Performances and Challenges

20.10.2009, Sunday

President Calls for Concensus: Stresses mutual cooperation among parties: President Zillur Rahman yesterday called for mutual cooperation and understanding of the political parties to reach consensus on issues of national interest. I hope the country’s political parties will extend their hands of mutual cooperation and understanding in the national interest and for development of fair democracy,” he said addressing the inaugural function of ‘Jagannath University Day’ at the Osmani Memorial Auditorium. More: The Daily Star, 20 October 2009

Global Recession: Tk 3424cr stimulus plan announced: The government yesterday announced a Tk 3,424-crore stimulus package to cushion the blow of global economic downturn. The fund includes Tk 450 crore in cash subsidies for the export sectors already hit by the recession. Unveiling the plans at a press conference, Finance Minister AMA Muhith said the package may not satisfy all as only selected sectors will have cash incentives.  However, he said, those who are not getting the cash benefits will receive a bundle of policy supports no less valuable.

Of the plans, some will be implemented during the last quarter of the current fiscal year and the rest in fiscal year 2009-10. In April-June period, cash incentives for export of jute goods, leather and leather goods, and frozen foods will be increased by 2.5 percent.

To meet the expenses for fiscal and policy support under the stimulus package, an additional Tk 3,424 crore will be allocated in the revised budget for the current fiscal year. Of the allocations, Tk 450 crore will be spent on cash subsidy for export sectors, Tk 1,500 crore on agriculture, Tk 600 crore on power sector, Tk 500 crore on re-capitalisation of agriculture loans and Tk 374 crore on social security programmes.  With these, the budgetary allocations will mount up to Tk 14,554 crore, from Tk 11,130 crore originally.

Prime Minister’s Finance and Planning Adviser Dr Mashiur Rahman, Bangladesh Bank Governor Dr Salehuddin Ahmed, Finance Secretary Dr Mohammad Tareque, Economic Relations Division (ERD) Secretary M Musharraf Hossain Bhuiyan, National Board of Revenue (NBR) Chairman Dr Nasiruddin Ahmed were present at the press conference held at the secretariat.

The finance minister said the additional funding for the social safety schemes will mean a rise in the number of pension-holders and the amount of pensions.  The finance secretary said Tk 1500 crore allocated for agriculture will be used to ensure smooth flow of agri-loans through recapitalisation of Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank and Karmasangsthan Bank.

The amount set aside for power sector will be used to shore up the financial base of the Power Development Board (PDB).  Of the export sectors, jute and jute-made products will see cash incentives rise to 10 percent from 7.5 percent, leather and leather goods to 17.5 percent from existing 15 percent, frozen foods and other fish export to 12.5 percent from 10 percent. However, no additional cash incentive has been announced for garments and ceramic sectors.

Explaining the rationale for not granting cash incentives to RMG and ceramics industries, the finance minister said these sectors have indeed a slowdown in growth, but their export figures did not dip in the current fiscal year. “We’re not saying they are insulated from the effects of economic downturn. But the projection up to June this year says the time is not ripe yet for giving them cash assistance,” he added.

Muhith said the government has drawn up the fiscal package in light of the recommendations of its special task force and technical committee. Under the fiscal package alongside fiscal and financial stimulus plans have been taken for policy support and administrative reforms. It will be implemented in immediate, medium and long-term programmes.

The policy supports to be executed during the last quarter include disbursing 70 percent of the incentives immediately after primary examination of the claims and the rest 30 percent after necessary audits. If any beneficiary is later found to have taken more than what it really needs actions will be taken against it. Previously, the money would be released only after a full audit.

To help the export sector, Bangladesh Bank will expand its credit at 7 percent interest to all products. It will also stretch the time limit for repayment to 120 days, upped from 90 days at present. The central bank has already raised the limit on Export Development Fund’s credit for a single borrower to $1.5 million from $1.0 million.

It yesterday issued a circular announcing the decisions to bring down the lending rate below 13 percent and allow rescheduling facility without down payment. Meanwhile, the finance ministry has requested the civil aviation and tourism ministry to withdraw the surcharge on carrying fruits and vegetable on international routes. Programme to supply garment workers rice at subsidised price has started.

Bangladesh Bank will take necessary steps on case-to-case basis to help the export-oriented industries survive the recession. At the press conference, the finance minister described the measures planned to be included in the next fiscal year’s budget to increase export, remittance and investment.

BB Governor Dr Salehuddin Ahmed said sectors that have not been chosen for cash incentives will get banking facilities worth much more than the direct monetary help. He said the commercial banks will have to make sacrifices with regard to their earnings to ensure these facilities for the exporters.

Source: The Daily Star, 20 April 2009

Stimulus falls short of expectations: Garment leaders say they are neglectedBusiness leaders yesterday expressed dissatisfaction over what they said was the neglect of the readymade garment sector in a stimulus package, but lauded the government’s “timely” steps for other areas to tackle fallout from global recession.

The mixed reactions came hours after Finance Minister AMA Muhith rolled out a Tk 3,424 crore stimulus package that consists of cash subsidies, loan facilities and social security.

Under the package, the government has marked Tk 1,500 crore for the agriculture sector, Tk 500 crore for farm loan re-capitalisation, Tk 600 crore for the power sector, Tk 374 crore for social security (food) and Tk 450 crore for the exports sector.

Jute and jute goods, leather and leather goods and frozen foods will be beneficiaries of the stimulus to the exports sector.

Asked to comment on other export-oriented sectors, including garments and textiles, Muhith said different steps such as policy support and bank-loan rescheduling have been declared for those areas.

“I welcome the overall initiative taken by the government in response to the demands of the business community. However, it is not a full-fledged stimulus package,” said Annisul Huq, president of Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), the apex trade body.

Huq said the highest export-earning sector should have been given more importance in the stimulus package, as garments exports growth is declining.

“Similarly, the spinning sub-sector has also been hit by the recession. The spinners should also benefit from the announced stimulus package,” Huq said.

Talking to The Daily Star, Abdus Salam Murshedy, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said he was not delighted over the terms of the stimulus package, as the government excluded the garments sector.

“Since the government did not grant any cash subsidy for the garments sector, we demand a full-fledged implementation of the policy support, which was earlier demanded from the government. Proper implementation of those demands will help offset losses from the recession,” Murshedy said.

Earlier, the BGMEA urged the government to provide bank loans at a single digit interest rate, relaxation of the Credit Information Bureau rules, termination of the 0.25 percent tax at source, extension of loan rescheduling from the three-and five-year terms to seven and 10 years and withdrawal of VAT on utilities.

“I hope the government will consider the garments sector in the second phase of the stimulus package,” Murshedy said.

“I am disappointed by the terms of the stimulus package, as the garment and knitwear sectors have not been taken into account,” said Fazlul Hoque, president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), in an instant reaction to the financial stimulus.

Abdul Hai Sarker, president of the Bangladesh Textile Mills Association (BTMA), said the announced stimulus package is inadequate, as the textiles sector will not benefit from it.

Spinning, under the primary textile sector (PTS), is the most affected by the recession and yet it has been neglected by the stimulus package, Sarker said.

He said the latest move has betrayed the government’s “unfeeling attitude” to the spinning sub-sector, which is vital to the readymade garments sector.

Later in the day, leaders of BGMEA and BKMEA from separate press conferences urged the government to review its decision and include woven and knitwear in the stimulus package.

In response to a query, Murshedy said the government should form a sub-committee, if necessary, to review the decision. “We are disappointed with the government’s decision as the whole clothing sector has been ignored.”

The BKMEA president said if the country’s garment sector sinks due to the recession, it would be difficult for the sector to recuperate. “The government has to bear the burden.”

Kazi Belayet Hossain, president of Bangladesh Frozen Foods Exporters Association (BFFEA), said increasing the cash incentive from 10 percent to 12.50 percent is too inadequate to offset the losses, as the exports of frozen foods declined by 11 percent in the July to February period due to the recession.

“At present, we are facing a liquidity crisis in the exports of frozen food. We need cash to stay on,” Hossain said.

“Cash subsidies would be given against export performances, but the problem is that we are now unable to export the item as demand for the luxury food item has declined significantly in the western countries,” he said.

Source: The Daily Star, 20 April 2009

Recession package for affected exporters in 4 days

Commerce Minister Faruk Khan today said the government will announce a bailout package of Tk 2500-3000 crore

Finance Minister AMA Muhith & Commerce Minister Faruk Khan

 for the businessmen affected by the global economic recession.

 “The package will cover only the businessmen who were affected by the recession,” he told reporters this noon at the Secretariat. “The businessmen involved in jute, jute products, garments and textile, frozen food and leather and who have been suffering from the current economic meltdown, will get this benefit,” he said.

 Earlier today, Finance Minister AMA Muhith said the government will announce a special financial support package for the exporters affected by the global economic crisis within four days.  After a meeting with the officials of the Association of Development Agencies in Bangladesh (Adab), Muhith told reporters that the package would cover only the exporters who were already affected or likely to be affected by the recession.

 He said the government would follow the existing rules for offering such packages. The government will give cash to the exporters.

Source: The Daily Star, Online Edition,  15 April 2009

BTMA demands 15pc cash incentive for textile sector

Textile mills owners today requested Prime Minister Sheikh Hasina to raise cash incentive for textile sector to 15 percent from five percent to face the global financial recession.

 Leaders of Bangladesh Textile Mills Association (BTMA) met the prime minister today at her office and made the demand. “We submitted our proposal of increasing cash incentive from five percent to 15 percent to rescue the textile industry from the recession,” BTMA President Abdul Hai Sarkar told reporters after the meeting.

 The BTMA leader said 10 spinning mills were already shut in the fallout of the recession. Other mills will face the similar consequences if the government does not increase the incentive, he added.

Source: The Daily Star, Online Edition, 15 April 2009

Exporters demand immediate support

Exporters of fabrics, readymade garments, jute and yarns, raw jute, leather and leather goods, and frozen foods have placed their demands for cash incentives, cut in bank interest rate, special exchange rates for exporters and other fiscal measures for them to offset the impact of the ongoing global recession.

The Bangladesh Textile Mills’ Association has demanded that cash incentive for textile millers should be increased to 10 per cent from the existing 5 per cent and a two-year moratorium on the repayment of long-term project loans.

The Bangladesh Garment Manufacturers and Exporters’ Association has demanded 10 per cent cash incentive on the export earning as performance bonus. ‘The government needs at least Tk 700 crore ($100m) a month to meet the demands of the Bangladesh Textile Mills’ Association and the Bangladesh Garment Manufacturers and Exporters’ Association,’ said a member of the task force working to recommend what the government should do to offset the impact of the global financial meltdown.

Exporters of raw jute, jute goods and frozen foods have demanded an increase in cash incentive to 20 per cent from the existing 7.5 per cent on the export earning. The frozen foods exporters have also demanded a five-year moratorium on 40 per cent of their bank loans.

The Bangladesh Finished Leather and Leather Goods Exporters’ Association has demanded 25 pert cent of cash incentive on the export earning. Only shoe exporters now enjoy 7.5 per cent of cash incentive. The association has also demanded a one-year moratorium on the loans of the tanners as most of their products remained unsold because of a marked decline in the flow of orders from buyers.

Earlier in mid-March, the Federation of Bangladesh Chambers of Commerce and Industry demanded a bailout package of around Tk 6,000 crore as support for export sectors. The federation demanded Tk 1,400 crore for spinners, Tk 3,300 crore for RMG manufacturers and Tk 1,500 crore for exporters of primary goods, including jute, frozen foods and vegetables. Private sector aviation companies have also demanded financial support or stimulus package for them.

In March, the Airline Operators’ Association of Bangladesh demanded a fund of Tk 1,000 crore. It said airline operators were incurring losses because of the high cost of flight operation and decline in traffic on domestic and international routes.

The businessmen said they were frustrated at the government inaction, when the country was losing market, as exporters of other countries were forcing them out of the global market price competition. Exporters of China, India, Indonesia and Pakistan, who have received various government supports such as devaluation of currencies, are set to compete against Bangladeshi suppliers on the global market, they said.

‘Lack of support has frustrated local exporters as many of their buyers have started showing reluctance to import Bangladeshi items because of a decline in price competitiveness,’ said Abdus Salam Murshedy, president of the Garment Manufacturers and Exporters’ Association. Ahmed Hossain, president of the Bangladesh Jute Spinners’ Association, said entrepreneurs would fail in a few weeks to keep their industries if the bailout package could not be immediately announced. ‘The price of jute yarns declined by 25 per cent and its export volume came down by more than 30 per cent in six months,’ he said.

Tauhidur Rahman, secretary general of the Bangladesh Frozen Food Exporters’ Association, said only 30 shrimp processing factories were in operation when 70 were in operation this time in 2008. ‘Shrimp export is about to collapse and many of our buyers are rushing to China and India as the weaker currency and cash incentive makes shrimp cheaper in the countries,’ he said.

In eight months of the current financial year till February, the frozen food export earning declined by 11 per cent, compared with its export the same period in the previous financial year. In the period, jute goods export earning declined by 18 per cent, raw jute by 19 per cent and finished leather by 33 per cent. Frozen food, raw jute, jute goods and finished leather exporters experienced a big decline in exports from the mid-2008.

Source: The Daily New Age, 11 April 2009

BB chief against sector-wise stimulus

Staff Correspondent

The country does not need to provide bailout package to any entire sector for offsetting impacts of global recession unlike the packages offered by the Western governments, the central bank governor said on Wednesday.
   Salehuddin Ahmed stressed on promoting inward looking development to significantly substitute export market of some products, also airing confidence of retaining the flow of remittances in the coming months through regulatory and incentive measures to keep a healthy foreign exchange reserve.
   ‘Bangladesh doest not need economy-wise [bailout or stimulus] package,’ he stated while making deliberation at a seminar on ‘Global Financial Crisis and Impact of Recession on Bangladesh’ at the Independent University. Bangladesh.
   The Bangladesh Bank governor, when asked later, elaborated that no blanket package should be given to a sector since ‘nothing like collapse of financial institutions in the West happened here’. He, however, felt that those who would be really affected by the fallouts of the global crisis should be given necessary supports.
   Salehuddin dispelled the complaints of complacence in Bangladesh, which remained largely unaffected from the global crisis despite risks involved in the next phase of recession effects, and added that the Bangladesh Bank, in close cooperation with the finance ministry, was monitoring the situation to take measures. ‘We are watchful but we don’t want to give any bad signal,’ he pointed out,
   He further showed silver-lining in the flow of remittances in the nine of the current fiscal year at $7.29 billion compared to $7.9 billion in the entire 2007-08 fiscal. ‘If number of Bangladesh people abroad comes down, I will still be able to tap the remittances by increasing official flow because 30 per cent to 40 per cent remittances still come through unofficial channel,’ said the governor.
   He informed the gathering that Bangladesh, as only country in South Asia, had current account surplus and it also had a positive balance of payments with $$462 million as the latest surplus.
   The central bank is trying to ensure adequate liquidity with the banks for distribution of both industrial and agricultural credits. ‘We want to ensure that there is adequate credit flow to the productive sector; otherwise, business will come to a halt,’ Salehuddin maintained. ‘We want that real sector does not suffer from credit crunch.’
   He said Bangladesh Bank was also trying to increase re-financing fund of Tk 550 crore so that entrepreneurs of small and medium enterprises could be provided with capital for initiating venturing or running the current one properly. He also mentioned about efforts to disburse loans from Tk 3000-crore housing fund and export development fund now worth $150 million.
   Dwelling on the fall in demand in the West affecting exports from countries such as Bangladesh, Salehuddin pointed out that the country must try to increase domestic demand baking on investment opportunities and creating massive employment.
   In this context, he emphasised the importance of creating and grasping domestic market of more than 140 million people, but admitted that many investors were not taking their decisions, given the circumstances at home and abroad.
   The governor discarded suggestions to bring down significantly the interest rate on various loans. ‘Unless there is increased demand, what do you do with the money at zero per cent interest?’ he questioned at the seminar by the university’s School of Liberal Arts and Social Sciences.
   Asked about devaluation of Taka against US dollars, he said the central bank could not do so under the floating exchange rate regime. ‘If we temper artificially it will give bad signal to the market,’ he said terming the current value of Taka close to effective exchange rate. He also pointed out that even if dollar was appreciated by Tk 6, it would have given an export competitiveness of 0.7 per cent at the costs of low to the import sector.
   The vice chancellor of the university Bazlul Mobin Chowdhury appreciated the governor’s statements and thoughts on relevant issues. Pro-vice chancellor Omar Rahman moderate the discussion chaired by the director of the school Nazrul Islam.

Source: The Daily New Age, 09 April 2009

 

 

China outpaces Bangladesh in US trousers market

Kazi Azizul Islam

Taking the advantage of total quota-free access to the US market Chinese apparels exporters have outnumbered Bangladesh in trouser segment. The Chinese exporters, with their swelling shipments, out-placed Bangladesh from its number one position in US market of imported trousers, said officials at the Bangladesh Garment Manufacturers and Exporters’ Association.
Trouser shipment generated $1.3 billion out of $3.4 billion of Bangladesh’s entire apparel export earnings from the USA in 2008, so they term that the trend of exports was very much alarming for the country’s apparel sector.
The BGMEA officials quoted US commerce department data that show Chinese trouser shipments to the USA grew by robust 76 per cent in January-March of the current year while growth for Bangladesh dropped to less than 18 per cent. In 2008, Bangladesh’s trouser shipments to USA grew by more than 26 per cent over the year.
The US Commerce Department data shows in January-March, Chinese exporters shipped 105 million pieces of trousers to the US markets. Chinese shipments grew by robust 76 per cent on 60 million pieces shipped in January-March 2008.
Bangladesh’s shipment amounted at 101 million pieces in first three months of 2009 against 86 millions in the corresponding period of the past year.
Chinese exporters have regained their competitive strength as they get fresh cash incentives, full rebates on taxes and other facilities from their government,’ said M Nasir Uddin, chairman of the Pacific Jeans Limited, a leading exporter.
‘Due to much lower labour cost, Bangladesh was able to offer lowest prices earlier, but exporters in China have slashed prices much recently,’ said Nasir, ‘They [other countries’ exporters] are also utilising the benefit of their fresh monetary incentives to be more competitive.’
Nasir said Chinese exporters are now able to offer competitive prices than the Bangladeshi suppliers, so US importers are diverting their orders to China again.
Withdrawal of quota on some categories of their garments opened market for China in the USA from the beginning of the current year, said Professor Mustafizur Rahman of Centre for Policy Dialogue.
‘The recent massive stimulus packages of the Chinese government have strengthen the competitiveness of the Chinese exporters much to cultivate the quota-free market,’ he pointed out.
Suggesting the Bangladesh government to sit with the garment exporters for diagnosing the trouser market, Mustafiz said, ‘Possible supports to exporters for retaining their market should also be provided immediately.’
Abdus Salam Murshedy, president of the Bangladesh Garment Manufacturers and Exporters’ Association, said US data indicated how Bangladeshi exporters were becoming vulnerable in the global market.
He said that declined demand in recession-hit market and redefined competitiveness in the manufacturing were reshaping the map of apparel sourcing.
He, however, hopes that Bangladeshi exporters will be able to retain their market share if government supports exporters with fresh incentives and effective policy measures.

Source: The Daily New Age, 09 April 2009