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Yearly Economic & Market Roundup 2006
J a n u a r y
2 5,
2 0 0 7
Undaunted exports and remittances, a resilient capital market and expansion of industrial and
service sectors continue the growth march despite grave inflation and political disr uptions
The movers
The shakers
 Despite political turmoil, the overall economic feat appeared
resilient with 6.7% GDP growth in FY2005-06 against 5.5%
last year, which is likely to reach 7% in FY2006-07.
 Bangladesh improves in corruption perception, as it loses
its position of the most corrupt country to Haiti, despite TI
reasons that this is more to the latter’s failure to improve
than Bangladesh’s success in curbing corruption.
 Overall balance of payment stands surplus at the end of the
year despite gradual slides in the external assistance and
growing imports.
 Foreign exchange reserve sets a new high with $3.88b at
the end of the year, rising from $2.83b in December 2005
and $3.22b in 2004.
 In a fully floating exchange rate regime, the local currency
for the first time experienced appreciation amid an overall
depreciation of 4.0%.
 Remittances from the expatriate Bangladeshis surpassed
all previous records with $5.5b, since informal transfer of
money have continuously been discouraged along with
encouraging the formal channels.
 Number of migrant workers grew markedly despite there
were various political and social disruptions across the
world and deepening crises at home.
 Exports continued to rally, and poised to exceed $11.6b,
despite frequent disturbance in production and shipment
because of continuous political mayhem.
 Export earning from Export Processing Zones (EPZs) has
set remarkable growth of 73%.
 Import grew at 16.7% despite a reported slide in the last
quarter due to political uncertainty, and bulk of the growth
comes from capital machinery, industrial raw materials, etc
hinting expansion of production.
 Trade deficit comes below $500 at the end of the year due
to rise in export and concomitant restraint in import.
 Overall classified loans in banks slumps to 14.3% at the
end of third quarter of the year, though it increased in the
private banks.
 Disbursement of industrial term loans soared despite rate
hike, indicating a greater appetite for industrial expansion.
 Teledensity shot to 14.3% with mobile phone connections
exceeding 20m at the end of the year.
 Capital market shakes up at the end of the year after the
caretaker government (CTG) assumed office, though index
was at low ebb throughout the year.
 Though decreased in number, IPOs raised more money in
the capital market with similar subscription zeal.
 Newly formed caretaker government emphasized more or
curbing grafts, inordinate inflation spurred by syndicated
trading, and widespread lawlessness at various political
hierarchies.
 Political turmoil ahead of a national parliamentary election
gripped economic, social and cultural activities of the country
to a standstill for a long period.
 Bangladesh slipped into an image crisis after the first caretaker government failed to create a congenial atmosphere
for holding a free, fair and credible parliamentary election in
January 2007, which was later canceled after a new regime
took office instead.
 High inflationary pressure led by hike in prices of fuel and
utility services, syndicated trading of essential goods may
seriously damage projected growths.
 Utterly politicized and lack of governance plunged the law
and order situation to a new low during the year, though a
desired caretaker government later came to rescue.
 Revenue mobilization grew at moderate pace because of
political uncertainty and blanket reduction of import duty
that slowed import in the last quarter.
 Growing expenditure forced the government to borrow
more as NBR fails to cope with a high target of revenue
collection amid utter political chaos, government already
exceeded its annual target of borrowing in just 6 months.
 Sales of savings instruments shot sharply after increase in
interest rates, which raised cost of government borrowing.
 Extremely low foreign assistance due to bureaucratic redtapes posed by the political intervention and interministerial
incursions on respective jurisdictions have slowed many
development projects.
 Implementation of annual development program (ADP) has
grown by 6% in the first quarter of FY2006-07 due to hasty
disbursement by the last political regime, but later slowed to
almost halt because of reluctance by CTG to finance the
largely politically influenced projects.
 Classified loans with SoEs continue to grow as Bangladesh
Petroleum Corporation, mired in deep trouble due to sudden
hikes in oil prices in the international market.
 Provision shortfall against bad debts in the banking sector
jumped by over 50% during the year, due to the yawning
shortage in nationalized commercial banks.
 Pace of poverty reduction and social development activities
was slow due to delay in release of foreign funds of some
NGOs.
 The rich-poor gap widens more during the year, as inflation
spurred by the conspicuous spending of the ill-earning rich
plunges the hard-earning poor to a more marginal situation.
 Bangladesh missed the proposed infrastructure megalink of
Trans-Asian Railway where 18 Asian nations signed treaty
to integrate the continent into a single railway network, as it
in principle opted for.
 Budgetary incentives forced the black money holders dole
out their money into real estate making the sector pricey for
other hard income-earners.
2
The year that was
The year 2006 was a crucial juncture of time for Bangladesh
that steps into a new realm of sociopolitical and economic
sphere. First, it was the concluding year of the stint for the
ruling coalition, and the national parliamentary election was
supposed to be held in January 2007. But the first caretaker
government failed to create any impetus for the opposition
political parties in particular and the general citizenry as a
whole that the government was neutral and independent in
action to deliver a free, fair and credible election. Though later
in January 2007 a second caretaker government took office to
its rescue, but the year had concluded with utter political
chaos, confrontation and uncertainty. Second, despite there
was political turbulence throughout the year, some social and
economic activities were visibly nonchalant towards it.
Exports, remittances, currency and the capital market defied
any political doomsaying, while people became increasingly
louder against corruptions in the political and bureaucratic
echelons, black money, political degeneration and flexing of
muscles in making quick fortunes. Third, with gradual rise in
the country’s strategic importance in business, geopolitics and
natural resources, Bangladesh attracted attention from the
venture investors of US, Europe, East Asia, and Middle East
countries. In socioeconomic sphere, winning of Nobel Peace
Prize by Dr Muhammad Yunus and his dream-child Grameen
Bank added to it a great deal. Empowerment of women,
immunization of children and poverty alleviation are few other
sectors where Bangladesh achieved dazzling performance.
These factors had mixed impact on the country’s economic,
political and social sectors throughout the year. As political
confrontation became the order of the day with the leading
political parties’ egocentric movements, production of goods
and services had been the first victim. This coupled with a
price hike of petroleum fuels in the international market and
hidden cost of business spurred inflation that gobbled not only
the incremental income arisen out of the growth, but also
reduced it to a level below previous mark.
Besides, there was increasing number of corruption cases
revealing in the media that drew flak from almost all walks of
life. People close to the ruling parties as well as bureaucracy
across the country became the prime predators on national
resources. These raised hackles among the general public,
who began to voice against further degeneration. Increasing
awareness among the civil society on corruption and abuses
of national resources soon has graduated to an organized
movement with the renowned citizens at the forefront. Their
apt demand to cleanse the politics of corruption and use of
muscles, reform the electoral process, exclude the ill gotten
money-holders and uphold a democratic, secular and tolerant
image of the country in fact forced the new CTG to make
some real and visible drives.
During the year, media emerged as a sovereign forth column
of the state. Despite founded by the people close to the ruling
circle, most electronic media along with the print ones served
interest of the general people. Media now enjoys enormous
freedom that would help the country get rid of its perennial
curses. That is why the new caretaker government excluded
media from the bans in its state of emergency imposed in the
second week of January 2007.
The year also saw an improved image of the country with Dr
Yunus’ receiving of the prestigious Nobel Peace Prize. The
global attention to local politics and economy also grew with
this achievement. If the new caretaker government can hold
the national election as desired, i.e. free and fair, the image
would further be improved, which would attract more foreign
direct investment to and prelude exports from Bangladesh.
Global scenario in 2006
As the year 2006 had been turbulent, vibrant and somewhat
catastrophic for many, the world economy, which had been
growing rapidly for the past 4 years, is expected to advance at
slower pace in 2007, as some leading developed economies,
including USA, began to slide during the last half of the year.
International Monetary Fund (IMF) estimated that the global
economy has grown 5.1% in 2006, higher than 4.9% in 2005,
making the past four years the fastest-growing period since
1970s. The robust growth was mainly attributed to vigorous
expansion of developed economies in the first half of the year,
particularly in the first quarter, and the sustained fast growth
of China, India and other such major developing economies.
Last September, IMF predicted a 4.9% growth for the global
economy in 2007, but later hinted that the projection could be
revised downward. World Bank (WB) has also shared IMF’s
prediction, arguing that the global economy had arrived at a
point of inflexion in 2006. Among the 3 largest economies only
the euro-zone economy has maintained a relatively strong
trend of growth, while US and Japanese economies slowed
down noticeably since the second quarter of 2006. Thwarted
by a drastic plunge in investment in the housing industry, US
economic growth slid to 2.6% in the second quarter and
dropped further to 2% in the third, from a hefty 5.6% in the
first. The Japanese economy, which is currently wrecked by
the weak individual consumption, has grown 2.7% in the first
quarter last year, but slowed to 1.1% and 0.8% in the second
and third quarters. Compared to same period in 2005, the
euro-zone economy grew 2.2%, 2.8% and 2.7%, respectively.
Both the developed and developing economies are likely to
experience a slowdown in 2007. According to the prediction of
Organization of Economic Cooperation & Development (OECD)
last November, average growth rate of its member economies
would decline to 2.5% in 2007 from 3.2% last year. Among
them, US would decelerate to 2.4% from 3.3% in 2006, Japan
to 2% from 2.8%, and the euro-area to 2.2% from 2.6%.
World Bank (WB) predicted that the developing countries
would slow down to 6.4% in growth in 2007 from 7.0% last
year. As per WB, China’s economy would slide a bit in 2007,
as its government takes further measures in terms of macroeconomic regulation and control, while that of India would
grow 7.7%, slightly lower than 8.7% in 2006.
Economists hinge prospects of the world economy in 2007
mainly on US and the prices of oil. They predicted that if the
US economy cooled further, the global economy would slow
down. Oil prices could be affected by unpredictable factors
like Iranian nuclear crisis, climate changes and deteriorating
situation in Iraq. Nonetheless, global economy is likely to
boom in 2007, since USA, Japan and the euro zone are all
expected to sustain moderate growth, while the developing
economies would remain vibrant. World Bank projected that
with the increase of crude oil production and low demand at
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high prices, oil prices could continue to decline in 2007 and
2008 that would spur consumption and curb inflation, thus
reducing pressure for monetary authorities to adopt rigorous
policies. Optimistic economists believe that the developing
economies in Asia, which are playing an increasing role in
driving world growth, would to some extent offset the impact
of slow US growth on the global economy. Asia contributed
21% to the world economic growth since 2001, higher than
19% made by US.
GDP to grow over 7%
As hope boosted by some positive signs of political stability
Bangladesh is now poised to achieve a 7.0% growth in the
fiscal year to conclude at June 2007, maintained a cautious
Bangladesh Bank governor. In the last fiscal year, growth was
6.7%. Among the GDP basket agriculture is expected to grow
at a paltry rate, while industry at a moderate and service
sector at a boisterous rate. Though the estimates are not
available, it is learnt that the prime credit goes to the private
sector that has grown by 18.8% year on year as of November
2006. The central bank expectation is likely to come true as
all indicators are there that the election, which was supposed
to be held at January end 2007, may not be held before June
2007, since the proposed introduction of voter identity cards
would not be finished within a period shorter than 6 months.
Under a caretaker government (CTG), economic activities are
expected to take place faster than that of a political regime,
which is usually marked by confrontation, strikes and chaos.
Bangladesh dropped in competitiveness
Despite better growth and other positive economic indicators,
Bangladesh slipped by another position down in the Global
Competitiveness Index 2006, released by World Economic
Forum, ranking 99th among 125 countries. Last year it stood
98th among 117 countries. Poor performance in infrastructure
and institutions pushed the position to lower level.
Bangladesh ranked 121st in institutions and 117th in infrastructure, but in macroeconomy it ranked 47th. Other than
Bangladesh, every country in South Asia gained in position.
As Nepal is included for the first time in the report and ranked
110th, Bangladesh placed 3rd among 4 South Asian countries.
India ranked 43rd this year, up from 45th last year, while Sri
Lanka moved to 79th position from 80th and Pakistan up to 91st
position from 94th last year. Bangladesh fared only better than
some poorer African and Asian states like Nigeria, Cambodia,
Cameroon, Nepal and Zambia, while Angola is ranked the
lowest position at 125th.
Though overall rank was 99, in basic requirement Bangladesh
stood at 96th, in efficiency enhancers at 108th and in innovation
factors 104th position. It also shows that Switzerland, Finland
and Sweden are top 3 economies, while Denmark, Singapore,
USA, Japan, Germany, Netherlands and UK follow to fill the list
of top 10. USA shows the most pronounced drop, falling from
1st to 6th. Over 11,000 business leaders had been polled in a
record 125 economies worldwide this year.
Corruption perception improved
Bangladesh has been ranked the third most corrupt country in
a recent corruption perception index (CPI) by the Berlin-based
Transparency International (TI), finally jettisoning its position
as the most corrupt one for the past 5 consecutive years. CPI
annually ranks countries in terms of the degree of the political
and institutional corruption. Haiti, a Caribbean state, replaced
Bangladesh’s position as the most corrupt country in the TI’s
CPI of 2006, while Guinea in Africa and Iraq and Myanmar in
Asia are jointly placed as second. Bangladesh is accompanied
by African countries of Chad, Democratic Republic of Congo
and Sudan with 2 points out of 10, while Haiti bottomed with
1.8 points and Guinea, Iraq and Myanmar bagged 1.9 points
each. Finland, Iceland and New Zealand were on the top of
the list with 9.6 points. Bangladesh was bottom in the CPI
index with 0.4 point in 2001, 1.2 points in 2002, 1.3 points in
2003, 1.5 points in 2004 and 1.7 points in 2005.
Instead of confirming a decrease in corruption, TI has rather
attributed Bangladesh’s apparent improvement in position to
the poorer performance by some other countries, as there
was no real drop in corruption levels. TI Bangladesh chapter
explained that points have increased for Bangladesh due to
enhancement in the number of institutions from where data
and information are gathered. Earlier in 2001 TI gathered data
from 3 organizations, but this year it took data from 6
organizations. The report has been based on perception of
businessmen, politicians, bureaucrats and corruption analysts
as surveyed by various organizations.
Among 163 countries surveyed, 71 countries scored below 3.
In South Asia, Bhutan has scored the highest with 6 points,
securing 32nd position in TI index, while India was placed in
70th position with 3.3 points, Sri Lanka in 84 th with 3.1 points
and Pakistan in 142nd with 2.2 points.
ADP spending spree
Some 886 projects were included in Annual Development
Program (ADP) of FY2006-07, nearly half being unapproved
ones with no allocation against. The government disbursed
Tk42.93b or 25% of the proposed ADP of Tk260.0b during the
first quarter of FY2006-07, up by 6% over the last quarter.
Though seemingly normal in total share of size, usually no
more than 10% is disbursed in the first quarter due to usual
delay in planning and approving of projects and schemes. The
spending spree by the last regime at the fag end of its tenure
has mostly been aimed at funding image-boosting schemes,
as dubbed by the finance and planning ministry.
Poverty nonchalant, as rich-poor gap yawns
The country's struggle against poverty gathers momentum, as
all development spending has for the past few years been
routed to the poverty alleviation. But the enormity of poverty
leaves little room for any perceived change within the short
period. Recently a study carried out by Bangladesh Institute of
Development Studies (BIDS) in cooperation with Chronic
Poverty Research Center (CPRC) of UK revealed that about
19% of the rural households cannot afford 3 meals a day,
while around 10% subsist on 2 meals or less for a number of
months every year. While Bangladesh has come out of the
shadow of famine, problems of starvation still persist, and
24% of the total population currently lives in extreme income
poverty.
The study revealed that around 31% of the rural population
suffered indignity of chronic poverty, i.e. low consumption,
hunger, malnutrition, lack of access to basic health services,
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illiteracy and other deprivations. Some 25m to 30m citizens
are chronically poor. Despite the country does not provide an
easy context for poverty reduction, the recent growths, overall
improvement in services and resilience and innovation of the
poorest however augur well. It noted that Bangladesh was
well on its way to achieve most of the millennium development
goals (MDG) save reduction in poverty, maternal mortality rate,
and in under-5 mortality rate, an a key social indicator, adult
illiteracy.
Though Bangladesh has achieved an average annual GDP
growth of 5.4% over the last decade, people had not been
able to reap much benefits from such growths, since disparity
in incomes between the richest and poorest section widened
alarmingly, found a study by Center for Law Research and
Support. In FY1995-96, the top 5% of the poorest people
shared only 0.88% of GDP, while the top 5% of the richest
shared 23.62%. In 2000 the top 5% of the poorest people
went down to 0.67% of GDP, while the top 5% of the richest
increased to 30.66%. Though no figure has been revealed for
2006, the picture is not expected to change positively, as the
year was worse than 2005 for the poor.
Government borrowing shot high
Government borrowing from domestic sources, mainly banks
and savings instruments, marked a significant rise during the
year. Its severity peaked at the end of the year when it hit a
decade-high of Tk63.65b. Of these, Tk38.52b was borrowed
from scheduled banks, particularly nationalized commercial
banks (NCBs), and the remaining Tk25.12b from Bangladesh
Bank. Decline in the foreign aid and government earning from
revenue collection has apparently caused such an upsurge in
borrowing. It also resulted from a stark inconsistency between
earning and expenditure of the last political regime that
resorted to significant raise in expenditure at the fag end of its
tenure.
During July-September of 2006, government borrowing from
banks went up by 197%, reaching at Tk23.13b, as against
Tk7.77b in the last corresponding period. Apart from this,
borrowing from savings instruments has reached Tk12.09b,
recording a 137% increase against Tk5.10b in the previous
year. In July-October period the borrowing further increased
with the last political regime’s departure. Just before quitting
power, the regime hurriedly focused much on implementing
internal resource-funded projects instead of donors-funded
projects in order to duck away donor pressure to abide by
their conditions for providing assistance. The first CTG, within
just one week after assuming power, borrowed Tk6.5b from
banks, raising the total bank loan taken by the government to
Tk49.31b, of which Tk26.89b was from commercial banks,
and the remaining Tk22.43b from Bangladesh Bank. Shortfall
in revenue earning and absence of any initiative for reducing
expenditure are two major reasons for such a huge amount of
bank loans.
Revenue collection dipped
Revenue collection by the National Board of Revenue (NBR)
remains much lower than targeted in the last annual budget
made in June 2006, because of lowered tax rates on many
import goods, lower imports (than expected) due to political
crises and failure to launch the desired collection efforts. NBR
has collected only Tk158.23b in the July-December period,
the first half of the FY2006-07, against a targeted 205.27b,
and with a shortfall of Tk47.04b. Despite VAT and tax were up
to the mark, collection of duties was too poor to reach at a
comfortable vicinity to the target. Terming the revenue target
ambitious and the drawn-out political unrest that hampered
business activities as a major reason for the poor revenue
generation NBR refixed its annual collection target of customs
duty at Tk176.0b from Tk186.0b set earlier.
Tax breaks to various corporations and big business cost the
government a large amount every year. Major areas of such
tax exemption include tax holiday, tax deduction, tax at the
concessionary rates, accelerated depreciation, deferrals and
tax credit. Currently tax exemption is given to corporate sector
under 22 categories. Last year the government lost Tk3.5b in
foregone revenue, a study by NBR revealed.
Inflation gnawed on growth
Inflation was one of the most menacing factors in Bangladesh
economy during the past 5 years, as the last political regime
failed to check syndicated trading of essential goods, which
were allegedly perpetrated by the people with close relation to
the ruling clique. This spurred inflation to over 8% a year. The
first CTG also failed to dismantle such syndicates as it was
busier with meddling political feuds between the rival alliances
than curbing black marketing or inflation.
Point-to-point inflation calculation carried out by Bangladesh
Bureau of Statistics (BBS) shows that at the end of November
it was 6.37%. Inflation was measured at 6.7% in the rural and
5.53% in the urban area. It came down from 7.39% and
7.13% respectively in October 2006. It is noted that deficiency
in food production, dependence on the imported goods like
fertilizer and consumer goods, etc are some of the reasons
why rural people faced more inflationary bite. Inflation has not
only reduced purchase capacity of the poor that plunged them
to a new marginality, but also made growths in many sectors
evaporate outright.
Export keeps growing faster despite political odds
Despite there was an ongoing political crisis since the very
beginning of the year, export continued its roaring march as
usual. During the first 11 months of 2006 exports totaled at
$10,622m against all odds at home and abroad. Earning was
$2,63m more than $8,359m in same period last year. If the
trend continues, total exports would cross $11,600m in 2006.
Readymade garments and knitwear maintain strong growth as
usual and commanded over three-fourths of total export
revenues. While earnings from frozen food, home textiles,
footwear, raw jute, jute goods, leather, bicycle and textile
fabrics showed growth, vegetables, tobacco and tea marked a
decline over the same period last year.
The export felt the initial bites of political confrontation sharp
at the end of third quarter of the year, when the opposition
allies began to call hartals and sit-in programs that hit the port
operation hard. Many garments exports had reportedly been
cancelled thanks to failure to comply with the deadline. Till the
second week of January 2007, transport of exportable goods
faced various disruptions. Although by the second week of
January 2007 port operations sprang back to life, it was one
of the most disturbing factors for exporters that forced them to
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request the CTG to declare a state of emergency, which now
has been imposed on the country indeed. The following table
shows the month-wise export for the past 5 years (figures in
m$):
Period
January
February
March
April
May
June
July
August
September
October
November
December
Total
2002
539
497
418
428
531
576
612
609
506
460
440
530
6,147
2003
569
482
514
533
618
676
678
637
584
516
558
626
6,990
2004
730
463
628
629
717
836
868
827
673
604
528
744
8,248
2005
663
650
699
643
823
870
904
849
720
873
665
904
9,264
2006
856
822
891
846
1,045
1,116
1,143
1,158
958
871
916
NA
10,622
Import grew amid caution
The cost of import has grown up by 11.6% during the first 3
quarters of the year 2006 over the same period last year, due
mainly to increased oil prices and higher imports of essential
goods. Spending on import of petroleum fuels has increased
substantially during the period, while import of sugar, pulse,
onion, spices and edible oil grew more than 40% on average.
Import costs of industrial inputs like capital machinery, other
machinery, raw cotton and scrap vessels rose at a moderate
pace. Other major imports included rice, wheat, fresh and dry
fruits, dairy food, edible oil, drugs, oil and seeds, raw cotton
and synthetic fiber, yarn and textile fabrics and accessories
for garments. Although surge in import remained halted for
the last couple of months, it reportedly shot again after the
new CTG had taken office in January 2007.
The following table shows month-wise import for the past 5
years (figures in m$):
Period
2002
2003
2004
2005
2006
January
634
743
857
1,076
1,165
February
532
681
782
1,201
1,209
March
988
1,147
983
1,280
1,338
April
650
770
937
1,197
1,411
May
686
796
1,035
1,099
1,387
June
879
1,297
1,316
1,162
1,378
July
638
826
967
1,122
1,351
August
599
850
994
1,194
1,302
September
727
850
1,009
1,055
1,577
October
735
828
1,068
1,122
NA
November
723
747
1,055
1,158
NA
December
797
991
1,040
1,207
NA
Total
8,588 10,527 12,043 13,872 12,118
Import of consumer goods soared during the past couple of
years after import of essential goods was usurped allegedly
by a handful of politico-business syndicates close to the ruling
circle. Especially, imports of edible oil, sugar, lentil, rice and
onions fell completely to the avarice of these syndicates. But
there were some other reasons as well. For example, import
of edible oil grew radically after there had been exorbitant
price hikes in the domestic market, but it was also revealed
that consumption of edible oil has been soared by the rural
population in recent times, since their buying capacity has
improved, which also prompted its import in greater volume.
In 2006 the local oil millers imported some 1.27m tons of
crude edible oil, which is about 17% more than 1.09m tons in
2005. They also imported about 0.88m tons of crude palm oil,
0.32m tons of crude soybean oil and 0.05m tons of mustard
oil seeds. Besides, food processing industries, now booming
in urban areas, raised demand for food ingredients greatly.
Total spending on edible oil imports in 2006 is nearly $800m.
Annual average per capita consumption of edible oil in the
rural area is now about 4.5 kg compared to 3.5 kg a couple of
years back, and 8 kg in urban areas. But it is still far below the
prescribed health standard of 9 kg, as well as compared to
other countries like India (12 kg), Pakistan (16 kg) and USA
(45 kg).
The table below shows the calendar year-wise actual export
and import for the past 5 years: (figures in m$)
Year
Export
Growth
Import
Growth
2002
6,066
0.55%
8,555
5.87%
2003
6,990
15.24%
9,374
9.57%
2004
8,302
18.77%
10,839
15.63%
2005
9,264
11.59%
13,872
18.58%
a
b
c
2006
10,622
25.88%
12,118
16.68%d
a
c
up to November 2006
up to September 2006
b
d
growth based on corresponding period
growth based on corresponding period
FDI: More repatriated than invested
The country received foreign direct investment (FDI) worth
$400m in the last 6 months of the year, while target for the
period was $500m. FDI inflows recorded a sharp decline in
the last quarter, but with noted improvements in the political
situation, and if the CTG approves large investment proposals
lying pending, target for the first half of 2007 would easily be
achieved.
Foreign investors have taken out more money than they have
pumped into Bangladesh in the last 5 years mainly through
profit repatriation and repayment of loans with foreign banks.
Out of several hundred foreign investors in the country, a few
mobile phone companies dominate the said outflow of capital,
followed by oil and gas companies and foreign banks. Since
2001 investors who made total foreign direct investment (FDI)
of $2,185m have eventually repatriated $2,744m. FDI records
for 1996 to 2005 show the investors remitted $3,626m or 81%
of their investment of $4,457m. Data shows that between the
period of 1996 and 2000, the country enjoyed a higher rate of
FDI inflow with a lower outflow of profit and loan repayment.
Investors in telecommunications sector claim 36% of the total
FDI, textiles 18% and chemical industries 7%, oil companies
18%, banks 10%, while power companies claim the rest 2%,
as reveals the Board of Investment (BoI).
The main outflow of money is taking place in service sector,
i.e. telecommunications and energy that do not export any
goods or employ any large manpower. Cutting as a doubleedged sword, the sectors even are not willing to get their
companies listed with the local stock exchanges, which could
retain a certain part of the profits home. The situation in fact
has been created by the licensing and regulatory authorities
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6
themselves, who ignored the public interest while inviting and
signing investment agreements with the foreign companies.
The following table shows inflow-outflow situation for 5 years:
Year
FDI inflow
2001
2002
2003
2004
2005
$355m
$328m
$350m
$460m
$692m
FDI outflow
Profit
Loan
$175m
$188m
$195m
$243m
$355m
$229m
$338m
$372m
$418m
$208m
% outflow
of inflow
102.25%
133.54%
166.86%
154.35%
90.46%
Within January-May 2006 period, investors repatriated $180m
in profit. Economists suggest that if the country fails to raise
overall FDI inflow, especially in the manufacturing sector, it
might soon face a dire impact on the balance of payment.
During the year the Export Processing Zone (EPZ) attracted a
substantial amounts of FDI. Bangladesh Export Processing
Zone Authority (BEPZA) has approved proposals of some 48
companies to invest $375.2m that would create some 45,118
employments. Last year investments in EPZs were $192.3m
with nearly 43,000 employments. Of these 48 companies 19
were 100% foreign-owned, 10 joint ventures and the rest 19
local. EPZ’s aggressive campaign among the domestic and
foreign investors about the unique facilities for investment in
EPZ areas helped boost the overall investment figure in 2006.
Meanwhile a new EPZ, Karnaphuli Export Processing Zone
(KEPZ), is going to be launched soon with 222.42 acres of
land. It is projected to receive an investment of Tk3.60b and
an annual export target of Tk2.5b. It will create employment
opportunities for nearly 50,000 people. The new EPZ is to be
set up on the land earlier had received from Chittagong Steel
Mills, an SoE that was closed in 1999 as a losing concern.
Remittances continue to amaze
During the year 2006 remittances from migrant Bangladeshi
workers performed remarkably in the context of an equally
turbulent global and domestic scenario. A belligerent middleeast situation further aggravated by the oil price instability, a
more hawkish northern America toward the immigrants and
impatient Europe played down attempts to send more workers
to these regions, but the remittances have kept its upward
pace unbridled with East Asia coming forward. In 2006 over
$5,485m was remitted by the expatriate workers, registering a
29.06% growth over the last year’s $4,250m. The table shows
month-wise inflow of remittances for 5 years (figures in m$):
Period
January
February
March
April
May
June
July
August
September
October
November
December
Total
2002
252.3
213.8
230.3
227.5
230.5
232.2
250.1
235.0
243.3
243.4
259.6
229.9
2,848
2003
275.6
234.6
275.7
284.3
255.7
274.8
258.8
227.7
248.3
308.2
245.4
289.7
3,179
2004
357.1
256.3
311.4
283.3
278.1
307.7
286.7
271.7
275.4
297.0
267.3
379.2
3,571
2005
316.3
329.1
400.3
367.9
311.8
345.8
342.5
377.4
351.5
374.2
316.3
417.0
4,250
2006
396.0
424.0
476.7
410.4
487.2
429.1
412.8
471.2
448.4
377.3
596.0
556.0
5,485
The flow of remittance soared by nearly 150% in the last 5
years, while overseas manpower employment has doubled. In
2006 some 0.40m people left the country for joining jobs
overseas, compared to 0.20m in 2001 and 0.252m in 2005.
United Arab Emirates alone hired the single highest number
of 130,204 people, while Saudi Arabia employed 109,513 in
2006 alone. compared to 61,978 and 80,425 in 2005. Other
countries that hired Bangladeshi workers include Kuwait with
35,775, Malaysia 20,469, Bahrain 16,355, Oman 8,082, and
Qatar 7,691 workers.
During the CTG era, the number of workers migrating abroad
marked a sharp rise, as it was about 46,474 in November and
49,012 in December alone. At present over 50% of around
5.0m migrant workers and professionals are in the Middle
East region, who send about 70% of the total remittances.
Bangladesh earned over $41.4b as remittances in the past 3
decades, since overseas employment market was opened for
the local skilled and semiskilled workers in 1976. The number
of Bangladeshis absorbed in overseas jobs now stands at
4.55m, of which 0.062m are women. Of them only 0.973m
migrant workers have been covered by the official database
launched in 2004. However, unofficial sources suggest that
the size of Bangladeshi diaspora was over 7.0m thanks to the
safe presence of a large number of undocumented workers in
many countries with blessings of the employers.
Forex reserve inched up
Bangladesh Bank’s foreign exchange reserves reached an alltime high last year thanks to a rise in remittance inflows and
export earnings. The gross foreign exchange reserve at the
end of December stood at $3,877m, equivalent to imports in
2.9 months, up from $3,533m at the end of November 2006,
compared to last year’s $2,826m. The table below for growth
of the reserve for the past few years shows that the reserve
does not exhibit any consistent performance, though exports
and imports grew at a steady rate:
Year
2000
2001
2002
2003
2004
2005
2006
Foreign Exchange Reserve
$1,602.1m
$1,305.5m
$1,722.2m
$2,624.1m
$3,222.6m
$2,825.8m
$3,877.0m
Growth
5.17%
(18.51%)
31.92%
52.37%
22.81%
(12.31%)
39.89%
Though Bangladesh already crossed the $4.0b mark right in
January 2007, it is still pretty small compared to other regional
economies. While China holding the world's highest foreign
exchange reserve, surpassing the trillion-dollar threshold, and
India amassing a mighty $170b in 2006,and even Pakistan
with hefty $14b, the $4.0b is pretty tiny. But it is still safe for
Bangladesh, as it is enough to cover for 3 months of foreign
obligations. At present the reserve is able to cover for over 3
months of imports, based on the average monthly import of
$1.3b for the past 4 months. This also fulfills a condition of the
IMF for disbursement of installments of credit for the poverty
reduction growth facility (PRGF) that the government must
maintain a reserve over $3.0b. The reserve is likely to grow
much in 2007.
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7
Currency depreciates at moderate rate
The year 2006 saw a relatively lower level of year-on-year
depreciation of local currency compared to that of previous
years. Against about 9% in 2005, taka depreciated by over
4% in 2006. Though the movement in USD-BDT rates was
traditionally unidirectional, taka has always been depreciating
against US dollar, but the market saw massive movements in
both the directions in 2006, appreciating and depreciating in
turns. By the first quarter of 2006, BDT depreciated by over
6% against US dollar, but by May it appreciated by 3.6%. The
USD-BDT rates remained relatively quite in mid-year. The
rate was Tk66.25 on January 01, and Tk68.10
Banks fare better
Banks in the country have performed reportedly better in 2006
than in the previous years, as indicated by their half yearly
reports. Their balance sheets now show less bad debts, as
they are allowed to write off. Their classified loans also have
waned, and business expanded. To their commendation, the
last political government withstood severe pressure from the
party circle and did not grant licenses to any new bank or
insurance company in 2006.
A large amount of bad debt written off
Bad debts worth around Tk110.0b in the country’s banking
sector have been written off from the banks’ regular books of
accounts till the end of September 2006. Estimates available
with Bangladesh Bank (BB) revealed that state-owned banks
wrote more than half of the bad debts off. BB had introduced
the writing-off system in January 2003 that allowed banks to
separate loans classified as ‘bad’ or ‘loss’ for 5 years or more
keeping 100% provisions for the written-off amount. These
written-off amounts will be deleted from balance sheet of a
bank and keep it in a separate book. Banks have also been
empowered to file case with the court to recover bad loans.
Though writing-off is an international system, experts observe
that sometimes it gives misleading information about real
condition of a bank’s loan portfolio, since significant amount of
bad debts separated are actually not recovered.
Default loans decline, but not in PCBs
Total default loan in the banking system stood at Tk206.86b in
September 2006, down from Tk234.65b in June 2006. Of the
total loans disbursed, share of classified loans was 14.3% in
September, reduced from 16.6% in June 2006. It is, however,
higher than that of December 2005, Tk175.09b. In October it
further declined, as Bangladesh Petroleum Corporation has
rescheduled its huge amount of loans. However, it is reported
that the default loans have risen a little at the end of the year
because of the recipients’ failure to repay installments due to
political chaos. But the amount is still below the level of 2005.
Defaulted loan volume of 4 nationalized commercial banks
(NCBs) marked a 20% drop, reaching Tk30.77b at the period
end. The total default loan in Sonali Bank slid to Tk56.46b in
September from Tk97.01b in June 2006, but in Rupali Bank it
grew from Tk8.67b to Tk18.06b. Classified loans in the private
commercial banks (PCBs) have also risen by Tk3.15b during
the period, but declined in development financial institutions
(DFIs) by Tk0.18b. Default loan in PCBs reached at Tk46.01b
(6.13% of outstanding loans) in September from Tk42.86b
(5.98%) in June. Classified loans with DFIs were Tk38.71b
(32.32% of their outstanding loans) in September, as against
Tk38.89b (32.70%) in June. Default loans rose by Tk20m in
foreign commercial banks (FCBs) during the above period,
reaching Tk0.65b in September.
A handful of defaulters
Amount of loans defaulted by 561 loanees, who are among
the top 20 defaulters of some 30 private commercial banks
(PCBs), now stands at Tk24.21b, making 56% of the PCBs'
total classified loans. Up to June 2006, outstanding loans by
the banks reached at Tk716.47b, of which Tk42.85b were
classified. Though PCBs have sued some 244 defaulters for
realizing Tk12.72b, almost all cases remained pending in
courts for long due mainly to usual slow procedures. Top
defaulters account for 70% to 90% of PCBs' total classified
loans. As the process of loan recovery through filing cases is
quite lengthy, banks are unwilling to sue the defaulters,
preferring recovery of the bad loans through negotiation. It is
alleged that some of the loan defaulters often escape the rule
of laws, as they belong to the influential coterie in the society
and politics.
BB data shows that up to September 2006 some Tk109.81b
has been written off by the banks, as against Tk106.51b in
June 2006. Thus banking sector has separated bad debts
around Tk3.30b in 3 months. Of them NCBs have separated
bad debts worth Tk36.63b since January 2003. The 5 SCBs
wrote off some Tk29.29b during the said period, while PCBs
wrote off Tk42.37b, and with a very low amount of nonperforming loans, FCBs have written off around Tk1.53b.
Provision shortfall widens
The shortfall in provision against bad debts in the banking
sector has jumped by 65% in the third quarter of the year,
mainly due to huge shortage in NCBs. BB statistics showed
the total provision shortfall stood at Tk53.12b at September
end from Tk34.43b in June end 2006. The 48 banks have
kept some Tk54.99b as actual provision for their bad debt
portfolio against a required amount of Tk108.11b. Combined
shortfall of 4 NCBs stood at Tk43.62b at September 2006,
which was Tk10.13b at June 2006. Soanli Bank suffered a
shortfall worth Tk29.16b in the first quarter, while it enjoyed a
surplus of Tk126.8m in June 2006. Combined provision
shortfall in the private commercial banks (PCBs) increased
significantly to Tk5.22b at September from Tk4.26b only a
quarter back. However, out of 30 PCBs, 26 have surplus
provision. Oriental Bank has the highest amount of shortfall
worth Tk6.07b, while Social Investment, First Security and
Bangladesh Commerce Bank suffered marginal shortfalls.
The total provision shortfall in the 5 development financial
institutions (DFIs) declined slightly to Tk5.0b in September
from Tk5.01b in June. Among the 5 DFIs Bangladesh Krishi
Bank has huge shortfall of provision, while provision surplus
of foreign banks increased to Tk0.73b from Tk0.72b during
the period.
Default with SoEs grows on
The total outstanding and classified loans of some 38 stateowned enterprises (SOEs) with the nationalized commercial
banks (NCBs) and a special bank stood at Tk192.62b until
October 2006. Of this, outstanding loans worth Tk175.13b
and classified loans at Tk17.52b are owed by the SOEs to
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8
Sonali, Janata, Agrani, Rupali and Basic Bank. Bangladesh
Petroleum Corporation has the highest outstanding amount
worth Tk100.55b, but has no classified loan. Bangladesh Jute
Mills Corporation has outstanding loans of Tk30.34b, where
classified loans are Tk10.56b. Power Development Board has
outstanding loans worth Tk13.65b with two NCBs. Due to dire
political disturbance at the fag end of the last regime a large
number of loans has fallen classified as some SOEs failed to
decide repayments. While some SOEs could not simply repay
because of fund shortage.
Domestic credits grow at banks
Domestic credit grew by 6.31% during the first 4 months of
the current fiscal due to rise in credit to public and private
sectors. Total outstanding credit shot to Tk1,890b in October
2006 from Tk1,777b in June 2006. Of the total borrowing of
Tk112b during the period, the government net borrowing was
Tk47.6b, while private sector borrowed Tk60.24b and other
public borrowings totaled Tk4.34b. Taking into account the
loans from non-bank and external sources for financing the
budget deficit, the total government borrowing stood at
Tk63.8b, against Tk46.6b in October 2005. Total domestic
outstanding debt expanded by 17.5% to Tk754b at October
end of 2006, which was Tk642b in 2005.
Overdue industrial term loans at the end of September 2006
stood at Tk40.02b, against Tk39.74b in June 2006. Overdue
as share of outstanding industrial term loans improved, as it
decreased to 14.2% of the total outstanding in September
from 18.13% in June 2006.
Telecom sector improves, others stumble
Bangladesh has achieved a resounding record in growth of
mobile phone connections during the year. Number of mobile
phone and fixed phone subscribers crossed 20.0m in October
2006. As per the Bangladesh Telecommunications Regulatory
Commission (BTRC) data, mobile and land phone operators
so far provided over 20.3m connections at the end of the
month. Bangladesh has currently 6 mobile phone operators,
of which Warid Telecom is yet to launch its operation. There
are 19 land phone operators, though only 5 including stateowned Bangladesh Telegraph & Telephone Board (BTTB) are
in operation. Mobile phone subscribers rose to nearly 19.14m
in October from 17.66m in September 2006. The land phone
operators added only 1,000 new customers in October to
reach around 1.134m at the month end. GrameenPhone, the
largest cell phone operator, reached 10.0m, while the second
largest operator AKTel reached 4.56m, Banglalink 3.25m and
CDMA operator CityCell netted 0.97m subscribers. The stateowned Teletalk reached 0.36m at the end of October. This
has taken teledensity to a new height at 14.3%, i.e. every 7
people in Bangladesh now own a telephone connection.
Bangladesh is now one of the top 10 mobile phone markets in
the Asia-pacific region in terms of adding net subscribers with
over 20.0m, contributing 1% of GDP. Industry people expect
that the number of subscribers would cross 50.0m within the
next 3 years as start-up cost as well as call tariff would be
constantly going down. The current penetration rate is around
12%, and with a 30 to 35% rate, operators can reach 50.0m in
the next 3 years. Economists suggest that the country has a
consumption capacity of this quantum.
Source: AIMS Res earch
Bangladesh missed the much-awaited opportunity for linking
its rail network with the proposed Trans-Asian Railway (TAR),
because of lack of a policy decision by the first CTG at the
end of the year. The proposed TAR network aims to promote
trade and balanced development in the largest and fastestgrowing continent. The 81,000km network, first mooted by UN
back in 1960 would link the capitals, ports and industrial hubs
across 28 Asian countries all the way to Europe. The railway
network will ease international trade and create the conditions
for shared prosperity, as 12 of world's 30 landlocked countries
are in Asia. Bangladesh has failed to respond to the proposed
network because all proposed alternative routes were through
India that virtually provides India a de facto transit, a facility
that the immediate past government was unwilling to grant.
Capital market regains vibrancy
The capital market has been out of warmth almost entire year
as apparently there were no visible incentives in the market
and banks tried to mobilize funds through enhanced interest
rates. The simmering political climate also exerted negative
impact on the market, which is manifest in the fact that trading
on DSE took place only for 230 days in 2006, compared to
258 days in 2005.
Despite the long bearish mood prevailed since the last half of
2005, the market began to change in the last quarter of the
year when the CTG took office on October 29, 2006. As seen
earlier, investors feel more comfortable with the nonpartisan
CTG, as it allows a relatively congenial atmosphere for trading
securities. But unlike the other two CTG eras, the market did
not move as desired unless a new CTG took office in January
2007.
The stock market took several undulating rides since the very
beginning of the year. As the relatively higher interest rates on
government and bank savings instruments has become more
intriguing, most individual investors started diverting fund to
such high yielding instruments at the beginning of the year.
Besides, with the induction of more primary shares, investors
kept selling shares to finance them. And the annual budget
that was laid down in early June has little or no mention of the
stock market, but had an indirect disincentive. Undeclared
money holders, who had long been using the capital market
as a vehicle for laundering their ill-earned incomes, apparently
shifted their investments from the capital market to the real
estate sector to reap low tax benefits for their unaccounted
money.
DGEN (0.00, 0.00, 1,762.43, +5.89929)
1780
1760
1740
1720
1700
1680
1660
1640
1620
1600
1580
1560
1540
1520
1500
1480
1460
1440
1420
1400
1380
1360
1340
1320
1300
1280
1260
Novem ber
1780
1760
1740
1720
1700
1680
1660
1640
1620
1600
1580
1560
1540
1520
1500
1480
1460
1440
1420
1400
1380
1360
1340
1320
1300
1280
1260
DSE General Index
2006
February
April
May
June
July
Augus t
Septem ber
Novem ber
2007
February
This kept the market bearish till July. But quite interestingly,
when the deteriorating political situation, which in fact slipped
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9
into a crisis at the end of October, began to vibrate the market
with new hope, individual investors joined to the spree with
rather more buys than panic sales. They took the political
crisis for a temporary pitfall instead of an ominous danger.
Outraged by the prolonged strife, investors not only ignored
the moods and moves of the political parties, but by investing
more created pressure on them so that they refrain from any
harsh measure that thwart the bullish mood in the market.
Indicators down
Market capital at Dhaka Stock Exchange (DSE), the prime
bourse of the country, has reached at Tk305.28b on the last
trading day of the year, equivalent to $4,555m, which is only
7.34% of GDP of FY2005-06. During the year DSE General
Index dropped from 1677.35 on the last trading day of 2005 to
1609.51 on the same day in 2006, registering a decline of
4.04%. Index hovered at around 1500s most of the time (46%
of all trading days), followed by at 1300s (27%) and 1600s
(15%) with the lowest on 15 June (1294.04) and the highest
on 15 January (1712.49).
During 2006 some 832.7m shares worth Tk65.06b ($975m)
have been traded in 228 days, compared to 883.3m shares
worth Tk64.84b ($979m) in 258 days in 2005, marking a
5.73% slide in share volume and 0.34% in value. However,
per day trade volume was 2.91m shares worth Tk251m
($4.0m) in 2006, compared to 3.42m shares worth Tk251m
($3.8m) in 2005. Compared with Index decline, this shows
that the decline was more induced by the volume of trade
than the prices of shares.
The following table shows corporate performance of the listed
securities:
Sector
Banks & FIs
Investment
Engineering
Food & allied
Fuel & power
Jute
Textiles
Pharmaceuticals
Paper & printing
Service
Cement
Info Tech
Leather
Ceramic
Insurance
Miscellaneous
Total
EPS
48.55
17.78
35.42
21.11
27.61
24.40
11.99
81.31
10.12
4.43
27.57
16.89
68.08
6.63
21.52
77.73
49.55
DPS
22.50
13.32
16.32
2.98
4.12
Nil
9.00
34.67
5.16
1.89
17.06
11.82
15.28
8.43
19.20
33.82
22.42
PER
11.14
11.22
9.53
18.40
14.01
10.39
11.87
5.54
7.84
12.53
16.63
12.01
6.93
14.71
7.43
7.82
10.51
DYld
4.16
6.68
4.83
0.77
1.07
Nil
6.47
7.39
6.51
3.41
3.72
5.83
3.24
8.65
12.01
5.56
4.29
*Stock dividend has been calculated on face value; therefore, actual
dividends and their yield are much higher
Regulators long on renegades
The listed companies have shown good performance during
the year. As SEC has enhanced its monitoring and began to
punish the wrongdoers, their corporate performance has also
been improved. Yet out of 255 listed companies, some 58
have failed to hold annual general meetings (AGMs) by
December 2006, which is 22.75% of the total companies.
SEC has warned 10 listed companies for not holding AGM
and paying dividend to the shareholders. It has also issued
show cause and hearing notice to 40 default companies last
year for failure of complying with the SEC rules. Meanwhile,
holding of AGM by 18 companies await for court verdicts.
SEC also fined 39 directors of a problem bank for breaching
securities rules, and caught 9 shareholders of another bank
allegedly involved in dubious transactions through insider
trading.
Market gets more streamlined
Meanwhile SEC approved Stock Exchange (Direct Listing)
Regulations, 2006 with a view to facilitating direct listing of
public limited companies with a minimum paid-up capital of
Tk50m. Companies that are in commercial operation for at
least 3 years, do not have any accumulated losses and
earned profits for a minimum of 2 years out of last 3 would be
eligible for direct listing with bourses.
To differentiate the newly listed companies SEC introduced a
new category in stock exchanges called ‘N’ following a
proposal placed by the consultative committee of SEC. The
trading of a newly listed company under ‘N’ category will be
only for an initial period and upgradation and degradation of
the shares would be adjusted under the existing rules.
SEC reportedly plans to introduce a circuit breaker system on
trading of Z category shares in the bourses to protect the
investors from price manipulation on a single trading day. At
present the circuit breaker system controlling individual share
prices is effective on trading of A, B, G and N category shares
whereby price of shares are kept cannot cross a certain level,
up or down, on a single trading day. Earlier SEC withdrew the
circuit breaker system on trading of category Z shares on
March 13, 2004. At present, there are some 95 companies
under category Z in DSE. Most of them do not hold AGM and
declare dividend regularly. But in recent times the bourses
demanded introduction of the system arguing that the market
manipulators sometimes took the absence of any price
restrictions to their advantage. SEC is also planning to limit
the time of settlement of A, B, G and N category shares to 2
days from existing 3 from the early next year. SEC also
recommended for providing money-netting facility for buying
shares of A-category against sale proceeds of the Z-category
shares. At present the facility is applicable for A-category
shares only. To support this, trading settlement period of Z
category shares will be T+3+4 instead of existing T+4+3. The
new facility will help improve liquidity in the capital market as
well as encourage investors to buy good shares rather instead
of the weak ones.
MFs get 10% quota in IPO
SEC in revision of the initial public offer rules approved 10%
quota for mutual funds to promote subscription by institutional
investors in IPOs. The new move allowed the mutual funds to
acquire a fair share of IPOs, as demanded for long by the
asset management companies. But the state-owned ICB and
BSRS, two fund managers, cashed in the opportunity for their
unregistered mutual funds with borrowed money that curbed
profitability of the registered mutual funds of ICBAMCL and
AIMS of Bangladesh Ltd. This not only violated SEC rules, but
also damaged the spirit of quota. Earlier there was a 10%
quota for only nonresident Bangladeshis (NRBs).
ASSET & INVESTMENT MANAGEMENT SERVICES OF BANGLADESH LIMITED
Chandrashila SuvastuTower (5th floor), 69/1 Panthopath, Dhaka 1205, Bangladesh
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10
Number of IPOs shrank, but fattened in size
Some 7 companies have floated primary shares during the
year raising around Tk1.77b through initial public offerings
(IPOs). Besides two state-owned power companies also got
listed under direct listing regulations. Companies that issued
IPOs in 2006 are Jamuna Bank, S Alam Cold Rolled Steels,
LankaBangla Finance, Bangladesh Industrial Finance, IPDC
of Bangladesh, Brac Bank and Prime Islami Life Insurance.
Against nearly Tk1,981m offered these issues were hugely
oversubscribed, as some Tk14,534m were doled out by the
zealous investors, making over 7 times of over-subscription.
Of the IPOs some 13 issues were listed during the year, with
a hefty Tk10,964m inducted into the market, of which 2 stateowned companies worth Tk4,914m got directly listed. In 2005
the market absorbed 17 new issues with Tk1,468m offer,
against which some Tk15,318m was subscribed. The issues
inducted some Tk3,207m capital to the market. The following
table shows the IPO scenario for 2006:
Issue
Offered
Subscribed OversubsmTk
mTk
cribed by
Jamuna Bank
514.80
3,900.47
7.6 times
S Alam Steel
120.00
425.85
3.5 times
LankaBangla
90.00
1,375.12
15.3 times
BIFC
110.96
1,570.68
14.2 times
IPDC
250.20
1,973.93
7.9 times
Brac Bank
850.00
3,871.07
4.6 times
Prime Islami Life
45.00
1,417.05
31.5 times
Total
1,980.86
14,534.17
7.3 times
government criticized mobile companies for their reluctance to
enlist in the capital market despite making enormous profits
from the country’s burgeoning mobile phone market, which
has seen more than 100% growth in the last 3 years.
Delisting back again
DSE has delisted Eagle Box & Carton Manufacturing Co Ltd
and Rabeya Flour Mills Ltd, and with these, so far delisted
some 36 companies since 1994. Most of these companies
were meted out with the ignominious ouster after they failed to
run their operations properly, depriving the shareholders of
their minimum rights. However, a few of them voluntarily
opted for delisting. Of these, 15 were delisted in 2004, 14 in
1996, and 2 each in 1994 and 2001. As per the existing law,
investment was refunded to the shareholders in most cases.
Dematerialization blaze fades
The paper scripts continued to be dematerialized with the
Central Depository Bangladesh Ltd (CDBL), but only at a
slower pace. Starting on January 24, 2004 with the shares of
Square Pharmaceuticals Ltd some 105 securities have been
listed with CDBL at the end of December 2006, of which only
17 have been listed in 2006 including 11 new issues. The
share of market capitalization of the companies is over 82%.
A total of 897,548 depository or beneficiary owner (BO)
accounts were opened for electronic trading settlement up to
December 31, 2006 against 667,817 on December 31, 2005,
marking a growth in opening BO accounts 34.4% in a year.
However, during the period over 50,000 BO accounts were
also closed.
Of the above, 5 got listed both on DSE and CSE. The rest two
companies, BRAC Bank and Prime Islami Life Insurance, will
be listed in January 2007. It was noted that almost all IPOs
were oversubscribed, proving immense investor confidence
on the market. Shahjalal Islami Bank Ltd got permission from
SEC to float primary shares worth Tk935.8m, the largest IPO
in the banking sector. Subscription of the bank will start on
January 14, 2007 and close on January 18, 2007.
SoEs get listed, finally
The capital market stakeholders had long been struggling to
persuade the government to offload the profit-making stateowned enterprises (SoEs). During the year, two such SoEs
have been listed with the stock exchanges. Dhaka Electric
Supply Co (DESCO) made its debut on DSE on June 18, as
the government earlier decided to offload its 25% stakes in
the capital market. Some 10% of the offloaded shares will go
to the employees of the company as per the government
approval. DESCO is the first company to be listed with the
bourses under direct listing rules. Earlier, Square Textiles Ltd
had been directly listed under a special arrangement in 2002.
Though DESCO received lukewarm response from investors
in the block market trading, it was later traded in considerable
volume when the block was made free. The second SoE,
Power Grid Co. Bangladesh, was directly listed on October
09, 2006. At present both issues are being traded in good
volume.
Despite there were incessant pressure on the government to
devise ways to force the telecommunications companies to
get listed and offload a substantial part of their shares, none
of the existing 6 companies came forward. Earlier, the
New rules and regulations
 SEC has amended the Direct Listing Regulation 2006, as
proposed by DSE, that fixed minimum paid-up capital at
Tk100m and commercial operation to be at least 5 years.
 SEC has amended the SEC (Merchant Banker & Portfolio
Manager) Regulations, 1996 that allow the bankers to do
portfolio management with their own funds.
[Sources used include daily newspapers; Monthly Reviews by DSE, Quarterly
Reports by SEC, Monthly Economic Indicators, Annual Reports as well as
Scheduled Banks Statistics of Bangladesh Bank, and in-house research
reports, etc.]
Yawer Sayeed, Managing Director & CEO
Wasiq al Aazd, Head of Operations
Laila Mahmuda Shilpi, Manager, Research
Shahida Akhtar, Executive Officer, Research
Subrata Bhakta, Executive Officer, Fund Management
Our Mission:
To be a household name in Bangladesh and be recognized as a
reliable companion in the pursuit of wealth creation.
Our Goal:
To take the extra mile to meet the customer’s needs through
continuous innovation of suitable financial products and offering the
best services.
Our Values:
To strive for achieving and maintaining the highest ethical and moral
standards to earn the trust of our clients and patrons.
Published by AIMS of Bangladesh Limited
in association with
Aims Information & Marketing Services
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Chandrashila SuvastuTower (5th floor), 69/1 Panthopath, Dhaka 1205, Bangladesh
Tel : (+88-02) 862 1821-3; Fax : (+88-02) 862 1109; e-mail : aims@aims-bangladesh.com; web: http://www.aims-bangladesh.com