A spike in the cost of food staples like rice and wheat could push tens of millions more people into extreme poverty in South Asia but food subsidies targeted at the poorest in the region would help them cope with still-high prices, says a report by the Asian Development Bank (ADB).

South Asia’s high population growth rates and the high number of people already living on or close to the extreme poverty line of $1.25 a day mean it is one of the most vulnerable regions in the world to food price shocks, said the report released on Monday in Manila.

The study—Food Price Escalation in South Asia: A Serious and Growing Concern—says that spending on food already accounts for half the total budget of low-income households.

The study said a 10 per cent rise in prices could push almost 30 million more Indians and nearly four million more Bangladeshis into extreme poverty. Pakistan is also at risk, with the same price leap causing an additional 3.5 million more people to drop to or below the $1.25-a-day income mark.

“Subsidizing the cost of a basic meal for the poorest and most vulnerable in places like India means the help goes to those who need it the most without putting an excessive burden on government finances,” said Hiranya Mukhopadhyay, an economist in ADB’s South Asia Department and an author of the report.

Nepal and Sri Lanka would be less affected, although a further surge in wheat prices would be especially painful for Sri Lanka, which is completely dependent on imports of the staple and has already seen prices hit historical highs in recent years.

It said after peaks in 2008 and 2011, prices of key food commodities have eased somewhat, although the rate of decline has been slower in South Asia than the international average.

In addition, the region suffers from higher overall food inflation rates than the rest of developing Asia, with food making up a bigger share of items measured by the consumer price index.

Short-term weather shocks and costlier oil account for some of the past price upside but the study says rapid population growth, changing food consumption patterns linked to higher incomes, and stagnating agricultural output are more critical factors driving rising food demand and inflation.

The study suggested that in the long term, governments must step up support for agricultural research to spark another “green revolution” to lift output and help develop crops more resistant to weather extremes.
More investment in infrastructure, such as irrigation systems and farm-to-market roads to improve distribution and reduce post harvest losses is also essential.

Strengthening home-grown initiatives such as the food bank established in 2008 by the South Asian Association for Regional Cooperation may also help to smooth out price volatility and improve food security in the South Asian region during times of shortage, the report says.

The Independent/Bangladesh/ 21th March 2012

The country’s foreign aid inflow still remained low during the first eight months of the current fiscal, compared to the same period in the previous year.

Foreign aid disbursement marked a fall by US$16.61 million to $1,196.59 million during July 2011 to February 2012 period of the FY2011-12, compared to $1,213.20 million during the same period in 2010-11 FY.

The foreign aid commitment for July-February period of the current fiscal was $4,021.54 million including $2,992.88 million as loans and $1,028.66 million as grants.

Of the disbursed $1,196.59 million foreign assistance in the fiscal, $826.60 million came as loans while the rest of $370 million as grants, according to official data.

In the last fiscal, the government received a total of $1,213.20 million in foreign assistance, of which $684.97 million came as credit while $528.23 million as grants.

During the eight-month period, the government made a repayment of $650.75 million to the development partners, of which $506.42 million was principal amount, and the rest $144.33 million interests.

During the same period of last fiscal, the government made a repayment of $583.49 million, of which $ 458.58 million was principal amount and $124.91 million interests.

Of the disbursed loan, the ADB disbursed the highest $336.21 million followed by World Bank $306.39 million, Japan $90.98 million, IFAD $10.92 million, Kuwait $33.51 million and South Korea $33.27 million.

Of the disbursed grants, DFID provide $113.93 million, World Bank $59.58 million, EU $35.75 million, UNDP $39.65 million, UNICEF $30.43 million and Germany $31 million.

The country witnessed a sharp fall in foreign aid disbursement during last fiscal over the previous 2009-10 fiscal as donors did not disburse in line with their commitments.

The foreign aid disbursement during the last fiscal totaled $1,777.33 million, $450.44 million less than $2,227.77 million recorded in fiscal 2009-10.

The aid commitment for the last fiscal, both as loans and grants, was $5,929.27 million. Of the amount, the loan component was $5,335.08 million, mostly because of the donors’ commitments for the Padma Multipurpose Bridge project.

The grant commitments from the donors during the last were $594.19 million.

However, the total aid disbursement during last fiscal was $ 1,777.33 million, including $726.62 million as grants and $1,050.71 million as credit.

The Daily Sun/Bangladesh/ 21th March 2012

Syed Manzur Elahi, Chairman of Mutual Trust Bank, speaks at a workshop at a city hotel recently.

Mutual Trust Bank Limited has organized a workshop on “Corporate Governance for Sustain- able Banks” at a city hotel recently.

Syed Manzur Elahi, Chairman of Mutual Trust Bank Limited presided over the function, said a press release.

Among others, Zuber Soomro, former head of CitiBank NA, Pakistan, K Mahmood Sattar, CEO of City Bank, Barrister Sheela Rahman, and Pradip Kar, former Head of Securities Exchange Board of India and directors and chairmen of leading private sector banks were present on the occasion.

Shireen S Mainuddin, Managing Director of ASAAN, moderated the workshop.

The Daily Sun/Bangladesh/ 21th March 2012

Standard Chartered Bank Limited awarded Asia Cup tickets to its credit cardholders at a function yesterday.

Gitanka D. Datta, Head of Cards of Standard Chartered Bank, handed over tickets to the winning cardholders, said a press release.

The Bank has arranged the function for distributing awards to top scorers who have won free tickets of the ongoing Asia Cup 2012.

The ICC Hospitality Box Tickets were handed over to the winners at a ceremony held at the Bank’s head office in the city.

The Bank recently ran a promotion for its credit cardholders where everyone scored runs by spending on their credit cards and top scorers won free tickets to Asia Cup 2012.

Among others, Md Mahiul Islam, GM (Marketing and Service Quality) and other senior officials of the Bank were present.

Mentionable, Standard Chartered Bank is the official partner of Asia Cup 2012 which is being hosted by Bangladesh.

The Daily Sun/Bangladesh/ 21th March 2012

Bangladesh Bank has been repositioning its focus on bank supervision in a strategic way. We are monitoring the condition and performance of the banking sector with sharpened risk focus, taking up new initiatives to improve our oversight, both on-site and off-site.

As part of that initiative, we have been holding town hall meetings of BB supervision staff -- nationally and regionally -- to know from them the ground realities and then providing necessary guidelines to strengthen the quality of oversight. The core objective is to integrate all aspects of supervision and realise a new architecture where oversight focuses, especially on institutional and systemic risks in lending and other business activities taken up by banks, and on how well corporate governance and internal control processes in banks deal with these risks.

Recently I inaugurated a regional town hall meeting in Chittagong following the national one held in Dhaka, where I provided some necessary guidelines to the field supervisors. Let me share with the readers some of those ideas.

I understand that some of the supervisors in the divisional offices can sometimes feel disconnected from the changes taking place in the financial sector. All of the scheduled banks are headquartered in Dhaka, along with most of the important conferences, media events, and policy discussions inside and outside of the government. Policies are made in the capital and announced from the capital.

But we cannot forget that a significant number of our fellow citizens live outside the capital city, undertaking a significant share of economic activities. And our banks are here, too, with a significant presence in Chittagong and the other divisions. Of the total loans extended by our banks, about one-third of the funds were extended by branches of banks outside of the Dhaka division. Of those loans, 60 percent were originated in the Chittagong area.

Deposits are also substantial outside the Dhaka division. About 36 percent of depositors' funds in Bangladesh are located at bank branches outside of Dhaka. Of these, 56 percent are deposits gathered from your families, friends, and neighbours in the Chittagong area. So in both lending and deposit-taking, banks that have a presence in the Chittagong area contribute significantly to the national totals.

In other words, the bank branches that Chittagong-based supervisors inspect throughout the year are responsible for about 20 percent of the growing banking market in Bangladesh. That makes the supervisors' job, in promoting banking excellence and integrity at these branches, extremely important.

But I want to step back from the local level for a moment, and talk about promoting banking excellence and integrity at the national level. As we all know, financial markets all over the world are undergoing dramatic changes. The global financial crisis, debt crisis in Europe, and recession and slow growth in much of the industrialised world have necessitated sweeping reforms in the manner in which banks are supervised and in which bank failures are handled.

Banks in Bangladesh escaped the turmoil of the past several years. But this does not mean that we can ignore the reforms taking place in the rest of the world. In fact, we have to speed up the reform process. We must put in place additional safeguards that will help prevent a local or national banking crisis from developing in Bangladesh.

We are a country of modest means, and we simply cannot afford to deal with the consequences of any banking crisis. We have to be alert and resourceful in doing whatever we can to avoid that painful outcome. Every banking crisis has a different origin. The savings bank disaster in the United States in the late 1980s was caused by risky investments in real estate development.

The Asian financial crisis in the late 1990s was caused by poor liquidity management. The US meltdown of the last decade, from which nearly the entire industrialised world is still recovering, was caused by risky lending to the single-family housing market, which used to be thought of as the safest kind of private-sector loan. Now, in Europe, even government debt is viewed as risky and a threat to the solvency of many large banks.

High and rising levels of government debt, relative to GDP, has called into question the ability of several eurozone countries to pay the interest of these debts without undertaking massive structural reforms and painful budget cuts. Greece is about to default on part of its debt, directly harming the capital and profitability of a great many of Europe's leading banks.

In short, banking has changed and as banking regulators we must also change. The old assumptions, old certainties, old procedures just are not sufficient anymore. There are risks and vulnerabilities in our own banking sector and we have to work harder and work smarter to uncover these risks and promote best practices in our banks.

This is what we mean by promoting banking excellence. Above all, best practices mean sound judgment in the granting of credit, lending to legitimate borrowers who have the ability and the intent to repay. Best practices also mean diligent monitoring of all credits through their life cycles. Banks have to maintain an internal risk-rating system for all borrowers and monitor their ability and willingness to repay constantly. And they have to provision for expected loan losses when doubts arise that the borrower will pay back the loan.

Best practices also mean the prudent management of other risks in addition to credit risk, especially liquidity risk and the market risk arising from direct or indirect investment in shares. Best practices also mean an efficient, secure IT architecture that generates appropriate financial statements and management information reports, prevents the maintenance of separate, fraudulent books and records, and guards against data security breaches.

Above all, best practices mean effective corporate governance, including a corporate culture that stresses compliance, respects internal audit, and implements strong internal controls. All of these best practices are the responsibility of bank management. As regulators, we must evaluate their performance, and make them take corrective action if there are deficiencies. This is what we mean when we say “promoting banking integrity.”

Integrity in banking means making sure that the shareholders, directors, executive officers, and indeed all staff are honest and trustworthy individuals who will follow the laws and regulations, and implement best practices. Supervisors, in the Chittagong office, are an integral part of our efforts to promote banking integrity in Bangladesh.

How can they help achieve the objective we have been promoting? When they are visiting a bank branch as part of an inspection team, they have to pay close attention to the branch management. They need to talk to them, listen to them, ask them questions. They also have to assess their qualifications and assess their character. They should listen to the branch staff.

In many cases, information about illegal or unethical activity taking place at a bank branch comes from lower-level employees. If they see something that looks wrong, in the loan files or anywhere at the branch, they should tell their supervisor. Very often, illegal or unethical conduct by branch managers or staff is indicative of the same kind of conduct at the head office.

The Daily Star/Bangladesh/ 21th March 2012