A bumper output of rice has eased pressure on import.

Food grain imports have fallen by 56 percent in the current fiscal year, cutting the country's import bills by $1 billion, thanks to a rise in production of rice at home.

Rice and wheat imports slumped to 2.24 million tonnes between July and mid-June of the outgoing fiscal year, from 5.15 million tonnes in the July-June period a year ago, according to food ministry data.

During July to June 9 of the outgoing fiscal year, import payments for rice and wheat fell by $1.02 billion or 55 percent from $1.87 billion during the same period a year ago, according to Bangladesh Bank data.

The drastic fall in imports provides much relief to the policymakers at a time when export growth slows but the pressure on the balance of payments remains high due mainly to import of fuel to generate electricity through 'quick rental' power plants.

"The dip in food imports has helped curb a further depreciation of the taka," said economist Mahabub Hossain, attributing the reduced import to a rising rice output.

Rice yield rose by around 1 percent to 33.73 million tonnes in the current fiscal year from 33.54 million tonnes the previous year, enabling Bangladesh to become almost self-sufficient in its staple food, thanks to favourable weather, availability of fertiliser and its balanced use.

The reduced import of food grain has saved a good amount of subsidy, which the government can use in the power sector, said Hossain, who follows agriculture and rural economy.

"If the subsidy for food was needed, the government had to borrow more funds, which might make the economic situation of the country worse," said Hossain, also executive director of BRAC, a development organisation.

So, the condition of economy remains better because of the fall in food grain imports, he said.

He said import requirement for food for the next fiscal year would not be high unless there is any natural disaster.

Food and Disaster Management Minister Muhammad Abdur Razzaque said the government did not open fresh letter of credit (LCs) to import rice in the current fiscal year.

"We took delivery of rice against the contracts we signed the previous fiscal year," he said.

Razzaque said rice is in surplus now because of higher production in the past three harvests.

The government will review the overall production and stocks situation in November based on the production outlook of rain-fed aman rice, he said.

"We may need to export if we have surplus at that time," said Razzaque, explaining that export might be required to help prices of rice increase from the current low level to encourage farmers to stay with the cultivation of the crop.

A lack of space in public warehouses is another factor, said the minister, adding that import requirement for food grain would not be high the next fiscal year, beginning in July.

The government has cut its target for importing food grains by 15.4 percent to 1.1 million tonnes for the next fiscal year. Of the amount, wheat and rice import has been planned at 0.8 million tonnes and 0.3 million tonnes respectively, according to budget documents.

Till mid-June of the outgoing fiscal year, the government's imports fell by 52 percent to 1.01 million tonnes from 2.12 million tonnes the same period a year ago.

However, imports of wheat by the private sector may rise the next fiscal year, said Abul Bashar Chowdhury, chairman of BSM Group, a Chittagong-based commodity importer.

Including the government's planned wheat import, the total imports of the grain may rise to 2.3 million tonnes the next fiscal year from nearly 1.9 million in the outgoing year, said Chowdhury.

The Daily Star/Bangladesh/ 28th June 2012

The remittance inflow is set to cross $13 billion mark at the end of the current fiscal year as the amount has already reached $12.54 billion till June 22 this year, Bangladesh Bank (BB) sources said.

The country, however, fetched $11.6 billion as remittance in 2010-11 fiscal.

A BB official said the growth in remittance was driven by a couple of factors including migration of a large number of workers and also some regulatory measures.

“The inward remittance is expected to exceed $13 billion mark at the end of June 2012 as banks are relentlessly working to mobilise more foreign currencies from Bangladeshi workers abroad by offering hassle-free and low-cost money transfer,” said the BB official, seeking anonymity.

He also informed that BB governor Atiur Rahman himself is constantly monitoring the situation.

“If any single remitter faces problems with any bank, the governor has constant directives on us to resolve the problem rapidly,” the official said. BB data shows that migrant workers have so far remitted $767.49 million this month.

Remittance inflow reached $1.15 billion in May this year, up by 15.30 percent compared to $998.42 million in the same period a year ago.

Traditionally, the Middle East countries are the major sources of remittance inflow to Bangladesh. During the July-May period of the current fiscal, the country received $3.38 billion as remittance from Saudi Arabia, $2.20 billion from United Arab Emirate (UAE) and $1.09 billion from Kuwait, according to BB data.

Islami Bank Bangladesh Ltd (IBBL) handled the largest amount of remittance among the country’s public and private commercial banks during the last few years.

The bank channeled $3.19 billion during the July-May period of 2011-12 fiscal.

In FY 2010-11 and FY 2009-10, the bank handled inward remittance of $3.0 billion and $2.9 billion respectively.

State-owned Sonali Bank Ltd, Agrani Bank Ltd and Janata Bank Ltd channeled $1.16 billion, $1.14 billion and $913.05 million respectively in July-May period of 2011-12 fiscal, according to BB data.

Sources said state-owned Rupali Bank is in the process to accelerate remittance by expanding its overseas operation and getting new agreements with authorised dealer banks in the destination countries.

Among the private banks, National Bank, BRAC Bank, Pubali Bank, South East Bank, Uttara Bank, The City Bank, NCC Bank, Bank Asia, Prime Bank and AB Bank also extended their efforts to secure bigger amount of remittance in the days to come.

Participation of foreign banks in remittance handling has been low over the years. In July-May period of the outgoing fiscal, all nine foreign banks together channeled only $205 million. Of the amount, the stake of the HSBC Bank is $103 million, followed by Standard Chartered Bank’s $90 million.

The Daily Sun/Bangladesh/ 27th June 2012

The government has prepared a roadmap to prevent money laundering and terrorism financing for a period up to 2013 with a provision of imposing restriction on cash transactions for some selected sectors.

The finance ministry has already prepared a strategy paper -- National Strategy for Preventing Money Laundering and Combating Financing of Terrorism 2011-2013.

Finance ministry officials said the paper was supposed to be placed in parliament during the budget session but finally it did not happen.

Finance Minister AMA Muhith in the strategy paper said the strategic planning initiative has used APG (Asia Pacific Group on Money Laundering) Mutual Evaluation Report and Bangladesh's self-assessment exercises in identifying the threats to anti-money laundering and combating financing terrorism efforts.

The strategy paper also incorporated stakeholders' recommendations.

Muhith said, after setting the medium term vision for fighting money laundering and terrorism financing, the document identifies 12 strategic objectives to be attained.

The strategy paper said Bangladesh is mainly a cash-based economy and most of the banks are concentrated in large towns, leaving the majority of population in remote areas deprived of banking services.

The paper also said there are limited banking facilities, a small banking network and less trustworthiness upon the formal financial system among the low-income people in Bangladesh.

As a result, most of the business transactions are made in cash instead of paper or electronic media such as cheque or e-money, it said.

The roadmap includes a provision of imposing restriction on cash transactions for selected sectors/ types/purposes/thresholds by December this year.

The finance and home ministries, Bangladesh Bank, Securities and Exchange Commission, Insurance Development & Regulatory Authority Bangladesh, and NGO Affairs Bureau will impose the restrictions.

The strategy paper said if these are done, combating money laundering and terrorism financing activities will be easier.

The government has also set a target to develop an electronic database by December next year for sharing information among law enforcing and regulatory agencies such as Anti-Corruption Commission, Bangladesh Bank, customs authority and police.

Connectivity among the regulatory agencies for sharing the database would be established by June next year.

The strategy paper said strong coordinated efforts are required to analyse and unearth the money laundering cases as criminals use sophisticated methods.

For ensuring transparency in the ownership of legal entities, personal information of the owners or controllers of licensed entities will be reviewed and collected by December next year.

The strategy paper said, in Bangladesh, generally the organisations or registered entities such as corporations, limited companies, partnership firms and trusts are licensed or registered under different authorities under different laws.

These entities often do not have minimum public disclosure of personal information on controlling interest and ownership.

Due to a lack of capacity of the government, the Registrar of Joint Stock Companies and Firms (RJSC&F) is the main authority to register these entities.

Financial institutions cannot properly identify suspicious transactions due to a dearth of transparency and thus hinders law enforcing agencies from investigating and prosecuting money laundering and terror financing cases.

By using these entities, money launderers and terrorism financiers may get access to financial systems.

The government has set a target to make the RJSC&F fully automated by December this year to block this access. At the same time, the government will use national identification number as a unified identity number.

In order to improve transparency in financial reporting on money laundering and terrorism financing issues, the government will issue directives to incorporate a separate chapter dedicated to compliance issues on financial statements of reporting agencies by December this year.

The Daily Star/Bangladesh/ 26th June 2012

Banks and their directors are grappling to comply with two regulatory decisions.

The central bank has recently tightened loan rescheduling and provisioning rules, while the stock market regulator has won a High Court backing to force directors to hold 2 percent shares individually.

These two directives have put both the managements and boards of the banks in a difficult situation.

Against this backdrop, Association of Bankers Bangladesh (ABB) -- a platform of banks' managing directors -- and Bangladesh Association of Banks (BAB) -- a forum of directors -- at two separate meetings yesterday urged the regulators to be accommodative in implementing the new rules.

“We welcome all sorts of monitoring and discipline regarding loans, but these have to be accommodative and supportive to all stakeholders,” Helal Ahmed Chowdhury, managing director of Pubali Bank and vice chairman of ABB, told The Daily Star after the meeting.

The Bangladesh Bank (BB) issued a circular to the banks on June 14, asking them to make a continuous loan classification for non-repayment within three months instead of six months and limit rescheduling scopes within three times.

Chowdhury feared quick implementation of the loan rescheduling rules may give a rise to non-performing loans and an additional requirement for provisioning will eat up banks' profits and as a consequence the government will lose taxes.

The chief executives of banks sought the time till January 2014 to implement these new decisions on loan rescheduling instead of September this year.

They also asked the BB to relax rules for them in maintaining the base for provisioning at minimum 20 percent for collaterally-secured loans.

Bankers said many borrowers might become defaulters unintentionally because of the new decision.

They also said the present liquidity position amid external and internal economic slowdown is not appropriate to tighten the terms and conditions of commercial banks' loan agreements.

On the other hand, with the High Court's judgement on upholding the Securities and Exchange Commission's (SEC) power to impose the section 2CC of SEC ordinance, it has been made mandatory for directors of listed companies to hold 2 percent shares individually.

Directors had filed writ petitions with the High Court challenging the section 2CC of the SEC ordinance, but these were rejected last week.

The BAB's problem seems to be more critical as many directors will lose their directorship for not being able to hold 2 percent shares in line with the SEC decision. The BAB has decided to request the stock to give them a waiver in holding shares as banks' capital base is much higher than others.

“We want a waiver from the SEC in the issue of holding 2 percent shares by each director,” said Nazrul Islam Majumder, chairman of the BAB.

“Banks are very big companies and their paid-up capital is also very high compared to other listed companies,” he said, adding that 2 percent shares of banks would cost at least Tk 30 crore.

The Daily Star/Bangladesh/ 25th June 2012

The government will bring a number of changes to the tax proposals in the budget for the next fiscal year, taking into account the low-income people and the problem-ridden export sector.

Officials of the National Board of Revenue (NBR) said big changes may be made to the proposed tax on mobile phone bills, bank interest and export earnings.

Finance Minister AMA Muhith may give a final declaration in this regard in parliament on Wednesday.

In the proposed budget for the next fiscal year, the government raised tax at source on export receipts to 1.2 percent from the existing 0.6 percent.

But in the face of opposition from businesspeople, the rate may be lowered to 1 percent or 0.9 percent.

The NBR official said the export sector, especially readymade garments, has grown to an annual $18 billion export industry but they pay tax less than the corporate sector does.

The NBR has a plan to increase the tax on the apparel sector gradually and take the rate to 2 percent.

The official said the proposed tax on export earnings is going to be slightly reduced as this year has been showing a sluggish trend.

The government in the next fiscal year's budget proposed a 2 percent tax deduction at source on post-paid and pre-paid mobile phone bills.

The NBR official said either the proposed tax may be completely withdrawn or a threshold bill of Tk 200 may be set in case of taxes on pre-paid mobile bills.

The government has been facing criticism from economists, civil society members and general people since it has proposed the imposition of tax on mobile bills.

The Bangladesh Bank has already suggested that the tax should be levied on post-paid mobile bills instead of the pre-paid ones.

The central bank in a set of recommendations sent to the NBR recently said commercial banks provide mobile banking services to reach more unbanked people.

The BB also said people having accounts with banks that provide mobile banking services can get different services such as receiving remittances and various social safety allowances from the government.

Also, farmers can get fair prices for their produce and market their commodities in time through mobile phones, the central bank said.

The NBR official said they have already talked with mobile phone operators about the imposition of the tax.

The operators have told the tax administrator that if the tax is imposed, maintaining the tax-related documents will be difficult for the operators, according to the official.

Now there are around nine crore mobile phone subscribers in Bangladesh.

The government also proposed a minimum tax on individual taxpayers at Tk 3,000 from the existing Tk 2,000. But now the amount may be brought to its previous level or at Tk 2,500.

In the budget for the next fiscal year, it was proposed to charge 15 percent advance income tax instead of 10 percent on the interest earnings of the bank depositors who do not have any tax identification number.

But the NBR official said the government now plans to relax the rules. If a person has a deposit up to Tk 5 lakh and does not have a TIN, he will now pay 10 percent tax.

According to BB statistics, of the total bank accounts, 98 percent have up to Tk 5 lakh in deposit each. The number of total bank accounts is 5.52 crore now. Besides, the proposed 10 percent advance income tax on insurance premium may also be withdrawn.

Muhith yesterday told journalists that the government is considering the issue of withdrawing the 10 percent interest on insurance premium.

The Daily Star/Bangladesh/ 25th June 2012