The Hongkong and Shanghai Banking Corporation (HSBC) China has got approval of Chinese central bank to be a market maker for direct trading of local currency RMB and Japanese Yen in the inter-bank market.

With this approval, HSBC becomes one of the first market makers for the direct trading of RMB and Yen in China's foreign exchange market, according to an official statement of the bank.

HSBC China launched its RMB-Yen trading on Friday last, aiming to bring liquidity to the market.

The Daily Sun/Bangladesh/ 6th June 2012

The government may earmark Tk 5 billion under the Equity and Entrepreneurship Fund (EEF) next fiscal to extend equity support for some fixed risky but promising investment areas, a Bangladesh Bank (BB) official said Monday.

The government introduced the fund in 2000-2001 financial year (FY) for the first time to promote entrepreneurship and employment generation in the risky, yet promising areas of Information Technology, agriculture and food processing.

BB is the custodian of the fund, executed by Investment Corporation of Bangladesh (ICB). In last 10 years till the 2009-2010 financial year, real disbursement from EEF stood at Tk 9.25 billion against the budgetary allocation of Tk. 21 billion.

In the past two financial years from 2011-12, there was no disbursement for the EEF due to fund crunch. Meanwhile, the central bank has received green signal from the finance ministry this time for a fresh allocation of Tk 5 billion in the upcoming budget, in response to a proposal of it to get the allocation.

“We hope the government will respond to the BB proposal in the next budget, which is likely to be placed in the parliament on June 7,” said a BB high official, who was involved with the process.

An entrepreneur can get up to 49 percent of his or her total project costs from ECF, subject to approval by its Technical Advisory Committee (TAC).

To avail ECF support, total cost (including net working capital) of a project should be minimum Tk 5 million for IT and agro-based industries and a maximum Tk 50 million for IT projects and Tk. 100 million for agro-based projects.

So far a total of Tk 5.71 billion was disbursed for 278 projects since the launching of the fund. Of the approved projects, a total of Tk 5.24 billion was disbursed for 243 agro-based and food processing industries.

On the other, Tk 466.1 million was extended for 35 IT sector projects. The main advantage of availing EEF support is that an EEF funded project gets eight years as interim period before treating the financial support as credit. After the tenure, the minimum IRR (Internal Rate of Return) is 15 percent.

The enterprises to apply for EEF support should be a private limited company registered under the Companies Act, 1994. Established old companies can also apply for EEF support by setting-up new subsidiaries of the existing firms.

The Daily Sun/Bangladesh/ 6th June 2012

Lowering the corporate tax on banks will be an ‘extra privilege’ for the bankers if the central bank fails to provide adequate credits to the underprivileged sectors, former BB governor Dr Salehuddin Ahmed said.

Banks and Non-Banking Financial Institutions (NBFIs) currently pay taxes at 42.5 percent.
Dr Salehuddin Ahmed said though the rate of corporate tax in Bangladesh remains quite high compared to many developed countries, the rate of income tax on the bigwigs of the banking sector is very low.

“So, any cut in corporate tax will be an ‘extra privilege’ for the beneficiaries of the banking sector, such as directors, shareholders and top officials,” Dr Ahmed told daily sun.

The former BB governor, however, said the government can rationalise the tax rate (corporate tax) by lowering it slightly by 2 to 2.5 percent. “But the central bank must ensure that the banks increase their investment volume to the small and medium enterprises (SMEs) and other underprivileged sectors,” he said.

He viewed that the banks have a common trend to provide loans to a certain group of clients, who are widely known as ‘privileged’ business personalities. The trend leads to confinement of large amount of money in the hands of a few, depriving the other loan seekers.

“In order to reduce the discrimination, banks should go for effective initiatives to offer financial access to the underprivileged people,” Dr Salehuddin said.

In a surprising move, the parliamentary standing committee on finance ministry in its recent meeting recommended for lowering the corporate tax. The committee, however, did not suggest any specify amount to be slashed.

Earlier, the central bank sent a proposal to the finance ministry seeking reduction of corporate tax on banks and NBFIs.

The BB proposal mentioned that the current corporate tax rate on the listed companies is 27.5 percent while it is 37.5 percent for the non-listed firms.

Corporate tax on banks and FIs is 42.5 percent, which is quite high, the BB proposal observed.
A private bank owner said the high income tax on banks has a direct impact on bank lending rates.

“We could have been reduced the rate of interest for loans if the corporate tax had been lower,” said Nazrul Islam Majumder, chairman of Export Import Bank of Bangladesh Limited.

However, data reveals that the banks have not reduced their lending rates despite making huge profits in the last few years.

Private commercial banks logged as high as 90 percent growth in their operating profit in 2010, riding on a boom in stock-market and an upward trend in external business.

Most banks marked a rise in profit, ranging from 50 percent to 90 percent, while a few posted more than Tk 10 billion profit.

Primary data of 30 Private banks shows that their combined profit soared by 57 percent to Tk 132.03 billion in 2010, against Tk 80 billion in 2009.

In 2010, Islami Bank of Bangladesh made the highest profit of Tk 11.43 billion. Besides, National Bank and AB Bank logged more than Tk 10 billion each.

The profit of the private commercial banks increased by 10 percent in 2011 compared to the previous year.
The state-owned commercial banks also logged sufficient profit during the last few years, according to BB data.

The Daily Sun/Bangladesh/ 6th June 2012

Prime Minister’s econo-mic affairs adviser Dr Mashiur Rahman said the government should find the sources of black money to reduce its surge in the economy.

“Identifying the sources of black money is rather important,” he said while addressing a pre-budget discussion styled as “Fiscal 2012-13: The Budget We Want” at the Dhaka Reporters Unity audi-torium in the city Tuesday.

Dr Mashiur Rahman said if the government failed to make an appropriate fiscal policy, all of its efforts would go in vain.

abnews24.com, an online news agency, orgainsed the discussion chaired by its chief editor Subhash Singh Roy. Janata bank director Dr. RM Debnath presented the key-note paper.

The discussion was also addressed by Bangladesh Krishi Bank (BKB) chairman Khandaker Ibrahim Khaled, Agrani Bank chairman Dr. Khondoker Bazlul Hoque, Rupali Bank Ltd cahairman Dr. Ahmed Al-Kabir, Dhaka University teacher Prof. MM Akash, senior research fellow of Centre for Policy Dialogue Dr. Khandaker Golam Moazzem and Journalist Ajoy Dasgupta.

BKB chairman des-cribed the current state of the economy as making the poor people poorer and the rich people richer.

The Daily Sun/Bangladesh/ 6th June 2012

The Power Division is frustrated over implementation of 24 public and private sector power projects having capacity to generate around 3197MW of electricity by 2014, due to fund shortage.

Of the power projects, nine are under public sector, officials said.
13 out of 15 power projects under the private sector are yet to mobilise the funding to implement the projects. Besides, a public sector project has also failed manage its fund, they added.

In a letter to the Prime Minister’s Office (PMO) recently, Power Division Secretary Md Abul kalam Azad said the private sector sponsors have failed to open letter of credits (LC) to import equipments for the projects due to liquidity crisis in the commercial banks and complexity regarding the exposure limit of foreign currency.

Following the letter, Prime Minister Sheikh Hasina has decided to sit with Power Division to discuss the issues.
The government earlier decided to implement the private sector power projects with 70 percent of foreign funding.

“We need support from the Finance Division, Banking Division and Bangladesh Bank to implement the power projects with 70 percent foreign funding to ensure sovereign guarantee and financial closing,” Azad said in the letter.

In the letter, the power secretary also sought help from Bangladesh Bank and commercial banks so that the private sector investors can open LCs to import equipments for the proposed power plants.

“If the concern authorities fail to address the issues, implementation of the power projects under private sector would be uncertain in the next two years,” the letter said.

Prime Minister’s Power and Energy Adviser Dr Tawfiq-e-Elahi Chowdhury told daily sun that the government is still stick to its plan to produce more electricity in the private power.

The PM’s adviser also said the government would assist the private sponsors to mobilise foreign fund to implement the power projects.

“The Independent Power Producers, sponsors by private sector, would be charged with liquidated damage (LD) if they fail to generate electricity in time,” he added.

The World Bank has already refused to finance two mega power projects at Bibyana, sponsored by local Summit Group, a concern of Tourism Minister Faruk Khan’s family.

Meanwhile, two other Power plant projects owned by Aslamul Huq, a ruling party lawmaker from Dhaka-14 (Mirpur), are yet to mobilise fund, concern officials of BPDB said. The lawmaker has no previous experience in power sector.

Besides, three mega coal-based power projects owned by Orion group have also failed to manage funds.
According to Power Division, the government has so far added 3330MW of electricity in the last three years from 47 power projects.

The daily demand of electricity is recorded 6500MW against the supply of 5000-5500MW.
The government also targeted to generate around 13000MW of electricity between 2012-2016.

The power division officials said the electricity generation was only 3268MW against the demand of 4200MW when the AL government took office.

“I think it’s a failure of Bangladesh Power Development Board (BPDB) to sign contracts with private sponsors without ensuring foreign funding to implement the projects,” said Professor M Tamim, former special assistant on power, energy and mineral resources to the chief adviser of a caretaker government.

The Daily Sun/Bangladesh/ 6th June 2012