the quarter from a year earlier, London-based Coali on. Equi es revenue sank 3% to USD 11.2 billion, while investment banking, including advisory, rose 4 percent to USD 9.7 billion. According to Coali on, tougher regulatory capital requirements and subdued client ac vity were the driving factors for weakness in FICC. This more than offset modest improvements in investment-banking divisions and resulted in an overall decline of revenue. Barclays, U.K.’s second-largest bank, said this month (April 2014) that income from FICC, tradi onally the largest source of revenue for its investment bank, fell 41% to 1.2 billion pounds (USD 2 billion) in the first quarter. Clients of securi es firms are trading less as the U.S. Federal Reserve slows its monthly asset purchases and leaves bond investors preparing for rising interest rates. Faster economic reforms needed: China According to the country’s top economic planning agency, China will try to quicken the pace of economic reform this year (2014) as part of the government’s efforts to arrest a slowdown in the world’s second-largest economy. The Na onal Development and Reform Commission (NDRC) reaffirmed nine reform priori es for 2014, including deepening reforms in the power and the oil and gas industries and cu ng red tape for investment approvals, according to a statement on its website ( China adopted last November (2013) a reform blueprint for the rest of the decade. So far Beijing has chosen a steady and gradual way to carry out the plan. The regulator said China will push forward price reforms for resource products and speed up urbaniza on- related reforms to allow more people to live in ci es. It reiterated it would speed up efforts on liberaliza on of interest rates and exchange rates and quicken reforms on property taxes and consump on taxes. INTERNATIONAL NEWS BUSINESS AND ECONOMY
  18. 18. Volume: 05 | Issue: 05 | May-June 2014MTBiz18 Wells Fargo sets up in Aberdeen as part of UK expansion Wells Fargo, the world’s biggest bank by market value, recently opened an office in Aberdeen to tap into oil industry business on Scotland’s east coast as part of its UK expansion. San Francisco- based Wells Fargo said the office has three people and is the latest step in a steady expansion in Europe, Middle East and Africa (EMEA), where it now has 930 people, up from about 600 at the start of 2012. Aberdeen has been one of the most buoyant areas in banking in the past two years, built on business with oil, gas and energy services firms based in the city. Wells’ office is led by Kendal Milne, a former Barclays (BARC.L) and DNB (DNB.OL) oil and gas banker. Wells Fargo is regarded as one of the winners from the financial crisis and last month reported record quarterly earnings and its highest ever share price. Its European expansion is mainly targe ng wholesale services for U.S. medium and large companies, and catering to European firms ac ve in the United States. Most of the expansion is in areas where it is strong in the United States, such as the energy industry and commercial real estate. HSBC reveals sliding profits Bank giant HSBC said that its net profit slid 18% in the first quarter as lower revenues offset cost-cu ng, but added that bad debt charges fell. Profit a er tax stood at USD 5.069 billion (3.64 billion euros) in the three months to the end of March 2014, compared with USD 6.211 billion in the first quarter of 2013. Revenue dropped 8.0% to USD 15.71 billion, while pre- tax profit was down 20% at USD 6.785 billion. The Asia-focused lender is pushing on with its savings program, having announced last year (2013) plans to cut costs by a further USD 2.0 billion to USD 3.0 billion between 2014 and 2016. BlackBerry’s partnership with Foxconn signals shi ing priori es BlackBerry, like most phone makers, has long contracted out the manufacturing of its phones, but the Z3 has also been designed and distributed by Foxconn Technology Group, the Taiwanese manufacturer. BlackBerry’s partnership with Foxconn, a company perhaps best known as a builder of iPhones and iPads, comes at a cri cal me for BlackBerry. Although sales of the company’s devices have plummeted globally in recent years, the revenue from the phone business remains vital as John S. Chen, BlackBerry’s chairman and chief execu ve, tries to shi the organiza on’s focus to services and so ware. Deutsche Bank Plans to Raise USD 11 Billion in Fresh Capital Deutsche Bank, the largest German bank, recently said that it would raise roughly USD 11 billion in new capital from exis ng shareholders and the royal family of Qatar, responding to regulatory pressure on banks to reduce risk. Deutsche Bank said it had sold new shares worth 1.75 billion euros, or USD 2.4 billion, to Paramount Holdings Services Ltd., an investment vehicle owned by Sheikh Hamad bin Jassim bin Jabr Al-Thani of Qatar. The remaining 6.3 billion euro is to raised from exis ng shareholders in a rights issue likely to begin on June 24, 2014. The measures will help answer persistent cri cism that Deutsche Bank, which has the biggest investment banking opera on among European banks, presents a risk to the financial system because it does not have enough capital to absorb poten al losses. Japan posts strong growth ahead of sales tax rise Japan’s economy grew at the fastest pace in nearly three years in the first quarter due to increased spending ahead of a sales tax increase on April 1, 2014. Official data showed GDP rose 1.5% in the January-to-March period, against a revised 0.1% in the prior quarter. The figure beat forecasts for 1% growth, and was led by consumer spending which rose by 2.1%. Capital spending by businesses also outperformed, rising by 4.9%, which was more than double analyst expecta ons. Private consump on accounts for about 60% of Japan’s economy. However, economists warned that spending may taper off now that the April tax hike has been introduced. Japanese Prime Minister Shinzo Abe has been trying to revive growth in the world’s third-largest economy. His policy of “Abenomics” has helped Japan’s economy grow faster, but Alibaba files for IPO, could raise as much as USD 20 billion Alibaba files for IPO, could raise as much as USD 20 billion The Chinese e-commerce giant Alibaba filed to sell stock to the public recently, the first step in what many expect to be one of the largest IPOs in U.S. history. Alibaba said it would raise USD 1 billion, but analysts expect the company’s haul to be much bigger, poten ally USD 20 billion. That would surpass Facebook’s 2012 IPO, which raised USD 16 billion and ranks as the largest tech IPO in history. Alibaba’s long-awaited Securi es and Exchange Commission filing gave a rare view into the massive firm, which is largely unknown in the United States. It sells everything from designer dresses to farm machinery, processes billions in mobile payments and runs its own cloud compu ng pla orm. The retailer’s size makes it a poten al compe tor to Amazon, eBay and other online companies. It reported revenue of USD 5.6 billion in the year that ended in March and earned a profit of USD 1.4 billion during that period. Alibaba has 231 million ac ve users in China and 8 million ac ve sellers, who spent a combined USD 248 billion last year (2013). INTERNATIONAL NEWS BUSINESS AND ECONOMY
  19. 19. Volume: 05 | Issue: 05 | May-June 2014 MTBiz 19 Honda cuts motorcycle outlook for India Honda Motor Co., the world’s biggest maker of motorcycles, lowered its forecast for India’s two-wheeler market as economic growth in the region cools. According to opera ng officer in charge of motorcycle opera ons, Industry deliveries will probably expand to 20 to 25 million units by 2020 in India, fewer than Honda’s earlier forecast of 30 million. Motorcycles accounted for more than 20% of the Tokyo- based company’s opera ng profit last fiscal year. Two-wheelers were the only vehicle segment in the country that expanded in the year ended in March, with deliveries rising 7.3% to 14.8 million units, falling short of Honda’s expecta on. Honda sales in India rose 37% to 3.6 million units last fiscal year, making it the second-largest two-wheeler maker in the country, a er former partner Hero MotoCorp Ltd. Its market share rose to 26% in the January-March quarter, compared with 12% in 2009. E-commerce edge helps Bri sh retailers expand abroad Marks & Spencer Plc is making a new push to expand abroad, hoping e-commerce will give Britain’s biggest clothing retailer a be er chance to succeed than earlier a empts to enter new markets. It is one of several retailers that are using exper se developed in the UK’s fast-growing e-commerce market to expand overseas. Store chains like M&S are star ng to emulate the success of online-only fashion players like ASOS. Britain is the world’s most developed online retail market, according to a ranking by commercial real estate firm Cushman & Wakefield, followed by the United States, Germany and France. M&S withdrew from mainland Europe in 2001 a er a failed expansion. The retreat was temporary. In March the firm said it would use “bricks and clicks” - opening new stores in a few markets while offering online sales in several more - to accelerate growth abroad. Although the United States is the biggest e-commerce market by absolute turnover, internet orders make up a bigger por on of total retail sales in Britain - about 11% in 2013 to 7.3% in the United States. Japan’s trade deficit narrows on slower imports Japan’s trade deficit narrowed in April a er the yen strengthened and a sales tax hike dampened demand for imports of consumer goods despite s ll modest growth in exports. Costs for imports of oil and gas that account for about a third of the country’s imports moderated, reflec ng a rise in the yen a er a year of decline and decreases in shipments of some fuels. The 808.9 billion yen (USD 8 billion) deficit in April 2014, according to preliminary figures released recently by the Ministry of Finance, compared with a gap of 877.4 billion yen a year earlier and with a 1.7 trillion yen deficit in March. Japan’s exports are improving as the economy emerges from a protracted slump and recoveries gain momentum overseas, but Japanese manufacturers have shi ed a large share of their produc on offshore to cut costs, avoid trade barriers and be closer to fast growing emerging markets. Credit Suisse deal seen as paving way for Swiss Banks to se le Credit Suisse Group AG’s USD 2.6 billion in penal es for helping Americans dodge taxes clears the way for other Swiss banks to resolve their own quarrels with the U.S., ending years of deadlock and uncertainty. Credit Suisse’s main bank subsidiary agreed to the record penalty for an offshore tax case and on May 19 became the first global bank in a decade to admit to a crime in a U.S. courtroom. The Department of Jus ce reached the deal a er years inves ga ng more than a dozen Swiss firms, including Julius Baer Group Ltd. The lender, Switzerland’s second-biggest, kept its New York State license and doesn’t have to disclose informa on about U.S. clients in a way that might contravene Swiss financial secrecy laws. The U.S. has used treaty requests to iden fy only 238 Credit Suisse clients out of 22,000 accounts held by Americans, according to a Senate subcommi ee’s report in February. RSA to sell Canada broker to Gallagher in USD 460 million deal RSA Insurance Group Plc agreed to sell a Canadian brokerage to investors led by Arthur J. Gallagher & Co. for CUSD 500 million (USD 460 million) as the company narrows its focus a er an accoun ng scandal. Gallagher, the U.S. insurance brokerage that has been striking deals to expand in Australia and the U.K., will pay USD 400 million for an 87% stake in RSA’s Noraxis Capital Corp., the Itasca, Illinois-based broker said in a presenta on on its website recently. Noraxis management will own the remaining 13%. RSA Chief Execu ve Officer Stephen Hester, the former CEO of Royal Bank of Scotland Group Plc, has been seeking to sell assets and bolster capital at London-based RSA since taking over in February. He struck a deal in April to sell units to Poland’s PZU SA for about USD 498 million. The Canada sale is expected to add about 225 million pounds (USD 378 million) to net tangible assets and be completed within two months. Lenovo profit rises 25% as PCs, smartphones boost market share Lenovo Group Ltd., the world’s largest maker of personal computers, reported a 25% jump in fourth-quarter profit as its desktop models and mobile devices gained global market share. Net income climbed to USD 158.3 million in the three months ended March from USD 126.9 million a year earlier. That compared with the USD 163.6 million average of nine analysts’ es mates compiled by Bloomberg. INTERNATIONAL NEWS BUSINESS AND ECONOMY
  20. 20. Volume: 05 | Issue: 05 | May-June 2014MTBiz20 Chief Execu ve Officer Yang Yuanqing has maintained Lenovo’s leadership in the PC market at a me when industry wide shipments have contracted, and he also is expanding sales of smartphones overseas. Lenovo, which in January agreed to buy Motorola Mobility for USD 2.9 billion, plans to triple the number of countries where it sells phones by adding 20 new markets in the Middle East, Africa and La n America. Lenovo’s sales climbed to USD 9.4 billion from USD 7.83 billion a year earlier. Google is said to have held acquisi on talks with twitch Google Inc. has held talks to purchase video service Twitch Interac ve Inc. to boost its YouTube site, according to a person with knowledge of the ma er. With Twitch, Google would gain a pla orm that has more than 45 million ac ve viewers a month. The San Francisco-based company acts as a social gathering place for video gamers, le ng them discuss games or watch other players. Twitch is available on Sony Corp.’s PlaySta on 4 and Microso Corp.’s Xbox One game consoles. Variety reported earlier recently that the two companies are in talks on a transac on that could value Twitch at about USD 1 billion. Google has been on an acquisi on tear as it looks to bolster services and a ract more users. The Web-search company acquired digital-thermostat maker Nest Labs Inc. for USD 3.2 billion in February 2014. Flipkart to buy Myntra in challenge to amazon in India Flipkart, India’s largest online retailer, will buy compe tor to gain a business with higher margins and boost compe veness against Amazon. com Inc. The deal values Myntra, the country’s biggest online apparel store, at about USD 330 million and its shareholders will get a combina on of cash payouts and stakes in Flipkart. Acquiring Myntra will give Flipkart, founded in 2007 by former Amazon employees Sachin Bansal and Binny Bansal, a larger share of the na on’s online retail market, which CLSA Asia- Pacific Markets projects will jump more than sevenfold to USD 22 billion by 2018. The combina on would add customers and help challenge Amazon, which has expanded by buying several rivals, including the USD 1.2 billion deal for online shoe retailer in 2009. Ne lix enters Germany, France in biggest push since 2011 Ne lix Inc. will introduce its online video service this year (2014) in Germany, France and four other European countries, the company’s biggest expansion in almost three years. The world’s largest Internet subscrip on service, which produces the Emmy-winning poli cal drama “House of Cards,” plans to enter Austria, Belgium, Luxembourg and Switzerland as part of the move. The expansion into Western Europe’s most-populous na ons is the most ambi ous by Chief Execu ve Officer Reed Has ngs since late 2011, when Ne lix began streaming films and TV shows across La n America and the Caribbean. The company is racing to establish global online dominance ahead of Inc.’s Prime Instant Video service and Time Warner Inc.’s HBO. The company’s an cipated move has already put pressure on established providers of on- demand TV. Vivendi SA recently said it may seek partners for its unprofitable Watchever service in Germany. Sky Deutschland AG, the German pay-TV provider controlled by Rupert Murdoch, began targe ng new customers with its Snap streaming service in December. Mall Built on Saudi sand spells Sukuk success: Islamic Finance Dar Al Arkan’s third Islamic bond sale in a year is a rac ng buyers as investors bet the Saudi Arabian company’s real estate assets outweigh a junk credit ra ng at Standard & Poor’s. Dar Al Arkan Real Estate Development Co. is poised to sell a benchmark U.S. dollar-denominated sukuk due 2019. The yield on the company’s May 2018 sukuk slid 109 basis points this year (2014) to 6.02%. Rates on Middle East Islamic bonds fell 49 basis points in the period to 4.15%, JPMorgan Chase & co. indexes show. Dar Al Arkan, which mostly develops and then sells land so that others can build on it, opened the largest mall in Riyadh in 2012 and is benefi ng as the kingdom implements a 2011 plan to spend USD 130 billion on social causes, including building homes amid a shortage. The developer, rated four levels below investment grade at S&P, owns more than USD 3.5 billion of property in Saudi Arabia, the majority in Riyadh and Jeddah. Russia signs China gas deal a er decade of nego a ons Russia and China reached a deal to supply natural gas through a new pipeline between the two countries, paving the way for hundreds of billions of dollars in fuel sales over the next three decades. Russia is turning to China to bolster its economy as rela ons sour with the U.S. and European Union because of the crisis in Ukraine. The accord, signed a er more than 10 years of nego a ons, will allow Gazprom to develop giant gas fields in the eastern Siberia too distant from exis ng markets in Europe. Alexey Miller, chief execu ve officer of OAO Gazprom (OGZD), Russia’s biggest company, signed the contract with Chinese officials in Shanghai. The agreement, made during a two-day visit to China by President Vladimir Pu n, is for 38 billion cubic meters of gas annually over 30 years. INTERNATIONAL NEWS BUSINESS AND ECONOMY
  21. 21. Volume: 05 | Issue: 05 | May-June 2014 MTBiz 21 2015 Ford Mustang giveaway To liven up the crowds filtering through the Blue Oval display, Ford decided to spice things up a bit. The 2015 Mustang freebie is a model kit that provides a hands-on approach to the latest model ‘Stang. The kit comes with a molded subframe featuring slots to allow for the axle configura on, a molded dash and steering column and a shiny, red body. Luckily, no glue is required, so with a few easy snaps, the car comes together in minutes. This is a flashback to dealership promo onal models given to enchant poten al buyers from as far back as the 50s and the Chevy Bel Air era. And many of these models are highly collectable. Toyota remains the most valuable car brand worldwide Toyota is the world’s most valuable car brand once again, while Ford and General Motors’ Chevrolet brand are making strides as U.S. consumer confidence builds, according to research released recently by marke ng consultant Millward Brown Op mor, a unit of Kantar, adver sing agency WPP’s data investment management unit. Ford had the largest up ck in brand value with a 56% gain -- enough to move it into the Top 5. Chevrolet rejoined the list for the first me since 2009. The Toyota brand is valued at USD 29.6 billion, a 21% boost from 2013. The brand has finished in the top spot among auto brands in seven of nine years the study has been undertaken. INTERNATIONAL NEWS BUSINESS AND ECONOMY
  22. 22. Volume: 05 | Issue: 05 | May-June 2014MTBiz22 IMF Commodity Market Review Commodity prices rose 1.0% in April, with gains in all main groups due, in part, to deprecia on of the dollar—down 0.4% against a broad group of countries. A few commodi es face growing supply constraints, such as nickel following Indonesia’s ore export ban, while a few agriculture commodi es have been affected by weather and disease. Record global produc on of corn, rice and oilseeds are projected for crop year 2014/15. Crude oil prices rose by 0.9% in April, averaging USD 104.9/bbl, on rising tensions between Russia and western countries over the conflict in Ukraine, and con nued global produc on outages. Deteriora on in Ukraine raises the possibility of further sanc ons, and Russia has stated it will only supply gas to Ukraine that is pre-paid beginning in June. Exports from Libya have been slow to re-emerge, but reopening of two ports could see exports of around 0.2 mb/d in the near term. Refinery maintenance in the Atlan c basin, that was expected to wind down in April, has been extended into May with further announced turnarounds (and maintenance is now underway in Asia). OPEC produc on reportedly rose in April with a rebound in Algeria, Iraq and Saudi Arabia. OPEC next meets June 11th to discuss its 30 mb/d produc on target. The Brent-WTI spread widened to USD 6/bbl, and to nearly USD 10/bbl in early May, due to a con nued buildup in U.S. crude oil inventories. Stocks in the mid-con nent have plunged in recent weeks facilitated by new pipeline capacity from Cushing OK to the Gulf coast. However, the surplus has now shi ed to the Gulf where stocks are at record highs. Rising light crude oil produc on from U.S. shale deposits has reduced light crude imports. However, imports of La n American heavy oil—which Gulf coast refineries are typically designed to process—are also declining somewhat and being redirected to other markets in Europe and Asia. Natural gas prices in the U.S. fell by 4.1% in March on modera ng seasonal demand. The storage injec on season— which commenced in early April—began at a faster pace than last year, partly due to mild weather. However, larger injec ons are required to replace depleted inventories before winter, and may require higher prices. The pace of summer cooling demand will be a key factor. Agriculture prices rose by 0.9% in April, with large gains concentrated in a few commodi es. Orange prices leapt 8% on reduced produc on es mates in Brazil because of drought and in the U.S. from bacterial disease. Swine prices rose 6%, up a third straight month, as a contagious disease has wiped out 10% of the U.S. swine popula on since last summer. Shrimp prices increased 5% as a disease in Asia is reducing supplies of farm-raised shrimp. Soybean and soybean meal prices were up 5 due to strong demand, but prices eased in early May as a record South American crop entered the market. Arabica coffee prices rose 5% (and are up 85% the past 5 months) due to concerns about the size of Brazil’s crop because of drought. Partly offse ng these gains was a 6% drop in tea prices on rela vely weak demand at auc ons in Kenya, the world’s largest black tea exporter. Rice prices fell 5%, down a second month, as the Thailand g o v e r n m e n t con nued to sell from its stocks to help finance delayed payments under its Crop Rice Paddy Pledging Program. Palm oil prices declined 4% on rising produc on and stocks in Malaysia. Rubber prices fell 4% as global produc on is expected to record a surplus for the fourth straight year. Thailand is taking steps to reduce output but growth con nues in other south-east Asian countries. Metals prices rose by 2.7% in April, up for the first me this year, with gains in all metals except uranium. The largest increase was for nickel—jumping by 11% and up for the sixth consecu ve month—mainly due to Indonesia’s January 12th export ban on unprocessed ore. The nickel market is expected to gradually shi from a large surplus into deficit, especially in 2015, and record LME inventories have recently started to decline. China, which imported most of Indonesia’s ore to process nickel pig iron, had stocked up with several month’s supply to help cushion the loss, but smaller producers are already repor ng shortages and larger producers are cu ng output. Aluminum prices rose 6% following a court ruling against the London Metal Exchange (LME) to cut its warehouse queues, as well as con nued produc on cuts outside of China. However, prices fell back in early May on rising stocks and con nued growth in produc on in China. Iron ore prices rose 2% on expected higher demand in China, but prices in early May fell to the lowest levels in 20 months due to con nued growth in produc on from Australia, and higher stocks at Chinese ports. Partly offse ng these increases was a 6% drop in uranium prices, to the lowest level in almost nine years, due to excess global supply and delay restar ng Japan’s nuclear power plants. INTERNATIONAL NEWS COMMODITY MARKET IMF Commodity Price Indices (2005=100) 220 200 180 160 Jan-11 Jan-12 Jan-13 Non-Energy Energy Total Jan-14 Crude Oil Prices ($/barrel) 130 120 110 100 90 80 Jan-11 Jan-12 Jan-13 Jan-14 Brent WTI Dubai Food and Beverage Price Indices (2005=100) 275 250 225 200 175 150 125 100 Jan-11 Jan-12 Jan-13 Jan-14 Meat Seafood Beverages Cereals Vegetable Oils & Meal IMF Commodity Price Indices (2005=100) Metals Jan-11 Jan-12 Jan-13 Jan-14 Energy Agriculture 275 250 225 200 175 150 125
  23. 23. Volume: 05 | Issue: 05 | May-June 2014 MTBiz 23 OECD Economic Outlook 2014 A nascent recovery and s ll large es mated slack call for accommoda ve macroeconomic policy, but with increasingly differen ated policy stances in the main OECD (Organisa on for Economic Co-opera on and Development) areas. Government debt remains high in many countries and is merely expected to stabilise in the OECD over next 18 months (Table 1), limi ng the extent to which fiscal policy can be used to support the economy. In the context of s ll large es mated output gaps, high unemployment and below-target infla on, this implies that accommoda ve monetary policy should be maintained. However, with the recovery more advanced in the United States and the United Kingdom, monetary s mulus should be reduced gradually, in contrast to Japan, where addi onal easing is already planned, and the euro area, where addi onal accommoda on is needed. In China, monetary policy will have to be eased if growth were to slow sharply. Pruden al measures should also be used in a mely manner to gradually slow rapid credit expansion and harder budget constraints should be imposed on local governments. In the projec on period, policy rates are likely to remain low by historical standards and simple policy benchmark rules. This poses some risks to price and financial stability in the future. Nevertheless, cau on is needed in withdrawing monetary s mulus, as policy rates are s ll at or close to the zero lower bound. Notwithstanding the progress achieved in improving the state of public finances, addi onal sustained consolida on will be needed in several countries in the coming years, calling for some offset from monetary policy. Uncertainty about the postcrisis level of neutral interest rates and the possibility that they might be lower than they used to be prior to the crisis provide another argument for keeping policy rates low. Updated OECD es mates of neutral interest rates (Bouis et al., 2013) indicate that they remained nega ve in real terms in 2013. Although these es mates are inherently uncertain, they suggest that policy interest rates at zero output gaps and on-target infla on could remain lower for longer than in the past. United States Accommoda ve monetary policy remains warranted but should be scaled down gradually. Policy accommoda on is required as current economic slack remains large (with the nega ve output gap es mated at 3½% of GDP in 2013), infla on is low and infla on expecta ons are well anchored. However, a reduc on in monetary policy s mulus will be needed given the projected narrowing of output and unemployment gaps and the projected increase of infla on towards its target. There are risks that prolonged strong monetary accommoda on could unanchor infla on expecta ons and generate asset price bubbles once again. The path set by the Federal Reserve for reducing monthly purchases of securi es from the USD 55 billion in April to zero later this year seems appropriate and it would allow policy rates to start rising in 2015 as currently envisaged by FOMC members and expected by markets. United Kingdom Withtheunemploymentratefallingclosetoitsthresholdlevel,the Bank of England provided further guidance in February, which – as in the United States – was jus fied in view of the changing aims of guidance as the start of monetary policy normalisa on draws closer. The recent decline in infla on and infla on expecta ons, the lack of immediate infla onary pressures, especially in the context of sizeable es mated slack (even if it is narrowing faster than expected) and weak wage growth, and s ll nascent recovery suggest that current s mulus could be maintained in 2014. However, from next year (2015), the policy rate should be increased gradually, as currently expected by markets, to ensure price and financial stability. By the end of 2015, the employment and output gaps are projected to be largely closed and infla on will be close to the target, while policy rates are likely to be significantly below neutral levels, even if the la er could be lower than prior to the crisis. Japan The authori es are pushing ahead with their three-arrow policy package: very expansionary monetary policy to end defla on and a ain a 2% infla on target; flexible fiscal policy to give temporary support to the economy; and structural reforms to boost the poten al growth of the economy. So far, progress has been most evident in the monetary and fiscal domains, but much remains to be done to rapidly improve structural policy se ngs. Euro area Very low underlying infla on and large economic slack are expected to persist for several quarters. Accordingly, the main refinancing policy rate should be reduced to zero, and possibly the deposit rate to a slightly nega ve level, and they should be maintained at these levels at least un l end-2015. Together with recent improvements in financial markets, this should contribute to reduce interbank overnight interest rates and ul mately bank lending rates, helping to s mulate growth and reverse disinfla onary pressures. Addi onal non-conven onal measures would be required if infla on did not show clear signs of returning toward the European Central Bank (ECB) target or, a for ori, if a defla onary scenario threatened to occur. INTERNATIONAL NEWS ECONOMIC OUTLOOK Table 1 Fiscal positions will continue to improve Per cent of GDP / Potential GDP 1. Excludes Chile and Mexico. 2. Excludes Chile, Mexico and Turkey. Source : OECD Economic Outlook 95 Data base. 2011 2012 2013 2014 2015 United States Actual balance -10.7 -9.3 -6.4 -5.8 -4.6 Underlying balance -8.7 -7.8 -5.2 -4.9 -4.1 Underlying primary balance -5.7 -4.8 -3.0 -2.4 -1.7 Gross financial liabilities 98.8 102.1 104.3 106.2 106.5 Euro area Actual balance -4.1 -3.7 -3.0 -2.5 -1.8 Underlying balance -3.6 -2.3 -1.5 -1.0 -0.6 Underlying primary balance -1.0 0.3 0.9 1.4 1.8 Gross financial liabilities 95.9 104.4 106.7 107.7 106.9 Japan Actual balance -8.8 -8.7 -9.3 -8.4 - 6.7 Underlying balance -8.0 -8.1 -8.8 -8.2 -6.8 Underlying primary balance -7.2 -7.2 -7.9 -7.1 -5.4 Gross financial liabilities 209.5 216.5 224.6 229.6 232.5 OECED1 Actual balance1 -6.5 -5.9 -4.6 3.9 -3.2 Underlying balance2 -5.9 -5.1 -3.9 -3.5 -2.8 Underlying primary balance2 -3.7 -2.9 -2.0 -1.5 -0.8 Gross financial liabilities2 102.1 107.1 109.5 111.1 111.2