At Capital Weekly 29 September 2008

29 September 2008 AT CAPITAL RESEARCH
AT Capital Weekly Update

Key themes in this issue are:
Weekly News Update
Global markets:
markets:
• Congressional negotiators and Bush administration officials have reached an agreement on a
USD 700bn rescue plan for the US financial system.
• In the light of Thursday's WAMU bankruptcy, the largest bank failure in US history, and the
mounting pressure on Wachovia (the fourth largest US bank) any failure to reach a deal would
have had such cataclysmic consequences that it had to be agreed.
• The global nature of the crisis is underlined by the nationalization of Bradford and Bingley (B&B)
in the UK and the collapse in the share price of Belgium's largest bank Fortis.
• In Hong Kong, the Bank of East Asia required a massive liquidity injection by the Hong Kong
Monetary Authority and share purchases by Li Ka-Shing to bolster confidence.
• While one can support the efforts of policy makers to avoid further chaos in financial markets, it
is important not to overlook the risk that the financial firefighting may create serious long term
problems.
• Bank credit risk is escalating - The A2/P2 Spread hit 409bp yesterday. This is literally off the
chart compared to any previous period.
• US Housing weakness persists - Sales of new one-family houses in August 2008 were at a
seasonally adjusted annual rate of 460,000 - this is 11.5% below July data and 34.5% below
August 2007
• The Baltic Dry Index has collapsed 42% from its all-time high last November - the risks are for
global commodity prices to follow and move sharply lower as the pain spreads from the US to
Europe and to Asia and other Emerging Markets.
• We provide a recap on the causes of the Great Credit Crunch of 2008
Bangladesh Overview and Special Focus:
• In light of the BOI’s statement that it would discourage investment in industries that rely on gas
due to depletion of reserves, we reiterate the need to push through the Coal Policy without delay
• The retail industry in Bangladesh presents tremendous potential, considering two of the largest
drivers for growth within the sector are urbanization and income per capita.
• Prospects for Indian Retailing and lessons for Bangladesh
Asian Tiger Capital Partners
EDITORS • We discuss industry dynamics, constraints and prospects for growth
We will not be publishing the AT Capital Weekly next week due to the Eid break. We will however be
Ifty Islam publishing the AT Capital Renewable Energy Report next week.
Managing Partner
ifty.islam@at-capital.com
USD 700bn rescue package to keep the US afloat
Syeed Khan
Partner
syeed.khan@at-capital.com
Professor Jahangir Sultan

Senior Advisor
jahangir.sultan@at-capital.com
Masud Khan
Senior Advisor
masud.khan@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
Overview – Global Markets

USD 700bn lifeline for the US financial system 3
A recap on causes of the great credit crunch of 2008 4
Longer term risks of bail out 4
IMF perspectives on global banking crises 4
Bank credit risk escalating 5
US housing weakness persists 5
Global Economy Slowing - Baltic Dry Index at two-year lows 6
And finally… 7
Overview – Bangladesh
Time to finalise and push through the coal policy without delay 8
Coals reserves in Bangladesh8 8
Prospects for Indian retailing and lessons for Bangladesh 8
The fragmented nature of Indian retail 9
Bangladesh retail – organised and unorganised 9
Favorable demographics 9
Special Focus – Retail 10
Stock Market Weekly 13

Weekly Stock Market Commentary 14
Stock Market News 14
Economics 17
Economic News 18
Sector News 20
_______________________________________________________________________________________
AT Capital Weekly Update 2
Ifty Islam, Managing Partner
ifty.islam@at-capital.com
Negotiators found a way to address concerns that the bail-

Overview
Overview – Global Markets
Markets out plan insufficiently protected taxpayers. If, after five years,
losses were incurred by the government on the sale of the
USD 700bn lifeline for the US financial system troubled assets it purchases through the programme, the US
president would have to present a plan to recover the money
from those who benefited from it.
While imposing curbs on the compensation of executives at

companies participating in the bail-out, Democrats dropped
demands that shareholders be given a vote on pay. The USD
700bn would be authorised fully but released in three stages,
beginning with an initial $250bn. Congress would review and
could in principle block the final $350bn disbursement.
A draft of the bailout deal can be found at:

http://online.wsj.com/public/resources/documents/bailoutbill2
0080928.pdf
In the light of Thursday’s WAMU bankruptcy (one of the

largest US mortgage servicers/loan companies) and the
th
mounting pressure on Wachovia (the US’s 4 largest bank)
any failure to reach a deal would have such cataclysmic
consequences that it had to be agreed.
At the time of writing Sunday evening Dhaka/Sunday Wachovia was in talks with multiple suitors that
morning EST, newspaper reports suggested that include Citigroup Inc., Wells Fargo & Co. and Banco
Congressional negotiators and Bush administration officials Santander SA, people familiar with the situation said. One
had reached an agreement on a USD 700bn rescue plan for key factor in the discussions is the potential impact of the
the nation’s financial system. proposed USD 700bn federal bailout plan, which could rid
Wachovia' books of some bad assets and make potential
Concerns about the plan can be found in academia as well acquirers less wary about losses lurking in its massive
as with a number of Congressmen. Professor Nouriel mortgage portfolio. Wachovia's fall began with its $25 billion
Roubini of NY Stern School and one of the earliest housing purchase of mortgage lender Golden West Financial Corp. in
bears, summed it up as follows: 2006. While then-CEO G. Kennedy Thompson Jr. touted the
deal as a "grand slam home run" given Golden West's
“The Treasury plan is a disgrace: a bailout of reckless reputation for screening borrowers, the Oakland, Calif.,
bankers, lenders and investors that provides little direct debt company had been lending to people with weaker credit
relief to borrowers and financially stressed households and scores in places where housing prices are in decline, such as
that will come at a very high cost to the US taxpayer. And the California and Florida. Wachovia now predicts losses from
plan does nothing to resolve the severe stress in money that USD 122bn mortgage portfolio could approach 12%.
markets and interbank markets that are now close to a
systemic meltdown."
However, any failure to pass the bill risks a financial “nuclear

meltdown”. The New York Times Sep 28 reported that
Congressional staff members would work through the night
to finalize the language of the agreement and draft a bill, and
that the bill would be brought to the House floor for a vote on
Monday.
The bill includes pay limits for some executives whose firms
seek help, aides said. And it requires the government to use
its new role as owner of distressed mortgage-backed
securities to make more aggressive efforts to prevent home
foreclosures.
In some cases, the government would receive an equity

stake in companies that seek aid, allowing taxpayers to profit
should the rescue plan work and the private firms flourish in
the months and years ahead.
The global nature of the crisis is underlined by the
The White House also agreed to strict oversight of the nationalization of Bradford and Bingley (B&B) Building
program by a Congressional panel and conflict-of-interest Society in the UK and the collapse in the share price of
rules for firms hired by the Treasury to help run the program.
_______________________________________________________________________________________
Belgium’s largest bank Fortis. The UK Sunday Times 1. The bubble in home prices, fueled by the ready
reported that the Treasury was poised last night to availability of credit, resulted in an underestimate of the
nationalise Bradford & Bingley (B&B), the troubled mortgage 2. Risks of residential real estate; the Greenspan Fed
bank. In an attempt to try to avoid a re-run of the Northern swapped one tech-driven bubble for another housing-
Rock debacle the government plans to hold an immediate driven one.
fire sale to sell off B&B’s assets to one or more banks. The 3. The peaking of residential home prices in 2006,
Spanish banking giant Santander was in talks last night combined with lax lending standards were followed by a
about its potential role in the rescue. Another buyer could be very high rate of delinquencies on subprime mortgages
HSBC. Although the Financial Services Authority had been in 2007 and a rising rate of delinquencies on prime
trying to find a single white-knight bidder to take over B&B’s mortgages.
loans in their entirety, it was reported that Britain’s big banks 4. Losses thereafter on the complex collateralized debt
refused to get involved. obligations (CDOs) that were backed by these
mortgages; these CDOs were opaque means by which
It was also reported on Sunday that Fortis is this weekend banks hid many of the risks away from their balance
poised to become the first large continental bank to fall victim sheets and hence from ratings agencies and regulators.
to the credit crunch, as the global chaos continues with 5. Increased liabilities by the many financial institutions
Bradford & Bingley and American savings giant Wachovia (banks, investment banks, insurance companies, and
both teetering on the brink. Fortis is the largest European hedge funds) that issued “credit default swaps” contracts
firm so far caught up in the global financial crisis. Fortis (CDS) that insured the CDOs.
dropped 35 percent last week on concern the company 6. Losses suffered by financial institutions that held CDOs
would struggle to replenish capital depleted by the 24.2 and/or that issued CDS’s; the illiquid nature of the
billion- euro takeover of ABN Amro Holding NV units and securities made it much harder to price these securities.
credit write downs. 7. Cutbacks in credit extended by highly leveraged lenders
that suffered these losses. This will link the crisis on Wall
Fortis, the largest Belgian financial-services firm, received an Street to Main Street or the broader US economy. It is
11.2 billion-euro (USD 16.3bn) rescue from Belgium, the not just mortgage finance that is being squeeze but
Netherlands and Luxembourg after investor confidence in the lending on all sorts of consumer loans as well as to
bank evaporated last week. Fortis has fallen 71 percent this corporate America. Indeed the squeeze on credit is
year, the second-worst performance among the 69 affecting companies around the world as well as banks.
companies on the Bloomberg Europe Banks and Financial
Services Index, cutting the lender's market capitalization to Longer term risks of bailout
12.2 billion euros. The company has about 3 billion euros of
bonds maturing this year and needs to refinance an While one can support the efforts of policy-makers to avoid
additional 7 billion euros next year, said Ivan Lathouders, an further chaos in US and global financial markets through
analyst at Banque Degroof SA in Brussels, in a report last some means, it is important not to overlook the risk that the
week. financial firefighting may create serious long term problems.
As Bailey and Litan note, when government funds on a large
Belgium will buy 49% of Fortis's Belgian banking unit for scale are used to support private sector companies, without
EUR 4.7bn, while the Netherlands will pay 4 billion euros for a clear quid pro quo or price to be paid for that support, there
a similar stake in the Dutch banking business, the is inevitably the problem of moral hazard and the
governments said in a statement late yesterday. Luxembourg encouragement of excessive risk taking in the future.
will provide a 2.5 billion-euro loan convertible into 49% of Furthermore, the sweeping nature of the proposed rescue –
Fortis's banking division in that country. benefiting a broad range of financial institutions holding
troubled mortgage securities – will make it difficult for
There was also a run in Hong Kong on the Bank of East Asia policymakers in the future to resist requests by other types of
prompting a massive liquidity injection by the Hong Kong firms in other industries for similar treatment, and more
Monetary Authority and share purchases by Li Ka-Shing, broadly, may undermine for a lengthy period the public’s faith
Asia’s richest man, to bolster confidence. in markets in a wide range of contexts. Whatever steps are
taken in the short run to address the current financial crisis,
So we will assume that the deal goes ahead and in the rest there is at least broad consensus that financial regulatory
of this section of the weekly, we consider some of the longer- and supervisory reform is needed to dramatically reduce the
term risks from the bailout. likelihood that something like the recent set of events never
recurs.
A recap on causes of the great credit crunch of 2008
IMF perspectives on global banking crises
crises
While there has been many thousands of pages of analysis
on the causes, consequences and solutions to the Great In the heat of the current enthusiasm to get a deal done, it is
Credit Crunch of 2008, one of the most insightful and worth having a look at a recent paper published by the IMF,
succinct has come from Martin Baily and Robert Litan in a “Systemic Banking Crises: A New Database” by Luc Laeven
Brookings Paper on International Finance titled “ A Brief and Fabian Valencia. The report covers the universe of
Guide to Fixing Finance “. In it, the authors note that the systemic banking crises for the period 1970-2007, with
drivers of the current crisis moved in a domino-like effect as detailed data on crisis containment and resolution policies for
follows: 42 crisis episodes, and also includes data on the timing of
currency crises and sovereign debt crises.
_______________________________________________________________________________________
A notable excerpt from the report that highlights the The A2/P2 Spread hit 409bp yesterday. This is literally off the
challenges of balancing short-term expediency with longer- chart compared to any previous period. When the A2/P2
term policy risks is as follows: spread spiked to 160 last year that was considered shocking;
now that spike looks minor.
“Existing empirical research has shown that providing
assistance to banks and their borrowers can be
counterproductive, resulting in increased losses to banks,
which often abuse forbearance to take unproductive risks at
government expense. The typical result of forbearance is a
deeper hole in the net worth of banks, crippling tax burdens
to finance bank bailouts, and even more severe credit supply
contraction and economic decline than would have occurred
in the absence of forbearance. Cross-country analysis to
date also shows that accommodative policy measures (such
as substantial liquidity support, explicit government
guarantee on financial institutions’ liabilities and forbearance
from prudential regulations) tend to be fiscally costly and that
these particular policies do not necessarily accelerate the
speed of economic recovery. Of course, the caveat to these
findings is that a counterfactual to the crisis resolution cannot
be observed and therefore it is difficult to speculate how a
crisis would unfold in absence of such policies. Better
institutions are, however, uniformly positively associated with
faster recovery…Fiscal costs, net of recoveries, associated The A2/P2 spread is the difference between high and low
with crisis management can be substantial, averaging about quality 30 day nonfinancial commercial paper. What is
13.3 percent of GDP on average, and can be as high as 55.1 commercial paper (CP)? This is short term paper - less than
percent of GDP. Recoveries of fiscal outlays vary widely as 9 months, but usually of much shorter duration like 30 days -
well, with the average recovery rate reaching 18 percent of that is issued by companies to finance short term needs.
gross fiscal costs” Many companies issue CP, and for many of these
companies the risk of default is close to zero. This is the high
Barry Rieholtz, a well known US economic commentator, and quality CP. Lower rated companies also issue CP and this is
lead author of blog “The Big Picture”, summed up the need the A2/P2 rating. Usually the spread between the A2/P2 and
for careful regulatory reform, especially of the SEC, AA paper shows the concern of default for the A2/P2 paper.
suggesting that: But right now this shows the credit markets are essentially
locked up waiting for the mother of all bailouts.
“We on Wall Street feel somewhat compelled to take at least
some responsibility. We used excessive leverage, failed to
maintain adequate capital, engaged in reckless speculation,
created new complex derivatives. We focused on short-term
profits at the expense of sustainability. We not only
undermined our own firms, we destabilized the financial
sector and roiled the global economy, to boot. And we got
huge bonuses.
But here's a news flash for you, D.C.: We could not have
done it without you. We may be drunks, but you were our
enablers: Your legislative, executive, and administrative
decisions made possible all that we did. Our recklessness
would not have reached its soaring heights but for your
governmental incompetence.”
Bank credit risk escalating
Many US market analysts’ favoured measure of banking

sector credit risk is the TED spread (the difference between
the LIBOR interest rate and the three month T-bill). Usually
the TED spread is less than 0.5%. The higher the spread, the Source: Calculated Risk
greater the perceived credit risks (compared to "risk free"
treasuries). The TED spread increased to 3.27% on Friday. US housing weakness persists
Completely off the charts!
Sales of new one-family houses in August 2008 were at a
And the following graph below courtesy of “Calculated Risk” seasonally adjusted annual rate of 460,000, according to
is the A2/P2 spread from the Fed's commercial paper report. estimates released jointly today by the U.S. Census Bureau
and the Department of Housing and Urban Development.
This is 11.5 percent below the revised July rate of 520,000
and is 34.5% below the August 2007 estimate of 702,000.
_______________________________________________________________________________________
Source: Bespoke Investment
US New "Months of supply" is at 10.9 months. Sales are

falling quickly, but inventory is declining too, so the months of Historically, the performance of the Baltic Dry Index has
supply is slightly lower than the peak of 11.2 months in correlated strongly to the CRB Index and other commodities
March 2008. The all time high for Months of Supply was 11.6 indices. But this time, the CRB Index is just a few percent
months in April 1980. Currently the Case-Shiller futures are below its all-time high a few weeks ago and has not declined
predicting a 33% decline peak-to-trough in US house prices, in sympathy with freight costs (see chart below). This might
Goldman is forecasting 27%, and Lehman was forecasting suggest the demand for raw materials remains very strong
32%. despite fears of a growth slowdown worldwide. However, we
are skeptical. The risks are for global commodity prices to
follow the Baltic Index and move sharply lower as the pain
spreads from the US to Europe and to Asia and other
Emerging Markets.
Global Economy
Economy Slowing - Baltic Dry Index at two-
two-year lows
While everyone’s attention is on the Hanky Panky bailout
plan, the Baltic Dry Index has dropped over 15% this week to
two-year lows @ 4163.
The London-based Baltic Dry Index, a freight gauge for the

transportation costs of major bulk commodities, has
collapsed 42% from its all-time high last November.
Transportation costs for iron, coal and the grains plunged to

a six-month low last week – the largest decline since records
began in 1985. The large price drop clearly suggests that
global economic growth is slowing and bulk shipping rates
are finally coming down to earth following a price explosion
since 2003.
_______________________________________________________________________________________
And finally…
_______________________________________________________________________________________
Coal reserves in Bangladesh
Overview – Bangladesh Recoverable
Recoverable
Estimated by
Time to finalise and push through the coal policy without Depth of by opencast
Coal deposit
deposit reserve underground
deposit (m) mining (mn
delay (mn MT) mining (mn
MT)
MT)
The issue of depleting gas reserves is the most significant Jamalganj 800 – 1,150 1,053 168 N/A*
obstacle to investment in Bangladesh. Newly built
Barapukuria 119 – 504 390 62 270
manufacturing plants lie idle and large FDI projects, such as
the USD 3bn Tata investment, have been turned away as Khalshpir 257 – 480 685 110 480
energy security could not be provided by the government. Phulbari 140 – 350 426 68 360
This week the Board of Investment (BOI) Chairman
Kamaluddin Ahmed clarified their position – the BOI would Dighipara 328 – 455 200 32 140
discourage investment in industries that rely on gas. He said, Total 2,754 441 1,250
“We are sorting out how we can discourage investments --
both foreign and local -- in gas-based industries to save the In conclusion, the key to Bangladesh’s energy and hence
natural resources from quick depletion,". He added, economic future lies in coal. Both this interim government
"Investments in the services sector will be given priority over and the next elected one should accelerate the coal
the manufacturing sector”. development plan as fast as possible.
On a more constructive note, he added, "We'll be able to Prospects for Indian retailing and lessons for Bangladesh
attract more foreign investments after the new coal policy is
in place”. The BOI stance reinforces our view that we must A report released on Sep 25 by Global Consulting firm
move forward without delay to use the country’s substantial McKinsey, ‘The Great Indian Bazaar: Organised Retail
coal reserves. Comes of Age in India,’ suggests that the organised segment
of the retail industry is expected to grow from the current 5
The Coal Policy has been a long time in the making and has per cent of the total market to about 14-18 per cent of the
been through several iterations. We had previously written expected USD 450 bn market by 2015. But they also caution
about the latest draft, which we felt was more pragmatic and global players waiting to enter the great Indian retail bazaar
dealt with many of the critical issues. It is high time for that a ‘cut and paste’ format of their stores elsewhere would
decision makers, the regulatory body and the stakeholders to not work here suggesting that “they need to have innovative
come into consensus to resolve any outstanding issues and formats based on where to participate in the retail value
quicken the process of finalizing the policy. chain, which geographies to play in and what price points to
offer. They also have to craft a customer-insight driven
There has been a lot of discussion about the merits of merchandising strategy and create an efficient retail
underground mining versus open pit coal extraction. Perhaps operating platform.
the most lucid explanation of the necessity of open pit mining
was given at a talk on July 31 at the Bangladesh Enterprise McKinsey’s retail report also talks about the uniqueness of
Institute by Mr Nazrul Islam. CEO of the Infrastructure the Indian shopper vis-a-vis the rest of the world: least loyal
Investment Facilitation Centre (IIFC). Among the key issues to a single retailer, dislike for pre-packaged fresh foods,
we would note that Bangladesh has five good quality coal willingness to pay more for convenience and services but not
reserves in the northern part of the country. Currently, only a premium price for a brand and demands ethnicity in
one mine (Barapukuria) is producing coal using underground apparel accessories. And, in the absence of quality control,
mining method with production capacity of 1mn MT per year information about the product and trust in retailers, brands
where the actual production in the previous year was 0.5mn serve as a proxy for all these factors.
MT.
Of the current 204 million households in India, the report
With Underground mining method we could recover only estimates that only about 13 million households have the
441mn MT of coal from our five coal deposits while with the income to patronise organised retail. The great news is that
best combination of Underground and Opencast Mining the this relevant consumer segment will grow five-folds from 13
amount could be 1,418mn MT. For the maximum amount of million to 65 million households in the next eight years but
coal recovery, we should focus on the best mining method mom and pop stores would continue to be relevant across
based on the mine type. If we go for an underground method the country, in both small and large towns.
for all the mines then 1bn MT of coal will be left underground
worth USD 100bn (Considering USD 100/MT). This has been The report also suggests retailing in India would require an
summarized in the table on this page. approach that is distinctively different from the rest of the
world. To achieve leadership position in the sector, players
These challenges could be overcome if the government or would have to integrate real estate into the business model,
the mine developer develop the appropriate rehabilitation create an effective and scalable supply chain, increase
project. Along with short term compensation, the developer basket size by shaping consumption, develop and retain
could also ensure long term packages for the dislocated talent, influence regulation to ensure healthy development of
population around the mining area. One suggestion at the the sector and to de-risk margins.
BEI seminar was to give some stock of the mining company,
preference in working in the mining company, encouraging Mr Laxman Narasimhan, Director, McKinsey & Co and leader
the setting up of supporting industries etc. of the Consumer, Retail and Media Practice in India, stated
that, “given the nascent state of organised retail and the
_______________________________________________________________________________________
vary from India is the greater openness in terms of FDI laws
rapid evolution of the industry, it is imperative for retailers, and labour laws and the lack of variability of tax regimes from
manufacturers, real estate developers, logistics providers state to state that India suffers from. Where there are likely to
and partners along the value chain to work in a collaborative be similarities is in the cultural biases towards fresh produce
spirit.” from small food retailers or local markets. Also the
challenges of finding land in major cities such as Dhaka and
Factors Descriptions Implications Chittagong.
Barriers to FDI not permitted in pure retailing Absence of global players
FDI
Franchise arrangement allowed Limited exposure to best practices Bangladesh retail - organized and unorganized
Lack of Government does not recognize the industry Restricited availability of finance
Industry
Status
The retail industry in Bangladesh remains highly fragmented,
Restricts growth and scaling up
Structural Lack of ubanization Lack of awareness of Indian
which is a situation highly analogous to surrounding markets,
Impediments consumers such as India, about a decade ago. It is arguably not
Poor transportation infrastructure Restricted retail growth recognized as a significant industry and there is no clear
Consumer habit of buying fresh foods Growth of small, one-store formats,
regulatory body that directly oversees country-wide
Adminstered pricing with unmatchable cost structure operations of different retailers. Moreover, there is minimal
Wastage of almost 20%-25% of farm information available with regards to market size.
produce
High Cost of Pro-tenant rent laws Difficult to find good real estate in
Retail might be segregated into two segments – unorganized
Real Estate terms location and size
and organized. By unorganized retail one refers to informal
Non-availability of government land, zoning High land cost owing to constrained low-cost retailers (i.e. local kirana shops, paan/beedi shops,
restrictions supply convenience stores, pavement vendors etc). With a large
population of 150 million, unorganized retail is one of the
Lack of clear ownership titles, high stamp duty Disorganized nature of transactions
(10%) country’s largest employers. On the contrary, by organized
Supply Chain Several segments like food and apparel Limited product range retail, one refers to licensed retailers (i.e. those registered for
Bottlenecks reserved for SSIs sales and corporate taxes) – this would include supermarket,
Distribution, logistics constraints - restrictions Makes scaling up difficult hypermarkets, departmental stores and retail chains, as well
of purchase and movement of food grains,
absense of cold chain infrastructure
as privately owned large retail outlets. Organized retail in
Bangladesh is presently at an embryonic stage of
Long intermediation chain High cost and complexity of sourcing development and has negligible presence in the market to
& planning date.
Lack of value addition and increase in
costs by almost 15%
Complex Differential sales tax rates across states Added cost and complexity of
Taxation distribution
System
Multi-point octroi Cost advantage for smaller stores
through tax evasion
Sales tax avoidance by smaller stores
Multiple Stringent labor laws governing hours of work, Limits flexibility in operations
Legislations minimum wage payments
Multiple licenses/clearances required Irritant value in establishing chain
operations; adds to overall costs
Customer Local consumtion habits Leads to product proliferation

Preferences
Need for variety Need to stock larger number of SKUs
at store level
Cultural issues Increases complexity in sourcing &
planning
Increases the cost of store
management
Availability of Highly educated class does not consider Lack of trainer personnel
Talent retailing a profession of choice
Lack of proper training Higher trial and error in managing

retail operations Favorable demographics
Increase in personnel costs
Manufacturer No increase in margins Manufacturers refuse to dis- The retail industry in Bangladesh presents tremendous
s Backlash intermediate and pass on intermediary potential, considering two of the largest drivers for growth
margins to retailers
within the sector are urbanization and income per capita.
Source: Market Participants, Fitch Recent demographic trends indicate a strong influx into the
larger metro areas of the country, particularly Dhaka,
The fragmented nature of Indian retail Chittagong and Sylhet. Moreover, robust growth in national
income over the past few years has been reflected by the
Experiences in the developed and developing countries rapid emergence of a middle-class population, bringing with
prove that performance of organised retail is strongly linked it changing consumption patterns and a demand for
to the performance of the economy as a whole. The table organized retail, a phenomenon that was almost absent even
below from an analysis by Indian consulting firm CII gives a decade earlier. We discuss this in more detail in the special
valuable perspective on some of the retailing challenges that focus article which is in the next section.
Bangladesh might face. Where retailing in this country will
_______________________________________________________________________________________
S Adeeb Shams, Research Associate
adeeb.shams@at-capital.com
Special Focus – Retail

Bangladesh’s grocery retail industry is at a nascent stage – a
market that remains highly fragmented with few organized
branded retailers penetrating the market. Informal
unorganized formats dominate the market, with the majority
of the 150 million population preferring to shop at their local
low cost kirana and small paan/beedi stores.
Organised retailers, Agora, Meena Bazaar, Nandon and

PQS, to name the leading four, have concentrated their focus
so far, on more affluent shoppers, in upper class areas.
However this is changing with some operators spreading
their wings with aggressive expansion plans and varied
formats tailored to wider socio-economic groups catering for Current retail scenario – no market leader
their tastes and buying habits.
Organized retail in Bangladesh is primarily concentrated in
India provides a useful benchmark and in many areas has Dhaka. The past few years have seen the emergence of
similar characteristics to the Bangladesh market, albeit at a different retailers (Agora, Meena Bazaar, Nandon and PQS),
later stage in its evolution - a market characterized, by a but none of these chains have managed to scale to more
large and growing population, increasing disposable than five outlets, restrained by supply chain, logistical,
incomes, a fast growing middle class and changing buying regulatory and real estate constraints. Additionally the key
habits. players have catered to a very niche market of high-income
individuals.
Many Indian domestic players have managed to successfully
roll out formats country wide. Larger global players, such as However in the last six months at least two players have
Walmart and Tesco are entering India via JVs with local reported they have very aggressive rollout plans to expand,
players. Regulatory, real estate, human resource and supply with some new entrants, such as ACI signalling that they are
chain issues continue to challenge, but none the less a planning to enter the market on a significant scale.
market forecast to evolve into a USD 450bn in the next
decade provides growth prospects that are unachievable Relatively low incomes
outside emerging markets.
Bangladesh’s GDP per capita is approximately USD 470,
In this week’s Special Focus, we evaluate the prospects of making it one of the poorest nations in the world. A majority
the grocery sector in Bangladesh – key drivers, market of consumers have relatively low disposable incomes which
characteristics, key constraints and prospects for growth. reflect on the size and nature of the average basket at a
grocery store. Staples and food-related essentials account
Favorable demographics for a considerable portion of this basket. This almost certainly
makes price the most significant factor affecting a
The two key demographic drivers for growth are urbanization consumer’s decision between two retailers.
and income per capita. Recent demographic trends indicate
a strong influx into the larger metro areas of the country, However, this trend has evolved in recent years with the
particularly Dhaka, Chittagong and Sylhet. Consistent GDP introduction of electronics retailers (global brands such as
growth (c. 6%) over the past few years has been reflected by Sony and Philips) in district towns, outside of the more
the rapid emergence of an urban middle-class population, developed metro areas of Dhaka, Chittagong and Sylhet.
bringing with it changing consumption patterns and a This is an indication of the gradual emergence of a middle-
demand for organised retail, a phenomenon that was almost class with an increasing percentage of incomes now
absent even a decade earlier. dedicated towards non-essentials such as electronics.
The largest percentage of Bangladesh’s population consists Greater urbanization coupled with rising middle-
middle-class
of those within the working age group (25-59) and the
creation of a sizeable middle-class would inevitably induce Urbanization has greatly contributed towards the growth of
greater demand for organized retail. the organized retail sector in Bangladesh. Moreover, there
are a greater number of well-paid corporate jobs particularly
As organised retail becomes more prevalent in the country, in Dhaka with a trend towards longer working hours and less
with rising incomes and the advent of western consumption personal time. This is further re-enforced by higher workforce
patterns (a trend that embraced surrounding markets such as participation by women and a preference for convenience
India and Thailand long ago), one would expect Bangladesh shopping.
to follow.
_______________________________________________________________________________________
Existing high service retail network Currently this segment is characterized by quite a few one-off
stores, as well as a few supermarket chains (Agora, Meena
Even though of a disorganized nature, Bangladesh’s retail Bazaar, Nandon and PQS). Their presence is primarily
sector is fairly large as a result of the country’s demographic restricted to Dhaka and the highest number of outlets that a
patterns, income levels and consumer preferences. Informal chain presently has is five.
credit is extremely prevalent, making it necessary for each
retailer to create a certain degree of rapport with customers Real estate constraints
who visit regularly. This rapport is based completely on trust
and often takes long periods of time to build. The market is Bangladesh is the most densely populated country out of the
such that consumers tend to be loyal to their neighborhood top ten most populous countries in the world - a large
retailer and therefore, reluctant to switch to other stores. population, coupled with a very small land area – for example,
the population of Bangladesh is approximately half of that of
High traveling costs – low auto penetration the US, even though its area is roughly one-ninetieth of it.
Land is by far the country’s scarcest resource.
The relative cost of traveling for a majority of the population
is quite high and a very small portion of the population There is yet to be a full service hypermarket anywhere in
consists of consumers who are car owners. Bulk shopping is Bangladesh. The most obvious locations for such stores
restricted to such car owners. As such the average basket presently would be the locations where the current organized
size in regular unorganized retail tends to be very small. The retailers are primarily concentrated, i.e. areas such as
effects of a gradual movement towards organized retail and Gulshan, Banani and Dhanmondi etc. Considering the rate at
increased incomes, will not only be characterized by larger which the cost of land is rising and also the fact that there is
basket sizes, but also a greater degree of diversification minimal unutilized land, it would practically be impossible to
within products (a greater proportion of processed food such acquire large tracts of land for hypermarkets in such areas.
as jam, ketchup etc) within those baskets. One option might be purchasing (fully or partially) the
government-owned markets such as Gulshan Markets 1 and
Existing store
store formats 2, or New Market. Even if land is available, it is often very
difficult to assure transparency and accountability with
The different type of retail stores in Bangladesh might be regards to legal title.
classified into four broad groups, ranging from the very small
open-air temporary store to fully air-conditioned western-type One possible means of making land available, is for the use
supermarkets. of government-owned unutilized land – there are many large
sites in urban locations. One viable option might be
Roadside shops: This type of retailer is most prevalent. Store negotiating with the government into taking up a long-term
sizes are generally very small (between 50 and 100 square lease of government-owned land using them for larger retail
feet). Products consist of basic essentials. Imported items outlets.
are rarely available, with the exception of low-quality
products from border adjacent areas of India. Even though Regulatory constraints
almost all markets in rural areas consist of stores of this
category, such stores are also seen in the capital. The government recently introduced a law whereby all
retailers are required to have a ‘shop license’. However, such
Municipal corporation markets: These stores tend to be more initiatives are yet to bear fruit and retailers have stated that
prevalent in semi-urban and urban areas of Bangladesh and despite taking up such an initiative that promises to make the
are still the most popular source for shopping amongst a business itself more accountable, the government has failed
large percentage of the market within their areas. to provide any written guidelines. Lack of legislation with
Businesses are usually arranged and segregated according regards to retail is inevitably one of the greatest barriers that
to the kind of commodities they are carrying. For example, retailers face towards growing at a rapid pace.
within the same market, there would be different stores each
for fish, meat and vegetables. Selected popular imported Fragmented supply chain
products are available.
The supply-side market is largely unorganized and generally
Convenience stores: These have traditionally been located in controlled by syndicate of middlemen who control pricing and
the more affluent urban areas, but they have spread to supply. Prices of groceries such as fresh vegetables at most
almost all areas of the larger cities, such as Dhaka, retailers in Dhaka increase two to three-fold of the price at
Chittagong and Sylhet. With rising incomes, this type of store which the farmers sell the same products. This stems from a
is beginning to become popular in district towns as well. failure of existing retailers in the market to gain a stronger
These outlets usually provide a wide range of imported foot-hold on the supply chain and eliminate the role played
items, along with high-quality local products. by these middlemen (wholesalers). Sourcing directly from
suppliers would not only help reduce the final price of the
Supermarkets: The past decade has seen the advent of product (which will be beneficial to consumer), but it would
supermarkets, i.e. stores that fall into the organized retail also enable the retailer to raise its margin (the retailer would
category, in different large metropolitan cities, particularly in be able to compensate the absence of the wholesaler, by
Dhaka. The objective of these stores was to cater to urban raising price).
elites and expatriates in the capital. However, recently in the
past few years, there has been a growth in the number of Generally, existing players have not sourced directly from
organized retail supermarket outlets, although these stores suppliers, due to scale issues – in order to break the current
still account for a negligible portion of the entire retail sector. status quo and disintermediate the middle man and provide
_______________________________________________________________________________________
incentives and economic security to farmers, retailers need
to be of sufficient scale. The maximum number of outlets a
chain presently has is five (Meena Bazar) and many contend
that existing businesses are not scalable enough to introduce
such pioneering initiative. However, some retailers are finally
starting to source some of their products directly from
suppliers. Nandan and Meena Bazaar are presently
acquiring some selected produce directly from farmers.
As is the case in India, developing a strategy which provides

effective management of the supply chain- a ‘farm to fork’
strategy – is a critical success factor. We would expect that
players with sufficient integration into the supply chain, with
existing agro related businesses or through joint ventures –
infrastructure and market presence - are at a significant
competitive advantage to those that depend on the
imperfections of the existing supply side market,
Complex logistics
Bangladesh has poor infrastructure with regards to storage

and this in turn hinders efficient supply chain management.
Most stores do not have a feasible plan laid out when it
comes to storage and some chains have separate
warehouses with each store. Decentralised independent cold
storages for each outlet might is cumbersome. The overall
cost of storage is considerably lowered for retailers if they
receive reliable deliveries from selected wholesalers to a
centralized distribution center, rather than having to deal with
multiple wholesale markets in daily intervals.
For chains to grow and have sizeable presence throughout

different metropolitan areas of the country, it is imperative
that chains introduce centralized cold storages and benefit
from economies of scale.
Labor and manpower challenges
Since organized retail is at such a nascent stage of

development, a shortage of trained personnel is a major
barrier towards rapid growth of the sector. The workforce
lacks sufficient education and specialization in retail service
provision. One would expect the situation to improve with the
expansion of the existing chains and the introduction of new
entrants. There are no programs related to supply-chain
management per se at universities in Bangladesh. One might
expect relevant programs to become institutional once there
are international players in the market – the introduction of
international players would induce a requirement for
management trained with expertise in such relevant areas.
Conclusion
Retail growth in Bangladesh is expected to grow at a rapid

pace in the coming years, with rising incomes, shifting
lifestyles and complimentary demographic trends. While the
macro picture seems compelling the challenge remains to
develop a viable scalable business model and execute an
effective strategy to penetrate the 150 million strong
population, cater for a diverse social and regional
demographic, effectively manage supply chain and logistics,
overcome infrastructure and regulatory constraints and the
scarcity of real estate in urban centres.
_______________________________________________________________________________________
Stock Market Weekly
DSE performance: 52 weeks
weeks Market news
• DSE market capitalisation crosses BDT 1 trillion mark

• DSE, NBR differ on tax exemption on GP IPO placement
• GP extends time for private placement
• Investor fined BDT10mn for insider trading
• DSE to upgrade its trading capacity by year-end
• Government plans to increase GDP growth projection to
7%
DSE performance: 30 days Regional stock market performance (last week)
Market summary Valuation snapshot
DSE General Sector P/E

Index performance DSE 20
Index Apr-08 May-08 Jun-08 Jul-08
Opening of this week 2,838.5 2,383.7 Banks 22.2 22.6 21.7 19.2
Closing of this week 2,966.8 2,466.1 Cement 14.7 17.6 12.4 11.2
Change within a week (%) 4.5% 3.5% Ceramic 43.7 42.7 42.0 50.3
Change within a week (Point) 128.3 82.4 Engineering 38.9 41.4 39.1 38.4
Food & Allied 28.2 28.5 13.2 19.3
Fuel & Power 25.8 26.2 23.6 16.1
This Last %
Capitalization and turnover Insurance 28.1 32.4 26.9 22.8
Week Week Change
Investment 64.9 65.2 53.1 33.5
Number of Trading Days 5 5
IT 18.4 17.6 20.0 20.3
Market Capitalization (USD bn) 15.18 14.47 4.9%
Jute 16.4 16.0 16.0 16.3
Total Turnover (USD mn) 306 235 30.3%
Miscellaneous 23.0 25.9 23.2 25.2
Daily Avg. Turnover (USD mn) 61 47 30.3%
Paper & Printing 9.2 9.5 9.2 7.9
Total Volume (mn) 161 130 24.2%
Pharmaceuticals 26.7 29.8 28.1 25.6
Daily Avg. Volume (mn) 32 26 24.2%
Service & Real Estate 20.5 19.5 20.8 20.5
Tannery 25.1 23.1 19.8 21.3
This Last 15.2 16.3
Weighted avg. P/E Ratio* Issues Textiles 14.9 14.4
Week Week
Source: Dhaka Stock Exchange
This Week 21.33 Advanced 150 65
Last Week 20.51 Declined 80 172
% Change 4.0% Unchanged 13 8
*Weighted on Market Cap. Not Traded 43 43
_______________________________________________________________________________________
Weekly Stock Market Commentary sector alone will account for 15% growth of the capital
market.
It was an eventful week for the market before it closed for
nine calendar days. The long recess includes two weekends Third, we expect to see changes in the underdeveloped
and an extended Eid vacation in between. The market will Insurance sector of the country. Currently, the insurance
open on October 5. Defying all the turmoil in the global companies are tiny and undercapitalized. The new
financial market during the week, the DGEN gained on each insurance ordinance is expected to take effect shortly. Under
of the trading days during the week and ended with a weekly the new ordinance, the minimum paid up capital of life
gain of 4.52%. insurance company is BDT 300mn (USD 44mn). It is BDT
400mn (USD 58mn) for a general insurance company. The
The market reached a very important milestone this week – ordinance will also change the regulatory environment of the
the market capitalization (stocks and government bonds sector and is expected to add momentum to its growth.
combined) exceeded BDT 1 trillion mark on Monday. At Therefore, many insurance companies are expected to raise
close of trading on Thursday the capitalization exceeded capital from the market.
USD 15bn. The equity market capitalization was BDT
8,171bn (USD 11.9bn) and there was BDT 2,224bn (USD Fourth, we expect the government initiative to privatize state
3.2bn) worth of fixed income securities (mostly government owned companies through direct listing to continue. The
bonds that do not trade). The government bonds have been government has already corporatized many of the large state
listed in the recent years. owned entities in banking, telecom, airlines and other
sectors. Eventually, many of these corporatized entities will
get listed.
The high drama involving the IPO of Grameenphone

continues. In the previous edition, we commented that the
Grameen IPO may not happen this year. Now it is almost
certain. Earlier, the SEC chairman commented that the SEC
has not received all of the information it needed to approve
the IPO. Furthermore, the CEO of DSE stated that Grameen
should change the denomination of its shares. This week, the
biggest blow came from the National Board of Revenue
(NBR) when it commented that the pre IPO placement of
Grameen will not be considered a public offer for purposes of
the 10% tax benefit provided to companies who go public,
the incentive that may have prompted Grameen to get listed
in the first place. According to NBR, at least 10% of its total
The market capitalization has grown on average 50% share capital has to be offered through IPO for a company to
annually in the last seven years. The equity market be eligible for such tax benefit. Grameen planned to issue
capitalization grew by on an average 46% a year during that 5% of the shares through pre IPO placement and 5% through
time. Though increase in prices of existing securities IPO.
contributed substantially to this growth, there have been a
lots of new listings and issuances of right shares and bonus In the meantime, the fundamentals of Grameenphone
shares by existing companies. continue to deteriorate. The company is experiencing
decline in its revenue and net profit and its market share is
Bangladesh capital market should maintain its high growth falling faster than expected. In September, it hardly acquired
as long as corporate earnings, which increased 48% in the any new subscribers. Maybe all those factors resulted in
first half of 2008, do not drastically fall. Earlier, a lack of poorer than expected response from institutional investors
supply of securities was considered to be the main reason during the bidding for Pre IPO placements. To add insult to
behind the underdevelopment of Bangladesh capital market. the injury, bickering between major existing shareholders
But now the pipeline of new issuances looks pretty robust, surfaced recently. Also the CEO of the company has
which will contribute to the growth of the capital market. declared that he will resign by the end of the year. His stint
was supposed end in 2010.
First, the telecom sector will be the strongest driver of capital
market growth in the next three years. In addition to the Stock Market News
listings of Grameenphone, the largest, and Aktel, the third
largest mobile phone operators in the country; three DSE to upgrade its trading capacity by year-
year-end
WiMAX, three Interconnection Gateway, three International The Financial Express, Monday, September 29, 2008
Gateway , and one Internet Gateway companies will get
listed in the next three years. Such listing will occur as the The Dhaka Stock Exchange (DSE) is set to upgrade its
Bangladesh Telecom Regulatory Commission (BTRC) automated trading system with its plan to expand capacity.
requires all recent licensees to get listed within three years The country's prime bourse has already undertaken a project
as per the licensing agreements. to upgrade the electronic trading system, making available
an electronic “order book” facility, to be implemented in
Second, the banking sector is expected to continue its high phases. In the “order book” system, member firms of the
growth and banks will keep relying on the capital market for DSE execute orders at a given price by pushing a button
their tier I and tier II capital. We estimate that the banking under the automated trading system. Actual prices, rather
_______________________________________________________________________________________
than bids and offers, are being posted in the order book, Grameenphone however did not specify any new deadline
making trading fairer. for the PPO. There is a rumour in the capital market that
Grameenphone extended the time for participating in PPO as
After upgrading the current trading platform, the DSE will be the offer received poor response from the local institutional
able to handle 0.15 million transactions per day (from the investors. People close to the matter said that only a handful
existing capacity of 0.1 million) by December this year and of local institutions -- including Trust Bank, Prime Bank, ICB,
0.25 million by 2010. Currently, the bourse handles 50,000 to AIMS of Bangladesh, IDLC and Lanka Bangla -- participated
60,000 transactions on an average per day. in Grameenphone's PPO before its deadline ended last
week. The highest offer for each Grameenphone share
http://www.thefinancialexpress- during the PPO was BDT 12, while the lowest was BDT 3.
bd.info/search_index.php?page=detail_news&news_id=46831
http://www.thedailystar.net/story.php?nid=56371
Investor fined BDT10mn for insider trading
The Daily Star, Saturday, September 27, 2008 DSE market capitalisation crosses BDT
BDT 1 trillion mark
The Daily Star, Tuesday, September 23, 2008
The capital market regulator has fined Arif Ahmed, an
investor and a relative of some sponsor directors of Popular The market capitalisation of Dhaka Stock Exchange
Life Insurance, to the tune of BDT 10mn( USD 0.15mn) for yesterday reached over BDT 1 trillion for the first time on the
his alleged involvement in stock market manipulation and trading debut of First Security Bank shares. Such
insider trading. The Securities and Exchange Commission capitalisation was BDT 0.99 trillion on the previous day.
(SEC) also fined three directors of Popular Life Insurance a
total of BDT 2mn, a shareholder BDT 0.5mn, and the wife of Market capitalisation represents the aggregate value of a
Arif Ahmed BDT 0.5mn on charges of insider trading. company or stock. It is calculated by multiplying the number
of shares outstanding by the current price on each share.
Insider trading is a form of share transaction carried out for First Security Bank joined the stock market with an issue size
profit on the basis of price sensitive information that has not of BDT 1.15bn.
been disclosed in public. The fines, imposed after an
investigation by the stock market watchdog, must be paid to http://www.thedailystar.net/story.php?nid=56097
the SEC within the next 15 days.
DSE, NBR differ on pre-
pre-IPO placement
The commission also forfeited BDT 1.9mn that a Popular Life The Financial Express, Tuesday, September 23, 2008
Insurance director gained as profit by selling shares in the
restrictive period. The SEC formed a probe body in March to The Dhaka Stock Exchange (DSE) authority said that the
find out why share prices of Popular Life reached BDT 5,000 stand of National Board of Revenue (NBR) on disallowing the
(USD 73) each in March from BDT 811 (USD 11.8) in June 10% corporate tax benefit on pre-IPO placement would
2007. The team found Arif to be the brother of four sponsor discourage the mobile companies to go public. DSE officials
directors of Popular Life: Hasan Ahmed, Kabir Ahmed, expressed their fear when Chairman of National Board of
Farzana Zahan Ahmed and Noorjahan Ahmed, and a cousin Revenue (NBR) Abdul Mazid visited the country's prime
of Shabbir Ahmed, another sponsor director. bourse on the day and wanted to know the officials’ views on
the Grameenphone's (GP) initial public offering. The NBR
From February 2007 to August 2007, Arif bought a total of states that a company will not get a 10 per cent corporate tax
181,150 shares of Popular Life Insurance through his nine cut if it raises funds through pre-IPO or private placement.
trading or BO accounts. Of the shares, the probe body found
that 10,750 were bought just before the disclosure of price- DSE Senior Vice-President Saiful Islam said, "The decision
sensitive information, which indicates insider trading. During will discourage other mobile companies to come in the
the seven-month period, he sold 50,350 shares of Popular. capital market."
http://www.thedailystar.net/story.php?nid=56506 In the wake of the NBR directive, the country's largest mobile
phone company is likely to halve its proposed initial public
GP extends time for private placement offering (IPO) size from USD 300mn to USD 150mn, market
The Daily Star, Thursday, September 25, 2008 sources said. Of the total revised size of the GP IPO, USD
100mn may be allotted to the public, USD 15mn to micro
Grameenphone, the country's largest mobile phone operator, credit borrowers of GP, USD 10mn to GP staff and the rest
has extended the deadline for local institutional investors to USD 25mn to local financial institutions and mutual funds,
participate in its private placement offering (PPO). according to the market sources.
“Local institutional investors need to be given adequate time http://www.thefinancialexpress-

to do due diligence and allocate funds for the bidding. Under bd.info/search_index.php?page=detail_news&news_id=46332
the current challenging global capital market conditions in
which international investors are hesitant to commit to new
investments, it is important to ensure that potential investors
in Grameenphone are given adequate time to make
investment decisions,” Grameenphone quoted its CEO
Anders Jensen as saying in a statement. “We are working
with the Securities and Exchange Commission (SEC) to
expedite the matter,” he also added.
_______________________________________________________________________________________
DGEN Performance LTM DGEN Performance YTD
Turnover leaders Best performers* Worst performers*

(All figures in mn) BDT USD % Change % Change
TITAS Gas 1,460 21.3 Glaxo Smithkline 60.0 Agni Systems Ltd -16.9
Beximco Pharma 1,338 19.5 Beximco Fisheries 39.7 Safco Spinnings -12.7
ACI Ltd 1,108 16.2 Saleh Carpet 38.2 BLTC -9.9
BEXIMCO 1,104 16.1 Golden Sons 37.9 Perfume Chemicals -9.6
Grameen1: Scheme 2 994 14.5 Shinepukur Holdings 33.6 MAQ. Paper -9.3
AIMS First Mutual Fund 839 12.2 BEXIMCO 30.5 Padma Printers -9.1
ICB AMCL 2nd NRB BSC 26.7 BCIL -8.8
763 11.1
Mutual Fund Summit Power 24.9 Desh Garments -7.5
Summit Power 758 11.1
BD Welding Electrodes 22.2 BDCOM Online Ltd -7.4
Lankabangla Finance 484 7.1
BD Thai Aluminium 21.8 United Insurance -6.7
Square Textiles 435 6.3
Source: Dhaka Stock Exchange *By closing price
Source: Dhaka Stock Exchange
Market cap. by sector*
Banks 52.6%
Fuel & Power 12.2%
Pharmaceuticals 10.4% Correlation with other Indices*
S&P NIKKEI KSE FTSE
Cement 5.7% 500 Sensex 225 100 SSECI 100 HangSeng DSE
Insurance 5.7% S&P500 1
Miscellaneous 3.0%
Sensex 0.49 1
Engineering 2.6%
NIKKEI225 0.40 0.50 1
Foods 2.4%
KSE100 0.13 0.31 0.10 1
Textile 2.1%
SSECI 0.28 0.41 0.22 0.04 1
Tannery 1.5%
FTSE100 0.81 0.48 0.41 0.21 0.38 1
Service & Real Estate 1.0%
Hangseng 0.65 0.58 0.46 0.09 0.50 0.73 1
IT 0.5%
Ceramics 0.1% DSE 0.10 0.14 0.09 0.06 0.03 0.13 0.11 1
* Based on the last 80 months’ USD returns
Paper & Printing 0.1% Source: AT Capital Research
Jute 0.03%
Total 100%
*As of July 31, 2008
Research Team
Professor Jahangir Sultan

Shahidul Islam
Senior Advisor
Investment Manager
jahangir.sultan@at-capital.com
shahid.islam@at-capital.com
Rashed Hasan Syed Najibullah

Research Associate Research Assistant
rashed.hasan@at-capital.com syed.najibullah@at-capital.com
_______________________________________________________________________________________
Economics
Selected macroeconomic indicators Market news
23-
23-Sep-
Sep-07 30-
30-Jun-
Jun-08 23-
23-Sep-
Sep-08
• Falling global commodity prices fail to benefit local
Forex reserves (USD mn) 5,028.23 6,148.82 5,741.93 consumers
USD-BDT average rate 68.7100 68.5297 68.5187
Call money rate (%) 6.91 4.78 8.91

• Government plans to increase GDP growth projection
to 7%
Aug-
Aug-07 Aug-
Aug-08 2007-
2007-08
Remittances (USD mn) 470.95 732.98 7,914.78
Annual percentage change -0.06 55.64 32.39 • FDI inflow drops
Jul-
Jul-07 Jul-
Jul-08 2007-
2007-08
• Bangladesh Bank raises T-bill rates to limit credit
Imports (USD mn) 1,546.00 2,071.30 21,629.00
growth
Annual percentage change 14.34 33.98 26.07
Jun-
Jun-07 Jun-
Jun-08 2007-
2007-08
• BGMEA eyes USD 25bn exports by 2013
Exports (USD mn) 1,218.03 1,469.51 14,110.80
Annual percentage change 9.52 20.65 15.87

Latest Treasury yields
Aug-
Aug-07 Aug-
Aug-08 2007-
2007-08
Weighted
Auction date Tenor & security type
Tax revenue
revenue (USD mn) 432.55 482.83 6,906.55 average yield
Annual percentage change 22.55 23.67 27.06 22-Sep-08 91-day T-bill 7.83%
14-Sep-08 182-day T-bill 8.05%
Source: Selected Indicators by Bangladesh Bank, 24 Sep 2008 22-Sep-08 364-day T-bill 8.55%
16-Sep-08 5-year T-bond 10.60%
FDI inflows (USD mn)
23-Sep-08 20-year T-bond 13.07%
Region 2005 2006 2007
Source: Bangladesh Bank
Bangladesh 845 793 666
India 7,606 19,662 22,950
South Asia 12,136 25,780 30,620 S Adeeb Shams
Research Associate
World 958,697 1,411,018 1,833,324
adeeb.shams@at-capital.com
Source: The Daily Star
_______________________________________________________________________________________
Economic News Meeting sources said Bangladesh Bureau of Statistics
officials expressed their reservations about revising GDP
Falling global commodity prices fail to benefit local growth after just two months into the fiscal year. Bangladesh
consumers Bank officials on the other hand, believed that all economic
The Financial Express, Friday September 26, 2008 indicators were positive enough to chase a GDP growth
target between 6.5 and 7%.
Consumers have not been benefitted by the falling global
commodity prices, as retailers are yet to have made According to economist Professor Abu Ahmed, even though
adjustments with wholesale rates, according to a government 7% GDP growth was positive news for the country,
report. The quarterly Food Situation Report (April-June), sustainable economic growth will be down to a positive
prepared by the Food and Disaster Management Ministry, political situation and the new government's economic
says the difference between retail and wholesale prices has agenda.
widened in recent past.
http://www.newagebd.com/2008/sep/27/front.html
In Dhaka, retail and wholesale prices have moved in the
same direction in the last July-June period with percentage FDI inflow drops
margins ranging from 4% to 8% for rice and 4% to 11% for The Daily Star, Thursday September 25, 2008
wheat. The report also says that margins for both rice and
flour have gone up in May-June despite a general decline in Bangladesh received USD 666mn worth of foreign direct
prices. investment in 2007, a 16% fall from the previous year's
amount of USD 793mn, although global FDI marked a 30%
According to Bangladesh Bank Chief Economist Mustafa K. rise during the same period, according to a global investment
Mujeri, it is not surprising to see very little reflection of falling report.
global commodity prices within the local market, as traders
and importers are benefited at the expense of consumers. The United Nations Conference on Trade and Development
Dr. Mujeri said the government had waived duties on many prepared the World Investment Report 2008 titled
products following request from importers and traders in the "Transitional corporations and infrastructure challenge".
past, but hikes in the price of those products could not be Statistics from the report indicate that Bangladesh has
halted. slipped to 121st this year in terms of inward FDI performance
index from a rank of 120th last year.
Consumers Association of Bangladesh General Secretary
Quazi Faruque said blaming retailers is not the solution to The Board of Investment launched the report at a press
the government, as wholesalers are also to be blamed as conference at its office in Dhaka. Professor of Economics at
they dictate prices in the absence of proper price regulation Jahangirnagar University M Ismail Hossain presented the
by the government. report at the event. Political uncertainty, indecision over
some big proposals and infrastructural constraints were
The Commerce Ministry plans to establish a permanent price identified as the major factors that influenced the fall in FDI.
monitoring cell to monitor the price situation.
Of Bangladesh's USD 666mn of FDI flows, textiles received
http://www.thefinancialexpress-
the highest amount of USD 102mn, followed by telecom
sector's USD 89mn, trade and commerce USD 93mn and
gas sector USD 71mn.
Government plans to increase GDP growth projection to 7%
New Age, Saturday September 27, 2008 http://www.thedailystar.net/story.php?nid=56367
Financial planners are upbeat about revising this year's Bangladesh Bank raises T-
T-bill rates to limit credit growth
economic growth projections by half a percentage point to New Age, Tuesday September 23, 2008
7%, because of good paddy harvest and outlook, coupled
with declining global commodity prices. The revision was Bangladesh Bank has increased interest rates on treasury
decided at a recent meeting of medium-term macroeconomic bills to keep credit expansion and inflation in check,
framework (MTMF) working group with Finance Secretary according to officials. The central bank raised its key policy
Mohammad Tareq in the chair. The budgetary projection for interest rates by between 0.30 and 0.50% for two t-bills after
GDP growth in the 2008-09 fiscal year is 6.5%, up from a period of over three years.
6.2%, which was achieved in the previous fiscal.
http://www.newagebd.com/2008/sep/23/front.html
A bumper boro rice harvest and good prospects for the next
aman crop have boosted the mood of policy planners for BGMEA eyes USD 25bn exports by 2013
projecting higher growth, according to a high official of The Daily Star, Thursday September 25, 2008
Finance Ministry. Declining prices of food and fuel oil in
global markets, positive trends in import-export trade, high Bangladesh Garment Manufacturers and Exporters
growth in remittances and limited impact of recent floods on Association (BGMEA) has promised to shoot up the country's
the crops are to accelerate economic growth, according to exports to USD 25bn by 2013, provided the new elected
the official, while defending the upward revision of the growth government and all concerned can maintain political stability
projection. and ensure correct economic policies.
_______________________________________________________________________________________
BGMEA President Anwar-Ul-Alam Chowdhury Parvez
expressed his gratitude to the caretaker government for its
role in ensuring 525 days that have been free of hartals to
operate the USD 10.7bn industry smoothly. He stressed the
need for synergising public-private initiatives in an attempt to
improve the country's image, develop human resources and
improve infrastructure and economic zones by encouraging
private investors with the right policy initiatives.
_______________________________________________________________________________________
Sector News
Agriculture
United Airways goes international
Govt bans import of Chinese milk The Daily Star, Thursday September 25, 2008
New Age, Monday, September 22, 2008
United Airways inaugurated international operations with a
Government has banned the procurement, sale and stocking flight from Dhaka to Kolkata on Wednesday. Chairman and
of powdered milk of three Chinese brands- San Lu, Sun Care Managing Director of United Airways Captain Tasbirul
and Yashili- because of chemical contamination that caused Ahmed Chowdhury, Directors and other senior officials of the
four deaths in China. The decision came after the Chinese company were present at the occasion.
authorities informed Bangladeshi government about the
presence of harmful substances in the milk of these
companies. The airline will initially operate a daily flight on the route,
even though there are plans of expanding services to other
No powdered milk of Chinese origin can be unloaded at the regions of India, such as Mumbai, Chennai and Guwahati.
seaports without any melamine testing. Melamine is the toxic
particle that has caused this crisis. In China, so far, 6,244 http://thedailystar.net/story.php?nid=56395
children have become ill and four died. China accounts for
less that 10% of country’s total milk imports. Banking
What is alarming is that BSTI, the local standard testing ATC Comment
agency, lacks the necessary equipments to carry out the test.
The commerce ministry instructed BSTI to take legal action This week one of the most prominent news on the banking
against two local importers for selling powdered milk without sector is that some banks have increased their deposit rates;
certification. few others reduced their lending rate. It is expected that
such moves will narrow the interest rate spread – the
http://www.newagebd.com/2008/sep/22/front.html#3 difference between the deposit rates and lending rates.
Aviation It is generally perceived that the banks enjoy “high interest

rate spread” in Bangladesh. It is often a topic for heated
Best Air flies to KL, Singapore from next month debate on TV talk shows. Bankers generally take one side—
The Daily Star, Friday September 26, 2008 that is the interest rate spread is just right-- and the business
persons take the other—the spread is too high. Even some
Local private airliner Best Air will introduce flights to Kuala business persons go to the extent of suggesting that
Lumpur and Singapore from early October, according to Bangladesh Bank should intervene to reduce the spread.
officials of the carrier, according to M Haider Uzzaman, Many of the commentators are fond of comparing the interest
Chairman of the company. There will be two weekly return rate spread in India, Pakistan and Sri Lanka with that in
flights to Singapore, whereas the carrier will fly to Kuala Bangladesh.
Lumpur four days a week.
We think that many of the comparisons are unfair. First,
Best Air officials said they took the decision to introduce credit risk in loans account for bulk of the difference between
these particular routes as GMG Airlines has recently the deposit rates and lending rates. If the credit risks in two
suspended its operations to Kuala Lumpur. countries are not same, we should not expect interest rate
The current international destinations of Best Air are Dubai, spread should be the same. Second, the maturity profiles of
Colombo, Male and Bangkok. the deposits and loans of a banking sector of a country can
differ significantly from those in other countries. The banking
http://www.thedailystar.net/story.php?nid=56530 system of a country that runs higher refinancing risk or
reinvestment due to higher mismatch in maturities of loans
Air Asia may fly from Dhaka and deposits is expected to command higher interest rate
The Daily Star, Tuesday September 23, 2008 spread. Third, the banks need to load their operating cost in
their lending rates. As the operating costs differ from one
The government is likely to allow Kuala Lumpur-based low country to another, the load attributable to the operating cost
cost carrier Air Asia to operate flights from Dhaka, according should also differ. Last, the methodology to calculate interest
to a government official. A meeting was scheduled where a rate spread may differ among countries. For instance, the
final decision was to be made if the Kuala Lumpur-based ratio of Cash Reserve Requirement (CRR), the percentage of
airliner would be allowed to operate on the Kuala Lumpur- bank deposits that a bank needs to maintain with central
Dhaka route. According to an inter-ministerial committee bank in non-interest bearing account and the Statutory
recommendation, such low cost carriers are generally Liquidity Reserve (SLR), the mandatory investment of banks
required to first operate from Chittagong, rather than Dhaka. in government securities, differ among countries.
The only low cost carrier that operates in Bangladesh is Air As we do not know exactly how all those factors affect the
Arabia, which flies between Chittagong and Sharjah, six days banking sector in different countries, we are not in a position
a week.
_______________________________________________________________________________________
to say if interest rate spread in Bangladesh is effectively Agricultural Credit Monitoring Committee comprised of
higher than that in its neighbors. But intuitively we do not representatives from the agriculture ministry and commercial
see a strong reason why the interest rate spread in banks decided on September 16 to make the agriculture
Bangladesh should be significantly higher than that in its credit mandatory and introduce the revolving crop credit
neighbors. There is enough competition in the market. Forty system considering the food situation.
nine banks are enough number of players in any industry to
ensure enough competition and erosion of excess profit. The central bank deputy governor, Nazrul Huda, said the
foreign commercial banks, operating here without having
We think the source of perception or rather misperception adequate branches, would use the NGO networks to
about interest rate spread is elsewhere. It is the high profit disburse agriculture credit and they also would have to
numbers of the banks that have been making the headlines ensure whether the NGOs using the fund only for agriculture
of business pages of the newspapers in the recent years. credit. The new mechanism of revolving crop credit limit
Many people think that the banks are making billions of Taka would be for a three-year term to relieve farmers of fresh
profit by squeezing their customers. But one should not look applications, documentation, approvals and often middlemen
at the absolute amount of profit. It is all about how much again for a fresh loan.
return on equity the banks are generating. The return on
equity of the banks may not be higher than that of other http://www.thefinancialexpress-
successful sectors in Bangladesh such as Textile. If the bd.info/search_index.php?page=detail_news&news_id=46681
return on equity is relatively high, it is most likely due to
under reporting of profit in other sectors. Banks are unlikely BB relaxes forex transaction rules
to under report profits and evade taxes as (a) the banks are The Daily Star, Wednesday, September 24, 2008
heavily regulated and supervised by Bangladesh Bank and
(b) their corporate governance standard, thanks to initiatives The central bank has liberalised foreign exchange
taken by Bangladesh Bank, is relatively better that that in transaction rules to some extent for exporters, foreign
other sectors. investors and other foreign currency users. The Bangladesh
Bank (BB) issued two separate circulars on Tuesday to this
We believe that it is the lack of risk based loan pricing, not effect and allowed all banks to issue international credit,
the high pricing, is the problem in Bangladesh. The banks debit and pre-paid cards to foreign currency users.
here lack in their ability to quantify risks. The phenomena of
risk rating or risk grading and risk based pricing are new As per the liberalised rules, roaming mobile phone bill can be
here. Some of the local banks apply single interest rate to all paid through the cards and in some cases currency can be
its borrowers in the same industry or same tenor. If the remitted abroad without prior permission from the central
loans are rated properly, the rating will reflect the probability bank.
of default and probable loss of the financial institution if a
loan is defaulted. If the loans are priced based on proper A BB senior official said the central bank has taken the steps
rating, the good borrowers will get loan cheaper. They will to make the forex transaction rules more liberalised and time-
not have to shoulder the cost associated with probability of befitting. Banks now can issue international credit card/debit
default and loss given default of a bad customer. cards against the balances held in the exporters' retention
quota foreign currency (FC) account. The banks can also
Therefore, we think that the debate should be whether the issue international cards in favour of up to three top-level
financial institutions are inconsistent in loan pricing. Are they executives of an exporting firm/organisation holding retention
charging lower interest rates to better rated customers? As quota FC accounts. An exporting firm/organisation can avail
the country adopts Basle II norms of banks’ capital of the card facility from a card issuing company only. The
adequacy, the need for quantifying the risks of the loans and banks may issue international credit card/pre-paid card
risk based pricing will be of paramount importance. against the annual personal travel quota entitlement.
International credit card/pre-paid card may be issued
Foreign banks to use services of NGOs to disburse farm favouring officials of government/ autonomous/ semi-
credit autonomous institutions for official/ semi official visits abroad
The Financial Express, Saturday, September 27, 2008 against forex entitlement fixed by the finance ministry.
Bangladesh Bank (BB) has made agriculture credit However, while issuing the cards the banks shall endorse an
disbursement mandatory for all commercial banks and also amount not exceeding the entitlement on the passport.
introduced a new credit mechanism of revolving crop credit in
view of stimulating production, reports UNB.
SME refinancing trebles
The practice of direct lending had been apparently absent
The Daily Star, Wednesday, September 24, 2008
since the inception of Financial Sector Reform Programme
(FSRP) undertaken in 1990, resulting in the freedom of the
Loans under the Bangladesh Bank's SME refinance scheme
commercial banks whether they would provide agriculture
have increased more than threefold to about BDT 1bn (USD
credit.
14.6mn) in the April-June quarter from the previous quarter,
according to the central bank officials. In the earlier quarter,
But the recent experience of global food crisis had made it
an amount of BDT 282mn (USD 4mn) loan was disbursed.
clear that there was no alternative to investment in
agriculture to face the challenge of food security in the global
As part of the government initiatives, the central bank in 2004
price situation. Considering the situation, the high-powered
introduced a refinance scheme (revolving) with BDT 1bn
_______________________________________________________________________________________
(USD 14.6mn) to increase small and medium enterprises' commitment made by the Bangladesh Association of Banks
access to bank finance at lower rates. Later, the fund was (BAB) to the central bank.
increased to BDT 3bn (USD 43.8mn) in fiscal year 2007-08
and BDT 5bn (USD 73mn) for FY 2008-09. On March 3 this year, the BAB confirmed to the central bank
that its members would reduce interest rates on industrial
Bangladesh Bank has SME refinance agreements with 16 term loans to 14.75 per cent from the existing 16 per cent
banks and 22 non-bank financial institutes. These banks and while the interest rates for the productive sector will be
non-bank financial institutions lend to the SMEs and receive brought down to 14.50 per cent from existing 15.50 per cent.
refinancing from the BB on a quarterly basis. The banks have slashed their interest rates by 0.75 to 1.75
percentage points for mainly term loans and working capital,
Among banks, Eastern Bank, Dhaka Bank, Mercantile Bank the BAB added.
and One Bank disbursed the highest amount of SME loan
last quarter. According to BB officials, Eastern Bank The weighted average spread between lending and deposit
received the highest amount, BDT 215mn (USD 3.1mn), from rates in the country's banking sector came down to 5.34
the BB for financing the SME sector. Among the non-banks, percent in June from 5.75 per cent in March this year,
IDLC, MIDAS and United Leasing were the leaders in SME according to the central bank statistics.
credit financing.
Treasury officials of the commercial banks, however, expect
Meanwhile, a section of BB officials complained that some the interest rates on deposits to go up further strengthening
financial institutions charge the SME loans at their usual the credit deposit ratio position. Bankers and experts,
rates without considering the fact that the BB is refinancing however, said the real interest rate in the country is still low
the amount at a lower interest rate, which is contrary to the and, to some extent, negative because of high inflation rate
government and BB's desire that SMEs get easy access to that was 10.04 percent in June last. As a result, the banks
bank finance at a relatively lower rate. are raising the interest rates on deposit to attract more funds
from their clients.
Banks asked to submit reports on profit repatriation within 15 bd.info/search_index.php?page=detail_news&news_id=46350
days of next month
The Financial Express, Thursday, September 25, 2008 Climate Change
The central bank has asked the commercial banks to submit ATC Comment
reports on profit repatriation by the foreign airlines, shipping
lines and courier services within the 15th of next month. "We The level of public awareness to climate change is
have taken the decision aiming to strengthen our monitoring increasing, as evident from the increasing number of
on such foreign exchange transactions," a senior official of workshops held in the capital on the topic. Still, it can be said
the Bangladesh Bank (BB) told the FE. the interest is limited only to the elite members of the society
not spread among mass. The government in its climate
He also said that Bangladesh Bank's latest move will change strategy paper has emphasized on mass awareness
facilitate the timely post factor examination of relevant and we believe the job to create a social consensus on the
documents and that would also help the service providing issue should be started with private sector as partners.
agencies to keep their documents updated. The central bank Private promotional firms can be employed for the task.
has already amended its guidelines for foreign exchange
transactions (GFET) asking the authorised dealers banks, The Climate Change strategy and action plan prepared by
generally known as AD banks to follow the amendments the government should be revised and more workshops
while remitting such funds. should be arranged so that the paper represents the voice of
people from different social classes. And it has to be
http://www.thefinancialexpress- decided, what is total amount of fund required to face the
bd.info/search_index.php?page=detail_news&news_id=46519 challenges of climate change and a plan has to be
formulated on how to raise such fund. An approach to raise
Seven banks raise interest
interest rates on deposits
deposits; four banks cut fund could be to seek the assistance of established NRBs in
rates on lending the field. More workshops and discussion, we believe, will
The Financial Express, Tuesday, September 23, 2008
help to pin point the different aspects of climate change that
require additional attention.
A number of commercial banks raised the interest rates on
deposits; others reduced interest rates on lending in the Urge to face threat of climate change in comprehensive
current month aiming to narrow the interest rate spread. .At manner
least seven commercial banks increased the interest rates on
The Daily Star, Friday September 26, 2008
deposits in September to encourage the people to keep their
money in the banks. The banks have raised the interest rates While speaking at an event of “Climate Change”, Foreign
on deposit by 0.25 to 3.0 percentage points to attract fresh Advisor Iftekhar Ahmed Chowdhury called for transfer of
funds from general depositors, officials said on Monday.
necessary resources to the more vulnerable groups of
nations like the LDCs (least developed countries) in order to
On the other hand, at least four out of 48 banks have
surmount the threat of climate change. He pointed out that
reduced interest rates on lending this month in line with the the lion’s share of the cost for technology transfer to the
poorer and more vulnerable countries has to be borne by the
_______________________________________________________________________________________
developed world. Nearly 50 ministers representing both rich - Taking initiatives to redress the shortage of medical
and poorer countries attended the event. Many speakers professionals
praised the domestic initiatives undertaken by Bangladesh in - Strengthening the government’s capacity for an efficient
this area and also Bangladesh's contribution to stimulating and effective regulatory role
the climate change debate, particularly with regard to
“adaptation”.
We believe that the government’s decision to gradually raise
http://www.thedailystar.net/story.php?nid=56589 budgetary allocation on healthcare to improve healthcare
standards at all levels and redress human resource shortage
EU pledges continued help in climate change strategy is commendable. The government’s decision to enhance
The Daily Star, Saturday September 27, 2008 participation of the private sector, especially in the secondary
and tertiary level healthcare facilities, is also creditable given
Ambassador and Head of Delegation of the EC to the government’s continued focus on primary healthcare.
Bangladesh Dr Stefan Frowein assured that The European However, we believe that there should be a detailed and
Commission (EC) will continue its support for the clear roadmap to implement these policies. The entry of
Bangladesh government's Climate Change Strategy and more private players in the healthcare sector or privatization
Action Plan through substantial contribution to various of inefficient public facilities might not be enough to ensure
programmes. He admitted that a substantial fund is needed improved healthcare. The suggested policies need to be
for mitigation and adaption strategy, while speaking as the backed by definitive strategies that would offset malpractices
chief guest at a workshop on Climate Change moderated by like financial inter-linkages among the private and public
Dr KAS Murshid, research director of Bangladesh Institute of sector providers, misappropriation of public funds and
Development Studies. EC has launched Global Climate uncontrolled pricing of services by private providers. The
Change Alliance (GCCA) in September last year with an aim government needs to formulate and enforce such a
to providing a broader range of actions through dialogue and regulatory framework which would check such malpractices
exchange as well as practical cooperation between the EC and establish healthcare rights of the general masses.
and the developing countries.
Proposed health policy ignores basic issues
Disaster expert Naim Gouhor Wahra, in a paper on The Daily Star, Tuesday 23 September, 2008
Bangladesh's vulnerability to climate change, said climate
change and its impacts should be taken into consideration A group of healthcare experts disapproved the proposed
while taking up any development work. According to him, National Health Policy 2008 which, they believe, ignores the
Bangladesh is experiencing frequent floods due to climate provision of primary healthcare to the poor. They said this in
change, and he added the recent floods are more a seminar on 'National Health Policy 2008: A critique and
devastating than previous ones. Naim suggested the plan of action', organized by Health Movement which is a
inclusion of two more pillars -- creating public awareness and network of organizations working to protect health rights.
mobilisation of funds -- to the Climate Change Strategy and
Action Plan. First Secretary of the EC Delegation to Speakers at the seminar commented that the proposed
Bangladesh Koen Duchateau presented a paper on the EC's health policy gives more priority to medical technology and
activities on climate change. ignores the basic need of preventing diseases and ensuring
primary healthcare for all. They also criticized the decision to
http://www.thedailystar.net/story.php?nid=56082 privatize different healthcare facilities. The speakers at the
seminar announced that they would formulate the draft of a
Healthcare 'pro-people national health policy' in two months and place it
before the next elected government.
ATC Comment
The government has proposed a revised National Health
Policy (NHP) 2008. The first NHP, issued in 2000, is being Grameen Health to establish independent collaborations with
implemented by the Ministry of Health and Family Welfare. A Pfizer, GE Healthcare, and Mayo Clinic
second revised NHP was issued in 2006. The latest NHP Reuters, Wednesday 24 September, 2008
2008 has been formulated to offer a policy framework which
will be more relevant and timely in meeting the sector’s Grameen Health, an affiliate of Grameen Bank, announced
current needs. The latest NHP aptly recognizes some of the today that it will establish independent partnerships with
critical challenges the healthcare sector is facing today – Pfizer Inc., GE Healthcare, and Mayo Clinic to create
acute shortage of medical professionals, potential health sustainable models for healthcare delivery in the developing
hazards due to global climate change, the need for medical world. Grameen Health has chosen to work independently
waste management and the need for increasing efficiency of with these partners because of their respective expertise:
the public healthcare facilities. Pfizer Inc is the world's largest research-based
pharmaceutical company, GE Healthcare is the world's
Some important proposals in the NHP 2008 are: largest manufacturer of medical devices such as ultrasound
- Increasing allocation of the national budget on healthcare and CT/MRI, and Mayo Clinic is the world's first and largest
from current 7% to 12% by 2015. integrated, not-for-profit group practice.
- Allocating minimum 60% of the total government
expenditure on healthcare for primary healthcare Over the course of next year, the collaborations will focus on
- Enabling greater participation of the private sector the following areas:
_______________________________________________________________________________________
-- Implementing primary health promotion and disease is getting only BDT 7 (10.2 Cents) for thousand cubic feet of
prevention programs. These are the most cost-effective gas production which is around 3% of what IOCs are
steps in affordable health care, and include maternal and charging! Contribution of IOCs in country’s gas production is
child health promotion and nutrition programs. increasing quickly due to various lucrative features and
incentives offered to IOCs where local gas production
-- Analyzing ways to expand and improve the current low- companies cannot expand their operation due to fund crisis.
cost micro-health delivery and insurance programs at
Grameen Health's 38 existing Kalyan clinics. Table: Current and proposed gas price
Current Current Proposed Proposed
%
-- Developing continuous training programs for nurses, Category price price Price Price
Change
technicians and physicians. (BDT) (USD) (BDT) (USD)
Domestic
(Double 400.0 5.8 600.0 8.8 50.0
-- Reviewing operating efficiencies and scope of services
burner)
(e.g., telemedicine, mobile health care) at Grameen Domestic
Health's Kalyan clinics. (Single 350.0 5.1 550.0 8.0 57.1
burner)
-- Introducing genomic, epidemiological and outcomes Domestic
130.0 1.9 208.0 3.0 60.0
research capability for the prevention and treatment of (meter)
diseases relevant to the population in Bangladesh, with Commercial 233.1 3.4 291.6 4.3 25.1
an emphasis on the best use of existing tested and Industrial 148.1 2.2 182.3 2.7 23.0
approved procedures and drugs. Captive
Power 105.6 1.5 182.3 2.7 72.6
http://www.reuters.com/article/pressRelease/idUS119163+24-Sep- Plants
2008+BW20080924 Power
73.9 1.1 93.7 1.4 26.8
Plant
Chief Adviso
dvisor for accelerating health sector projects, Fertiliser
63.4 0.9 93.7 1.4 47.8
program
programs
ograms Industry
New Age, Thursday 25 September, 2008
We agree that Bangladesh may not have adequate
The Chief Advisor, Dr. Fakhruddin Ahmed, emphasized experience and expertise in gas exploration and thus needs
accelerating different health projects and programs with to attract IOCs to explore its natural resources by offering
further focus on maternal health in a conversation with the different incentives and international price. On the other
UNFPA Executive Director, Thoraiya Obaid, on the sidelines hand, Bangladesh needs to develop its own expertise
of the 63rd session of the UN General Assembly. The Chief gradually and should not be fully dependent on foreign
Advisor also conveyed his satisfaction that the UNFPA was companies on such a sensitive issue like mineral resources
working in line with the government’s priority on ensuring and of its own. Unfortunately, most of the government owned
promoting safe motherhood, social and reproductive health energy companies are incurring ample amount of losses due
information, family planning and services for adolescents and to lack of right pricing and equal incentives that are offered to
youth. the private investor. This will ultimately create fund crisis of
these government owned companies and they will continue
He also appreciated the UNFPA campaign ‘End Fistula’ that to depend on government or donor agencies to expand their
has helped Bangladesh in the treatment of the disease in operations. To develop the capacity or expertise of the
government hospitals. The UNFPA Executive Director said government owned energy sector, these companies first
the UNFPA was thinking of setting up a centre of excellence need to be profitable and should not depend on funding from
in Bangladesh to help the country attain the MDGs. donor agencies. From this point of view, Bangladesh needs
to raise its gas prices mainly for the state owned gas
http://www.newagebd.com/2008/sep/25/front.html#11
production companies to help them expand their operations
and to be self dependent.
Infrastructure & Energy
ATC Comment
Bangladesh Energy Regulatory Commission (BERC) on

September 24 held its first public hearing on the proposed
gas price hike of a maximum of 72.6% (for Captive Power
Plants), and on an average of 45.3% across industries, amid
strong opposition from businesspeople and consumers alike.
At present, Bangladesh is producing gas around 1,800mmcfd

where International Oil Companies (IOCs) are contributing
around 50% of the total production. The state owned
corporation buys gas at an average rate of BDT 230 (USD
3.36) per one thousand cubic feet from IOCs and sells the
same to its consumers at BDT 92.84 (USD 1.36). On the
other side, country’s largest state owned gas production
company; Bangladesh Gas Field Company Limited (BGFCL) Source: Petrobangla
_______________________________________________________________________________________
Raising the gas prices across all consumer categories will BPC to import gas oil blend to reduce import cost of diesel
increase the cost of doing business significantly. This could New Age, Thursday September 25, 2008
create a negative impact on the national economy by
contributing to higher inflation and reduced to price The state-owned Bangladesh Petroleum Corporation (BPC)
competitiveness in the export industry. Considering these has taken a move for the first time to import 100,000 tonnes
issue, we believe that gas prices should not be raised of low-cost gas oil blend to minimise the cost of diesel import.
drastically in all consumer categories. The government can The procurement proposal has already been sent to the
initially raise prices for domestic and commercial consumers advisory council committee on purchase through the ministry
as per the Petrobangla recommendation. For the other concerned.
consumer categories like power, fertiliser and industry, the
government must determine the net economic impact of such Gas oil blend has low percentage of sulphur and cetane
price increases prior to finalizing any gas price increases in while the Kuwait Petroleum Corporation (KPC) supplied
these key sectors. In addition to implementing a reasonable diesel contains higher percentage of sulphur and cetane. If
gas policy, the government needs to focus urgently on these two items can be blended properly, the expenditure
developing our ample coal reserve to reduce our against diesel import will come down. A Singapore-based
dependency on our quickly depleting gas reserves. firm has agreed to supply the gas oil blend with the premium
of USD 4.65 per barrel where BPC procures diesel from KPC
Energy division
division seeks nod for Production Sharing Contracts
ontracts with the premium of USD 6 per barrel. KPC is the major
with two International Oil Companies supplier of diesel and other petroleum products to BPC that
New Age, Saturday September 27, 2008 annually imports 3.8 mn tonnes of fuel. The BPC is looking
for alternative fuel sources to reduce its dependence on
The Energy Division has sent the proposal to the chief KPC, which demands a higher premium as a result of such
adviser for approval of the selection of two international oil dependence.
companies (IOC) to sign production sharing contracts (PSC)
for nine offshore blocks. Petrobangla, the state-run oil, gas http://www.newagebd.com/2008/sep/25/front.html#18
and mineral resources corporation, has selected US-based
ConocoPhillips for eight deep-sea blocks and Irish Tullow Oil BPDB to pay higher price for Barapukuria coal
for a shallow sea-block for hydrocarbon exploration and The Financial Express, Tuesday September 23, 2008
production through the offshore round of bidding. The PSCs
with the companies is likely to be signed in October- The government has raised the price of Barapukuria coal for
November this year once the chief adviser approves the Bangladesh Power Development Board (BPDB) by nearly
selection. 20% at USD 71.50 a tonne from the previous USD 60. Chief
adviser's special assistant professor M Tamim said, "The
Petrobangla invited bids in February 2008 for exploration of coal price has been increased in line with the
28 offshore blocks for gas and oil, and opened the tenders on recommendations of the Executive Committee for National
May 7. Seven international companies submitted offers for Economic Council (ECNEC).
15 of the blocks and the tender evaluation committee
selected ConocoPhillips for eight blocks and Tullow for one "The international price of similar quality coal now ranges
block. Exploration of gas in country’s deep sea is urgent as between USD 190 to 195 per tonne," the BCMCL managing
the country is going to to face massive gas shortage after director said. The coal mining company would have to count
2011 with the current reserve. loss as the production cost of the BCMCL coal stood at USD
84 per tonne as per the latest audit report for 2006-07. The
http://www.newagebd.com/2008/sep/27/front.html#9 BPDB consumes 80% of the BCMCL high quality bituminous
coal where the remaining 20% are consumed by the private
Petrobangla's gas price hike proposal opposed sector. The new price would not affect the pricing for the
The Financial Express, Thursday September 25, 2008 private consumers and they would have to purchase the
BCMCL coal at a price to be determined through open
The energy sector stakeholders including trade bodies, tenders.
consumers' associations and members of the civil society in
a public hearing on September 24 opposed Petrobangla's bd.info/search_index.php?page=detail_news&news_id=46338
proposal of raising the gas price by 45.3% on an average for
all categories of consumers. They opined that the drastic ATC Comment
hike in gas prices would hamper the country's investment
and industrial growth leaving an adverse impact on the Government of Bangladesh has been weighing different
national economy. options to raise USD 650mn from different sources for the
USD 1.8bn Padma Multipurpose Bridge. The World Bank,
The decision over Petrobangla's proposed gas price hike will Islamic Development Bank, Japan Bank for International
be taken by October next in the form of an order. The state- Cooperation, and Asian Development Bank are financing
owned parent gas company incurs losses as it purchases USD 1.15bn for the bridge, while the balance of USD 650mn
gas at higher prices from the international oil companies has to be financed by the local government.
(IOCs) and sells it at lower rates. This is for the first time in
Bangladesh's history that a separate entity other than the
ministry is deciding on a hike in gas tariffs.
_______________________________________________________________________________________
http://thedailystar.net/story.php?nid=56672
Sources Amount (in USD mn)
ATC Comment
WB 300
ADB 350 It has been more than three years since the prospect of a
second highway connecting Dhaka with Chittagong came
JBIC 200 into existence. The Malaysia consortium, Azimat Consortium
IDB 300 first proposed to build the expressway in a BOOT (Build-
Own-Operate-Transfer) basis with a concession of 35 years,
Rest Amount 650 5 years for construction and 30 years for getting the return on
Total 1800 investment. In July 2006, the government approved the
project. Since then, more than 2 years have passed, but the
Different Options to raise USD 650mn: government has not even yet prequalified the interested
firms. This procrastination and lengthy waiting period in
Converting Padma Bridge into a company and starting infrastructure projects will work as a deterrent for the
raising the money from the stock market overseas investors and operators.
Imposing levy and surcharge
Financing from Annual Development Program.
Second Dhaka-
Dhaka-Chittagong highway
highway in limbo: Fresh pre-
pre-
qualification bid awaits government nod
The Daily Star, September 24, 2008
Kuwait has now come forward with a plan to finance the
construction of the bridge. Though it’s still in a very The second Dhaka-Chittagong highway project is gathering
preliminary phase to know how much they will finance or on dust for over a year after the Roads and Highways
what terms, it is good news for the Bangladesh government. Department (RHD) failed to find a suitable firm for the
This will remove the financial constraints to a great extent construction in July last year.. The RHD is, however,
and expedite the construction of the bridge. preparing so that it can invite firms for the pre-qualification
round soon after it gets permission to do so from higher
The proposed 5.58 kilometer long and 25 meter wide four- government officials.
lane Padma Bridge, which will be built at Mawa-Janjira site
over the mighty river Padma, will push the country's GDP by Although initiated in 2005 and approved by the cabinet in
1.2 per cent, according to Japanese experts belonging to the July 2006, there is hardly any headway in the project except
Japan International Cooperation Agency (JICA). Economic issuing of an invitation for pre-qualification round in July last
Internal Rate of Return has been estimated 15.13 percent. year. The project has stopped midway and remains stalled
After opening the bridge in 2015, the traffic volume at Padma since then as four pre-qualified firms failed to fulfill all the
Bridge will reach 21,300 vehicles per day and 41,600 "tough" criteria set by the government. Criteria for pre-
vehicles per day in 2025. It will induce 743,000 man per year qualification would be relaxed in the fresh invitation.
employment opportunities. The southwest region of the
country would receive the biggest benefits from the bridge, The four-lane dual carriageway spanning 215 kilometers
the experts said. from Dhaka to Chittagong will be constructed on a build,
own, operate and transfer (BOOT) basis. This would be the
The construction of Padma Bridge with railway provision is first expressway in the country with facilities like adequate
most likely to bring about a revolution in the transportation parking space, fuelling stations, food courts and rest houses
network of the country's southwestern part. It is also at regular intervals. This expressway, once built, would cut
expected to bring immense economic and social benefits to the journey time between the two major cities to three hours
the people in the region. With the bridge connecting the from existing seven to eight hours. It would also help develop
southwest to the central and other parts, investment and the economic corridor between the capital and the port city.
capital inflow will boost industrial and commercial activities
and create increased economic and employment A three-route option has been kept open from which one
opportunities. would be selected for the highway. The first runs parallel to
the existing highway, while the second route starts from
Kuwait to give aid to build Padma Bridge Jatrabari towards Narayanganj and then moving to the south
The Daily Star, September 27, 2008 to cross the Dhaleswari river, Munsiganj, the Meghna and
finally reaches Chittagong through Chandpur and Noakhali.
Kuwait has assured Bangladesh of providing necessary The third probable route begins from Jatrabari to reach
financial support for construction of Padma Bridge. Kuwaiti Chittagong by crossing Laksham and Feni and will be the
Prime Minister Sheikh Nas'r Muhammad Al-Sabah gave the shortest and most direct one.
assurance during a bilateral meeting with Chief Adviser (CA)
Fakhruddin Ahmed on the sidelines of the 63rd session of The then cabinet of BNP-led coalition government approved
UN General Assembly at UN headquarters on Thursday. construction of the second highway with private investment
on July 4, 2006 on the basis of a proposal made by Malaysia-
After the meeting, Chief Adviser's Press Secretary Syed based construction firm Azimat Consortium. In its proposal,
Fahim Munaim told newsmen that the Kuwaiti premier told the firm said it would take five years to complete the
the chief adviser that his country would provide financial construction. After operating for 30 years and recovering the
assistance for construction of Padma Bridge from the Kuwait investment through collecting toll, the expressway will be
Fund. He requested the CA to send details of the bridge handed over to the government, it proposed. The
project for processing the financial assistance. communications ministry forwarded the proposal to the high-
_______________________________________________________________________________________
powered private infrastructure committee (PICOM). The BTCL earning drops 35%
proposal was then placed before the cabinet for final The Daily Star, Thursday September 18, 2008
approval. Now the Malaysian firm will be considered pre-
qualified due to its proposal but it has to take part in the BTCL, the state owned landline operator, announced that its
competition with other firms. earnings dropped by 35% to BDT 350mn (USD 5.11mn) in
the second month of operations as a public limited company.
http://thedailystar.net/story.php?nid=56271 The main reason behind this decline was the lowering of call
tariffs. The company in July introduced the lowest tariff in the
Telecoms market. The BTCL offers Tk0.10 per minute in off peak and
Tk0.15 per minute in peak hours, whereas minimum tariff
Three firms
firms clinch licences to operate WiMax offered by private landline operators is Tk0.25.
The Daily Star, Thursday September 25, 2008
The landline sector as a whole has been experiencing glacial
Three bidders yesterday each won a WiMAX licence. The growth compared to the mobile phone industry. While the
winners competed against six other bidders and won by mobile phone sector has grown at a CAGR of 99% between
agreeing to pay BDT 2.2bn (USD 31.4mn) each in acquisition 2003 and 2007, the landline sector has hardly seen double
fees. The three bidders -- BanglaLion Communication, BRAC digit growth. Apart from BTCL, all other landline operators
BD Mail Network Ltd and Augere Wireless Broadband are in the red, with substantial capital investments, intense
Bangladesh Ltd -- won the licences at an auction organised competition within, and a lack of demand for landline phones
by Bangladesh Telecommunication Regulatory Commission crippling the sector.
(BTRC).
The BTRC yesterday also distributed 35 MHz spectrums to
each winner. On a priority basis, BanglaLion chose 2585- Textiles
2620 MHz bandwidth, while BRAC BDMail and Augere
Wireless went for 2330-2365MHz and 2365-2400MHz ATC comment
respectively. As per the WiMax guidelines, these three
companies will have to start operations by March 2009. A shortage of skilled workers in the country is a detriment
towards the production of higher-end RMG products. At
As per the WiMAX guidelines, bid winners can form joint present, the largest employment-generating sector cannot
ventures with foreign firms, but their share should not exceed optimize productivity due to unskilled manpower.
60 percent However, non-resident Bangladeshis are allowed Accordingly, if Bangladesh is to consistently pose a
to invest at 70 percent ownership in such joint venture with a competitive challenge to countries such as China, Vietnam,
local partner. The licensees will develop and operate a Cambodia and Mexico, a sufficient number of country-wide
broadband network to provide nationwide service. At least training programs need to be implemented in the immediate
128 kbps download rate with upload download ratio of 1:4 future. During this week, the recent initiative taken by
per subscriber should be ensured at all times. The operators BGMEA and Bangladesh Manpower, Employment and
should have the capability to provide domestic roaming Training (BMET) is exactly following this challenge. They
service within their own networks. They must provide inter- signed a memorandum of understanding (MoU) to train
operator roaming service when such technology is available 15,000 unskilled workers through 23 training centers.
and directed by BTRC. The licensees will have to go for
initial public offering (IPO) within three years of licence The Bangladeshi RMG industry is worth $10.7 billion and
issuance, and shall not be allowed to transfer any shares employs about 2.5 million people directly, with another 12
before issuance of the IPO. million whose livelihoods are indirectly dependent on the
sector. We at ATC believe that the RMG sector can achieve
http://www.thedailystar.net/story.php?nid=56368 its target of USD 25b exports by 2013 (as stated by BGMEA
during this week) through synergizing the public-private
initiative to improve the country's image, building up human
Grameenphone teams up with post office resources through training initiatives and working together
The Daily Star, Thursday September 25, 2008 with the government to improve infrastructure like gas,
electricity, highways and economic zones.
Grameenphone yesterday sealed a deal with the postal
department to boost its revenue by going deeper in rural The country's home textile exports grew nearly 14% in the
areas through the postmen working in about 8,300 postal fiscal year ending June 2008 and over 150 exporters earned
branches. Under the agreement, the largest cell phone nearly USD 300m from shipments to the European Union
operator will provide 24,000 SIM cards, having the benefit of and the United States. A number of countries of North and
Flexiload and public phone, for the postmen enabling them South America, Europe, Africa, Middle and Southeast Asia
offer recharge, local and overseas calling services to the are major markets of Bangladesh's home textiles. Unlike
people in remote areas. The new service will come into effect other sub-sectors of the RMG industry of Bangladesh, home
from November. textile producers have good backward linkages as the
manufacturers get more than 70 per cent raw materials from
http://www.thedailystar.net/story.php?nid=56370 local sources. Coupled with low labour cost, it makes our
products more competitive.
_______________________________________________________________________________________
Home textile manufacturers of China and some other 95pc RMG units pay timely: BGMEA
countries have shifted their focus to high valued textile items, The Financial Express, Thursday, September 25, 2008
as their production cost has increased due to soaring wages
and inadequate backward linkages. This diversification BGMEA claimed that the vast majority of RMG units timely
strategy will assist in the growth of the Bangladesh home pay their workers better than minimum wage. The BGMEA
textile industry, which will grow by up by 30 percent to USD also added that 95 per cent of the workers are peace-loving
1b this year. This also poses an opportunity for Bangladesh and hardworking people and are not the ones rioting on the
to tap into a higher end textile market. streets. Touching on employee welfare initiatives by the
BGMEA, BGMEA stated that it runs 10 medical centres and
According to our analysis, one of the major obstacles to schools for workers and their families, and also provides
home textile export growth is the lack of diversification in scholarships to 2,000 meritorious children of employees
products and markets, especially our lack of presence in the each year. The BGMEA also expressed its need for support
giant market of neighboring India. A small range of products from the next elected government to maintain political
(shirts, trousers, T-shirts, sweaters, jackets) makes up 60 stability and ensure the right economic policies
percent of RMG export. Vigorous marketing and promotional
drives would be needed to break into markets for other RMG http://www.thefinancialexpress-
products that Bangladeshi producers can produce bd.info/search_index.php?page=detail_news&news_id=46527
competitively. Since R&D and market research to expand the
product mix and public support in this area will be critical, a Duty-
Duty-free RMG exports to India hit snags
comprehensive research center built on public-private The Daily Star, Friday, September 26, 2008
partnership should be established. Its role would be to gather
and disseminate information effectively to local Bangladesh signed an agreement with India in September
manufacturers on the latest developments in products and last year to export eight million pieces duty-free garment
markets, including information on fabric developments, items a year to narrow the trade gap between the two
countries. In line with the agreement, New Delhi asked
blends, colors, patterns, latest fashion trends and design Dhaka to send the garment products by December 31 to
forecasting, as well as providing customer service to foreign reach the target. Under the total quota, affiliated members of
buyers purchasing from Bangladesh. Another problem is that the BGMEA will get a 70 percent share, while BKMEA
most firms have very little or no effective marketing members will get the rest of the pie. However, Bangladesh
strategies. We believe that firms will enhance their may miss out on the duty-free quota mainly because of tepid
productivity once they implement effective marketing response from local exporters. BGMEA had relaxed rules to
strategies. encourage the exporters to take advantage of the quota and
meet the deadline. The garment trade body had also
BMET to train 15,000 unskilled RMG workers
The Daily Star, Monday, September 22, 2008 published advertisements in national dailies asking the
exporters not to blow the export opportunity. After the
BGMEA signed a 2-year memorandum of understanding finalization of the agreement with India, BGMEA was
(MoU) with Bangladesh Manpower, Employment and instructed to issue certificates only on the basis of letters of
Training (BMET) Bureau to train unskilled people for the credit, but it has also issued certificates in line with contracts
garment sector. Under the agreement, the BGMEA will use signed between two parties. BGMEA and BKMEA have so
23 training centers of the employment bureau to train around far issued certificates to the exporters on 2.5 million pieces
15, 000 unskilled workers. out of eight million. Some exporters have complained of
hassles, as some banks take so long in transactions. Export
http://www.thedailystar.net/story.php?nid=55906 Promotion Bureau (EPB) also added that the quota fulfillment
had depended on the RMG exporters.
BGMEA eyes USD 25b exports by 2013: Links enhancement
of the volume to political
political stability http://www.thedailystar.net/story.php?nid=56502
The Daily Star, Thursday, September 25, 2008
Home textile exports may fetch USD 1bn
1bn in next few years
BGMEA promised to shoot up the country's exports to USD The Financial Express, Friday, September 26, 2008
25b by 2013 provided the coming elected government and all
concerned could maintain political stability and ensure right Export of home textile products can fetch USD 1b by the next
economic policies. BGMEA also expressed gratitude to the few years as exports of home textile items such as bed linen,
caretaker government for its role in ensuring 525 days free of cushion, blanket, nakshikatha, curtain and pillow will
hartals. Moreover, they also seek support from the continue to boom in the next years because of recent spike
government as well as the policy makers to obtain the target. in labour cost has forced dozens of manufacturers of China
and some other countries of the region to shift from their
http://www.thedailystar.net/story.php?nid=56390 traditional products. Industry insiders said home textile
products have the potential to earn USD 1b from export by
2012-13 fiscal years. They are expecting over 30 per cent
growth in export in the current fiscal year as our prime
competitors are diverting to other high-end products
gradually. The demand for home textile to the USA and
Europe, which account for Bangladesh's 80 per cent export
market, rose sharply in the recent months amid declining
shipments from some south and Southeast Asian countries
_______________________________________________________________________________________
including China, Pakistan and India. Moreover, new buyers an exclusive tourist zone similar to an export processing
from many European countries such as Italy, Britain and zone will be set up. Mehdi said proper arrangements for
France have also shown interest on Bangladeshi home entertaining the tourists will be ensured in line with local
textile because of its superior quality and exquisite traditional and cultural values.
fashionable designs.
The sources said Bangladesh Parjatan Department will work
http://www.thefinancialexpress- as the regulatory body.
http://thedailystar.net/story.php?nid=56392
Tourism
Seagull
Seagull plans luxury hotel in Teknaf
The Daily Star, Sunday September 28, 2008
Seagull Hotels Limited, the owning company of Seagull

Hotel, a luxury property in Cox's Bazar, is going to set up
similar property in Teknaf, a southern coastal area that is
approximately 500 kilometres away from Dhaka. The
company has already initiated the process of purchasing land
in Teknaf to set up the hotel, which is scheduled to be
completed within the next three years at a cost of around
BDT 6bn (USD 88mn), according to Managing Director of
Seagull Hotels, Masoom Iqbal. He also mentioned that the
number of both foreign and local visitors that frequently visit
the area has increased rapidly in recent years. The proposed
hotel is to have a golf course, theme park, ropeway, marine
aquarium and marine drive facilities.
Masoom further urged the government to formulate a policy

that will ensure the places within the coastal districts are
effectively utilized as tourist spots. He also called upon the
government for making available an air landing space, bus
and good railway communication facilities near Teknaf so
that tourists can go there easily at cheaper costs. He also
added that there is the potential of generating business worth
USD 5-10bn from tourism every year from Cox's Bazar,
Teknaf, Sonadia and St Martin's coral island.
Parjatan's bifurcation on cards

The Daily Star, Thursday September 25, 2008
Bangladesh Parjatan Corporation is to be bifurcated in order

to encourage the tourism industry and to attract more local
and foreign investors, according to official sources. The
Council of Advisors is likely to approve a tourism-friendly
policy next month that will open up a new horizon for the
industry. The initial plan is to split the corporation into the

Bangladesh Tourism Board and Bangladesh Tourism
Department. A draft of Bangladesh Parjatan Ordinance 2008
has already been sent to the Civil Aviation and Tourism
Ministry for approval.
Special Assistant to the Chief Advisor for Civil Aviation and

Tourism Mahbub Jamil said the government has been
working to move the industry ahead on the basis of a public-
private partnership.
According to the proposed ordinance, Parjatan's Chairman

Shafique Alam Mehdi said the National Tourism Board will
be an autonomous body. It will have the power to take
decisions and implement them. To ensure private sector
participation, five out of ten directors will come from the
private sector. He also mentioned that under the new policy,
_______________________________________________________________________________________
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
Shahidul Islam, CFA Investment Manager (880-2)-8155144, ext. 122 shahid.islam@at-capital.com

Taufique Hasan Investment Manager (880-2)-8155144, ext. 123 taufique.hasan@at-capital.com
Ziaush Shams Senior Research Associate (880-2)-8155144, ext. 120 zia.shams@at-capital.com
Syeda Tasnuva Akhter Research Associate (880-2)-8155144, ext. 127 syeda.tasnuva@at-capital.com

S Adeeb Shams Research Associate (880-2)-8155144, ext. 128 adeeb.shams@at-capital.com
A. M. A. Bari Nahid Research Associate (880-2)-8155144, ext. 130 nahid.bari@at-capital.com
Mohammad Emran Hasan Research Associate (880-2)-8155144, ext. 131 emran.hasan@at-capital.com
Sohana Alam Seraj Office Manager (880-2)-8155144, ext. 132 sohana.alamseraj@at-capital.com
Ahmad Sajid Research Associate (880-2)-8155144, ext. 135 ahmad.sajid@at-capital.com
S.M. Rashedul Hasan Research Associate (880-2)-8155144, ext. 137 rashed.hasan@at-capital.com
Tami Zakaria Research Analyst (880-2)-8155144, ext. 125 tami.zakaria@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
Sanwar Ahmed Research Analyst (880-2)-8155144, ext. 139 sanwar.ahmed@at-capital.com
Md. Zahidur Rahman IT Analyst (880-2)-8155144, ext. 140 zahidur.rahman@at-capital.com
Ashek Ishtiak Haq Research Assistant (880-2)-8155144, ext. 136 ashek.haq@at-capital.com

Syed Najibullah Research Assistant (880-2)-8155144, ext. 136 syed.najibullah @at-capital.com
Minul Islam Research Assistant (880-2)-8155144, ext. 136 minul.islam @at-capital.com
Rasidul Hasan Research Assistant (880-2)-8155144, ext. 136 rasidul.hasan @at-capital.com
AT Capital
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 Tigers 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.
_______________________________________________________________________________________

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29 September 2008 AT CAPITAL RESEARCH

AT Capital Weekly Update

EDITORS • We discuss industry dynamics, constraints and prospects for growth

Professor Jahangir Sultan

UTC Building, Level 16

Overview – Global Markets

Bangladesh retail – organised and unorganised 9

Special Focus – Retail 10

Stock Market Weekly 13

Negotiators found a way to address concerns that the bail-

While imposing curbs on the compensation of executives at

A draft of the bailout deal can be found at:

In the light of Thursday’s WAMU bankruptcy (one of the

However, any failure to pass the bill risks a financial “nuclear

In some cases, the government would receive an equity

Bank credit risk escalating

Many US market analysts’ favoured measure of banking

Source: Bespoke Investment

US New "Months of supply" is at 10.9 months. Sales are

The London-based Baltic Dry Index, a freight gauge for the

Transportation costs for iron, coal and the grains plunged to

Customer Local consumtion habits Leads to product proliferation

Lack of proper training Higher trial and error in managing

Special Focus – Retail

Organised retailers, Agora, Meena Bazaar, Nandon and

As is the case in India, developing a strategy which provides

Bangladesh has poor infrastructure with regards to storage

For chains to grow and have sizeable presence throughout

Labor and manpower challenges

Since organized retail is at such a nascent stage of

Retail growth in Bangladesh is expected to grow at a rapid

• DSE market capitalisation crosses BDT 1 trillion mark

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

Market summary Valuation snapshot

DSE General Sector P/E

The high drama involving the IPO of Grameenphone

“Local institutional investors need to be given adequate time http://www.thefinancialexpress-

Turnover leaders Best performers* Worst performers*

Professor Jahangir Sultan

Rashed Hasan Syed Najibullah

Selected macroeconomic indicators Market news

Call money rate (%) 6.91 4.78 8.91

Remittances (USD mn) 470.95 732.98 7,914.78

Annual percentage change -0.06 55.64 32.39 • FDI inflow drops

Exports (USD mn) 1,218.03 1,469.51 14,110.80

Annual percentage change 9.52 20.65 15.87

Aviation It is generally perceived that the banks enjoy “high interest

Bangladesh Energy Regulatory Commission (BERC) on

At present, Bangladesh is producing gas around 1,800mmcfd

Seagull Hotels Limited, the owning company of Seagull

Masoom further urged the government to formulate a policy

Parjatan's bifurcation on cards

Bangladesh Parjatan Corporation is to be bifurcated in order

industry. The initial plan is to split the corporation into the

Special Assistant to the Chief Advisor for Civil Aviation and

According to the proposed ordinance, Parjatan's Chairman

Shahidul Islam, CFA Investment Manager (880-2)-8155144, ext. 122 shahid.islam@at-capital.com

Syeda Tasnuva Akhter Research Associate (880-2)-8155144, ext. 127 syeda.tasnuva@at-capital.com

Ashek Ishtiak Haq Research Assistant (880-2)-8155144, ext. 136 ashek.haq@at-capital.com

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