National Credit and Commerce (NCC) Bank Limited recently signed an agreement with Islamic Exchange Co to receive remittance from Qatar.

Mohammed Nurul Amin, managing director and CEO of NCC Bank, and Yousuf P Hameed, general manager of Islamic Exchange Co, signed the agreement on behalf of their respective sides, said a press release

Under this agreement, Bangladeshi expatriates can now remit their money from Qatar to Bangladesh in easier and faster manner through this official channel.

Ibrahim Abdulla, vice president of Islamic Exchange Co, and A B M Jashim Uddin Ahamed, vice president of NCC Bank, were also present at the fucntion.

The Daily Sun/Bangladesh/ 28th Feb 2012

The Bangladesh Bank (BB) has undertaken a new policy to stimulate the bonds market.

At a tri-monthly coordination meeting, the BB on Monday urged the Insurance Development Regulatory Authority (IDRA) to enhance their investment in the government securities.

A regulatory guideline for life insurance companies to investment 30 percent of their paid-up capital in the government securities was suggested so that the banks can sell out their bonds for raising liquidity position.

BB governor presided over the meeting, while representatives from the Securities and Exchange Commission (SEC), IDRA, Department of Cooperatives, Micro-Credit Regulatory Authority (MCRA) and Registrar of Joint Stock Companies and Firms, deputy governors of the BB Najnin Sultana and SK Sur Chowdhury were present.

Emerging from the meeting, SK Sur Chowdhury said the meeting discussed the ways to develop the bond market, enhance liquidity of banks and ensuring stability in the capital market.

He said a strong bond market would play an important role in developing the country’s capital market.

The BB also urged the stakeholders of the coordination committee to keep close coordination with the BB to avoid baseless rumours for the overall development of the economy.

The Daily Sun/Bangladesh/ 28th Feb 2012

HSBC Holdings Plc, Europe's biggest bank, predicted growth in Asia and other emerging markets would outweigh sluggish European economies this year as it posted a $21.9 billion profit for 2011, the best outturn by a western bank so far.

HSBC added, however, that success in emerging markets was becoming increasingly expensive, with costs rising 10 percent, or $3.9 billion - a third of that due to higher pay.

Banks across Europe have been posting billions of dollars of losses as the euro zone sovereign debt crisis has eroded the value of their government bond holdings and hit their trading operations, and as they strive to meet tough new rules aimed at preventing a repeat of the 2007-09 banking crisis.

HSBC has been relatively unscathed because it makes more than three quarters of its profits outside Europe and north America. It remained upbeat on Monday about prospects for emerging markets despite fears that some are overheating and could see an abrupt slowdown in growth this year.

"We remain comfortable with the emerging markets (outlook) and are confident that GDP growth in emerging markets will be positive and China will have a soft landing," Chief Executive Stuart Gulliver told reporters on a conference call.

"We think there's some recent buoyancy in the US, so the real issue of negative focus is how the euro zone plays about," he added, predicting the euro zone economy would flatline this year, with "marked recessions" in some southern countries.

HSBC, with around 7,200 offices in 80 countries, said pretax profit rose 15 percent to $21.9 billion in 2011, just below analysts' average forecast of $22.2 billion in a Reuters poll.

The figure fell short of the group's record profit of $24.2 billion in 2007, but beat all other western banks that have reported so far for last year, including US rival JP Morgan, which made a $19 billion profit.

The world's most profitable banks in recent years have been China's ICBC, which made $32 billion in 2010, and China Construction Bank, which made $26.4 billion.

HSBC's profits were boosted by a $3.9 billion accounting gain on the value of its debt. Stripping that out, underlying pretax profit fell 6 percent to $17.7 billion, due in part to rising wages in emerging markets and to restructuring costs.

Gulliver, who is reshaping HSBC to cut annual costs by $3.5 billion, lift profitability and sharpen its focus on Asia, said he would step up his plan this year.

He said HSBC would continue to pay higher wages in emerging markets, where there is strong competition for bankers among international and local rivals, adding higher revenue from those areas showed the investment was worthwhile.

At 0945 GMT, HSBC shares in London were down 1.5 percent at 566.1 pence, lagging a 0.7 percent decline in the UK's benchmark FTSE 100 index .FTSE. The shares have beaten the STOXX Europe 600 banking index by 15 percent over the past year.

"They've had a good run so I can't get too enthusiastic, but they're (HSBC) going in the right direction and it's a good bet in a difficult sector," said Brown Shipley fund manager John Smith, who holds HSBC shares in his portfolio.

HSBC said profits at its investment bank fell 24 percent to $7 billion, hurt as the euro zone debt crisis slowed capital markets activity in the second half of last year.

Loan impairment charges and other credit risk-related provisions, however, fell $1.9 billion to $12.1 billion.

The group said it paid out $4.2 billion in bonuses, down 2 percent on 2010. Banks are coming under intense pressure from politicians and the public to rein in pay awards because of the role of the sector in the world's economic problems.

HSBC said it paid one of its bankers, whom it declined to name, 8 million pounds ($12.7 million) last year. Gulliver was the second-highest paid employee, getting 7.2 million pounds -- including a 2.2 million bonus -- down from 8.4 million in 2010 when he ran the investment bank.

Peter Wong, chief executive of HSBC in Asia, said: 'As our strong financial performance shows, HSBC's strategy is delivering results in the Asia-Pacific region across all geographies and the Global Businesses.

“It is clear that HSBC Asia-Pacific is well positioned for sustainable growth. As economic expansion in our region continues to outpace that of the developed world, I believe our international connectivity is a core strength serving our customers locally, regionally and globally.”

The Daily Star/Bangladesh/ 28th Feb 2012

The World Bank Group has responded to the global economic crisis effectively, but it will face difficulties to address similar levels of crisis response in future, said a report sponsored by the global lender.

The group, therefore, has to develop a roadmap for future crisis preparedness, said the World Bank's Independent Evaluation Group Report.

According to the report, the roadmap should contain a systemic analysis of stress factors and a decision-making process for blending country-level responses within a global strategy.

The World Bank responded to the crisis that started in 2008 with an unprecedented volume of lending and with accelerated disbursements, the report said.

It said financially, the response was unprecedented. Average new commitments of the bank and International Finance Corporation (IFC) combined were $63.7 billion a year in fiscal 200910, compared with less than half that amount each year over the pre-crisis period in 200507.

Of this amount, the bulk ($45.4 billion, compared with $18.7 billion pre-crisis) represented IBRD and IFC financing in middle-income countries.

Partly as a result of the magnitude of its lending response, the International Bank for Reconstruction and Development (IBRD) -- the part of the World Bank that works with middle-income and creditworthy poorer countries -- now has less headroom to accommodate similar levels of expanded crisis response were it to become necessary in future.

The report said the sharp decline in headroom was driven by declining global interest rates, a pre-crisis reduction in IBRD's lending spreads and its predominant use of traditional instruments.

Under these conditions, the rapid lending increase led to a considerable decline in the Bank's equity-to-loan ratio that is projected to gradually decline further given the long repayment periods of IBRD loans.

The rapid increase in lending with a limited increase in capital and reserves has led to a decline in the bank's equity-to-loan ratio, from a peak of more than 37.5 percent before the crisis -- well above the long-term target -- to around 28.5 percent at the end of FY10.

The Independent Evaluation Group of The Breton Woods institution carried out the study on "The World Bank Group's response to the global economic crisis: phase II" to evaluate performance of the group.

The report said IFC kept the overall volume of its investments constant as it focused on protecting the portfolio. It launched several innovative crisis initiatives, although the implementation of some of them was delayed.

The MIGA's countercyclical support in Eastern Europe was important for key financial institutions.

The evaluation showed that the Bank extended support to the majority of severely crisis-affected countries, usually in the context of broader donor support packages, where its financial contribution was relatively small.

The report also found that the bulk of crisis support was focused on countries that turned out to be moderately affected. In some cases, the policy content of crisis-response operations was limited in addressing both short-term crisis impact and medium-term development goals.

“Using multiple measures of country stress, the study showed that the Bank's new lending reflected its pre-crisis lending patterns and had a low correlation with the severity of crisis impact in countries," said Anjali Kumar, lead evaluator and author of the report.

"This does not necessarily imply however that bank group support to the countries that received it was unjustified."

"The unprecedented global crisis and scale of the World Bank Group's response offer lessons for the Bank and the international community. What we need now is a roadmap for future crises," said Caroline Heider, director general for evaluation of the World Bank Group.

"This will help provide better calibrated support to address the specific needs of severely and less-affected countries when necessary."

The Daily Star/Bangladesh/ 28th Feb 2012

There will be a bridge over Padma river, this much is certain but who will finance it and when have become a multi-billion dollar question. The usual lenders of such projects were lined up soon after the present government came to power. According to agreement reached in January 2009 the World Bank was to provide US$ 1.2 billion, the ADB $615 million, JICA $415 million and IDB $140 million.

Things were moving as per schedule and provisions of the agreement with lenders and construction work was to start in October 2011. But things did not move smoothly and thereby hangs a tale, as Shakespeare would have put it.

The problem that suddenly surfaced was more than a hiccup, rather it has turned out to be an intractable obstacle. Based on a case filed by Canadian police against the Canadian firm SNC Lavalin for giving kickback to a firm belonging to the former communication minister of Bangladesh the World Bank promptly suspended the loan that had already become effective and was being used by Bangladesh government for preparatory works.

The other lenders in the project soon followed suit and the work on Padma bridge ground to a halt. It was alleged that the Canadian firm had given bribe to the Bangladesh minister's firm to win pre-qualification as a bidder in the tender for works in the Padma river bridge project.

Knee-jerk reaction: World Bank's sudden and almost knee-jerk reaction to the news about Canadian police's corruption case against a firm of that country and abrupt suspension of loan committed to Bangladesh was brazen and lacked propriety. The allegation of corruption against the Canadian and the Bangladeshi firms had not yet been proved in court and taking a decision on submission of the case was premature.More importantly, the allegation of graft did not lead to any independent investigation by World Bank which has a department for this.

Allegation of corruption both within World Bank and inside member countries is not new for World Bank and it has a standard procedure to handle such cases. Strangely the Bank did not institute its own enquiry and thought it proper to rely on the investigation of an agency belonging to a member country other than the loan recipient country. This is what must have irked the government of Bangladesh most. The fact that the allegation was made public by the Bank even before a judgement was given by the concerned court aggravated the ire of the Bangladesh government.

The World Bank behaved as if the parties (the two firms) were guilty as charged and put the government of Bangladesh as a whole on the dock. It was small wonder that having been offended by the blanket accusation by the Bank the government of Bangladesh refused to take any action in response to the allegation at first. Any self-respecting government would have done the same in the face of such humiliating gesture and highhandedness from a lending agency of which it is a member. Having made its point the government removed the controversial minister to pave the way for resumption of work on the project.

At the same time a formal enquiry was ordered to be conducted by the Anti-Corruption Commission (ACC) of the country. By that time the World Bank should have instituted its own enquiry rather than harping on the same tune borrowed from the Canadian police. The Bank's failure in this regard has not only been astonishing but also smacks of amateurish approach in such a serious matter.

The enquiry into the allegation against the former communication minister's firm has been completed by the ACC. Nothing incriminating has been found to substantiate the charges of graft. The Bangladesh government has called upon the Bank to prove its allegation but there has been no move on the part of the Bank in this regard which can only be interpreted as its obstinacy and lack of finesse in dealing with member countries like Bangladesh.

Meanwhile, the suspension of loan by World Bank led to the expiry of the deadline for the effectiveness of loan. After keeping the government of Bangladesh in suspense for some time the deadline was extended by another six months only after the government made formal request for the purpose whereas this should have been done automatically.

Looking for alternative sources for funding: The request from the government of Bangladesh showed that it had not turned its back on the Bank for financing the Padma bridge project. But in view of the uncertainty caused by the suspension of the loan and the inscrutable attitude of the Bank the government had to look for alternative sources for funding the project. Soon a formal offer came from Malaysian government which showed interest in constructing the bridge under public-private-partnership. An emissary of the Malaysian Prime Minister came to Dhaka to hold preliminary discussion.

Soon after the ministry of communication expressed declaration of intent and informed that a memorandum would be signed with the Malaysian authorities. Even a date for this was announced even though the loan agreement to the Bank had not been cancelled. This showed lack of co-ordination between the ministry of finance and communication. But allowances can be made for this confusion because of the extraordinary circumstances. Meanwhile, some interest was also shown by China, though no formal proposal was made in this regard.

While exploring alternative means of financing Padma bridge project the government of Bangladesh had not cancelled the loan agreement with the World Bank and other co-financiers. The overture made to other financiers was merely to explore other sources of finance in case the Bank and other lenders continued to dither. Having already used some portions of the loan money from the Bank for acquisition of land and re-settlement of displaced persons the government of Bangladesh would naturally prefer to avail of the loan amounting to US$ 2.97 billion that have been committed for the project.

But it could not wait indefinitely for the lenders to resume lending after withdrawal of suspension of loan. Surprisingly, after removal of the communication minister and the completion of enquiry by ACC no new proposal had come from the World Bank to normalise the situation. The government must be at a loss as to what else does the Bank require from it for their satisfaction.

According to newspaper reports, having been exasperated by the nonchalant attitude of the Bank the government has now decided to set the process for cancellation of the loan in motion. A proposal has been sent by ERD to the PMO's office for the annulment of the loan agreement. Unless the Bank wakes up and takes a quick decision for resumption of the loan the government will be compelled to cancel the agreement. This will be both to preserve its prestige and to save valuable time for the construction of the bridge.

No one can blame the government if the agreement is finally cancelled. It has done everything that it was required to do though the actions taken were delayed somewhat. But this, too, can be justified when looked at from the government's perspective. How can a sovereign government be expected to dance attendance to the whim and unreasonable demands of a lender without asserting its position at first? But it is not the government of Bangladesh which has been obstinate, the blame should be laid at the World Bank.

Even after all the actions taken by the government the Bank has not budged an inch and change its position and the suspension continues. There is still time for it to salvage the insalubrious situation by resuming disbursement of fund for Padma bridge project. If the agreement ultimately falls through it will be mainly because of its rigid stand and negative attitude. Even the hardened critics of the government will be hard put to blame the government for this unprecedented event.

For the government of the Bangladesh the World Bank and other lenders with whom the loan agreement has been signed should still be the preferred choice and first priority. Before canceling the agreement the government should make a last-ditch attempt to remove the sticking point, if there is any. For this purpose a high-level meeting should be held immediately.

While cancellation of the loan will not be to the benefit of Bangladesh it will also not be to the credit of the Bank which will be seen as rigid and uncompromising in dealing with its member countries, particularly smaller ones. Cancellation of the loan will entail higher costs for the construction of the bridge which cannot be desirable for resource-poor country like Bangladesh. On the other hand, it will show the Bank in an unfavourable light as a lender driven more by ego than by reason.

Bangladesh should be careful: If the worse comes to the worst and the agreement with the World Bank and the other lenders has to be cancelled, Bangladesh should be careful about choosing the alternative financier. From what has appeared in newspaper there are quite a few aspects of the Malaysian offer that does not make it very attractive.

The involvement of many private firms in a consortium make it ambiguous whether agreement will be between the two governments or between GoB and a consortium of firms having the support of the Malaysian government. That there is a basic difference between these two positions need not be overemphasised. News about lack of experience of the consortium in constructing such a big bridge is also not very assuring.

Reportedly it will hire a third party for construction purpose and in that event the government of Bangladesh will have no say over this. Even the mobilisation of fund has raised many questions as to its legal status. The rate of interest ranging from 5 to 7 per cent as reported in newspapers will be much higher than 0.5 per cent charged by the World Bank.

The period of 50 years over which the consortium will have control over the bridge appear to be very long while the proposed recoupment of investment money through collection of toll leaves room for an exorbitant rate. The condition that no other bridge can be constructed over Padma elsewhere is not in the interest of Bangladesh. The requirement that the GOB will have to pay subsidy in case toll collection is less than expected is also too demanding. Floating bond for the project by the government of Bangladesh to help the consortium is also an undesirable condition.

Compared to these conditions and aspects a proposal from China will be much better, judged by their past record. If an alternative source has at all to be utilised for the Padma bridge, GoB should make a serious approach to China. Sitting over a vast amount of foreign exchange reserve China is looking for new avenues for investment. Padma river project may be just the type that fits their bill.

As a lender China has proved to be generous and considerate. Besides, it has vast experience in building infrastructures in developing countries. Padma bridge will be in safe hands if given to China after due negotiation. But before that government should give the World Bank a last chance to change its mind. It should not be given an excuse that GoB moved precipitately.

Financial Express/Bangladesh/ 27th Feb 2012