Bangladesh will receive a $120 million credit from the World Bank to implement a project on development of the private sector aiming at economic growth and creation of jobs.

The World Bank board of directors at a meeting in Washington on Tuesday approved the loan, according to a message received in Dhaka on Wednesday.

It said Bangladesh Private Sector Development Support Project is designed to facilitate investment in growth centres in the emerging manufacturing and services sectors of the economy with the aim of generating employment.

The project seeks to address key constraints to growth, including access to serviced land, cumbersome procedures, access to skilled labour, and access to finance.

“To achieve Bangladesh’s development goals requires accelerated, sustainable, and inclusive growth,” said WB Country Director Ellen Goldstein.

“Creating productive employment for the estimated 2 million new labour entrants every year will largely depend on creating an environment conducive to private sector investment.”

The country has attained an average gross domestic product (GDP) growth rate of 6.1 percent between 2005-2010 despite the effects of global food, fuel and financial crises.

The present government envisages a growth rate of 8 percent a year and a reduction in poverty to 15 percent of the population by 2021.

The project is expected to increase the capacity of government institutions in the development of economic zones and provide financing for necessary infrastructure in economic zones starting with the Kaliakoir Hi-Tech Park and will invest in up to two more economic zones.

In addition, it will create opportunities for cooperation and knowledge sharing between enterprises within the economic zones and their suppliers by providing training and supporting linkages between firms.

A $17 million technical assistance from the UK Department for International Development (DFID) will be added to the project.

“The new locations for economic zones and enhanced policy framework will catalyse private investment in Bangladesh by increasing capacity and reducing constraints to private sector development,” said Michael Wong, team leader for the project.

“This is needed to fuel the economic growth necessary to achieve the government’s job creation and poverty reduction targets.”

News: Daily Sun/ Bangladesh/ Mar-03-2011

Trust Bank Limited (TBL) recently signed a memorandum of understanding (MoU) with Pragati Life Insurance Limited (PLI) to provide insurance coverage to the clients of the bank's three savings and loan products.

Clients under ---'Trust Thikana-Home Loan, 'Trust Assurance Deposit Scheme' and "Trust Sristi', will get the facility following the MoU, said a press release.

M M Haikal Hashmi, deputy managing director of TBL and Quamrul Hasan, deputy managing director of PLI, signed the MOU on behalf of their respective sides.

TBL has recently introduced new saving product 'Trust Porua' to provide school banking services.

Ms. Ferdousi Begum, vice president and head of Retail, Ms. Mahmuda Momen, assistant vice president of Trust Bank and M. M. Monirul Alam, ADMD of Pragati Life Insurance, were also present at the function.

News: Daily Sun/ Bangladesh/ Mar-03-2011

Mamun Rashid

The Monetary Policy Statement (MPS) for the second half of fiscal 2011 is focusing on a continuous watch towards locating and neutralising likely inflationary pressures from the growth-supportive monetary and credit policies.

The policy has taken a stance to extend credit to agriculture, small and medium enterprises (SME), rural economy, housing loans, shipbuilding, and rural energy. This stance is backed by the reasoning that the domestic economy is operating below capacity and expansionary policy in the targeted sector would help to bring in short term stability and to realise long term growth prospects.

While we welcome that, the common people seem to be confused about some of the Bangladesh Bank (BB) stances. The dollar rate has gone up significantly, making import apparently much costlier than before and at times, there are serious issues coming up with regard to timely settlement of import liabilities due to foreign currency (FCY) liquidity shortage in the market. The central bank in the recent past was supporting essential commodity imports, especially in the state sector by supplying FCY liquidity to them. Lately, they expressed their shyness in continuing that and instead, they are allowing a few commercial banks to overdraw their FCY accounts held with the central bank.

However, this is creating serious disconnect in managing banks' asset and liabilities, especially in a fluctuating market, and banks are being forced to get into a tussle with their esteemed clients. Besides, common people on the streets cannot reconcile high dollar prices with a higher FX reserve. Their confusion heightens when they see imported items getting dearer, creating serious disengagement with the government's election pledges.

A study by BB in the past suggested a nominal US dollar over-valuation against the taka when compared to nominal effective exchange rate (NEER) and real effective exchange rate (REER). The monetary policy therefore emphasised stability of the exchange rate to maintain external competitiveness. However, with almost 6 percent depreciation of taka against dollar, now that gap has narrowed a lot, if not gone.

There are impending debates among economists (usually banks or bankers do not dare to criticise the central bank in emerging countries like Bangladesh), whether BB should try to dampen the dollar rate to support price reductions of imported essentials. Their argument in favour of an appreciated taka is emanating from an emerging debate of export being increasingly becoming insensitive to the exchange rate, rather more dependent on labor wages, productivity and an efficient supply chain.

The world has been experiencing an episode of inflation in commodity and fuel prices for quite some time and now it is only following one way traffic of going up, while the domestic inflationary pressure is reportedly making the life of the poor, low-, and middle-income people somehow miserable.

Had the Bangladesh currency been appreciated in terms of its intervention currency, that is, the US dollar, the costs of all imports, including essential commodities, would have gone down to some extent. That would have been considered otherwise a welcome development. In that event, the government could be in a better position to blunt the edge of all public criticisms for its failure to rein in soaring prices. The consumers could also see some sort of relief. However, policy planners as well as 'inflation targeting group' with the partner agencies feel, monetary management tools in their entirety cannot control the price rise. Rather, governments need to come up with fiscal measures (including safety net or targeted subsidy) to help the marginalised groups, without denting the growth driving sectors.

They also feel that appreciation of the taka is easier said than done. If the value of the US dollar depreciates against the taka, it would take its toll on the export sector, that is, the lifeline of the economy. There could also be cuts in employment in all export-oriented sectors. A strong taka will also have the potential of affecting the flow of inward remittance by the non-resident Bangladeshis through official channels and thereby, put further pressure on our widening balance of payment.

The government reported to have initiated a dialogue in reference to taking a balance of payment support fund of $1 billion from International Monetary Fund (IMF), which they have done at various intervals in the past, especially with a heated external sector, crop loss due to natural calamities or international food price surge.

Bangladesh had its first sovereign credit rating by Standard & Poor's as well as Moody's in the recent past and the rating came out to be quite good vis-à-vis peer countries. Analysts felt it was the best time for us to go into international markets to raise some money through sovereign bonds, like similar countries. That would have helped us support growth financing or at least try Bangladesh's ability to raise money from global markets and avoid at-times undesirable and conditional IMF support.

Take it or leave it, the Bangladesh economy has become more integrated with the world over last one and half decade. Thus, it is hard to insulate commodities prices in the domestic market from global influences. What is more important is that there is no guarantee that traders would be selling goods at prices lower than existing levels, in spite of the benefits to be accrued from a possible appreciation of the taka.

So, upward adjustment of the taka against the US dollar remains a dilemma for the central bank. However, the government and the central bank need to use whatever tools they have, under their control, to tame soaring inflation without compromising on growth.

There needs to be a good balance between monetary and fiscal policy execution. While the fiscal policy would be targeted at equitable distribution and adequate safety nets for the marginalised, the monetary policy would focus on price stability.

Unless we bring transparency in goal setting for fiscal and monetary policies, they would remain ineffective in our endeavor to fight international economic uncertainties and spikes in the domestic economy.

The writer is an adjunct professor at NSU Business School and can be reached at mamun1960@gmail.com.

News: The Daily Star/ Bangladesh/ Mar-02-2011

HSBC Amanah has again been named the Best International Islamic Bank by Euromoney magazine in Islamic Finance Awards 2011, HSBC said in a statement yesterday.

The awards are widely considered to be the most high profile accolades in Islamic finance industry, and annually recognise outstanding performance, quality, service, and innovation in the sector.

“HSBC Amanah is delighted to be at the forefront of a global industry which increases in scale, sophistication and penetration each year,” said Mukhtar Hussain, global chief executive officer of HSBC Amanah.

Shariah-compliant financial services continue to grow in line with customer demands and HSBC Amanah is proud to be recognised as the premier, cross-border financial institution by Euromoney, the statement added.

HSBC Amanah, established in 1998, is the global Islamic financial services division of the HSBC Group. More than 300 professionals are working in the Middle East, Asia-Pacific, Europe and Africa for the division.

HSBC Amanah products and services are offered in Bangladesh, Saudi Arabia, the UAE, Malaysia, the UK, Indonesia, Brunei, Singapore, Bahrain, Qatar and Mauritius.

News: The Daily Star/ Bangladesh/ Mar-02-2011

The Securities and Exchange Commission (SEC) yesterday approved the rights issue of Sonargaon Textiles and Social Islami Bank worth total Tk 3.15 billion.

The decision came at a meeting of the commission presided over by SEC chairman Ziaul Haque Khondker.

The SEC, however, did not approve two IPOs considering the existing volatile situation in the market, SEC spokesman and executive director Saifur Rahman said emerging from the meeting.

The share market regulator also amended merchant banks policy, but the provision for changing or firing chief executive officer of the bourses with SEC approval remained unchanged.

With SEC nod, the authority of Sonargaon Textiles will be able to offer rights share against total 10.91 ordinary shares worth Tk 163.6 million at an offer price of Tk 150 added a premium of Tk 50 per share. One rights share will be given against one existing shares, source said.

The approval was accorded under a condition that the company shall comply with the requirements embodied in the Securities and Exchange Commission (Rights Issue) Rules, 2006 and other relevant laws and Regulatory Requirements, and shall also adhere to the conditions imposed by SEC under Section-2CC of the Securities and Exchange Ordinance.

News: Daily Sun/ Bangladesh/ Mar-02-2011