Sherpa Hossainy's Blog

Bangladesh sees billion-dollar trade potential in Myanmar

Posted in Bangladesh, Dhaka, Economy, Export and Import, Myanmar, Yangon by Sherpa Hossainy on July 10, 2013

Renews pledge to boost cooperation

Published in Myanmar Business Today (Vol 1, Issue 21) on June 27, 2013

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Bangladesh and Myanmar can increase their bilateral trade up to a billion dollar if service-based trade can be bolstered, a top Bangladesh government official said.

“Our current bilateral trade is mainly goods-related, but the service-related trade hasn’t expanded that much. Bangladesh has an established service sector in banking and insurance, and these sectors haven’t developed much here. There’s also good potential for pharmaceuticals and IT services,” Md Shahidul Haque, foreign secretary of Bangladesh, told Myanmar Business Today.

“There are opportunities for expanding the exchange of services. The potential is huge. It can definitely cross the billion-dollar mark if we can add the services sector in our trade,” he said.

The bilateral trade between the two neighbours amounted to only about $79 million in 2011-12 fiscal year, while it stood at $190 million in 2010-11 fiscal. Bangladesh exported goods to Myanmar worth $13.45 million during the fiscal year 2011-12.

Bangladesh Foreign Secretary

Md Shahidul Haque (L), foreign secretary of Bangladesh, with Anup Kumar Chakma, ambassador of Bangladesh to Myanmar. Sherpa Hossainy

“At first we want to take the current trade volume up to $500 million,” Shahidul said. Myanmar was in a difficult situation and under various sanctions, so increasing the trade volume was hard as “we had to work within certain limits,” he added.

Shahidul said Bangladeshi private sector can facilitate in providing technical assistance to Myanmar, especially in garment industry, being the second largest garment exporter in the world behind China. “Exchange of technical expertise will be discussed during the next Joint Trade Commission meeting,” he said.

The Bangladesh Foreign Secretary was in Myanmar from June 12-17 to attend the 7th round of Foreign Office Consultations (FOC), where foreign secretaries of the two countries meet and review a range of bilateral political, economic and security issues. “We looked at ways to strengthen our relations and how both countries can grow,” Shahidul said, adding that trade and border issues were the main focal points.

During the talks Myanmar welcomed the four-country “Kunming initiative”, a sub-regional organisation that includes Bangladesh, China, India and Myanmar (BCIM), born in 1999 out of the attempts to link the development plans of the southwestern Chinese province of Yunnan to India’s ‘Look East policy.’ BCIM is a sub-regional organisation of Asian nations aimed at greater integration of trade and investment between the four countries.

“For a long time it was a Track II initiative but India and China has brought it up to Track I. Bangladesh and Myanmar has now decided to actively take part in the initiative and we will join the Track I force,” Shahidul said.

‘Track II diplomacy’ is a specific kind of informal diplomacy, in which non-officials engage in dialogue with the aim of confidence-building, while the term ‘Track I diplomacy’ refers to official governmental diplomacy, or a technique of state action, which is essentially a process whereby communications from one government go directly to the decision-making apparatus of another.

Shahidul led a 14-member Bangladesh delegation to the talks, while his counterpart Deputy Foreign Minister U Thant Kyaw, led a 20-member Myanmar delegation. Ambassador of Bangladesh to Myanmar Anup Kumar Chakma, along with senior officials from seven ministries and agencies of the Bangladesh government also took part.

During his visit in Nay Pyi Taw, the Foreign Secretary called on Deputy Ministers for Commerce, Home and Electric Power, and concerned members of the delegation met the Ministry of Transport officials. Both countries acknowledged the importance of increasing connectivity and expressed intention to sign the revised air service agreement soon.

“We will quickly start the air link programme. However, it’s not easy for the government to start the air link; private sector also has to take the initiative. We hope the agreement will be finalised next month” Shahidul said.

In a bid to have the best of neighbourly relations, Bangladesh and Myanmar pledged to begin an era of partnership based on trust and confidence for stronger economic ties and stability along the borders. To enhance security and stability at their common borders at land and sea, the two sides expressed willingness to address a range of trans-boundary crimes along the borders, including human, drugs and arms trafficking, and money laundering. The two sides also agreed to bolster regular interactions between the two border forces as well as civil administrations of the bordering districts of Bangladesh and Myanmar.

The two countries talked about the establishment of direct coastal shipping link and agreed to complete all necessary formalities for the purpose. They also agreed to renew the expired Agreement on Cultural Cooperation and conclude a memorandum of understanding on cultural exchange programme.

Bangladesh offered to arrange short diplomatic training courses for the mid-and junior-level diplomats of Myanmar, and invited Myanmar to send a delegation to an international conference on peace, tolerance and non-violence to be held in Bangladesh later this year. Bangladesh also proposed greater exchanges between Buddhist scholars to deepen intercultural understanding between the two countries.

The bilateral talks also focused on cooperation under regional frameworks like the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) and BCIM. BIMSTEC is a regional cooperation organisation involving Bangladesh, India, Myanmar, Sri Lanka, Thailand, Bhutan and Nepal. Myanmar is the current Chair of BIMSTEC and will hold the next BIMSTEC Summit in early September this year.

The Myanmar delegation said the discussions will “strengthen goodwill, confidence, mutual trust and understanding between the two countries,” while Shahidul hoped “the existing trade barriers will be removed soon in a bid to strengthen the political, cultural and economic cooperation between the two neighbours.”

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Myanmar-Bangladesh bilateral trade: Mired in lack of connectivity

Posted in Bangladesh, Banking, Business, Dhaka, Economy, Export and Import, Finance, Interviews, Investment, Myanmar, Yangon by Sherpa Hossainy on July 9, 2013

Bangladesh is keen to resolve all the barriers to trade and tap the huge potential of Myanmar, which it sees as a key regional partner and gateway to Southeast Asia, says Bangladesh Commerce Minister

Published in Myanmar Business Today (Vol 1, Issue 11) on April 4, 2013

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A dearth of basic land, air and sea connectivity is daunting the prospects of boosting the bilateral trade between Myanmar and Bangladesh, the Minister for Commerce of Bangladesh said.

“The transport and communication infrastructure is very poor between Myanmar and Bangladesh despite being neighbours. We still haven’t been able to resume the air linkage and we don’t even have land links with Myanmar’s major cities. This is gravely hurting the prospects of a better trade,” GM Quader told Myanmar Business Today.

GM Quader, Minister for Commerce of Bangladesh, speaks to Myanmar Business Today during his visit to Myanmar at the Bangladesh Embassy in Yangon. Sherpa Hossainy

GM Quader, Minister for Commerce of Bangladesh, speaks to Myanmar Business Today during his visit to Myanmar at the Bangladesh Embassy in Yangon. Sherpa Hossainy

Myanmar and Bangladesh have been working to re-establish direct air link to connect Yangon and Dhaka after Biman Bangladesh Airlines, the national flag carrier of Bangladesh, suspended its flight between Dhaka and Yangon in 2007 against the backdrop of economic losses.

Bangladeshi cabinet in June last year approved a proposal for inking a deal with its Southeastern neighbour to resume direct flight service, which will allow seven passenger and four cargo flights to fly between Dhaka and Yangon every week.

“The agreement has been finalised and signed. However, Biman is not in a position financially to start a route which will take some time to become profitable, and airlines from Myanmar are also hesitant about getting into a financially risky venture,” Quader said.

During Bangladeshi Prime Minsiter Sheikh Hasina’s visit to Myanmar in 2011, the two countries agreed to develop their land, sea and air connectivity.

“These three are the biggest barriers for us. India, China and Thailand have a good connectivity structure with Myanmar in place via air, sea and land. We have to improve our connectivity if we have to improve the trade,” the Bangladeshi Commerce Minister said while visiting Myanmar last month.

When asked why Bangladesh have reacted slower than other Myanmar neighbours such as India, China and Thailand to the recent economic reform process the minister said they were “well-ahead than anyone even before the reforms began.”

“China and Thailand have basic advantages. Their manufacturing and production base is much stronger and they are way ahead than us in terms of investing in other countries.”

China is Myanmar’s biggest trading partner, followed by Thailand. Bilateral trade between China and Myanmar was worth about $3.6 billion in the fiscal year 2011-12, according to Myanmar’s Ministry of Commerce, while bilateral trade between Myanmar and Thailand stood at $4.576 billion in 2012. Myanmar-India bilateral trade reached $1.19 billion in 2009-10, making it Myanmar’s fourth largest trading partner after Thailand, China and Singapore.

Besides air linkage, Bangladesh and Myanmar also haven’t been able to develop any reliable road network in the bordering areas. However, the minister hoped that the proposed Asian Highway will hugely boost the road connectivity.

The Asian Highway project, also known as the Great Asian Highway, is a cooperative project among countries in Asia and Europe and the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), to improve the highway systems in Asia.

A sub-regional organisation of Asian nations called the Bangladesh-China-India-Myanmar Forum for Regional Cooperation (BCIM), established in 1999 for greater integration of trade and investment between the four countries, organises a car rally, widely known as Kolkata to Kunming (K2K) car rally, to explore the potentials of expanding trade, investment and tourism, and enhance connectivity in the region along the Kolkata-Kunming route.

“We have to establish major road links with Myanmar to get access to Southeast Asia. Myanmar is our gateway to get into the markets of Thailand, Laos and Cambodia,” Quader said. Talks are also underway to allow Myanmar water vessels into Bangladesh’s inland waterways and vice versa to strengthen the sea connectivity, he added.

Asian Highway mapThe Bangladeshi minister also pointed out banking as “one of the biggest barriers” to Myanmar Bangladesh bilateral trade as there is a cap on transaction amount in place. Both countries are trying to increase border trade, which was hit hard by the recent sectarian violence in Myanmar’s Rakhine state.

“We are planning to set up wholesale markets and warehouses along the border. Bank draft margin has also been increased from $30,000 to $50,000 to facilitate trade. These issues were not stressed that much before as the trade volume was low and there were sanctions against Myanmar banks, but now we are developing mechanisms to remove the existing obstacles,” he said.

The border trade between the two countries is still low (125 commodities) compared to the existing potential and overseas trade. About 10,000 commodities are traded along the Myanmar-China border, while about 3,000 commodities are traded in Myanmar-Thailand border trade.

During the 6th Joint Trade Commission (JTC) meeting between Myanmar and Bangladesh held in Dhaka in November last year, both countries agreed to enhance the volume of bilateral trade to $500 million from around $100 million annually.

The bilateral trade between the two neighbours amounted to only about $79 million in 2011-12 fiscal year, while it stood at $170 million in fiscal 2010-11. Bangladesh exported goods to Myanmar worth $13.45 million during the fiscal year 2011-12.

However, the volume of unofficial trade between the two countries is about $300 million per year, Border Guards of Bangladesh (BGB) sources were quoted as saying in Bangladeshi media.

Bangladesh exports steel products, light engineering machinery, cement, dry foods, medicines and cosmetics to Myanmar and imports fish, timber, spices, synthetic foot-wears, among others. Besides the formal trade, a large quantity of petroleum products, fertilisers, agricultural inputs, and automobile parts are also smuggled into Myanmar.

The minister agreed that illegal border trade has been a problem as there were no formal banking channels in place. “Businesspeople don’t want to do illegal trade. But the payment system was complicated and they had to do transactions through hundis. But we are trying to clear the restrictions now so that all businesses can be done legally.”

During the Bangladesh Prime Minister’s visit Myanmar and Bangladesh signed memorandum of understandings to establish a Joint Commission for bilateral cooperation and a Joint Business Council (JBC) between the Republic of the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) and the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI).

Bangladesh is also interested in importing power from Myanmar as a power-starved country, the Minister said. “Not only power, we have to develop all kinds of infrastructures to facilitate business. Now people do business via Singapore or Bangkok and it takes a lot of time and money for businesspeople.”

“However, we have identified the barriers and efforts are being made from both sides to overcome those,” he said.

The Bangladeshi Commerce Minister said the trade volume between Myanmar and Bangladesh hasn’t reached a satisfactory level because of former Western sanctions and economic isolation of Myanmar, but the doors for business seem to have opened again.

“The opportunities are huge in Myanmar as it’s a very resourceful country. They have abundant agricultural products such as rice, pulse and beans. They have timber, oil and gas and jade, and most of the resources are mostly untapped here,” he said.

“The biggest advantage for Bangladesh is its geographical location. Many of our products are globally well-known for their quality such as readymade garments, leather and pharmaceuticals. Even Bangladesh’s shipbuilding industry, a sector where Bangladesh is recently registering remarkable export growth, has a great potential here.”

Bangladesh is the world’s second largest readymade garment exporter behind China with annual exports of about $20 billion and its leather industry is set to cross $1-billion mark in export earnings this fiscal year. The pharmaceutical industry in Bangladesh is one of the most developed hi-tech sectors within the country’s economy, with an export amount of over $50 million.

“If we can further the ties between the businesspeople of the two countries, and from the government’s part if we can ease the existing barriers then we can definitely develop our bilateral trade at a very faster rate,” he said.

“We both have goods that we need and can provide. So, the possibilities are endless.”

However, the Minister said it would take some time for Bangladeshi investors to come and invest in Myanmar because of Bangladesh government’s “rather strict” policy towards its businesspeople investing in other countries. “Only three to four months ago we started allowing foreign investments from Bangladesh in a case-by-case basis. Investment policy from our side to outside is still too restricted.”

“However, we are interested to invest in the cement industry in Myanmar as they have available raw materials. If Bangladeshi entrepreneurs are interested and Myanmar agrees to supply the raw materials we can go ahead and set up cement factories here,” Quader said. We also welcome any Myanmar investors who are interested to invest in Bangladesh, he added.

“We are very hopeful that there will be positive development. The Bangladeshi businesspeople who came here said they received overwhelming response from the Myanmar side.

“There is a huge trade prospect for both countries. The whole world is trying to establish their presence in Myanmar now. As a next door neighbour we shouldn’t just sit idly and let the opportunities fly past,” the Minister said.

Investment arbitration will increase FDI, say experts

Posted in Bangladesh, Dhaka, Investment, Legal by Sherpa Hossainy on February 4, 2012

Published in The Independent on 27 January 2012

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Foreign direct investments into Bangladesh can be boosted by formulating an internationally recognised arbitration law, legal experts said at a dialogue on Thursday.

Arbitration is an alternative dispute resolution (ADR) tool which allows two parties settle legal issues outside court, avoiding lengthy judicial proceedings and huge costs.

The experts were speaking at a dialogue on investment arbitration, organised by Bangladesh International Arbitration Centre (BIAC) at Hotel Ruposhi Bangla. Shafique Ahmed, minister for law, justice and parliamentary affairs, Dr Kamal Hossain, eminent lawyer, and Gavan Griffith, Queen’s counsel at the Australian Bar, were  present.

Griffith, a chartered and international commercial arbitrator, in his keynote speech, said  different states have different laws but local judgement is not acceptable internationally.
“Commercial entities want to know if there will be finality in case of a dispute resolution. In absence of an internationally recognised dispute settlement tool foreign companies get reluctant to invest as they feel unprotected,” he said.

Griffith said some commercial entities prefer some states over others for businesses because there is enough protection and justice for them. Some states are making arbitration laws allowing foreign investors, if treated unfairly, to claim damage against the state, he added.

“Bangladesh has a standard arbitration law, which is similar to that of the UK, but without an international treaty this will not be recognised globally. You have to create a level playing field,” Griffith said. He said investment arbitration is a tool to make the world a better place for trade and Bangladesh should adopt the internationally recognised New York International Treaty for Arbitration, to protect foreign investments.

The Law Minister Shafique Ahmed said Government is willing to cut down the lengthy court procedures and amending the age-old civil procedural law formed in 1908. “Alternative dispute resolution (ADR) is the only way to deal with the backlog of cases,” he said.

The minister said proper arbitration and investment protection law will encourage foreign investors and the ministry is going to amend Bangladesh Arbitration Act 2001 upon recommendation from the law commission soon.

Gold prices hiked again

Posted in Bangladesh, Business, Dhaka, Economy by Sherpa Hossainy on February 4, 2012

Published in The Independent on 25 January 2012

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Gold prices in the local market went up in a bid to counterbalance the devaluating local currency and to keep up with the soaring international price of the item.

The new rates were effective from Tuesday. This was the second hike in gold prices within 10 days.

The price of 22-carat gold was increased by Tk 1,283 per “bhori” (local unit of gold measurement, 1 bhori = 11.664 grams), and the prices of 18-carat, 21-carat and traditional gold were increased by Tk 1,108, Tk 1,283 and Tk 1,050 per “bhori” respectively, Bangladesh Jewellers Samity (BJS) sources said.

Following the rise, the prices of gold stood at: 22-carat Tk 57,736 per “bhori”, 21-carat Tk 55,170, 18-carat Tk 47,297, and traditional gold Tk 36,158 per “bhori”, according to BJS.

Gold prices closed on $1,664 per ounce [1 ounce = 31.1034768 grams] on Tuesday in the global market, while it closed on $1,638 per ounce on 14 January, when the first price rise came to effect in the local market.

“The spiralling prices in the international market forced us to increase the gold prices in less than two weeks,” said Dewan Aminul Islam Shahin, general secretary of Bangladesh Jewellers Samity (BJS).

“Our local currency (taka) is also losing its value against dollar. We are an import-based industry and the devaluation hurts our business,” he added.

Shahin said further price hike could be on the cards if the losing trend of taka doesn’t stop and the rising trend of global gold price doesn’t show any sign of easing.

Japan project to support Bangladesh informal sector workers

Posted in Bangladesh, Dhaka, Economy by Sherpa Hossainy on February 4, 2012

Published in The Independent on 23 January 2012

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Bangladesh can establish a social safety net system for vulnerable groups and boost its economic growth by incorporating its informal sector workers into formal sectors, the labour minister has suggested.

“If we can provide grassroots support for informal sector workers who are suffering from poverty and widening disparities, we can boost economic growth as their contribution to the economy will be recognised,” said Khandker Mosharraf Hossain.

Around 80 per cent laboureres are working in the informal sectors in Bangladesh which includes agriculture, domestic work, tailoring, hawker, barbers, porters and rickshaw pullers, among others.

The minister was speaking at a symposium organised by the Japan International Labour Federation (JILAF) and International Trade Union Confederation, Bangladesh Chapter (ITUC-BC) on Sunday in  Ruposhi Bangla Hotel.

The symposium was organised to launch the Japanese government programme — “Supporting grassroots activities through the International Employers and Workers Network” (SGRA). This programme is run in Asian countries by Japan Government’s Ministry of Health, Labour and Welfare and implemented by JILAF.

The support is provided through the international labour management network by organising informal workers and their families who lack public support.

Shiro Sadoshima, ambassador of Japan to Bangladesh, Hisashige Danno, deputy executive director of JILAF, Andre Bogui, director of ILO country office Bangladesh, and Masaaki Iuchi, deputy assistant minister for International Policy Planning Minister’s Secretariat, Ministry of Health, Labour and Welfare of Japan, were also present. The programme targets vulnerable groups such as low-wage earners, women and people with disabilities. SGRA currently runs in Thailand and Nepal.

“SGRA will improve the socio-economic and livelihood condition of the workers and their families in informal economy and enhance the role of trade unions,” said Kenichi Kumagai, assistant general secretary of JILAF.

JILAF aims for the development of free and democratic labour movements in developing countries and promote their sound social and economic development, Kumagai added.

The minister said the programme will also provide information and vocational training necessary for a better life thus contributing to raising the minimum standard of living.

Bangladesh Labour Welfare Foundation Act 2006, the only legal instrument of the country which provide definition of informal sector, says in section 2(a): “Informal sector” means types of non government sector where workers’ work or condition of work etc are not recognised or controlled by existing labour law and related policies and where there is very limited scope for employed workers to be organised.

According to definition of International Labour Organisation (ILO), the informal sector consists of small-scale, self-employed activities (with or without hire workers) typically a low level of organisation and technology, with primary objective of generating employment and incomes.

Tumbling taka hurts gold business

Posted in Bangladesh, Business, Dhaka, Economy, Industries by Sherpa Hossainy on January 24, 2012

Published in The Independent on 19 January 2012

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The country’s gold industry is going through a lean patch as flagging taka against dollar forces gold traders to push the item prices up, consequently driving the buyers away.

Gold is already trading higher in the local market than the global level, but the perpetual decline of taka is pushing the gold traders into a quandary as customers are averse to buying the precious metal at a higher rate.

“Gold prices should not be this high. But as taka gets weaker we are paying more for gold purchases and this is forcing us to hike the prices,” said Dewan Aminul Islam Shahin, general secretary of Bangladesh Jewellers Samity (BJS).

According to Bangladesh Bank, in the last one year alone taka devalued 15.43 per cent against the greenback. The dollar was trading on Wednesday at Tk 84.05 whereas it was around Tk 69 a year ago.

“It wouldn’t matter if the international gold price remained constant. Now we are paying Tk 12-14 more for every dollar than what we paid a year ago,” said Shahin.

After the historic rise of gold in the international market in mid-August last year, amid the Eurozone debt crisis, situation eased at the year-end. Gold crossed $1,800 per ounce [1 ounce = 31.1034768 grams] in mid-August, while in December it came down to $1,540 per ounce. However, since January gold prices started to shoot up again and on Tuesday gold traded at $1,630 per ounce.

In the course of this rising trend, BJS, the country’s largest gold traders’ association, is set to take the gold prices up again. The 35-member executive committee of BJS will sit  next Tuesday to decide the hike. “If majority of our members opine for a price increase we will implement it immediately,” the BJS general secretary said.

The latest price hike happened only last Saturday (January 14) where the price of 22-carat gold was increased by Tk 1,513 per “bhori” (local unit of gold measurement, 1 bhori = 11.664 grams). The prices of 18-carat, 21-carat and traditional gold were increased by Tk 1,222, Tk 1,397 and Tk 1,280 per “bhori” respectively.

After the hike, the prices of gold stood at: 22-carat Tk 56,454 per “bhori”, 21-carat Tk 53,888, 18-carat Tk 46,189, and traditional gold Tk 35,109 per “bhori”, according to BJS.

In India, gold prices continued to move up to new highs well beyond September and into December 2011 mainly because the rupee depreciated sharply against the dollar. In early December, spot gold in Delhi market hit a record high of Rs 29,540 per 10 gram. The rupee had moved down to around Rs 54 per $1 in December.

According to the World Gold Council, sharp volatility in gold prices and inflation do impact discretionary spending.

“When the gold price crossed the Tk 25,000 mark we started losing business as the customer base shrank,” Shahin said.

Very few customers now buy gold, and this is also confined to wedding occasions. No one wants to buy gold now unless it is mandatory, he said.

However, the traditional gold buying for wedding ceremonies is also hit by the rising prices, especially the middle-class is suffering the most. “A few years back, you could buy a whole set of jewelleries at Tk 50,000. Now you have to spend six times more just to get a bare minimum of five ‘bhoris’,” Shahin said.

The reluctant customer base is also forcing small jewellers to shut down businesses even amid the “wedding season”, which otherwise usually buoys the market. Dilip Roy, president of BJS, said, “20 per cent of the small shops have closed down now and the overall business is halved.”

Roy believes formulation of a gold policy can make this wobbling situation change. “If there was a gold policy, we would be able to buy gold from Bangladesh Bank. Then the price fluctuation in the international market would have a much lower impact,” he said.

In April, the ministry of commerce formed an inter-ministerial committee after receiving a letter from the BJS seeking formulation of a gold policy in three months. The committee then decided to make a jewellery industry policy, under the supervision of the industries ministry, immediately after formulation of the import policy, which will allow Bangladesh’s jewellery manufacturers to purchase gold through proper channels.

However, the progress following the formation of the committee has been sluggish, making matters much worse, Roy lamented.

State-run banks losing shine in export financing

Posted in Bangladesh, Banking, Business, Dhaka, Export and Import, Finance by Sherpa Hossainy on January 4, 2012

Published in The Independent on 4 January 2012

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The state-run banks are becoming a lacklustre option for export financing despite the fact that they offer lower interest rates and have better access to funds, exporters say.

Exporters nowadays are rather opting for private commercial banks, which provide fast and well-organised service, while the government banks are fraught with inept and complex procedures, bureaucratic red tapes and sluggish service. However, exporters still rely on state-run banks when it comes to big volume financing as arranging vast amount of cash is often hard for private banks.

“The processing of simple loan applications in state-run banks is very lengthy and it’s difficult to go through all the voluminous paperwork,” said Abdus Salam Murshedy, president of the Exporters Association of Bangladesh (EAB).

The EAB chief said the state-owned banks played an extraordinary role in industrialisation and export financing during the 80s and 90s but couldn’t keep up with the changing needs of exporters and struggled to provide efficient service.

“The private banks slowly took over the financing of export-oriented sectors because of their superior services. They also maintain better customer relations,” Murshedy told The Independent. The state-run banks are performing poorly in industrial loan recovery, he added.

The private banks’ top-notch service and hassle-free financing had made an increasing number of exporters move away from state-run banks.

Anowarul Islam, a garment exporter, said, “Private banks have state-of-the-art facilities and they are proactive in communication. Opening letters of credit and availing loans are much easier in private banks.”

The state-run banks, on the other hand, claim that they are providing better facilities such as lower lending rates and easy access to loans.

Md Abdur Razzaque, assistant general manager of Foreign Trade Department of Janata Bank, said, “State-run banks’ interest rate for exporters is 7 per cent, while the private banks charge 18 per cent. We have no extra fees and ‘hidden charges’ like private banks.”

Razzaque said private banks are reluctant to help small clients and state banks are still the solution to  them. He said the regular collateral ratio is 1:1.5, but for exporters it is either 1:1 or collateral-free.

He said the state banks are serving a big customer base and that could sometime lead to slow service. “If a private bank serves 10 clients, we serve 110. They have a selective customer base, we serve everyone,” Razzaque said.

Razzaque said state-run banks are working in line with the government’s export policy and give highest priority to the export sector. The state banks arranged quick cash during Eid for the garment exporters to pay their workers which helped avert labour unrest, he added.

Financing exports at a subsidised rate also makes it hard for the state-run banks to make any profit. “Sometimes we even make losses, but we are following government policy to help exports,” Razzaque said.

However, private banks defended their high interest rates, citing rising inflation and monetary policy pressures. “On top of the inflationary growth and tight fiscal policy, we have to think about availability of funds and the costs of running an operation. If you consider these things I’d say we are not charging high interest rates,” said Muhammad A (Rumee) Ali, chairman of BRAC Bank.

Murshedy said state banks can afford lending at a lower rate because they face much less liquidity crisis and get big funds from the government. “The private banks collect money from the public and they have a much higher risk factor,” he said.

He, however, said, “When it comes to big loans, there is little to do but to go to the government banks. Private banks have to form consortiums to put together such big amounts.”

At present, the government under the Export Credit Guarantee Scheme provides Export Credit Guarantee (Pre-shipment), Export Credit Guarantee (Post-shipment), Export Payment Risk Policy (Comprehensive Guarantee) and Whole Turnover Pre-shipment Finance Guarantee, covering risks on export credit as well as probable commercial and political risks occurring abroad.

The government also provides loans and venture capital on easy terms and low interest rates from the Export Promotion Fund (EPF) for the exporters. The Export Policy 1997-2002 also ensured incentives such as rebate on insurance premium, income tax rebate on export earnings, duty drawbacks, tax holiday and cash subsidies.

Financial inclusiveness should be banks’ target

Posted in Bangladesh, Business, Corporate, Dhaka by Sherpa Hossainy on January 2, 2012

Published in The Independent on 1 January 2012

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The country’s private banks should strive to serve the masses and promote financial inclusivity to bring them under a common economic system, said Muhammad A (Rumee) Ali, chairman of BRAC Bank. In an exclusive interview with The Independent, Rumee focused on the current banking sector scenario, and his bank’s service strategy, small and medium enterprise financing operations and its impending customer-centric banking model.

Muhammad A (Rumee) Ali, chairman of Brac Bank Ltd

What are the new products or services of your bank?

Brac has a subsidiary called “bKash”, which is our mobile banking wing, and this strategic investment intends to promote financial inclusivity for the masses. Opening bank accounts for bottom-of-the-pyramid people is difficult. They hesitate to come to a bank, and for them it’s a costly affair. For the real masses mobile banking is the answer because it opens new doors towards inclusivity. If you don’t give financial inclusivity to everyone it creates contradictions within the society. For people who can read and write and have fair knowledge to open a bank account we introduced the Access account, which is a no-fee account where people can easily access a bank account without going to banks. We serve them through our ATMs, where both the cash withdrawal and deposit can be done.

What is the overall performance of your bank?

BRAC Bank performed very well last year despite several constraints in the financial industry such as liquidity crisis and the stockmarket issue. The bank  successfully increased its book in terms of lending to the small and medium enterprises (SMEs), which is our main focus. The customer base significantly increased last year, which is now more than 1.5 million. We have also done some non-financial initiatives to promote financial inclusion such as Krishok card for farmers. We also introduced Probashi banking card for people who receive remittances.

What is your target for the next year?

We are planning to launch a new retail banking model, which concentrates more on customers rather than products. We have now put a team together and changing the existing model into a customer-based model. At the end of the day you are dealing with people, not with products. Products should be for people, people should not be for products. We’ll keep on pushing the same strategic issues and objectives to promote inclusivity and make finance more accessible to SMEs. But BRAC Bank is a full service bank so we want to give good products in the consumer banking sector and continue providing the best service to our corporate customers.

What do you think about spreading banking services to the people who are not covered by a bank?

BRAC Bank promotes financial inclusivity and that is why we are an SME-based bank. Traditionally small businesses have been out of the banking system and we are trying to bring them in. In every country, small and medium businesses drive the economy. The central bank in Bangladesh is already focussing on this but we need more traction. More banks need to get involved with small businesses. We are the pioneer and the leading bank in the country on small businesses and through bKash and Access accounts we are reaching out to the ‘unbanked’.

What about the rural banking services? How many branches of your bank are located in the village areas?

Sixty per cent of our branches are in rural and semi-urban areas and 40 per cent are in urban areas. I think BRAC is the only bank with this ratio in Bangladesh, except for state-run banks.

What is the uniqueness of your bank?

BRAC is perhaps the only bank with a specific mission and that is to support or create access for the SMEs. Other unique feature of the bank is that 60 per cent of the advances are in semi-urban and rural areas. Our branch and distribution structure is also unique.

What are the CSR activities of your bank?

I’ll start by saying that BRAC Bank itself is CSR. We are a bank with a mission. We promote financial inclusivity and we are looking at small businesses, and this is Corporate Social Responsibility (CSR) in its own. Besides, we are involved in many CSR activities, especially education.

Do you think there is any necessity of new banks?

If the question is approached from the point of view “are they serving the people?” or “are they getting more people involved in the banking system?” I think the banking industry has actually fallen short of expectations. If someone argues from that point of view that we don’t need any more banks, one has to agree to it. On the other hand, I think central bank should help   banks promote inclusivity. There are 45 banks in Bangladesh and from this point of view I don’t see any further need for banks but I think the emphasis should be now on the banks to move out and get more people involved in the system. That is where the regulators and the government should be pushing the banks. However, there is always a need for specialised institutions. If a group or bank can come up with specialised stream of products or specialised solution to a need in the economy, then that can be a reason why the bank should exist. Overall, as it stands now, we don’t need any more banks.

Do you think present lending rate is too high for growth of industrialisation? How can we reduce it?

I don’t think the rate is too high. If you look at the inflation rate you’ll see that the real interest rate is quite low. The interest rate is a function of lot of things such as monetary policy. When an economy is under inflationary pressure if you continue to keep the interest rates low the only thing that can happen is inflationary growth. When you set a price for lending to a customer you look at the availability of funds, the risks being taken and the cost of running an operation. If you take these things in consideration I won’t say banks are charging high interest rates. The central bank’s monetary policy in face of the inflationary pressure on the economy has been ‘not to move away from the accommodative policy.’ So, there will be pressure on the interest rates and that is true for any economy, and Bangladesh is not an exception.

What are qualities required to be a successful banker?

You should understand the economy, the dynamics of the banking system and most importantly remember that you are serving people and working with them — that is what successful banks and bankers do. Another thing is that, one should read about latest developments in the world of business, banking, management and leadership. This knowledge helps you to evolve yourself into a better banker. Many young bankers don’t care to do that.

What are the measures you are taking to reduce non-performing loans in your bank?

First of all prevention is better than cure. We have to prevent bad loans from happening. So you must have a very robust process of credit approval so that you know that you are doing the right thing. Internally, it can be bad management or bad financial management, and there are also technical reasons  behind bad loans. In terms of the external problem when the economy is in downturn you should help the customer to tide over that period. Dialogue with a customer and understanding the situation is very important. It is the question of due diligence before you give a loan. You must understand that the person has the knowledge and capacity to run business, he must understand some particular technical side of the business and finally the product right for the consumer that he is trying to sell. As far as recovery is concerned once a bad loan is done it is important to keep the dialogue going with the customer. You can be helpful or be unhelpful. I don’t think being unhelpful helps you to collect the loan. Particularly those customers who don’t want to default but they failed due to external reasons. When a bank gives loan it starts a partnership with the customer and the approach from that point of view.

What kind of policy support is needed for the improvement of banking sector?

Bangladesh Bank has been extremely proactive, particularly in the area of inclusivity and in supporting small and medium enterprises. The monetary policy also has to be right so that the banks do not get caught in a wrong situation. Supervision of banks is also very important. Sometimes when a bank is in bad shape, it affects other banks too because it erodes the confidence of industry insiders. These are the areas we hope there will be continuous policy support from the central bank and the government.

Your perception is your truth, but it’s not “the” truth

Posted in Bangladesh, Celebrity, Dhaka, Gurus, Interviews by Sherpa Hossainy on December 23, 2011

Published in Friday Features in The Independent on 23 December 2011

Read the article in Independent website

Digital print version (Page 25 and Page 31)

When we stumble upon a custom from another culture that does not tally with our proclivity we might indulge ourselves into thinking “What on earth is that?” and simply discard it as nonsense. It’s hard not to judge others and be sanctimonious rather than digging deeper or sparing a moment to understand others’ standpoints. However, while being pejorative and reaching a hasty conclusion appears to solve a dilemma quicker, it leaves a bitter taste in our mouth when it comes to cross-cultural communication.

In an exclusive interview with The Independent, renowned expert on cultural awareness and motivation, Pellegrino Riccardi, shared how empathy and understanding holds the key to successful cross-cultural communication. “Your perception is your truth, but it’s not ‘the’ truth. It’s easy to use our own standards to make a conclusion, but being judgmental doesn’t help any communication,” he said. To overcome cultural barriers, start looking for positives in other cultures, he added.

Pellegrino has had his fair share of cross-cultural exposure, as he was born to an Italian family, raised in the UK and lived and worked in Norway for the last 16 years. He recalled how he had to “switch” and “re-programme” to Italian culture after coming from a “British” school. “It was a conflict growing up as a child.  But later in life I learned it was a great advantage.” The cross-cultural communication expert travels around the world providing services for international companies and groups.

Pellegrino Riccardi at a lecture session in Ericsson office (Photo: Arild Klokkerhaug)

It was his first visit to Bangladesh, following an invitation from the Nordic Chamber of Commerce and Industry (NCCI) in Bangladesh. While here, he shared his experiences and expertise with members of top multinational companies about how culture and nationality affects communication. Pellegrino uses “edutainment”, which he believes is the magic formula for teaching along with a mixture of humor and theory.

According to Pellegrino, we have four basic needs, regardless of nationality: certainty, significance, relationship/connection, and, surprisingly, uncertainty (problems and surprises as life would be tedious if we always knew what’s coming). “While working with other cultures we react when we come across people’s actions and words that we are not prepared for,” he said, adding that people are surprised when they hear his British accent after seeing his “very Italian” name. Pellegrino said, “As humans we like our expectations to be met, we like to know what’s coming — more than we think we do.”

When people work in global companies they come across a lot of surprises, which makes international work exciting but too many surprises stress the body. Pellegrino said, “People who are culturally intelligent are good at tolerating and dealing with uncertainties.” Cultural intelligence consists of cultural knowledge, tolerating uncertainty, behavioural flexibility, being non-judgemental and self-questioning, he added.

Here’s an interesting scenario to understand the difference of interpretation of some core human values. Imagine you are in a car, which your best friend is driving. Suddenly s/he hits a pedestrian. It was purely an accident, but the pedestrian gets killed. Although it was an accident, you knew your friend was driving at 40km in a 30km zone. The case goes to court and the lawyer said that telling the court that your friend was driving at 30kmh would save her/him. The question is (answer in yes or no): Will you ‘lie’ to save your friend?

In this case, a study revealed that the percentage of people saying “no” was highest in Germany, Sweden, Norway, USA and UK; Poland, France, Italy had a lower percentage of “no” and India, Russia and Nigeria had few saying “yes”. After more extensive research Richard Lewis Communications, a communication research center, developed a cultural behaviour model, which categorises cultures in three groups — Blue, Red and Yellow — and found attributes that define a specific culture. However, a culture could also be in between these colours due to the diversity of human personalities. The colours themselves aren’t significant except as a point of reference.

Blue culture was found to be based on individualism, equality, freedom and very much linear and fact-oriented while Red culture was based on emotion, collectivism, hierarchy and more people-oriented. Yellow culture was found to be about obedience, harmony and intuition. Switzerland, Norway, Germany, USA were found to have Blue cultures while Denmark, Ireland and Australia have Blue with a touch of Red. Israel, South Africa, France, Russia were more close to Red while Portugal, Italy, Spain, Mexico, Nigeria were found to be Red. In the spectrum, Bangladesh, Turkey, Iran, India and Pakistan were close to Red with a touch of Yellow. UK, Sweden, Finland and Canada are also close to Blue and Korea, Thailand, China and Vietnam belong to Yellow.

Pellegrino Riccardi at a lecture session (Photo: Arild Klokkerhaug)

Truth or integrity in some cultures may be interpreted in a different way than another, none of which are necessarily bad. It depends on perspective. “About flexible truth you have to get around the cultural aspect and understand there is a positive intention,” Pellegrino said. The perception of Blue culture about the Reds is that you can’t trust them but to think from a Red perspective, Blues can’t be trusted because they’ll not be there for you in a difficult situation like the car accident scenario. But we are programmed to do our best and behind any behaviour there is usually a positive intention, Pellegrino said.

System, institution and rules play an important part in Blue life and there is a policy of “zero tolerance”. Blues believe systems work and they can be perfect, though pragmatically they never are. The important commodity in Red culture is “people” whereas Blues choose personal attachments carefully because it gets harder saying no, if you are too close. In order to make the Blue system work there has to be a distance maintained. “Blues communicate in a straight line, when there is unpredictability they become insecure. The recent financial crisis is all about Blue cultures getting nervous about volatility and that is very infectious,” Pellegrino said.

In cross-cultural communication, body language plays a crucial role. Research has shown that when people communicate, as much as 55 per cent of the message is communicated through body language and 38 per cent through tone of voice. Only 7 per cent is through words. Thus, without tone and body language the chances of misunderstanding and misinterpretation increase dramatically. For reds, it is important to make clear how they feel and for blues it’s about control and composure. “Some things considered normal in Red culture would be regarded as violent outburst in Blue societies. So there could be lot of misinterpretation between the Reds and Blues,” Pellegrino said.

Another important trait of Red culture is collectivism, which the individualist blue culture perceives rather negatively, thinking it makes everyone slow. There was an interesting poster from an anti-Obama campaign when he tried to introduce the welfare system where everybody pays tax and the money goes for the ones who need it. The anti-Obama slogan read: “Collectivism is slavery”.

Nevertheless, the communication skills trainer thinks there’s way for both the cultures to work in cohesion by understanding each other’s strength. Individualists are innovators; they are good at pushing forward, while collectivists are great team workers, which says a lot about having more production in Asia, Pellegrino said. “Blues seem to have forgotten how to be collective, how to work together.” However, Pellegrino thinks “money has a lot to do with individualism” and it is hard to say if Red cultures like India or Bangladesh would lose collectivism if people start earning more. The recent financial crisis, however, has dealt a blow to individualism, he thinks.

Pellegrino Riccardi speaking at a lecture session in Ericsson office (Photo: Arild Klokkerhaug)

Pellegrino also shared his views about the extreme power distance and hierarchical structure that exists in Red culture that he says works as a “fear factor”. “In a Red culture it is very difficult to be honest upwards. It creates friction and an underlying communication problem,” he said. “It’s a basic need for human to be able to say what they think. By that you get to know each other better,” Pellegrino said.

In Red cultures “togetherness” also leads to nepotism but Pellegrino said the Blue cultures should not feel too self-righteous. “It’s everywhere. In Germany two-thirds of all jobs are acquired through personal contact. Reciprocity in Blue culture is ‘corruption’ or ‘networking’ at best. It’s all the same, just different labels.” Pellegrino thinks there is a greater need for multinational companies to find out how corporate values differ around the world. “The values created in Stockholm would not always translate completely in a Red culture — there will always be a local flavour,” he said.

Pellegrino also provides training on motivation and negotiation skills. He said negotiation focuses on understanding others’ perceptions. “We should try to see others’ problems from their point of view. The question is are we willing to go there and take the risk of understanding how others see it?” He said negotiators sometimes think they are right and understanding others would make them weak. “But negotiation is not about winning, it’s about finding a common solution,” he said.

Pellegrino hopes that people will understand more about cultural differences after his sessions and they will learn to appreciate different ways of interacting and thinking of different people. You can even disagree but once you start judging people, you cease to communicate, he said. “People find it difficult to change, unless they have to; they still have to adapt to every culture they work around.”

Stressing the need to give significance to others, Pellegrino said: “Sometimes while communicating we forget to give importance to others, which we should do to be better connected. When we stop giving each other significance, relationships fail. We have to learn to coexist and try to understand one another; that’s the only way to grow.”  Pellegrino thinks some become conceited thinking that they are from a supposedly better culture and they have seen it all, but this approach never helps — the onus is always on an individual to learn about other cultures. “Whoever is coming to Bangladesh has to learn about Bangladeshi culture, it is not the other way around,” he said. “Every culture has its ‘good’, ‘bad’ and ‘ugly’ side. End of the day we all have similarities as well, lest we forget that.”

Promoting green technology is the goal

Posted in Bangladesh, Business, Computer, Dhaka, Environment, Internet, IT, Software, Technology by Sherpa Hossainy on December 23, 2011

Published in The Independent on 20 December 2011

Read the article online in Independent website

Digital print version

With the motto “Go green with ICT”, the fifth digital ICT fair is eyeing to endorse the latest environment friendly information and communication technology products, organisers of the fair said.

“This fair aims to promote green ICT products at affordable prices and take part in mitigation of climate change through the use of environment friendly technology,” said Tawfique Ehsan, president of Multiplan Centre Shop Owners Association, organiser of the fair.

Ehsan said, “We want to raise public awareness regarding use of green technology and integrate information and technology in everyday life.” Ehsan, convener of the fair, said this fair will also help increase the penetration of ICT throughout Bangladesh.

Visitors at Digital ICT fair checking out laptops

Leading computer and computer accessories importers will showcase the latest technologies from global brands, organisers said. More than 450 stalls will take part in the fair and some will display the local laptop brand “Doel”. The introduction of recent digital innovations around the world will help achieve the vision of “digital Bangladesh”, they said.

Kazi Obaid Alam, sales executive of Flora Ltd, said, “We are promoting technology, which is environment friendly, and at the same time energy efficient and cost effective. It is imperative to move to low-radiation, low-noise and low-heat emitting energy efficient devices. This fair will promote use of green ICT products.”

Flora Ltd is displaying two new printers from Epson — K100 and L100. The cost of printing a page in the K100 model is only Tk .90, whereas for a laser printer the cost is Tk 2 and for an inkjet Tk 4-4.5. The L100 model is designed for photo studio professionals and it can print 18,500 pages or 1,200 pictures with its “inktank” technology.

Flora Ltd, the leading computer retailer in Bangladesh, is also showcasing second generation laptops and notebooks with core i5 technology, and some environment friendly computer accessories from global brands like Uniross and Sony. The company is mainly targeting bulk buyers, Alam said. The fair is providing customers with a great opportunity as prices at the fair are competitive and they can choose from a range of options, he added.

The fair, which started yesterday, will continue until 26 December at the Multiplan Computer City Centre. Citycell is the platinum sponsor of the fair and Acer, Avira and Fujitsu is among other sponsors. More information can be found on the fair website: www.digitalictfair.com.

Visitors at Digital ICT fair check products at a stall

Although free for school students, a mandatory Tk 10 ticket to enter the fair has drawn flak from regular customers in the market who were not necessarily coming as a fair visitor. Many of them refused to pay the entry fee saying that they didn’t come to attend the fair. However there seemed to be no way of distinguishing between the fair visitors and others coming for repairing or warranty issues.

Many customers who were obstructed from going up without a ticket were told to get permission from higher authorities. But many didn’t seem to bother to go up and left.

Md Asaduzzaman Khan, a businessperson, who came to fix TV card problems, was not let in without a ticket. “It’s like a forceful sale of tickets. Do they think everyone is coming to join the fair? There are many other customers too,” Khan said. This entry fee might actually backfire by resulting in a waning number of visitors, he said.

Ehsan said with permission from the authority anyone can go up without having to buy a ticket. He stood by the decision of charging an entrance fee and hoped for a major turnout at the eight-day long event. “We are hoping to get 25-30,000 visitors in the fair,” he said.

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