At Capital Weekly 18 January 2009

18 January 2009 AT CAPITAL RESEARCH
AT Capital Weekly Update

Key themes in this issue are:

Bangladesh Overview:

• Last week, Bangladesh Bank (BB) Governor Salehuddin Ahmed presented the Bank’s Monetary

Policy Statement for the second half of FY 09 (Jan‐June 2009).

• It was a relatively upbeat assessment of the major trends in the economy and underlined the

continued resilience of the Bangladesh economy, despite the clear ongoing deterioration in the

global macroeconomic backdrop.
Weekly News Update

• We discuss some of the highlights inside but remain concerned that the risks to the Bangladesh
growth picture in 2009 are greater than the BD authorities assume.
• The evidence we have highlighted in recent weeklies of a worsening global economic backdrop has
been re‐enforced but what appears to be a new wave of the banking crisis in the face of the USD
15bn Q4 loss from Merrill Lynch forcing a USD 123bn package for Bank of America.
• Kuwaiti Foreign Minister Sheikh Mohammad al‐Sabah stated on Jan 16 that that about 60 percent
of development projects "have either been postponed or cancelled" by the six‐nation Gulf
Cooperation Council (GCC) states because of the global meltdown. It is difficult not to expect a
slowdown in BD remittances given this backdrop.
• Fazlul Hoque, president of Bangladesh Knitwear Manufacturers and Exporters’ Association
suggested that the government should immediately form a high‐profile taskforce to weigh and
monitor impacts of global recession on Bangladesh’s export sector. 
• The new government appears cognizant of the need to prepare for deterioration in economic
conditions. The Coordination Council on Monetary Policy and Exchange Rate of the finance ministry
is expected to meet at the end of this month to explore strategies for bringing stability in the
country’s balance of payments to contain inflation and keep the exchange rate of taka “at a
reasonable level”

Special Focus:

•
th
On Saturday 17 January 2009 Asian Tiger Capital Partners hosted a pharma sector strategy
meeting on ‘Challenges and Opportunities for the Pharmaceutical Sector in Bangladesh’.
• The meeting was attended and supported by the CEO and management team of the most
EDITORS important pharmaceutical companies along with representatives of the Bangladesh Pharmaceutical

Society, the Directorate of Drug Administration
• Although Bangladeshi pharmaceutical exports have shown significant growth over the last few
Ifty Islam
Asian Tiger Capital Partners
years, the total sales (approximately USD 50mn) still fall short of the total import of raw materials
Managing Partner (Active Pharmaceutical Ingredients (API)) required to manufacture finished pharmaceutical
ifty.islam@at‐capital.com products which is over USD 100mn.

Syeed Khan • The meeting discussed strategies to maximize opportunities for BD Pharma companies to globalize
and expand exports
Partner
syeed.khan@at‐capital.com

Jisha Sarwar
Senior Research Associate Global Banking Nerves Resurface
jisha.sarwar@at‐capital.com

Asian Tiger

Capital Partners

UTC Building, Level 16
8 Panthapath, Dhaka‐1215
Bangladesh
Tel: 8155144, 8110345
Fax: 9118582

www.at‐capital.com


Contents Page

Bangladesh Overview 3
Global economic backdrop continues to worsen 3
BKMEA President argues for a financial taskforce 3
Finance Coordination Council to meet 3
Highlight of the Bangladesh Bank Monetary Policy Statement 4

Special Focus
Asian Tiger Capital Pharma Sector Strategy Meeting ‐ ‘Challenges and Opportunities for the Pharmaceutical Industry in 6
Bangladesh’

Stock Market Weekly 8
Weekly Stock Market Commentary 9
Stock Market News 10

Economics 12
Economics News 13

Sector News 15
Food & Agriculture 15
Banking/ Aviation 16
Infrastructure & Energy 17
Real Estate/ Telecoms 19
Textiles 20

_______________________________________________________________________________________
AT Capital Weekly Update 2


Ifty Islam, Managing Partner
ifty.islam@at‐capital.com

pushing down the export volumes but by cutting the prices. He
Bangladesh Overview stated that ‘Industry insiders are already counting the number of
bites of global recession on Bangladesh’s exports. Importers are
Global economic backdrop continues to worsen cutting further and further the prices and agreed orders are being
deferred increasingly”. Referring to the seesaw growth in export
Last week, Bangladesh Bank (BB) Governor Salehuddin Ahmed earnings traced in October and November by the government, he
presented the Bank’s Monetary Policy Statement for the second said such fluctuations indicated unrest among the importers.
half of FY 09 (Jan‐June 2009). It was a relatively upbeat
assessment of the major trends in the economy and underlined Interestingly, when asked whether a devaluation of the local
the continued resilience of the Bangladesh economy, despite the currency would bolster the exporters, Hoque suggested that
clear ongoing deterioration in the global macroeconomic might not be the right strategy saying he understands that a
backdrop (We comment on the highlights of the BB’s statement weaker currency could instigate rise in inflation again by making
below). One has to respect the ongoing strength of the economic imported commodities costlier. He argued that ‘The government
data itself. However, we have been relatively more bearish on the can provide incentives to exporters through funds like the Export
economic outlook, arguing that the external impact of the Performance Scheme. Such funds will help exporters offset the
slowdown in both RMG and especially remittances is likely to price erosions and stay competitive,’ and pointed out that with
come through with a lag in the 2009 data. We still believe this to the Turkish knitwear industry struggling hard in recent times due
be the case. to increased cost of production, Bangladesh’s knitwear industry
sees the opportunity to become second to China on the global
The evidence we have highlighted in recent weeklies has been re‐ market of imported knitwear within three years.
enforced but what appears to be a new wave of the banking crisis
in the face of the USD 15bn Q4 loss from Merrill Lynch forcing a Finance Coordination Council to meet
USD 123bn package for Bank of America. Citigroup has been split
in two as a result of USD 6 bn+ Q4 losses and whose stock price The new government appears cognizant of the need to prepare
has fallen almost 40% in the past week or so. Perhaps more for deterioration in economic conditions. The Coordination
concerning was the 25% collapse in the last hour of Thursday’s Council on Monetary Policy and Exchange Rate of the finance
trading in the stock price of Barclays Bank, the only UK bank not to ministry is expected to meet at the end of this month to explore
accept any government funding. The UK Treasury and Bank of strategies for bringing stability in the country’s balance of
England are working flat out over the weekend to pull together a payments to contain inflation and keep the exchange rate of taka
fresh capital injection into the UK banking system that may “at a reasonable level”. A senior Finance ministry official was
involve the “Bad Bank” model employed by the Swiss authorities quoted as stating that ‘The council meeting will decide strategies
to put UBS’s toxic assets in a new holding structure. But ITEM has for implementing the monetary policy recently announced by the
forecast 2009 UK growth of ‐2.7% with 2010 also seeing a central bank and harmonising it with government’s fiscal
contraction in GDP The German economics minister suggested his policy,’. The official said the meeting also would examine the
country will likely see 2009 growth of ‐2.5% or worse. country’s current balance of payments situation, budget deficit
and inflation. . Finance minister Abul Maal Abdul Muhith will
Arab leaders will hold their first ever economic summit on January chair the council meeting at the ministry, with commerce minister
19‐20 will discuss the impact of the worldwide economic melt Faruk Khan, planning minister AK Khandokar, Bangladesh Bank
own on the 22 Arab countries. Kuwaiti Foreign Minister Sheikh governor Salehuddin Ahmed, finance secretary Mohammed
Mohammad al‐Sabah stated on Jan 16 that "The Arab world has Tareq, National Board of Revenue chairman Abdul Mazid, and
lost 2.5 trillion dollars in the past four months" as a result of the planning secretary Zafar Ahmed Chowdhury expected to be
global financial crisis. He also said that about 60 percent of attending. Finance ministry sources said the ministry sent a
development projects "have either been postponed or cancelled" letter last week to the central bank asking it to prepare three
by the six‐nation Gulf Cooperation Council (GCC) states because of papers – one on the current BoP situation, one on inflation, and
the global meltdown. It is difficult not to expect a slowdown in the last on exchange rate of taka – to be tabled at the
remittances given this backdrop. meeting. The ministry also asked the Bangladesh Bank to send
three experts on the above three subjects to the coordination
BKMEA President argues for a financial taskforce council meeting. The last meeting of the council was held in
June 2008 before announcing the national budget by the interim
Fazlul Hoque, president of Bangladesh Knitwear Manufacturers government. The renewed strengthening of the USD is recent
and Exporters’ Association. Earlier, the Bangladesh Garment weeks as illustrated in the chart below of the Dollar Index is likely
Manufacturers and Exporters’ Association president, suggested to see a re‐newed consideration of whether a BDT depreciation
that the government should immediately form a high‐profile makes sense. But appears from all the comments from
taskforce to weigh and monitor impacts of global recession on Bangladesh Bank officials that any early move on the exchange
Bangladesh’s export sector. In an interview with New Age on rate is unlikely.
Saturday, the BKMEA head claimed that global recession had
already started to bite Bangladesh’s export trades, though not by

_______________________________________________________________________________________


BB expects Inflation to decline but we see risks of it slowing
faster than expected given commodity trends
Highlights of the Bangladesh Bank Monetary Policy Statement BB: “CPI inflation is expected to decline further, to around 8.5
percent by the end of FY09, against the initial projection of 9.0
BB Optimistic that growth will remain resilient but we see risks percent in the MPS issued in July 08.”
on export demand and remittances in 2009

BB: “Attainment of the initially projected 6.5 percent FY09 real
GDP growth therefore still remains a realistic possibility subject to
export growth not weakening very substantially; and even in a
more downbeat scenario of significant slowdown in export, FY09
real GDP growth can be expected to be above or around 6.0
percent. The overall growth outlook will be clearer in Q3 FY09,
with information on post Christmas export trends to North
American and European markets… Because of the limited
openness and exposure to short term external capital flows, the
Bangladesh economy has thus far remained well shielded from
the financial turmoil and credit crunch in the global financial

market.”

ATC Comment: We are more pessimistic on Bangladesh’s BB does not plan any easing of monetary policy conditions
growth prospects in calendar year 2009 given the BB: “The revised outlook for FY09 GDP growth and CPI inflation
downwards risks to remittances and the likely pressures on mentioned above warrant no major change in the monetary policy
non-RMG sectors such as frozen food and jute. Even with stance announced in the July 08 issue of MPS seeking to ensure
RMG there is a risk significant margins squeeze from global adequate monetary accommodation for 6.5 percent real GDP
clothing retailers as the global economic outlook turns more growth in a scenario of 9.0 percent CPI inflation. Unlike economies
grim. Our central expectations are for GDP growth to be 5% - facing heavy capital outflows and credit crunch in the current
5.5% for calendar year 2009 versus the 6.5% forecast from global turmoil, credit and liquidity conditions remain easy in the
BB.
Bangladesh economy, with no need for any blanket, economy‐

wide monetary or fiscal stimulus. However, problems and

weaknesses if any arising in specific sectors will be addressed with

appropriate monetary and fiscal support.”

_______________________________________________________________________________________


Source: Bangladesh Bank

BB will look to target credit growth towards Agriculture and
SMEs and away from consumption

BB: “BB will continue to support adequate credit growth for
activities facilitating production and supply of goods and services,
Source: Bangladesh Bank providing refinance against lending in the priority sectors (SME,
agriculture, low cost housing etc.) under‐served by the market;
BB remains concerned that strong credit growth is fuelling asset while discouraging excessive expansion of non‐essential consumer
price bubbles, especially in housing credit and similar other demand‐side lending… BB policies accord
priority to expansion of relative shares of supply side loans such as
BB: “The year‐on‐year growth of domestic credit has remained those for agriculture and SMEs, and not of non‐essential demand
high (24.01 percent as of November 08, with 24.3 percent growth side consumer loans. This does not mean that consumer lending
in credit to private sector) in H1 FY 09, well above what would be must necessarily decline or stagnate, but that it should grow no
warranted for the initially projected 6.5 percent real GDP growth faster than the overall growth rate of bank lending.”
and 9.0 percent CPI inflation or for the revised projections made
here. Apart from delaying pass through of declining international BB focusing on increasing bank capital ratios and equity base to
prices into domestic consumer prices, this high credit growth has reduce excessive leverage
created bubble‐like pressures on real estate prices, and is also
causing high asset growth in non‐essential, even wasteful BB: “BB has introduced Basel II capital adequacy assessment for
‘lifestyle’ loans for such purposes as ostentatious wedding banks from January 2009 (initially on a parallel run side by side
festivities, holidaying abroad, conspicuous consumption etc.” with the requirements based on Basel I) to instill precise
quantitative awareness in banks about all material risks associated
with their operations vis‐à‐vis their capital bases. Further, to
prevent the kind of gross risk management failure that brought
many major global financial institutions down to their knees in the
ongoing global financial turmoil, BB has initiated steps to get the
core risk management guidelines issued in 2003 revised and
updated by the local bankers associations, in line with subsequent
developments in global best practices compiled and issued from
time to time by the Basel Committee for effective Bank
Supervision (BCBS). The tendency in Bangladesh of dependence
on high borrowing instead of equity has strained the availability of
lending resources for financing new growth supportive projects,
especially large infrastructure or manufacturing projects. BB feels
that it is high time for introducing mandatory safe limits of debt
equity ratios in bank lending to projects, to prevent tendencies of

excessive leveraging, a major factor deepening the financial

distresses and economic slowdown in the current turmoil.”

_______________________________________________________________________________________


new wave of generic drugs entering the marketplace and both the
Special Focus volume and market share of generic drugs will continue to
increase. About 10% by sales of all pharmaceutical products is
Asian Tiger Capital Pharma Sector Strategy Meeting already generics and in many countries national and stakeholder
‘Challenges and Opportunities for the Pharmaceutical Industry in pressure will only increase generic substitution.
Bangladesh’
Bangladesh has a successful generic pharmaceutical
On Saturday 17th January 2009 Asian Tiger Capital Partners hosted manufacturing base with 12% average growth over the last 5
the pharma sector strategy meeting ‘Challenges and years. Pharmaceutical sales have crossed 4,000 crore (nearly
Opportunities for the Pharmaceutical Sector in Bangladesh’ at $600m). There are 245 registered companies that are producing
their corporate offices in UTC Tower, Level 16 at 8 Panthapath, over 5000 brands in more than 8000 different dosage forms and
Dhaka. This was the start of an important initiative to explore how strengths. Recent years has seen significant capital investment to
Bangladesh can take advantage of the globally changing upgrade and build new manufacturing facilities that are compliant
pharmaceutical environment. The meeting was attended and with international standards. Square, Renata and Eskayef have
supported by the CEO and management team of the most facilities that are certified by overseas agencies. These new
important pharmaceutical companies along with representatives facilities will permit growth in the exportation of medicinal
of the Bangladesh Pharmaceutical Society, the Directorate of Drug products to overseas markets.
Administration, Ministry of Health and Family Welfare and
international representatives. It was widely covered on all the Although Bangladeshi pharmaceutical exports have shown
national news media. significant growth over the last few years the total sales
(approximately $50m) still fall short of the total importation of
raw material (Active Pharmaceutical Ingredients (API)) required to
manufacture finished pharmaceutical products which is over
$100m. This is in stark contrast to the $10bn export market
captured by ready‐made garment sector. There is fierce
competition in sourcing generic drugs in most countries, especially
in the larger regulated and more mature markets. How can
Bangladesh compete in this global arena and provide quality
medicines at low prices overseas without neglecting the local
market? Which markets should be targeted with which products?
What are the regulatory requirements to enter these markets?
These were all important challenges that were discussed at the
meeting in order to find the opportunities that clearly exist for
Bangladesh.

The participants discussed Global Market Trends following a
presentation by Mr Aminur Rahman, Managing Director of IMS
Bangladesh and Sri Lanka. Mr Rahman highlighted seven
challenges facing the global industry. Pharmaceutical growth in
the top seven markets is waning. US and Europe reported sales
growth of 4‐5% while in Japan the figure was 1‐2%. These are
historic low figures for all these markets. In contrast many
emerging and frontier markets have seen a reverse trend of
increasing growth. China, Brazil, Mexico, South Korea, India,
Turkey and Russia all grew at 12‐13% in 2008 and has a collective
market of $85‐90bn. India’s contribution to growth in 2011 is
forecasted to increase from 16 to 21% making it the second
highest growth contributor after China. Bangladesh has also
maintained double‐digit growth and is expected to be a $1bn
market by 2018 according to IMS trend analysis. Nazmul Hassan, Managing Director of Beximco and Secretary
General of the Bangladesh Association of Pharmaceutical Industry
Patent expiration of many blockbuster drugs is one reason for the asked at the meeting whether pharmaceuticals can become a
downturn in growth. Approximately $13bn in annual sales was major export sector for Bangladesh. Mr Hasan presented data that
lost due to patent expiry in 2007 while in 2008 it was even higher shows labor and white collar labor is both cheaper in Bangladesh.
at $20bn. It is forecast that by 2012 almost $60bn in lost revenue The 2008 IMF country report monthly wage for Bangladeshi labor
will be due to patent expiration. Undoubtedly this will result in a in $56 compared to $324 for India. Non labor wage costs are also

_______________________________________________________________________________________


higher in many countries in the region compared to Bangladesh.
Pharmacists and engineers can be employed in Bangladesh at half
the cost f neighboring India. Power is another major cost for the
generic pharma manufacturing industry. Bangladeshi pharma uses
gas which makes it one of the lowest power costs in the world.
While this is all encouraging but Mr Ifty Islam asked My Nazmul
Hassan to explain why cheaper manufacturing base and lower
power and labor cost has not resulted in increasing market share
overseas. Mr Hassan is confident that what we are seeing is a
natural lag phase since the investment in overseas accredited
manufacturing facilities and the drive to capture export orders is a
recent phenomenon. Even with this lag phase some felt that
Bangladesh faces challenges both in the medicines produced for
the local market as well as securing pharmaceutical exports
overseas. Bangladesh will need to ensure that the quality of the
medicines produced for the local market meets local regulatory
standards and similarly cGMP certification and overseas
accreditation of new manufacturing facilities need to remain
compliant with these standards. Even when good quality Mr Kaiser Kabir, Managing Director Renata made a passionate
medicines are produced many regulated markets will require plea for the Government of Bangladesh to permit companies to
bioequivalence testing to ensure that the products are handled by make overseas acquisitions. With regards to the pharma sector
the patient identically to the reference drug. Depending on the this is particularly important since it takes a considerable period of
markets and volumes considered these tests may be prohibitively time to prepare and submit regulatory dossiers fro drug approval
expensive and moreover there are no local accredited facilities to and marketing authorizations for each drug. Acquisition of an
conduct Bioavailability and Bioequivalence (BABE) testing. overseas pharmaceutical company in a regulated market will allow
almost immediate access to the regulated market. Mr Kabir gave
examples of how India has in recent years invested in great brands
overseas such as Landrover, Jaguar, Corus Steel and the German
pharma company BetaPharm. He showed that over the last 10
years Indian and Chinese companies have been transformed from
inward‐looking, rent‐seeking, low value‐added operations to
world class entities shaking up the global corporate landscape. A
significant proportion of the capital for these overseas
investments are raised overseas and there would naturally be all
the appropriate diligence to ensure that all local and international
standards are adhered to.

Asian Tiger Capital Senior Advisor, Dr Iqbal Hussain, responsible
for the pharma and healthcare business and the moderator of the
meeting, offered his support to parties that may be interested in
engaging ATC in doing feasibility studies and formally exploring
any of the opportunities that were discussed. Indeed Bangladesh
has immense opportunities in the pharma sector both locally and
There are about 450 generic compounds registered as medicinal overseas. Asian Tiger Capital, with its corporate HQ in Dhaka has a
products in Bangladesh. Many manufacturers produce their own global reach to provide support of any number of pharma and
brands of these compounds which is why there are over 5000 healthcare projects. Mr Ifty Islam and Dr Hussain offered to meet
brands on the market. In many regulated markets the with interested parties to discuss the framework by which these
manufacturer is required to demonstrate that these brands are collaborations and cooperative alliances can be developed.
‘Bioequivalent’ (BE) and that not only the same chemicals have
been used in the manufacture but also that the human body
handles the absorption, distribution, metabolism and excretion of Dr. Iqbal F Hussain BSc MBBS FRCS MSc(Urol)
these brands identically. These BE studies are not required in Senior Advisor
some countries such as Bangladesh and therefore Bangladesh has Asian Tiger Capital Partners Ltd.
not developed facilities to conduct these clinical BE studies locally.
However, if Bangladesh wants to increase exports of drugs to
regulated markets these studies have to be carried out. This
requires investment in people, processes and equipment and over
the longer term may add value to the pharmaceutical sector in
Bangladesh. This is thus both a challenge and an opportunity.

_______________________________________________________________________________________


Stock Market Weekly

DSE performance: 52 weeks Market news

• LankaBangla to open three more branches

• Market fall driven by banks falling 4%

• Investor sentiment softens for Banks with concerns
over 2009 earnings outlook

• Bangladesh Bank announces further regulation for
Banks

• Retail speculation : Seven out of the top ten gainers
were Z‐list stocks

DSE performance: 30 days Regional stock market performance (last week)

Market summary Valuation snapshot

DSE General
Index performance Index
DSE 20 Sector P/E
Opening of this week Aug‐08 Sep‐08 Oct‐08 Nov‐08
2760.67 2,271.2 Banks 19.08 18.24 15.62 15.62
Closing of this week 2695.58 2,199.3 Cement 10.96 10.34 10.32 8.91
Change within a week (%) -2.4% -3.2% Ceramic 49.92 43.93 41.76 32.17
-65.1 -71.9

Change within a week (Point) Engineering 39.11 41.36 40.8 31.94
Food & Allied 17.85 19.44 17.09 14.77
Fuel & Power 17.81 20.2 19.14 16.29
Capitalization and turnover This Week Last Week % Change
Insurance 23.17 24.77 23.12 17.69
5 4
Number of Trading Days Investment 45.08 55.48 28.93 21.42
Market Capitalization (USD bn) 15.15 15.12 0.24% IT 41.44 45.64 47.89 33.96
Total Turnover (USD mn) 255 236 7.8% Jute 16.16 16.16 14.18 14.18
Daily Avg. Turnover (USD mn) 50.91 59.02 -13.7% Miscellaneous 25.46 33.95 32.2 23.32
156 136 14.6%
Total Volume (mn) Paper & Printing 8.36 8.08 9.97 7.32
Daily Avg. Volume (mn) 31 34 -8.3% Pharmaceuticals 23.97 28.45 30.25 26.26

Service & Real Estate 20.57 22.87 23.55 18.74
This Last
Weighted avg. P/E Ratio* Issues Tannery 19.05 19.89 18.44 14.87
Week Week
Textiles 15.74 15.45 14.55 12.43
17.34 104 155
This Week Advanced
158 102
Source: Dhaka Stock Exchange
Last Week 17.83 Declined
% Change -2.7% Unchanged 2 4
*Weighted on Market Cap. Not Traded 31 31
_______________________________________________________________________________________

Weekly Stock Market Commentary effective Bank Supervision (BCBS). The tendency in
Bangladesh of dependence on high borrowing instead of
The market was down by 2.4% this week, following the 1.7% equity has strained the availability of lending resources
decline in the previous week. The daily average turnover of this for financing new growth supportive projects, especially
week was USD 50.91mn, 13.7% lower than the previous week. Out large infrastructure or manufacturing projects. BB feels
of 295 issues, 104 advanced, 158 declined, 2 remain unchanged that it is high time for introducing mandatory safe limits
and 31 not traded. of debt equity ratios in bank lending to projects, to
prevent excessive leveraging.

b. Basel II compliance to come into force from January
2009: Basel II capital adequacy requirements and the
consequent need to raise capital through either Tier 1
and Tier 2 capital will mean for those banks that have
yet to meet the requirements, they are likely to issue
equity..

While quality stocks fell, the rise of Z‐list stocks is indicative of the
speculative and retail driven nature of the market. Z‐list stocks are
categorised by virtue of their lack of compliance with SEC
regulations (eg filing of accounts) or are unprofitable – so are
largely constituted of companies lacking fundamental qualities –
that said there are some ‘good’ stocks, such as Lafarge which is
emerging from its green field investment stage. Among the top
ten gainers of the last week seven companies were from ‘Z’
Banks and Non Bank Financial Institution stocks saw the largest category shares. A few of the Z‐ list companies announced
falls down around 4% in the week. The weekly drop was largely dividends which likely pulled up prices partially. Titas Gas was the
driven by the fall in this sector as they collectively constitute 51% turnover leader with shares worth BDT 1.76bn (USD 25.56mn)
of listed stocks. We believe investor sentiment has softened due traded, accounting for about 10.2% of the week's total market
the following reasons: turnover.

1. Lower than expected full year 2008 earnings: With full year
results season underway for Banks, we expect earnings will
fall short of expectations in the second half of the year, as
the sector was under pressure as a result of the global crisis,
as banks faced liquidity pressure with difficulties opening LC’s
as their international counterparties remain under pressure,
and commodities derived trade finance revenues fallings, as
commodities and fuel prices plummeted. That said 2008 has
not been a bad year, with first half year profits up 48% from
prior year amongst private commercial banks. However,
there was likely an expectation of the second half to follow
suit in the price.

2. In 2009 Trade Finance earnings are expected to remain
under pressure: We expect a continuation of pressures felt in
Q3 2008, with commodities prices remaining low. A large
component of banking earnings is derived from the provision
of Trade Finance for the import of materials into the country.
To a lesser extent we expect remittance related banking
revenues to also face pressures as the recession deepens in
the global economy.

3. Bangladesh Bank Monetary Policy statement: In the policy
statement Bangladesh Bank (‘BB’) discussed:

a. Increased regulation and a move to increase equity
component of lending may limit risk taking: BB has
initiated steps to revise the core risk management
guidelines issued in 2003, in line with subsequent
developments in global best practices compiled and
issued from time to time by the Basel Committee for
_______________________________________________________________________________________


Stock Market News

LankaBangla to open three more branches
The Daily Star, Monday January 12, 2009

LankaBangla Securities plans to open at least three more branches
in and outside Dhaka this year. At present, LankaBangla has seven
branches across the country ‐‐ three in Dhaka and Chittagong each
and one in Sylhet. LankaBangla, an authorized brokerage house,
also plans to organise road shows abroad to attract foreign
investors to the Bangladesh stock market.

The brokerage house said it would develop internal resources
such as upgrading IT infrastructure and enlarging the capacity and
quality of its research team through training. LankaBangla
retained its position as the most active member for a third year on
the Dhaka Stock Exchange and for a fourth year on the Chittagong
Stock Exchange.

LankaBangla accounted for 15% of the total trading on the DSE
and 28% on the CSE in 2008. LankaBangla is a subsidiary of
LankaBangla Finance, a joint venture financial institution
established with multinational collaboration. Sampath Bank of Sri
Lanka, First Gulf Asia Holdings, and local entities such as One
Bank, SSC Holdings and Shanta Apparels own stakes in
LankaBangla Finance.

The other top nine brokers in terms of turnover in 2008 were ICB
Securities Trading Company, AB Bank Foundation, IDLC Securities,
Prime Finance and Investment Securities, Multi Securities and
Services, NCC Bank, Dhaka Bank, CMSL Securities and Wifang
Securities.

There are 238 members on the DSE and 137 on the CSE.

http://www.thedailystar.net/story.php?nid=70934

_______________________________________________________________________________________


DGEN Performance YTD DGEN Performance LTM

Turnover leaders Best performers* Worst performers*
(All figures in mn) BDT USD
Titas Gas 1370 19.9

Al-Haj Textile
% Change
61.7% Lexco
% Change
-19.7%
Shinepukur Ceramics
Limited
1291
18.8
Maq Paper 32.7% Metalex Corporation -16.8%
Quasem Textile 31.4% Wata Chemicals -12.0%
BEXIMCO 1195 17.4
Summit Power 1154 16.8
Quasem Silk 31.3% ICB Islamic Bank Ltd. -11.0%
M. Hossain Garments 30.2% Golden Son -10.2%
Beximco Pharma
Grameen One: Scheme2
759
525
11.0
7.6
National Housing Finance
Beximco Synthetics 28.4% and Investment Ltd. -9.7%
Aims 1st M.F. 515 7.5 Meghna PET 24.4% Pharma Aid -9.5%
ACI Formulation Ltd. 446 6.5 Beach Hatchery Ltd. 23.3% 2nd ICB M.F -9.3%
Summit Alliance Port Ltd. 302 4.4 Sinobangla Industries 20.8% Apex Adelchi Footwear -8.3%
Keya Cosmetics 286 4.2 1st Lease International -7.6%
Source: Dhaka Stock Exchange
Dynami Textile 19.1%

*By closing price
Market cap. by sector* Source: Dhaka Stock Exchange
Banks 51.0%
Fuel & Power 13.8% Correlation with other indices*

Pharmaceuticals 11.6% S&P500 Sensex NIKKEI225 KSE100 SSECI FTSE100 Hangseng DSE
Insurance 5.5% S&P500 1
Cement
Miscellaneous
5.1%
3.0%
Sensex 0.609533 1
Engineering 2.4% NIKKEI225 0.479296 0.57751 1
Foods 2.1% KSE100 0.137983 0.245628 0.136849 1

Textile 1.9% SSECI 0.315464 0.411735 0.245613 0.09449 1
Service & Real Estate 1.2%
FTSE100 0.843726 0.610483 0.494904 0.238387 0.431538 1
Tannery 1.2%
Hangseng 0.704434 0.677905 0.526227 0.110829 0.509843 0.786434 1
Ceramics 0.7%
IT 0.5% DSE 0.161589 0.193995 0.103366 ‐0.05588 0.035032 0.131261 0.143725 1
Paper & Printing 0.1% * Based on the last 86 months’ USD returns
Source: AT Capital Research
Jute 0.03%
Total 100%
*As of November 30, 2008

Research Team

Ifty Islam
Syeed Khan
Managing Partner
Partner
ifty.islam@at‐capital.com
syeed.khan@at‐capital.com

Mohammad Emran Hasan
Senior Associate
emran.hasan@at‐capital.com
_______________________________________________________________________________________

Economics

Selected macroeconomic indicators Market news

13‐Jan‐08 06‐Jan‐09 13‐Jan‐09
Forex reserves (USD mn) 5112.05 5349.17 5471.15
USD‐BDT average rate 68.5800 68.9500 68.9500
• BB decides to set a minimum credit target for
agriculture
Call money rate 2.95 9.42 9.32
• BB fixes a target for private sector credit growth
Dec‐07 Dec‐08 2007‐08
• Govt. sees 90pc ADP implementation: Six months'
Remittances (USD mn) 635.34 765.79 7,914.78
achievement only 24pc
Annual %age change 14.46 20.53 32.39
• Market lukewarm to price pledges
Oct‐07 Oct‐08
P
2007‐08
• Exports post 13% rise
Imports (USD mn) 1,649.90 2,090.40 21,629.00
P
Nov ‐07 Nov ‐08 2007‐08
Latest treasury yields
Exports (USD mn) 1144.47 1297.47 14,110.80
Weighted
Auction date Tenor & security type
average yield
P
Sep‐07 Sep‐08 2007‐08
Current A/C Balance (USD mn) 20.00 46.00 672.00 Dec-08 91-day T-bill 7.91%
Dec-08 182-day T-bill 8.16%
P
Nov‐07 Nov‐08 2007‐08 Dec-08 364-day T-bill 8.58%
Tax revenue (USD mn) 506.24 551.57 6,868.43 Dec-08 5-year T-bond 10.60%
Annual %age change 26.59 8.96 27.06 Dec-08 10-year T-bond 11.72%
Source: Selected indicators by Bangladesh Bank, 14 January 2008
Exports went up by 13.37 % in November 2008
Latest Bangladesh Inflation Rates following negative growth in October
Sep‐08 Oct‐08 Nov‐08

General 210.14 209.31 207.14
Inflation 10.19 7.26 6.12
Food 227.66 226.88 223.98
Inflation 12.07 8.08 6.68
Non‐food 187.10 186.13 184.95
Inflation 7.19 5.95 5.25
Jisha Sarwar Source: EPB
Senior Research Associate
Jisha.sarwar@at‐capital.com
_______________________________________________________________________________________

Economic News

BB decides to set a minimum credit target for agriculture
The Daily Star, Friday January 16th, 2009

The Bangladesh Bank (BB) has decided to set a minimum
requirement for the amount that private local banks and foreign
commercial banks should lend to farmers, in order to boost The monetary policy also stated, "BB will continue to support
agricultural production. adequate credit growth for activities facilitating production and
supply of goods and services, providing refinance against lending
In FY 2008, 30 private commercial banks (PCBs) disbursed BDT in the priority sectors such as SME, agriculture and low‐cost
15.6bn (USD 0.23bn) in farm loans, while nine foreign commercial housing under‐served by the market."
banks (FCBs) disbursed only BDT 8.5bn (USD 0.12bn).
The central bank will discourage excessive expansion of non‐
According to a central bank official, “The contribution of the essential consumer credit.
private local and foreign banks in agricultural lending still
remained poor compared to that of the state‐owned and The BB said attaining the initially projected 6.5 % real GDP growth
specialized lenders”. in FY09 still remains realistic, given that export growth will not
slow substantially.
Four state‐owned and five specialised banks, including Bangladesh
Krishi Bank (BKB), disbursed BDT 61.67bn (USD 0.90bn) and BDT http://www.thedailystar.net/newDesign/news‐details.php?nid=71384
52.93bn (USD 0.77bn) for agricultural purposes in FY 08 and FY 07
respectively. Govt. sees 90pc ADP implementation: Six months' achievement
only 24pc
FCBs operating in Bangladesh did not disburse any agricultural The Daily Star, Wednesday January 14th, 2009
loan before the last fiscal year ended in June 2008, according to
BB statistics. The new government expects to implement 90 % of the Annual
Development Programme (ADP) by the end of the fiscal year,
Regarding the poor presence of some PCBs and FCBs in rural although only 24 % has been implemented during the first six
areas, the official said the central bank has asked the banks to months.
collaborate with other banks and NGOs located in rural areas to
disburse farm credit. Out of BDT 256.00bn (USD 3.72bn) allocated for the ADP, BDT
60.23bn (USD 0.87bn) was implemented during the July‐
http://www.thedailystar.net/story.php?nid=71508 December period.

BB fixes a target for private sector credit growth http://www.thedailystar.net/newDesign/news‐details.php?nid=71237
The Daily Star, Thursday January 15th, 2009
Market lukewarm to price pledges
Bangladesh Bank (BB) yesterday fixed the target for private sector The Daily Star, Tuesday January 13th, 2009
credit growth at 18.5 %, bringing it down by 6.44 percentage
points. Prices of some basic commodities like rice and edible oil fell in the
local market recently. The beginning of this year's Aman harvest
The BB in its monetary policy statement, which was released and the fall in the price of soybean oil in the global market explain
yesterday, said private sector credit growth, which was 24.94 % in the decline in prices.
FY 08, rose to 26.5 % in September 2008 and was brought down to
24.31 % in November. There is a plan to bring it down to 18.5 % by Over the last two weeks, the price of coarse rice dropped by over
June. 12 %, while the price of fine and medium quality rice has also
declined.
However, public sector credit growth including net government
credit will be increased by 15.38 percentage points to 27.25% by
June 2009, up from 11.87 % in FY 08. In November public sector
credit growth increased to 23.02 %.
_______________________________________________________________________________________


According to traders the new government's pledges to reduce
prices of essentials and an overall drop in global commodity prices
have increased consumers' expectations about price cuts.

The price of soybean oil, for both pre‐packed and open varieties,
fell by 15 to 20 % since December 28, 2008, according to the
Trading Corporation of Bangladesh data.

But vegetables, camera parts, cut flower/foliage, raw jute,
handicrafts, jute goods and electronics posted negative growth
during the period.

Talking about the export performance, President of Bangladesh
Garment Manufacturers and Exporters Association (BGMEA)
Anwar‐Ul‐Alam Chowdhury Parvez said despite a fall in October,
the overall export in December‐January period would be positive
as the RMG sector received a good number of export orders for
the time.

http://www.thedailystar.net/newDesign/news‐details.php?nid=70932

On the other hand, prices of some other essentials like potato,
onion and winter vegetables rose by as much as a 100 % during
the last two weeks, due to a scarce supply.

Traders said that the foggy weather is partly to blame for the
shortage in supply of certain vegetables. The prices of onions, a
bulk of which comes from India, also soared in local markets,
following the jump in prices in the Indian market which was also
caused due to unpredictable weather conditions.


Exports post 13% rise
The Daily Star, Monday January 12th, 2009

Exports went up by 13.37 % in November 2008 following negative
export growth in October. In October 2008, the country's export
earnings fell by 7.48 % from a year ago, standing at USD 867.69mn
compared to USD 941.48mn in October 2007. Exports earnings
stood at USD 6.6bn during July – Nov 2008, up by 26.8% from the
same period a year ago.

Chemical products earned USD 168.48mn posting a 120.38 %
growth, tobacco USD 23.53mn growing by over 80 %, petroleum
by‐products USD 79.69mn with 67.73 % growth and agro‐
processed food earned USD 23.20mn growing by over 50 %.

_______________________________________________________________________________________

Sector News

Food & Agriculture

Grameen Danone Foods enters
The Daily Star, Sunday, January 18, 2009

Grameen Danone Foods Ltd entered Dhaka’s market with its
nutrient‐rich 'Shakti' brand food items. The company plans to sell
its products at higher prices in Dhaka for the time being in order
to compensate for selling at cheaper rates in rural areas. The
company will sell its items at BDT 10 and BDT 12 in Dhaka
compared to BDT 5 to BDT 7 charged in the northern part of the
country. Grameen Danone, a joint venture between Grameen
Group and global leader for food products Groupe Danone,

entered Dhaka’s market as it was incurring losses due to selling

products at lower prices in rural areas.


Fertilizer prices halved: Markdown to give Boro major boost;
govt. subsidy for non‐urea fertilizers will now stand at BDT 27bn
(USD 394mn)
The Daily Star, Thursday, January 15, 2009

The government cut prices of non‐urea fertilizers by almost half
per kilogram to help farmers during the country's Boro crop
season. The following graph reflects different price changes of
different fertilizers.

Farmers, however, will have to buy urea at the previous price of
BDT 12 a kg. The move is meant to bring down the prices of
essentials by cutting the farmers' production cost, which soared
recently because of a rise in prices of diesel and fertilizer. The
government cut prices of non‐urea fertilizers after reducing the
price of diesel. Agriculture experts say the reduction in prices of
non‐urea fertilizers and diesel would help farmers reduce
production cost by BDT 1‐2.5 a kg. The subsidy for non‐urea

fertilizers has been increased to 55% from 15% previously. This
means total subsidy to bail out the existing stock of non‐urea
The demand for urea during January‐March, the peak season for
fertilizers might stand at over BDT 27bn (USD 394mn) in fiscal year
Boro cultivation, has been forecast at over 1.2mn tonnes and the
2009. During the beginning of the current fiscal year the caretaker
total demand for urea in the current fiscal year is projected at
government allocated about BDT 43bn (USD 628mn) in subsidy for
2.85mn tonnes. The demand for non‐urea fertilizers for the
fertilizer, electricity and others, up from BDT 40bn (USD 584mn) in
January‐March period has been projected at about 0.3mn tonnes
FY 07. Despite a gradual drop in non‐urea fertilizer prices on the
against a yearly projected demand of about 1.1mn tonnes for the
global market since last August, the prices remained high on the
current fiscal year. Presently about 4,900 dealers distribute
local market, which discouraged farmers to use the inputs. This
fertilizers across the country.
resulted in a huge amount of unsold non‐urea fertilizers at the
dealers' level.

_______________________________________________________________________________________


Aviation hand, private sector credit grew by BDT 103.71bn (USD 1.51bn) or
5.45 % during July‐October 2008 compared to a 5.65 % rise in the
Best Air grounded for tax dodging same period a year earlier.
The New Nation, Thursday January 15, 2009
Only 21.1 % of total bank advances were for industry, 35.4 % for
The National Board of Revenue has sent a letter to the Civil trade, 2.3 % for transport and communication, 16.0 % for working
Aviation Authority of Bangladesh requesting to cancel all Best Air capital, 6.8 % for agriculture and 18.4 % for other purposes.
flights as the private airlines failed to pay travel taxes. In its letter, As per BB data on bank advances up to March 2008, 27.2 % was
sent to the CAAB on January 13, the NBR stated that Best Air had industrial, 24.7 % working capital and 18.7 % for trade on year‐on‐
not paid travel taxes of around BDT 20mn for a long time. year basis.

Best Air now operates flights to Singapore and Malaysia. Their http://www.thedailystar.net/newDesign/news‐details.php?nid=71794
Dubai, Bangkok, Colombo and Male routes are suspended. Best
Air started operations in 1999 as a Helicopter operator and Rupali Bank seeks BDT 20bn for its recapitalisation
started its journey as a Freighter Airline in the beginning of 2000. The Financial Express, Sunday January 18th, 2009
Best Air obtained its License in 2006 from CAAB to operate
passenger service in the international and domestic sectors and Rupali Bank Limited, a largely state‐owned entity, has asked for
started flights with a Boeing 737 aircraft. about BDT 20bn from the government to improve its capital base.

The NBR also has due travel tax from Biman Bangladesh Airlines According to the MD of Rupali bank, the proposal for the much‐
Limited and GMG Airlines. Biman in November paid BDT 150mn needed fund for recapitalization has been sought in order to
(USD 2.18mn) as travel tax while GMG paid BDT 5.5mn (USD implement the bank’s five‐year plan. The plan that has already
0.1mn). These two airlines also have unpaid travel taxes. been submitted to the Bangladesh Bank (BB) was prepared as per
a Memorandum of Understanding (MoU) between the bank and
The revenue board received BDT 2110mn (USD 30.65mn) in travel the central bank last year.
taxes from different airlines that operate flights in Bangladesh
during the first six months of this fiscal year, compared to BDT The BB has been assigned to look after the ongoing restructuring
2295mn (USD 33.33mn) during the same period in FY 08. programme of state‐owned commercial banks (SCBs).

http://nation.ittefaq.com/issues/2009/01/15/news0702.htm The classified loan of the bank in which the government held
more than 93 % stakes was about BDT 18.29bn (USD 0.27bn) until
Banking 2007. The classified loan representing 39% of the bank's total loan
increased by 51% in 2007 as it was BDT 12.12bn (USD 0.18bn) in
Trade tops bank loan 2006, according to a BB report.
The Daily Star, Sunday January 18th, 2009
The proposed recapitalization fund might be offered through a
number of ways such as writing‐off the classified loans the bank
has with the state‐owned enterprises by providing cash and
issuance of bonds.

The central bank is expected to consult with the finance ministry
on Rupali's five‐year plan, which also includes other issues like
recruitment of fresh manpower and time‐bound targets on loan
disbursement and recovery.

http://www.thefinancialexpress‐bd.info/2009/01/18/56294.html

BB hikes cash reserve ratio for banks

The Daily Star, Wednesday January 14th, 2009

Central bank data shows that a majority of bank credit has been
Bangladesh Bank yesterday increased the rate for daily cash
allocated for trade financing.
reserve requirement (CRR) against deposits by 50 basis points to

help banks manage liquidity better.
In September 08 about 35.4 % of total bank credit was kept for

trade financing, up significantly from 18.7 % in March.
In line with past rules, all banks had maintained a monthly CRR of

5 % on average. On a daily basis, the rate had been no less than
Up to September, bank advances for industrial purposes reached
4% ‐‐ a ratio which was hiked to a minimum requirement of 4.5 %
21.1 % from 27.2 % six months ago.
by the central bank yesterday.

BB data show domestic credit increased by BDT 174.13bn (USD
But the BB official would not see the latest move as a tight
2.53bn) or 7.0% during July‐October 2008 from BDT 100.08bn
monetary policy.
(USD 1.45bn) during the same period a year earlier. On the other
_______________________________________________________________________________________


The required reserve ratio is a bank regulation that sets the been penalized for suspicious transactions as they violated the
minimum reserves each bank must hold to customer deposits. The Money Laundering Prevention Act 2002. Seventeen banks were
reserves are designed to satisfy withdrawal demands and would punished in FY 07, and 14 were punished in FY 06.
normally be in the form of fiat currency, or with a central bank.
The BB has fined most of the banks charged with suspicious
The reserve ratio is sometimes used as a tool in monetary policy, transactions. Considering the gravity of the case, the central bank
influencing the economy, borrowing and interest rates. can also ask banks to suspend their officials responsible for the
transactions. The central bank can also file cases against a bank.
http://www.thedailystar.net/newDesign/news‐details.php?nid=71221 The BB is empowered to deal with the issue under the Money
Laundering Prevention Act 2002 and Money Laundering
BB intensifies monitoring of bank lendings Prevention Ordinance 2008.
The Financial Express, Tuesday January 13th, 2009
http://www.thedailystar.net/newDesign/news‐details.php?nid=70933
The central bank has intensified its monitoring and supervision to
help commercial banks avoid risks by making only quality lending. Infrastructure & Energy

Under the move, the central bank is strictly monitoring the credit Govt seeks WB fund for gas exploration
deposit ratio (CDR) of the banks, credit flow, particularly in The Financial Express, Sunday January 18 2009
nonproductive sectors, and implementation of credit risk grading
manual (CRGM). The government has sought funds from the World Bank (WB) to
explore natural gas in the country's two prospective blocks aiming
The BB has asked about four commercial banks for taking to increase supply sources. The state‐owned petroleum
initiatives to bring down their CDR to a rational level, as these exploration and production company ‐‐BAPEX, could not start
banks have CDR of over 100 % instead of the standard 82 %. The geological and geophysical surveys at those prospective blocks in
central bank is also strictly monitoring the implementation of the the greater Mymensingh area due to fund shortages. As there is a
CRGM for all exposures, other than those covered under gas shortage in Bangladesh, the government has decided to tap
consumer and small enterprises, agricultural and micro‐credit. various sources of funds to discover new oil and gas reserves in
different blocks in the country.
Loans will be divided into eight categories ‐‐ superior, good,
acceptable, marginal, special mention, sub‐standard, doubtful and BAPEX has planned to conduct a 2400km two‐dimensional (2D)
bad. seismic survey, geophysical and geological studies and delineation
of drillable subsurface structure to identify potential reserves in
At the pre‐sanction stage, such credit grading helps the the gas blocks.
sanctioning authority to decide on lending, loan price, extent of
exposure, appropriate credit facility, and various risk mitigation BAPEX has so far discovered gas at Semutang, Begumganj, Feni,
tools to put a cap on the risk level. Kamta, Beanibazar, Fenchuganj, Shahbazpur and Saldanadi fields.

At the post‐sanction stage, the bank can decide about the depth http://www.thefinancialexpress‐
of the review or renewal, frequency of review, periodicity of the bd.com/search_index.php?page=detail_news&news_id=56307
grading, and other precautionary measures.
BERC to decide on power tariff hike in May
http://www.thefinancialexpress‐bd.info/2009/01/12/55656.html The Daily Star, Friday January 16, 2009

BB spots suspicious transactions The Bangladesh Energy Regulatory Commission (BERC) has
The Daily Star, Monday January 12th, 2009 accepted proposals for electricity‐price readjustments at the retail
level but will announce its decision within May this year as to
whether or not it will allow the power‐distribution companies to
raise tariffs. Before the announcement, the BERC will hold a public
hearing on the issue in February to gather opinions from retail
customers and other stakeholders.

From early this month, four power‐distribution companies‐DPDC,
Desco, Westzone and REB‐have appealed to the BERC to raise
their tariff rates by 11% to 15% for retail customers. Earlier on
September 29, the BERC allowed Power Development Board
(PDB), which is responsible for power generation, to raise the
power price at the bulk‐customer level by 16%.
Bangladesh Bank (BB) received 466 suspicious transaction reports http://www.thedailystar.net/story.php?nid=71524

(STR) in fiscal year 2008, an increase of 412% from 91 cases
Govt lifts duty on solar energy tools
reported during the previous fiscal year. 102 STRs were filed with
The Daily Star, Friday January 16, 2009
the BB in FY 06. About 25 commercial banks, mostly private, have

_______________________________________________________________________________________


The government has decided to withdraw all duties from solar power. A mission from the World Bank visited Bangladesh last
energy equipments to encourage use of solar energy, especially in week to explore the possibility of renewable energy development.
remote and economically backward locations. With over 0.3mn
households already using solar energy equivalent to 15MW, Bangladesh's primary source of energy ‐ natural gas ‐ is depleting
mainly in the coastal southwestern region, this withdrawal would fast and the present recoverable gas reserve will meet demand
reduce around BDT 1,500 per solar panel worth BDT 10,000. only till 2012. Bangladesh now has over 250 million cubic feet of
Currently, there is a 15% VAT on renewable energy equipments. gas supply shortage per day (mmcfd) against the demand for over
2000mmcfd.
This decision was made in line with the Renewable Energy Policy
of Bangladesh, approved by the caretaker government on The government has already formulated a "renewable energy
December 18 and made effective through a gazette notification. policy" to encourage both the private and the public sectors to
The policy follows the Vision and Policy Statement, 2000 that aims come forward for developing alternative sources of energy.
at providing power to all by 2020 in phases. The policy targets
developing renewable energy resources to meet 5% of the total http://www.thefinancialexpress‐
power demand by 2015 and 10% by 2020. It also says renewable bd.com/search_index.php?page=detail_news&news_id=56001

energy project investors in public and private sectors will be
GTCL in a quandary over awarding contracts
exempted from corporate income tax for five years from the date
The Financial Express, Wednesday January 14, 2008
of notification of the policy and it will be extended periodically

following impact assessment of tax exemption on renewable
The government may have to bear additional costs of over BDT
energy.
1.40bn (USD 20.33mn) if it decides to award work orders to the

lowest bidders for supplying pipes under gas transmission line
An institution ‐‐ Sustainable Energy Development Agency (SEDA) ‐‐
projects. The additional costs would be on account of the large
will be established under the Companies Act, 1994 as a focal point
gap in prices quoted in the bids and the existing market prices of
for sustainable energy development and promotion. The SEDA will
transmission pipes in the international market. The state‐owned
coordinate sustainable energy planning, supporting new
Gas Transmission Company Ltd (GTCL) has almost finalised the
technologies and business models and establishment of small and
process of awarding all the three contracts for purchasing
medium renewable energy enterprises and providers. Under this
American Petroleum Institute (API) standard line pipes at prices
policy, electricity generated from renewable energy projects, both
which were very high when bids were submitted. The current
in public and private sectors, may be purchased by power utilities
international price of the project specific pipe is around USD 400
or any consumers through a mutual agreement.
per metre, whereas the lowest quoted price for the same pipe

http://www.thedailystar.net/story.php?nid=71531 under one bid was USD 540 a metre.

Study finds BDT 500mn (USD 7.26mn) leakage in fuel subsidy last The three gas transmission lines to be installed under the bids
year include ‐ Monohordi to Jamuna Bridge (east side), Jamuna Bridge
The Financial Express, Friday January 16, 2009 (east side) to Bheramara and Bheramara to Khulna. The GTCL
floated international tenders to purchase API standard line pipes
In a workshop organized by the Bangladesh Institute of in July, 2008 for these three projects when the prices of iron pipes
Development Studies (BIDS) on diesel subsidy to the poor farmers, were very high. In the bids accepted by the GTCL, there is a
chaired by BIDS director general Dr. Quazi Shahabuddin, BIDS provision for making adjustments to fluctuations in prices in the
research director Dr. MA Asaduzzaman and World Bank's international market. The company had earlier floated similar
Delegator Ninno Carlo presented findings from a study on diesel tenders in the early part of 2008, when prices were low, and
subsidy. The report stated that around BDT 500mn, which was subsequently received bids from a number of international
meant for subsidizing diesel for farmers, was misplaced last year. bidders. But as international prices of pipes went up later, all the
bidders refused to extend the validity of their offers, which forced
The last caretaker government disbursed a total of BDT 2.50bn the GTCL to scrap all the tenders.

(USD 36.31mn) as cash subsidy for diesel to the farmers. The
http://www.thefinancialexpress‐
study revealed that nearly 21% of the fund had not reached the bd.com/search_index.php?page=detail_news&news_id=55823
farmers who were eligible to get the money. Some 26‐27% eligible
farmers were not listed, 13% ineligible persons received subsidy Diesel, kerosene prices lowered by BDT 2.0 (US 2.9 Cents) a litre
and 18% eligible listed farmers did not get the payment, it added. The Financial Express, Tuesday January 13, 2009

http://www.thefinancialexpress‐ The new government has reduced diesel and kerosene prices by
bd.com/search_index.php?page=detail_news&news_id=56087
BDT 2.0 (US 2.9 Cents) per litre, with effect from 13th January this

year. Fuel oils are now selling at BDT 44 (USD 0.64) per litre
WB to provide USD 100mn for renewable energy development
following the reduction, down from the previous rate of BDT 46
The Financial Express, Thursday January 15, 2009
(USD 0.67).

The World Bank (WB) has decided to provide USD 100mn by June
This was a third cutback on fuel tariffs within three months in the
this year to promote use of renewable energy, particularly solar
wake of sharp declines in oil prices in the international market.

_______________________________________________________________________________________


The past caretaker government had reduced the price by 4.3% in Landowners in the area said they received offers from land
December 22, 2008. developers and businessmen to build high‐rise structures for
commercial purposes. Mohammad Nizamuddin, who owns three
http://www.thefinancialexpress‐ kathas of land and a tin‐roofed building adjacent to the road in
bd.com/search_index.php?page=detail_news&news_id=55738 Tejkunipara, said the price of a katha of land in the area shot up to
PDB claims USD 9mn from 3 rental power firms BDT 4mn (USD 58,000) from about BDT 1mn(USD 14,500) to BDT
The Daily Star, Tuesday January 13, 2009 1.5mn(USD 21,700) prior to the construction of the road. But the
people, whose lands were acquired by the government for the
Power Development Board (PDB) has claimed nearly USD 9mn in road, received BDT 0.8mn (USD 11,600) for a katha in addition to
liquidated damages from three rental power companies that 50% compensation on the total cost of the land.
failed to meet the project deadline or achieve the guaranteed
power generation target. A top power ministry official said that http://www.thedailystar.net/newDesign/news‐
PDB has already realised around USD 1mn from Energyprima of details.php?nid=71065
Hosaf Group, British company Aggreko and local GBB.
Telecoms
Energyprima is facing a penalty of USD 7.33mn for delaying two
50MW three‐year rental projects. Aggreko is facing a penalty of Mobile subscription grows 30% in 2008
USD 0.38mn for delaying its 40MW three‐year rental plant in The Daily Star, Wednesday January 14, 2009
Khulna and GBB is facing a penalty of BDT 43.5mn (USD 0.63mn)
for delaying its 20MW Bogra 15‐year rental project.


Dhaka‐Delhi talks on maritime boundary delimitation by March
The Financial Express, Monday January 12, 2008

Bangladesh and India will hold bilateral talks over the maritime
boundary delimitation and the dispute over the offshore oil and
gas blocks in the Bay of Bengal by March.

The foreign secretary initiated bilateral discussions with the two
neighbouring countries after the strife with India over establishing
oil and gas exploration rights in the Bay of Bengal. Three Indian The country's six mobile phone operators added 10.27 million
vessels, one survey ship aided by two other support vessels, had customers in 2008, posting a 30% growth compared to a 62%
entered into Bangladesh's deep‐sea block 14 on December 25, growth recorded in 2007. According to operators, the slower
2008, and left after the foreign ministry protested. Bangladesh growth in subscribers was due to the economic slowdown and
had a similar dispute with Myanmar on November 2008, which increased connection fees. Bangladesh's total mobile subscribers
was also mitigated through diplomatic efforts. reached 44.64 million by the end of December 2008, compared to
34.37 million at the end of 2007, according to Bangladesh
Though sea boundary demarcation is the key to offshore oil and Telecommunication and Regulatory Commission (BTRC) statistics.
gas explorations, Bangladesh is yet to resolve the disputes with its The subscriber acquisition growth was 103% and 62% in 2006 and
maritime neighbours ‐ India and Myanmar. According to the UK‐ 2007, respectively.
based prestigious global firm, Wood Mackenzie, neighbouring
countries have wholly or partly licensed a total of 12 gas blocks According to statistics, Grameenphone still holds the first position,
out of 28 offshore Bangladesh blocks. with 4.51 million customers in 2008. The company's total
subscribers were 20.99 million as of December 2008, up from
http://www.thefinancialexpress‐ 16.48 million in December 2007. Banglalink added 3.25 million
bd.com/search_index.php?page=detail_news&news_id=55667 customers and AKTEL added 1.8 million in 2008. Banglalink has
become the second market leader with 10.33 million customers,
Real Estate followed by AKTEL's 8.20 million by December 2008.

Bijoy Sarani‐Tejgaon link road drives land prices Due to higher taxes on SIMs, operators were also reluctant to
The Daily Star, Tuesday January 13, 2009 offer friendly packages targeting rural customers. Operator's
marketing strategy in 2008 was mainly concentrated on activating
The newly constructed 60‐foot wide road stretching from Bijoy unused old connection rather than offering new packages.
Sarani to Tejgaon has increased the prices of land adjacent to the
area. The acceleration in prices began with landowners and The top operators hiked pre‐paid SIM card prices by nearly three
businessmen eyeing the property and hoping to develop the area folds to BDT 400 (USD 5.8) and post‐paid SIM card prices to BDT
further. The 2400‐foot long link road connects the Old Airport 1,000 from September 2008.
Road at Bijoy Sarani with Tajuddin Ahmed Sarani at the Nabisco
intersection in Tejgaon. The new road was part of the interim http://www.thedailystar.net/newDesign/news‐details.php?nid=71218
government’s efforts to ease gridlock in the capital.
_______________________________________________________________________________________


Textiles

Waste treatment plants to be set up in EPZs
The Daily Star, Thursday, January 15, 2009

The government has decided to establish central waste treatment
plants (ETPs) in all the export promotion zones (EPZs) to reduce
environment pollution. Under the agreement, the Chittagong
Waste Treatment Plants Ltd (CWTPL) will establish an ETP in the
Chittagong EPZ (CEPZ), which will treat the waste output of 144
factories there. The ETP can be set up at a cost of USD 6.01mn in
18 months. The CEPZ will be the second EPZ to have an ETP.
Presently, only the Dhaka EPZ has a central ETP.


Yarn makers demand stimulus package
The Daily Star, Tuesday, January 13, 2009

Yarn makers requested a stimulus package from the government
to protect the sub‐sector from adverse affects of the global
financial recession. Producers complained that they had
suspended 30% of production in their spinning mills due to a drop
in sales in the local market and cheap imported yarn. Yarn
manufacturers pressed for increasing cash incentives to 10% from
the existing 5% and introducing a 5% research and development
fund to maintain a vibrant textile sector. According to the former
president of the BTMA, Indian yarn producers are in an
advantageous position, compared to Bangladeshi producers as
India has announced a stimulus package for the sector and is
providing R&D funds to manufacturers. Moreover, India produces
raw cotton and manufactures capital machinery.

According to Bangladesh Bank data, L/Cs (letters of credit) worth
USD 205.39mn were settled during July‐October 2008 compared
to USD 142.70mn during the same period a year ago to import
cotton yarn. In July‐October of 2008, fresh L/Cs worth USD
150.04mn were opened to import cotton yarn compared to USD
141.77mn during the same period in 2007. According to BTMA
statistics, 43 new spinning mills were set up in 2008 (January‐
December) with 9,44,744 spindles, up from 28 mills installed with
4,42,848 spindles in 2007. The country has a total of 341 spinning
mills with an annual production capacity of 1,600mn kg of yarn
and the total investment in the sector is EUR 4bn, according to
BTMA statistics.


_______________________________________________________________________________________


AT Capital Team – Dhaka

Ifty Islam Managing Partner (880‐2)‐8155144, ext. 132 ifty.islam@at‐capital.com
Syeed Khan Partner (880‐2)‐8155144, ext. 109 syeed.khan@at‐capital.com
Akther Ahmed Senior Advisor (880‐2)‐8155144, ext. 108 akther.ahmed@at‐capital.com
Masud Khan Senior Advisor (880‐2)‐8155144, ext. 113 masud.khan@at‐capital.com

Jisha Sarwar Senior Research Associate (880‐2)‐8155144, ext. 119 jisha.sarwar@at‐capital.com
Mohammad Emran Hasan Senior Associate (880‐2)‐8155144, ext. 131 emran.hasan@at‐capital.com

Ahmad Sajid Research Associate (880‐2)‐8155144, ext. 135 ahmad.sajid@at‐capital.com
Abdullah‐Al‐Farooq Research Analyst (880‐2)‐8155144, ext. 133 abdullah.farooq@at‐capital.com

M. Emrul Hasan Research Analyst (880‐2)‐8155144, ext. 138 emrul.hasan@at‐capital.com
Md. Zahidur Rahman IT Analyst (880‐2)‐8155144, ext. 140 zahidur.rahman@at‐capital.com
Sohana Alam Seraj Office Manager (880‐2)‐8155144, ext. 132 sohana.alamseraj@at‐capital.com

AT Capital Team – North America/Asia

Zarif Munir Senior Advisor zarif.munir@at‐capital.com
Professor Jahangir Sultan, Ph.D. Senior Advisor jahangir.sultan@at‐capital.com
M. Nasim Ali Senior Advisor nasim.ali@at‐capital.com

Iqbal Hussain Senior Advisor iqbal.hussain@doctors.org.uk
Robert Kraybill Senior Advisor robert.kraybill@at‐capital.com

© Copyright 2008. Asian Tiger Capital Partners Limited, Level 16, UTC Tower, Panthapath, Dhaka – 1215, Dhaka, Bangladesh.
All rights reserved. When quoting please cite “AT Capital Research”. The above information does not constitute the provision
of investment, legal or tax advice. Any views expressed reflect the current views of the author, which do not necessarily
correspond to the opinions of Asian Tigers Capital Partners or its affiliates. Opinions expressed may change without notice.
Opinions expressed may differ from views set out in other documents, including research, published by Asian Tigers Capital
Partners Limited. The above information is provided for informational purposes only and without any obligation, whether
contractual or otherwise. No warranty or representation is made as to the correctness, completeness and accuracy of the
information given or the assessments made.

_______________________________________________________________________________________

At Capital Weekly 18 January 2009

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18 January 2009 AT CAPITAL RESEARCH

Engineering 2.4% NIKKEI225 0.479296 0.57751 1

Foods 2.1% KSE100 0.137983 0.245628 0.136849 1

Sep‐08 Oct‐08 Nov‐08

Abdullah‐Al‐Farooq Research Analyst (880‐2)‐8155144, ext. 133 abdullah.farooq@at‐capital.com

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