Monthly Archives: February 2010

Nitol looking to assemble Tata Nano locally

Nitol looking to assemble Tata Nano locally
Mehdi Musharraf Bhuiyan

Bangladesh could be the next assembling home of the world’s cheapest car Tata Nano, if a negotiation among the government, the car’s Indian manufacturer and their local representative sees the daylight.

Nitol, the local sales agent of Nano’s giant parent concern Tata Motors, said Sunday that the company was aiming to assemble the jelly bean-shaped car from its own premises after its grand unveiling in Bangladesh at the recently-concluded India Trade Fair.

“The move is aimed at keeping the prices of the acclaimed tiny car at its expected level as maintaining that highly anticipated low price appears hardly feasible in Bangladesh after counting the high import duties and other expenses”, a high official of Nitol Motors told the FE recently.

“Currently, we are waiting for the final go-ahead from the government for setting up our own assembling plant on the outskirts of Dhaka and if everything goes well, we would be able to market the home-made Tata Nano by the end of this year”, he added.

Amid much media frenzy, Tata Nano was launched in March last year at the Pragati Maidan of New Delhi, the capital of India, with a starting price of Rs 100,000 equivalent to US$2,160, placing it in the Guinness Book of Records as the cheapest car in the world to date.

The news provides a ray of hope for a section of Bangladesh’s rising middle class people, for whom the luxury of owning a personal car still remains a distant dream.

However, much of this initial frenzy was about to die down, when the Nitol officials informed the prospective customers that they might not be able to sell the Tata Nano LX on display at the India Trade Fair at a price lower than Tk. 600 thousand in the local market after taking into account the high import taxes and the minimum profit margin.

“But if we can assemble the same car locally at our own plant, the price could come down to around Tk. 300 to 350 thousand, which can make it the cheapest car available in the Bangladeshi market by far”, Tata Nitol’s General Manager for International Trade Division Ayatollah said

Nitol officials pointed out that the car could possibly be a good bargain to the young jobholders and professionals, university students and even the female homemakers.

From its existing automobile plant in Jessore, Nitol is already assembling a number of other types of Tata commercial vehicles including trucks for the local market.

“We are yet to do a market feasibility study on the demand for such vehicles in Bangladesh; however if we find that there is a potential demand of 1000 units per year for this car in the local market, for instance, we may opt for locally assembling this vehicle”, Ayatollah said.

Industry insiders observe that the car could be a potential competitor to its Indian counterpart Maruti Suzuki and other low-budget automobile varieties available in the market, but they also expressed skepticism about the potential durability of such low-cost four-wheelers.

“Despite availability of cheaper options in the local market, rather pricey Toyota is the most sought-after brand in Bangladesh”, said an industry insider. “So it’s very unlikely that the customers here would risk quality for cheaper prices while buying their dream car”.


Yields of a rated Bangladesh

Yields of a rated Bangladesh

Mamun Rashid

Bangladesh is in the process of obtaining a sovereign credit rating. Noted rating agencies like Standard and Poor’s and Moody’s have been invited to drive this exercise, while three international banks operating in Bangladesh have been requested to provide them with necessary assistance (Standard Chartered and HSBC are advising for S&P and Citibank NA for Moody’s). A team has been formed with participation from relevant government agencies to support this process. Nobody less than the Bangladesh Bank governor, finance minister and secretary, along with the investors are taking keen interest in this process.

A sovereign rating is a forward-looking estimate of a borrower’s default probability based on a combination of historical performance and forward projections. Initial rating is always the toughest one, and a lot of work and senior level engagement are needed from the government. A rating not only assesses the likelihood of a country’s defaulting on its debt obligations, but also gives a strong signal about the overall health of the economy. A rating assumes even more significance for a developing country in terms of creating confidence and providing access to capital for development. In today’s global environment, a non-rated sovereign draws more negative attention than does a less-than good rated one.

Perceived investment risk of an unrated country often surpasses the facts on the ground, thereby increasing the risk premium that they ask for. This often leads to an unattractive value proposition. Bangladesh is already paying the price for not having a quantifiable sovereign rating.

A sovereign rating helps the investors in bringing their own internal risk appraisal in congruence with that of the market, thus reducing risk premium.

By obtaining a rating, Bangladesh will be able to enjoy benefits including: (i) a universally accepted measure of strong creditworthiness (ii) establishing a platform to facilitate immediate access to international capital markets (iii) precursor to establishing routine of investor education exercises and (iv) establishing itself as a sophisticated issuer in the international capital markets.

Bangladesh has embarked on a successful economic reform process, and made a great progress on most of the socio-economic issues including addressing institutional weaknesses. Bangladesh has passed through various events in the recent past, such as flood, Word Trade Organisation cutover, oil price hike, and has shown its strong resilience. Also, Bangladesh has never defaulted on any international financial obligations.

Given Bangladesh’s economic progress, the generally improved sentiment toward Asian sovereigns and the positive momentum of the political situation, experts believe the time is right to approach the agencies.

Naturally, the question would come to readers’ mind that what Bangladesh’s rating will be. While the answer to this question can be given by the respective agencies, I would like to present some data to have a broader understanding about where we can expect to see Bangladesh. Table 1 shows the rating scales of different agencies. Table 2 gives a comparative analysis of some other rated countries with Bangladesh.

While, the above table shows some attractive macroeconomic statistics for Bangladesh relative to its peer countries, it does not fully capture various qualitative strengths of the economy as well as of the country. I would like to highlight on some of them:

– Largely positive macro-economic environment based on public sector reforms, double digit export growth, relatively stable exchange rate, improving social indicators, etc.

– Investment climate in Bangladesh compares rather favourably with most South Asian countries. Bangladesh is blessed with huge reserves of natural gas and coal. Bangladesh has a large domestic market, with steadily rising disposable income among the middle class. Thirty-five percent of population is under 14 years of age while 61 percent between 15-64 years of age (Median age 23), coupled with growing purchasing power of an ever growing middle class; Bangladesh is in a unique position to attract entrepreneurs from home and abroad. Bangladesh is one of the least urbanised countries in the lists of Goldman Sachs and JP Morgan creating significant opportunity space. Competitive labour costs and flexible labour laws are key factors encouraging investment.

– Revenue Reforms Commission and Public Expenditure Reform Commission are set up to rationalise government finances. Reforms of state-owned enterprises, including privatisation, public-private partnership and energy sector rationalisation, have been initiated. Bangladesh Development Forum has provided an opportunity to the donors to focus on Bangladesh’s development needs.

– Financial sector achieved tremendous progress in terms of having repo, reverse repo and inter-bank repo. Primary Dealers guideline has been introduced for better convenience of underwriter and traders. Dhaka inter-bank offer rate (DIBOR) has been introduced to help develop an overnight swap market and a commercially acceptable yield curve for the taka. The Bangladesh Bank has approved a couple of derivative transactions. The Securities and Exchange Commission has outlined clear guidelines for companies to get listed and established stronger surveillance to monitor capital market participants. Total government debt is manageable at 49 percent of GDP (gross domestic product), which is lower than most of the peers. External debt along with current account balance performs better than India, Philippines, Pakistan and Indonesia.

– Stable inflow of remittances helped Bangladesh avoid any balance of payment pressure. The resilience of the economy is not only deriving from the fact that it is mostly insulated from the global markets by regulations, but also from an internally vibrant economy.

It is time to let the world know about our progress. What better way of telling this success story than having some respected international credit rating agencies mentioned above speak for Bangladesh?

10 firms team up over digital land records

10 firms team up over digital land records
Md Hasan

The land record system is up for automation with the help of some local IT firms — a step that promises to reduce hassles and disputes originating from the existing process.

Fake ownership of lands spawns criminal activities in Bangladesh, according to a study. More than 80 percent of criminal activities stem from land disputes, according to the Association for Land Reform and Development, a nongovernmental organisation.

Ten local IT firms have come forward to introduce a digital mapping and land revenue management system. The firms have already formed a company, Terra Tech Ltd, and sought a government go-ahead to start work. The law ministry has hinted at the green light.

Once the system is automated, landowners or buyers will not need to visit more than 10 government offices for documents. All the documents will be uploaded to a database, to which the government officials and people, in some cases, will have access.

“Land management needs reforms immediately with a fully secured automated system,” said Mahboob Zaman, chairman of Terra Tech. He said initially the company will start digitalising land records and registration process of Dhaka by June this year.

Terra Tech has already developed a business model to run the project and urged the government to take it under public-private partnership initiative.

Citing an example, Zaman said the business model could be like that of Chittagong Customs House automation. Zaman’s company, Data Soft, automated the customs house under a deal with the government where both the parties share revenue after a certain period.

“Terra Tech will provide land management services in a few minutes in a sharp contrast to days or weeks required under the existing system. The cost will be lowered and the services will go on uninterrupted,” said Habibullah N Karim, president of Bangladesh Association of Software & Information Services.

“The entire infrastructure for the land record system will be built without any government investment,” said Karim whose company, Technohaven Group, is also a member of Terra Tech.

Data Soft, IBCS-PRIMAX Software (Bangladesh) Ltd, Development Planners & Consultants, Business Automation, Techno Vista, Spectrum, E-generation, Technohaven, Upload Yourself and HSTC Ltd form Terra Tech, which has estimated around Tk 25 crore for digitising land records and the registration process in Dhaka city.

Dhaka District Collectorate, Settlement Publication Camp, land record and survey departments, and land offices of Demra, Tejgaon, Mirpur, Dhanmondi and Kotowali will be automated initially.

Terra Tech is offering to provide technology, equipment, manpower and required software to set up computer centres in these offices.

Land digitisation is not new for local software makers.

Projects including Modernisation of Land Administration Project (1995-98), Computerisation of Land Management Systems of Dhaka City Project (2004-06), Dhaka, Manikganj and Gazipur Collectorate Land Record Room computerisation (2005-07), Digital Khatian Preparation Programme (2005), Coastal Land Zoning Project (2009) have already been completed by local software companies.

The Bengal Settlement Regulation 1793 is the first initiative of land management in the region. Later in 1889, a cadastral survey was initiated in Bengal. During the Pakistan regime a revise survey was initiated. However, that survey did not complete.

“Absence of a database is the major reason behind land disputes,” said Mahmudur Rahman, director of Development Planners & Consultants.

“In line with our plan, it will be a comprehensive link-up of all land-related organisations under a single network,” Rahman added.

He said although some digitalisation projects were completed, those did not work because of a lack of maintenance.

He said the existing land records show that maximum lands, even in Dhaka city, are owned by farmers. So, the government is losing a huge amount of revenue from the sector as farmlands are still beyond taxation.

Once the land digitalisation project is completed, the government officials sitting at their offices will be able to see any transformation of lands including infrastructure and ownership.

Bangladesh’s land management has been divided in terms of authorisation, which remains as a problem. The land ministry looks after the survey and record issues, while the law ministry handles the registration process.

The Terra Tech president, however, said a fully automated system will ensure the centralisation of land management.

Intel, Qubee sign deal

Intel, Qubee sign deal
Business Desk

Intel and Qubee on Sunday signed a memorandum of understanding under which the companies will jointly propagate broadband internet along with wireless solutions such as WiMAX.

‘We are pleased to collaborate with Intel to bring WiMAX innovative solutions to Bangladesh,’ said Jerry Mobbs, chief executive officer of Qubee.

Intel Asia-Pacific region general manager Navin Shenoy also spoke on the occasion, said a news release.

Govt to install 100-200MW wind-based IPP

Govt to install 100-200MW wind-based IPP
Aminul Islam

The government will in a month begin the tender process for the installation of a 100MW-200MW wind-based independent power plant, according to an inter-ministerial decision made on Sunday.

Power Development Board officials at the meeting, chaired by the state minister for power and energy, Enamul Haque, made a presentation on the establishment of wind turbines in the Bay of Bengal to generate 100MW–200MW of electricity.

This will be the first large wind-based power plant in Bangladesh. The power board earlier made two unsuccessful attempts at running two 1MW power plants in Feni and Cox’s Bazar.

The board officials told the meeting wind turbine could be installed in offshore areas — about 50 metres off the coast — at Anwara, Banshkhali or Kutubdia to generate electricity.

They said the average wind speed in the areas identified was 6.5 metres a second above 50 metres from the ground whereas the latest wind turbine can generate electricity at the wind speed of 4.5 metres a second.

‘We will go for a pre-qualification tender for the installation of a 100MW–200MW wind-based power plant in a month if the government gives approval,’ the power board chairman, ASM Alamgir Kabir, told New Age after the meeting.

He said the plant would be installed as an independent power plant, from where the board would buy electricity.

PDB officials said the price of electricity of the ‘environment-friendly’ plant could be higher because of higher installation cost.

‘The installation cost of 1MW will be around $2 million whereas a conventional gas-based unit costs below $1million for installation,’ an official said.

He said there was a risk that the turbine might be affected in cyclones. ‘Additional care will be needed to protect the turbine during cyclones.’

The inter-ministry meeting also decided to install four 1MW wind-based power plants at Swandwip, Hatia and Kutubdia.

Officials of the defence and civil aviation ministries, Meteorological Department and the Bangladesh Parjatan Corporation were present.

Maksons plans for home textile unit

Maksons plans for home textile unit
Star Business Report

Maksons Spinning Mills, a listed company, has planned to set up a fully export-oriented composite home textile unit that promises to add Tk 300 crore to total turnover a year.

To set up the unit, the company has announced a plan to raise funds through issuing rights shares.

As part of the plan, the company’s Board of Directors yesterday recommended two rights shares against one existing share at an offer price of Tk 25, which includes Tk 15 in premium.

A portion of the raised fund will be used for paying off high-cost debt that will increase the profitability of the company, it said in a statement.

The rights offer is subject to approval from the Securities and Exchange Commission.

The company that listed on stockmarket in 2008 said the proposed unit would be an integrated textile industry with weaving, dyeing, printing, finishing and garments sections.

Maksons expects the implementation of the proposed unit will drive total turnover to Tk 400 crore a year.

The board members at yesterday’s meeting also decided to increase authorised capital from Tk 100 crore to Tk 500 crore.

Chaired by Maksons Chairman Abdul Ali, the meeting was attended by, among others, Managing Director Mohammad Ali Khokon.

Each Maksons share traded between Tk 107.70 and Tk 111 on Dhaka Stock Exchange yesterday.

Presently, sponsors hold a 41.2 percent share in the company, while institutions have a 26.15 percent stake and the public holding is 32.65 percent.

RMG exporters bag $1.8m orders from US show

RMG exporters bag $1.8m orders from US show
Unb, Dhaka

Bangladesh garments and knitwear manufacturers and exporters got export orders of around $107.96 million with instant confirmed order of $26.81 million in a show in USA.

The three-day Men’s Apparel Guild in California (MAGIC) show concluded in Las Vegas, the biggest city of Nevada, USA on February 18.

The MAGIC is the largest trade show in North America, which offers two shows annually — one in February and the other one on August 16-19.

Under the supervision of Export Promotion Bureau, 23 exhibitors from Bangladesh participated in the show.

Bangladesh’s consul general in Los Angeles met officials of the MAGIC authority and requested them to arrange a wide publicity of Bangladeshi exhibitors with their products and company information.

The consul general visited all 23 stalls and exchanged views with them and discussed about ways and means for greater participations of Bangladesh in the next MAGIC show.